In our opinion the result of the week was Rio Tinto’s full year results that came out on Wednesday afternoon, though we recognise that we may be in the minority given the share price has been flat since then. Underlying profit of US$5.1 billion was ahead of expectations, despite the overall adverse commodity price moves RIO faced in 2016. The highlight for us was the strong cash flow generation of $8.5 billion, achieved due to aggressive cost management and asset sales. This allowed management to both reward shareholders through a higher than expected dividend and a surprise buy-back, as well as a reduction in gearing to a mere 17%. Whilst the market remains concerned about the sustainability of current iron ore prices, RIO’s production costs of US$13.7/t should allow management to continue strong distributions to shareholders if they maintain the disciplined approach to capital management evident in this result. Contributed exclusively for Livewire by Atlas Funds Management: (VIEW LINK)
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