Analyst Note
| Jon Mills |After a record 2021, no-moat Rio Tinto’s adjusted net profit after tax, or NPAT, fell 38% to USD 13.3 billion or USD 8.15 per share driven by falling commodity prices and rising unit cash costs. Adjusted EBITDA was down 30%, to USD 26.3 billion, about 5% below our estimate. Lower iron ore prices accounted for USD 9.2 billion of the decline, while USD 3.5 billion in higher costs were partially offset by foreign exchange and volumes. Rio Tinto is dominated by iron ore, which made up around 71% of 2022 EBITDA, followed by aluminium at 14% and copper at 9%. The fully franked final dividend of USD 2.25 (AUD 3.27) was less than we expected given the absence of a special dividend, a feature of the last seven years. With net debt of about USD 4 billion—less than 0.2 times EBITDA—it would have been well within Rio’s financial capacity to have paid one. However, Rio was probably prudent in maintaining a pristine balance sheet given the uncertainty over global economic growth and the outlook for commodity prices, along with its initial steps towards expanding production.