Long-term holding within the ASX Blue Chip portfolio, Rio Tinto (RIO) has this morning released its first-half results, reporting an underlying profit of $5.8 billion, slightly below the analyst estimate of $5.89 billion.
This represents a modest 1.8% increase from the previous year. The company’s underlying EBITDA was $12.09 billion, surpassing estimates and marking a 3.4% year-on-year growth. Despite this, the net income of $5.81 billion missed the forecasted $5.83 billion but still saw a 14% increase year-on-year, indicating solid financial health.
Revenue came in at $26.8 billion, slightly above expectations and reflecting a 0.5% rise from the previous year. However, free cash flow experienced a significant decline of 25%, amounting to $2.84 billion. The iron ore sector, a critical revenue stream for Rio Tinto, generated $15.21 billion, which was down 2.5% from the previous year, highlighting some challenges in this segment.
An interim dividend of $1.77 per share was declared, unchanged from the previous year, demonstrating a commitment to returning value to shareholders. Capital expenditure saw a substantial increase of 34%, reaching $4.02 billion, reflecting ongoing investments in growth and sustainability projects aimed at ensuring long-term viability and competitiveness.
Looking ahead, Rio Tinto’s outlook remains consistent, maintaining its forecast for Pilbara iron ore shipments and production costs, as well as copper production targets. The company anticipates capital expenditure to reach up to $10 billion, with significant investments earmarked for decarbonisation and sustainability initiatives. This includes $1.5 billion over the next three years dedicated to decarbonisation projects, underscoring Rio Tinto’s commitment to environmental sustainability.
CEO Jakob Stausholm emphasised the company’s growth trajectory, highlighting the expansion in the aluminium sector and consistent production at Pilbara. He noted the ramp-up of the Oyu Tolgoi underground copper mine and the advancing Simandou and Rincon lithium projects as key contributors to future cash flow growth. Stausholm also pointed out that the company’s overall copper equivalent production is on track to grow by around 2% this year, with an ambition to deliver approximately 3% compound annual growth from 2024 to 2028 from existing operations and projects.
Rio Tinto’s strategic focus on sustainability and growth is evident in its significant capital allocation towards decarbonisation and new project developments. The company’s investment in the Simandou iron ore project and the Rincon lithium project are expected to provide substantial returns in the coming years. Additionally, the completion of the primary crusher 2 at the Oyu Tolgoi underground project by the end of 2025 is anticipated to enhance production capacity.
Overall, Rio Tinto’s performance in the first half of the year demonstrates resilience amid market challenges, with strategic investments poised to drive long-term growth. The company’s commitment to sustainability, combined with its robust financial performance, positions it well for continued success in the evolving global market.
As a reminder, RIO’s inclusion in the ASX Blue Chip portfolio is based on its gross dividend yield, which currently sits at 8.14% making it one of the highest-yielding stocks within the ASX 50. It is unlikely that based on this RIO would be removed from the portfolio any time soon and we remain happy for members to buy at current prices.
