Global miner Rio Tinto has more than tripled last year's earnings, posting an annual profit of $14.2 billion, and announced a share buyback plan worth almost $5 billion. The company benefited from soaring commodity prices such as copper, which jumped 47 per cent in the period, and iron ore which is negotiated on a quarterly basis.
These increases were driven by rising demand for its exports from emerging markets such as China.
Chief executive Tom Albanese says while he expects Rio Tinto to continue to benefit from these conditions, he did so with a degree of caution.
"GDP growth in emerging markets and supply constraints mean the general pricing outlook for commodities remains positive, albeit with elevated risk," he said.
"In particular the timing and speed at which the post-global financial crisis stimulus packages were removed have the potential to generate volatility and substantial swings in commodity prices."
Shareholders are set to benefit from the plan to return $5 billion through a share buyback to be completed by the end of 2012, as well as a 20 per cent increase in the final dividend.
The on-market transaction to take place on the London Stock Exchange (LSE).
Rio Tinto says that shareholders will benefit from the fact that there will be less shares in circulation.
Chairman Jan du Plessis says that commitment will still allow Rio Tinto to take advantage of any future growth opportunities that may arise.
The profit figure has come in broadly in line with market expectations, but analysts say there were a few surprises.
"The dividend increase is ahead of expectations, and while people were thinking that a buyback is possible, they thought it wouldn't be announced for another six months," UBS resources analyst Glynn Lawcock said.
"So Rio has come and surprised people on the upside with the dividend and the buyback. The buyback is clearly positive and it's what shareholders were asking for."
On its growth outlook, Rio Tinto says it will continue to make investments to drive organic growth and acquire small to medium assets.
"The commitment to small and mid-size acquisitions is good," Pengana Capital portfolio manager Ric Ronge said.
"That will throw the heat on BHP because BHP's strategy has been about buying large market-leading assets so they run into anti-trust issues. Small and mid-size acquisitions will not run into the same issues."
Rio Tinto is currently vying for smaller coal miner Riversdale.
It says it has extended its $3.9 billion takeover offer for the miner to March 4 after signs that Riversdale's second-biggest shareholder was holding up a deal.
Source http://www.abc.net.au/news/stories/2011/02/10/3135652.htm
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