Price, Productivity Aid Rio Tinto Cash Flow -- Commodity Comment

Rio Tinto PLC (RIO.LN) reported a 90% rise in 2017 net profit to US$8.76 billion and said it would pay shareholders a record full-year dividend. It also announced plans to buy back a further US$1 billion in stock, on top of the US$1 billion dedicated to repurchasing shares in mid-2017.

Here are some remarks from Rio Tinto's 2017 earnings report:

On cash flow:

"The strength of our cash flow is a result of resilient prices during the year coupled with a robust operational performance and a focus on mine-to-market productivity. Our strong balance sheet, world-class assets and disciplined allocation of capital puts us in the unique position of being able to invest in high-value growth through the cycle, and consistently deliver superior cash returns to shareholders."

On prices:

"The effect of all price movements on the group's commodities in 2017 was to increase underlying earnings by $4,107 million compared with 2016. The Platts price for 62% iron Pilbara fines was 20% higher on average compared with 2016. Realized hard-coking-coal prices were 42% higher on average compared with 2016 and realized thermal-coal prices averaged 32% higher. Earnings and cash flows were also boosted by higher average prices for copper and aluminium, which were up 27% and 23%, respectively, year-on-year."

On capital expenditure:

"Capital expenditure expected to remain at around $5.5 billion in 2018 and around $6 billion in each of 2019 and 2020. Each year includes approximately $2.0-2.5 billion of sustaining capex."

On sales:

"Movements in sales volumes increased earnings by $114 million compared with 2016. The main contributors were higher iron-ore shipments from the Pilbara, a 20% increase in titanium dioxide slag feedstock sales volumes and a 6% rise in bauxite sales."

Write to Rhiannon Hoyle at [email protected]