Rio Tinto chief executive Sam Walsh said “Last year, we made a clear commitment to materially increase cash returns to our shareholders. We have delivered this today through a 12 per cent increase in our full year dividend and a proposed $2.0 billion share buy-back. These represent a total cash return to shareholders, in respect of 2014, of almost $6.0 billion.
“Our continued financial and operating discipline enabled us to offset much of the impact of lower commodity prices in 2014. By increasing volumes and reducing costs, we achieved underlying earnings of $9.3 billion and we were able to maintain our EBITDA margin2 at 39 per cent. Free cash flow was assisted by a further reduction in capital expenditure3 and a successful programme to release working capital. As a consequence, we have reduced net debt4 by $5.6 billion to $12.5 billion.
“I would like to thank our 62,000 colleagues for their contribution to these excellent results. Decisive early action throughout the Group delivered the strong balance sheet, which enables us to announce today’s additional material cash return to shareholders.
“With lower commodity prices and uncertain global economic trends, the operating environment remains tough. However, in these conditions Rio Tinto’s qualities and competitive advantages deliver superior value. Our combination of world-class assets, disciplined capital allocation, balance sheet strength, operating and commercial excellence, and a culture of safety and integrity gives me confidence in our ability to continue to generate sustainable returns for our shareholders.”
| Year to 31 December |
2014 |
2013 |
Change |
| Underlying earnings1 (US$ millions) |
9,305 |
10,217 |
-9% |
| Net earnings1 (US$ millions) |
6,527 |
3,665 |
+78% |
| Net cash generated from operating activities (US$ millions) |
14,286 |
15,078 |
-5% |
| Capital expenditure3 (US$ millions) |
8,162 |
13,001 |
-37% |
| Underlying earnings per share (US cents) |
503.4 |
553.1 |
-9% |
| Basic earnings per share (US cents) |
353.1 |
198.4 |
+78% |
| Ordinary dividends per share (US cents) |
215.0 |
192.0 |
+12% |
| At 31 December |
2014 |
2013 |
Change |
| Net debt4 (US$ millions) |
12,495 |
18,055 |
-31% |
| Gearing ratio5 |
19% |
25% |
-6% |
The financial results are prepared in accordance with IFRS and are unaudited.
1Underlying earnings is the key financial performance indicator which management uses internally to assess performance. It is presented here to provide greater understanding of the underlying business performance of the Group’s operations. Net and underlying earnings relate to profit attributable to the owners of Rio Tinto. Underlying earnings is defined and reconciled to net earnings on page 44.
2EBITDA margin is defined as Group underlying EBITDA divided by Product Group total revenues as per the Financial Information by Business Unit on page 10 where it is reconciled to Profit on ordinary activities before finance items and taxation.
3Capital expenditure is presented gross, before taking into account any disposals of property, plant and equipment.
4Net debt is defined and reconciled to the balance sheet on page 38.
5Gearing ratio is defined as net debt divided by the sum of net debt and Total equity at each period end.