Rio Tinto slides to annual loss, abandons payout promise


Rio Tinto slumped to a loss for 2015 as prices for iron ore and copper plummeted and scrapped its promise to maintain or lift its dividend annually for this year onward due to a tough outlook.

The world no.2 miner held its 2015 full-year dividend steady at $2.15 a share - although below market forecasts for a higher dividend - at a time when all its peers are tipped to cut or suspend their payouts to shore up their balance sheets.

Rio reported a net loss of $866 million, hammered by $1.8 billion in writedowns, relating mainly to its Simandou iron ore project in Guinea.

Amy Coopes | AFP | Getty Images

Rio's underlying earnings slumped 51 percent to $4.54 billion in 2015 from $9.31 billion a year earlier hit by weaker iron ore, copper and aluminum prices. That was in line with analysts' average forecast of $4.534 billion.

"In light of the significant deterioration in the macro-economic environment and the resultant market uncertainty, the board believes that it is no longer appropriate to maintain the progressive dividend policy," the company said in a statement.

Miners are under pressure from credit rating agencies to curb spending, including cutting dividends, to help them weather the worst market conditions in nearly two decades.

Rio Tinto Chief Executive Sam Walsh said continued economic deterioration had generated widespread market uncertainty, calling for a shift in how the company spends its money.

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"We are embarking on a new round of proactive measures to cut our operating costs by a further $1 billion in 2016 followed by an additional goal of $1 billion in 2017," he said.

Standard & Poor's and Moody's have warned they may cut miners' ratings, with S&P saying it may downgrade Rio Tinto and BHP Billiton if the companies stick to their "progressive dividend" policies, under which they promise to never cut their payouts.

Rio said for 2016 the company intended to a pay a full-year dividend of not less than $1.10 a share.

Rio Tinto is in a stronger position than its rivals as it has reduced net debt sharply over the past three years.

Rio's net debt stood at $13.8 billion as of the end of December 2015, which is $700 million better than the $14.5 billion pro-forma position at the end of 2014. Analysts were expecting net debt of $14.8 billion.

We don't run our business on hope, we run it with foresight and focus," Walsh told reporters.

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