Rio Tinto CEO Jean-Sebastien Jacques before the release of the company's 2017 full-year results in London on 7 February 2018.
SYDNEY - Rio Tinto rewarded shareholders on Wednesday with a record dividend as the mining giant reported a bumper annual net profit of $8.76-billion (R104.75-billion) in 2017, a 90 percent jump, as commodity prices strengthened.
The Anglo-Australian firm had posted $4.62-billion in annual profit in the previous financial year, turning around a loss in 2015 when key metals prices slumped and the growth in Chinese demand slowed.
"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," chief executive Jean-Sebastien Jacques said in a statement.
He added that the firm&39;s strong position had allowed it to "invest in high-value growth through the cycle, and consistently deliver superior cash returns to shareholders".
Underlying profit -- a measure preferred by the world&39;s second-largest miner -- for the year to 31 December was $8.63-billion, a 69 percent rise from the previous period and broadly matching analysts&39; expectations.
The bulk of underlying earnings came from its main commodity, iron ore, at $6.69-billion.
The company issued a record full-year dividend of $5.2- billion -- $2.90 per share -- and announced a billion-dollar share buyback. The additional share buyback took the total declared cash returns to shareholders to US$9.7 billion.
Shares in Rio closed 3.82 percent higher at Aus$78.31 in Sydney ahead of the results, in a rising market.
Rio said improving prices in all its commodities increased underlying earnings by US$4.11-billion compared with 2016.
"Overall, it was a pretty good result," Fat Prophets resources analyst David Lennox told AFP.
"Pricing did all the heavy lifting for the year, they are still doing very well on (cutting) costs, volumes -- which we thought would be a small negative -- have come in at a small positive (and) the balance sheet was squeaky clean."
The annual net profit was Rio Tinto&39;s highest since 2010. It posted a loss of S$866-million 2015 on the back of slumping prices.
The plunge in key metals prices prompted major players to embark on cost-cutting programmes.
Rio said it was able to cut costs of $400-million last year, as part of its drive to free up $5-billion in additional free cash flow from 2017 to 2021.
The miner also reduced net debt to US$3.8 billion, and made US$2.7 billion in divestments last year, including the sale of most of its Australian coal assets to China-backed Yancoal.
It had forecast capital expenditure of about $5.5-billion this year and a rise to $6-billion in 2019 and 2020.
Rio said the global economy remained supportive of the mining sector, adding that while growth in key commodities consumer China may slow modestly over the next six months, the outlook "remains positive in the medium to long-term".
Lennox said commodities prices were forecast to remain flat over the coming year, meaning Rio would not get the same boost in earnings as in 2017.
"We&39;re expecting probably the results to be maybe around $9-billion to $9.1-billion," he said.