Rio Tinto swings to full-year profit

Mining giant Rio Tinto swung to a profit in the year to the end of December thanks to a recovery in commodity prices, as it announced a better dividend than expected and a $500m share buyback.

Net earnings came in at $4.6bn compared to a loss of $866m the year before as most commodity prices rose for the first time in a number years in the second half of 2016, despite numerous political and macro shocks to the global economy

Iron ore prices nearly doubled in the year, kicking off 2016 at $43 per dry metric tonne cost and freight and ending the year at around $80 per tonne.

Meanwhile, underlying earnings rose 12% to $5.1bn, beating analysts' expectations of of $4.75bn, while net debt fell to $9.6bn from $13.8bn.

Rio said it will pay a full-year dividend of $1.70 a share, which is down from the previous year’s $2.15 but above analysts’ expectations. In addition, the company said it will buy back shares worth up to $500m this year.

Chief executive Jean Sebastien Jacques said: "Today's results show we have kept our commitment to maximise cash and productivity from our world-class assets, delivering $3.6bn in shareholder returns while maintaining a robust balance sheet. At the same time, we strengthened the portfolio and advanced our high-value growth projects as we look to the future.

"We enter 2017 in good shape. Our team will deliver $5bn of extra free cash flow over the next five years from our productivity programme. Our value over volume approach, coupled with a robust balance sheet and world-class assets, places us in a strong position to deliver superior shareholder returns through the cycle."

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "All the dials seem to be moving in the right direction at Rio, mainly thanks to the self-help measures implemented by the company. Mining companies are price-takers, and have no control over commodity markets, but Rio has made ground by cutting cash costs and scaling back the dividend.

"However after a ruthless cut last year, the dividend now looks to be back on track, and the final payment announced today is way higher than expected. The fact that Rio has also decided to return capital to investors via a share purchase plan, as well as ramping up its capital expenditure, suggests the company is pretty bullish about its prospects going forward."