Falling commodity prices and rising costs are hitting 2023 earnings at two of the world’s top mining companies.
Rio Tinto Group’s profit fell 12% last year, although the company still managed to set a higher dividend. The largest iron ore producer reported a profit of 11.8 billion USD, broadly in line with analysts’ estimates. The company will pay a final dividend of 2.58 USD per share, up from 2.25 USD a year earlier.
The disappointing post-pandemic recovery in China, the world’s largest consumer of metals, is putting downward pressure on demand for industrial raw materials. While iron ore prices remained relatively resilient over the reporting period, the commodity fell to a 3-month low this week amid heightened concerns about steel demand in China.
“We will continue to pay attractive dividends and invest in the long-term strength of our business as we grow in the materials [sector] needed to decarbonize the world”, said the Chief Executive Office of Rio Tinto, Jakob Stausholm.
Rio Tinto reported a net impairment charge of 700 million USD for the year, mainly related to its Australian alumina refineries.
“This was driven by the challenging market conditions facing these assets combined with our improved understanding of the capital requirements for decarbonization and the recently introduced legislative increase in carbon costs”, the company said.
Meanwhile, Switzerland’s Glencore also reported a steep fall in annual profit, but also cut its dividend.
The company reported underlying profit of 17.1 billion USD – half the amount from a year ago, though still one of its best performances. The commodities trader and miner reported strong profit growth in 2022 after Russia’s invasion of Ukraine sent energy prices soaring, but much of the pressure has now eased. The company’s shares were down 5.2% in early morning London trading.
Glencore cut its dividend to 1.6 billion USD and for the first time in several years did not announce a share buyback program. The company has been channeling huge returns to shareholders in recent years – it announced total payouts of 7.1 billion USD this time last year – but temporarily shifted its focus to managing debt levels after agreeing to buy Teck’s coal business Resources.
Glencore’s commodities trading business has also seen a sharp drop in profit as the volatility on which trading thrives eases. The division posted a profit of 3.5 billion USD last year, up from 6.4 billion USD a year earlier. The decline was due to a 67% drop in energy trading profit, while metals trading saw a slight increase.
The company also wrote down 2.5 billion USD at the end of the year, including 762 million USD from its copper and cobalt mine in the Democratic Republic of Congo.
