Business context and reporting period
Rio Tinto plc and Rio Tinto Limited filed this annual report on Form 20-F for the fiscal year ended December 31, 2022. The dual-listed group reports consolidated results in US dollars under IFRS. Its diversified mining business includes iron ore, aluminium, copper, and minerals.
This is an annual report, not a standalone 2022 fourth-quarter report; the supplied filing text does not provide a clear set of Q4-only financial results.
Financial and operating performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Consolidated sales revenue | US$55.6bn | US$63.5bn | Down 13% |
| Underlying EBITDA | US$26.3bn | US$37.7bn | Down 30% |
| Underlying EBITDA margin | 45% | 57% | Down 12 percentage points |
| Profit after tax attributable to Rio Tinto owners | US$12.4bn | US$21.1bn | Down 41% |
| Underlying earnings | US$13.3bn | US$21.4bn | Down 38% |
| Basic earnings per share | 766.8 US cents | 1,303.4 US cents | Down 41% |
| Net cash generated from operating activities | US$16.1bn | US$25.3bn | Down 36% |
| Free cash flow | US$9.0bn | US$17.7bn | Down 49% |
| Capital expenditure | US$6.8bn | US$7.4bn | Down 9% |
| Net debt/(cash) at year end | US$4.2bn net debt | US$1.6bn net cash | Moved to net debt |
| Total dividend declared per share | 492 US cents | 1,040 US cents | Down 53% |
Revenue and EBITDA fell mainly because of lower iron ore prices, higher energy and raw-material costs, and general inflation. Lower prices reduced underlying EBITDA by US$8.1bn year over year; higher energy costs reduced it by US$1.2bn and general inflation by US$1.5bn. Higher sales volumes and product mix partly offset these pressures. Management reported a 30.9% effective tax rate on pre-tax earnings, compared with 27.7% in 2021.
Cash and cash equivalents were US$6.8bn at year end, with US$2.0bn in other liquid investments. Total financing liabilities, excluding net-debt derivatives, were US$12.3bn; their weighted average maturity was about 11 years. The group reported A/A2 long-term credit ratings and an undrawn US$7.5bn revolving credit facility.
Iron Ore generated US$18.6bn of underlying EBITDA, down 33%; Aluminium US$3.7bn, down 16%; Copper US$2.4bn, down 40%; and Minerals US$2.4bn, down 7%. Iron ore production was 324.1Mt, mined copper production 521kt, and aluminium production 3.0Mt.
Material changes versus the prior comparable period
- Results declined from the record-price environment of 2021: net earnings fell 41%, underlying EBITDA 30%, and operating cash flow 36%.
- The group moved from net cash to net debt, reflecting shareholder distributions and acquisitions, partly offset by free cash flow.
- Rio Tinto acquired the remaining Turquoise Hill Resources shares for about US$3.1bn, raising its direct Oyu Tolgoi interest to 66%. It also acquired the Rincon lithium project for US$825m.
- Ordinary dividends declared were 492 US cents per share, versus 793 cents in 2021; no special dividend was declared for 2022.
- Scope 1 and 2 emissions were 30.3Mt CO2e, 7% below the adjusted 2018 baseline, but emissions-abatement projects progressed more slowly than planned.
Outlook, commentary, risks and unusual items
Management expects long-term energy-transition demand to support growth in copper, lithium, aluminium, and high-grade iron ore. It expects growth capital spending to reach about US$2bn in 2023 and up to US$3bn annually in 2024 and 2025, while maintaining capital discipline. No formal earnings or revenue guidance is provided in the supplied filing text.
- Projects: Management expected Oyu Tolgoi to reach sustainable production in Q1 2023. The Rincon starter plant, with planned capacity of 3,000 tonnes per year, was expected to begin first saleable production in 2024. Western Range first production was anticipated in 2025. Simandou depends on permits, approvals, and agreement on shared infrastructure. Jadar remained uncertain after Serbia cancelled its Spatial Plan and required related permits to be revoked.
- Climate: Targets are to reduce Scope 1 and 2 emissions 15% by 2025 and 50% by 2030, against the 2018 baseline, and reach net zero by 2050. Management acknowledged delays in abatement projects and said greater use of offsets may be required for the 2025 target.
- Key risks: Commodity-price volatility, inflation and energy costs, economic and geopolitical disruption, project delays and permitting, climate-transition execution, physical climate and water risks, tailings and other major hazards, cyber events, and maintaining relationships with Indigenous peoples and host communities.
- Unusual items: Net earnings included an US$820m write-down of US federal deferred tax assets; a US$331m after-tax gain on the Cortez royalty sale was excluded from underlying earnings. The company also reported a US$202m impairment of the Boyne smelter investment and a US$150m reversal relating to the Roughrider project. It settled Australian tax disputes and reported significant non-recurring tax and currency-hedge cash outflows.
- Obligations and contingencies: Closure and restoration provisions were US$15.8bn, up from US$14.5bn. Capital commitments were US$3.4bn, and purchase obligations US$16.1bn. Contingent liabilities, indemnities, and performance guarantees totalled US$498m; the filing also describes legal matters for which exposure could not be reliably quantified.
- Post-period financing: In February 2023, Oyu Tolgoi refinanced its US$3.9bn project-finance facility, deferring principal repayments by three years and extending final maturity from 2030 to 2035.
Important facts for investors to verify
- Reconcile IFRS net earnings with management’s non-IFRS underlying earnings and EBITDA, including the treatment of exceptional items.
- Check how lower commodity prices, inflation, energy costs, and working-capital movements affect cash generation and margins.
- Confirm Oyu Tolgoi production ramp-up, project-finance terms, remaining acquisition-related payments, and the delivery schedule and cost of major growth projects.
- Track progress against climate targets, planned decarbonisation investment, and the risk of delays or increased reliance on offsets.
- Assess the assumptions and sensitivity behind US$15.8bn of closure provisions, including inflation, discount rates, and rehabilitation schedules.
- Review the status of material permits, community agreements, legal proceedings, and the disclosed contingent liabilities.