The most firepower Tuo earned more than $4.6 billi

2022-09-19
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Rio Tinto earned more than $4.6 billion in 2016, and the international mining recovery ushered in the spring

Rio Tinto earned more than $4.6 billion in 2016, and the international mining recovery ushered in the spring

China Construction Machinery Information

with the price of iron ore rising from less than $40 at the beginning of 2016 to the current high of $80/ton, the profitability of international miners is improving significantly, and the net profit of mining giant Rio Tinto has also increased significantly from a loss of $866 million in 2015 to a net profit of $4.617 billion in 2016

with the price of iron ore rising from less than $40 at the beginning of 2016 to the current high of $80/ton, the profitability of international miners is improving significantly. The 2016 financial report released by Rio Tinto on the 8th is an excellent example

according to Rio Tinto's financial report, the giant's net profit reached US $4.617 billion in 2016, successfully reversing losses

cost reduction and efficiency improvement helped increase net profit.

Dr. Ryohei Mori from Japan's Green Science Alliance Co., Ltd. has been selling nano cellulose composites and various types of biodegradable plastics, starch based biodegradable plastics, and other Australian mining giant Rio Tinto's 2016 fiscal year report released on the 8th has brought great surprises to investors. After a series of spending cuts and production efficiency improvement plans last year, Rio Tinto achieved consolidated sales revenue of US $33.8 billion for the whole year; The current income was US $5.1 billion, an increase of 12% year-on-year; The net profit also increased significantly from a loss of $866 million in 2015 to a net profit of $4.617 billion in 2016

Rio Tinto is one of the world's four mining giants and the world's second largest iron ore producer. In addition to the iron ore business, which contributes most of its revenue, Rio Tinto also owns a number of resource sectors, such as aluminum business, copper and diamonds, energy and coal mining groups. Rio Tinto has a dual listed company structure. Rio Tinto PLC is listed in London and New York, and Rio Tinto Limited is listed in Australia

Rio Tinto began its iron ore trading business with China as early as 1973. Over the past 40 years, Rio Tinto has supplied more than 2 billion tons of iron ore products to the Chinese market

in response to the cold winter of commodities, since the retirement of former CEO Sam Wales at the end of June last year, the new CEO of Rio Tinto Group, Xia Jiesi (who took office in July 2016), has deployed a new round of group business structure adjustment since he took office, and carried out further capital expenditure reduction and debt reduction plans

the latest financial report shows that in the past 2016, Rio Tinto has taken extremely strict measures to reduce expenditure and improve production efficiency, which have been broken down to major product groups, reducing the cash cost of $1.6 billion

in terms of capital expenditure, Rio Tinto's capital expenditure throughout 2016 was US $3billion, including US $1.7 billion of maintenance capital expenditure. The reduction of $3billion is amazing compared with the peak of $17.6 billion in capital expenditure in 2012

in addition to improving efficiency and reducing costs, Rio Tinto also divested some assets last year. According to the financial report statistics, the asset divestitures announced or completed in 2016 amounted to $1.3 billion, and the divestiture plans announced so far in 2017 amounted to $2.45 billion. It is worth mentioning that the latest asset sale: Rio Tinto announced in early February that it would sell a coal asset "United coal company" owned by Rio Tinto in Australia to Yanmei Australia Co., Ltd., a subsidiary of China Yankuang Group in Australia, at a price of US $2.45 billion

through the above-mentioned production efficiency improvement, expenditure reduction and asset divestiture, Rio Tinto achieved a total cash flow of nearly $8.5 billion in 2016, and its net debt was also reduced to $9.6 billion, and its asset liability ratio continued to decline to 17% (this asset liability ratio is also the lowest among peer miners)

at the same time, Rio Tinto announced a very "awesome" dividend plan in its annual report. The year-end dividend per share was US $1.70, equivalent to a total of US $3.1 billion. Coupled with the US $500million stock repurchase plan to be implemented in 2017, Rio Tinto's annual cash return to shareholders was as high as US $3.6 billion, more than 70% of the current earnings in 2016

Rio Tinto said that in the next five years, through the implementation of a series of cost reduction and efficiency improvement measures of the smart mine plan (including the use of smart railways and smart trucks in Western Australia), Rio Tinto could tap another $5billion in cash flow

as of the close of February 8, Rio Tinto US shares (nyse:rio) closed at $42.94 per share, up 96% from the lowest point of $21.89 per share on January 22, 2016

China's demand may decline in 2017

the author combed Rio Tinto's financial reports in recent years and found that the iron ore business has always been the largest source of Rio Tinto's profits. According to the financial report, the current income of the iron ore product group in 2016 was $4.611 billion, accounting for 76% of the total current income of the major product groups of $6.064 billion

especially in the second half of 2016, when the price of iron ore continued to rise, Rio Tinto achieved a current income of $3.53 billion in these six months, more than twice the target of $1.56 billion in the first half of the fiscal year. Rio Tinto analyzed the main reasons for the increase in revenue in the second half of the fiscal year, including price increases, efficiency improvements and cost reductions, and more production

the "Platts 62% iron ore index", a wind vane for iron ore prices, rose to $81.06 per ton on the 8th, an increase of more than 110% from the lowest $38 per ton in January last year. The latest financial report of Rio Tinto shows that the average cash cost of Rio Tinto's ton mine in 2016 has been as low as $13.7/ton

"even if the freight cost is included, the landed cost of Rio Tinto's iron ore (transported to China) per ton is no more than $30, or even $25 lower. How can it not make money?" Li Xinchuang, President of China Metallurgical Industry Planning and Research Institute, analyzed on the 9th

in fact, most of the iron ore produced by Rio Tinto every year is sold to the Chinese market. During the China Development Forum last March, Sam Welsh, Rio Tinto's former CEO, revealed that about 40% of Rio Tinto's annual revenue came from China. At the end of October last year, haggis also stressed that "China is very important to Rio Tinto, because China is our largest consumer market for iron ore and other products."

China has become the world's largest producer and consumer of steel and iron ore for many years in a row. Due to mining costs and environmental constraints, more than 80% of China's iron ore needs to be imported, mainly from Australia and Brazil. According to customs data, China imported 952.7 million tons of iron ore in 2015. In 2016, this figure increased to 1.024 billion tons, a year-on-year increase of 7.5%

Rio Tinto's iron ore production data is very similar to the growth trend of China's iron ore imports. In 2016, Rio Tinto's iron ore production increased by 6.1% year-on-year to 348 million tons (281 million tons based on Rio Tinto's equity), a record high. Among them, the iron ore production in Pilbara, Western Australia increased by 6.3% year-on-year to 329 million tons (271 million tons based on Rio Tinto's equity)

Rio Tinto also mentioned in its annual report that in 2016, driven by China's economic growth, international commodity prices rebounded. In particular, the substantial growth of domestic infrastructure, real estate and other downstream industries has stimulated steel consumption, resulting in a sharp increase in demand for iron ore. The withdrawal of some domestic mines' production capacity and the slowing growth of international low-cost ore supply have jointly driven Rio Tinto's performance

Rio Tinto is optimistic about the prospects of China's steel industry and iron ore demand in 2017. The annual report believes that the capacity reduction action plan being implemented by the steel industry can create a better market environment and sustainable development conditions for steel enterprises. With the withdrawal of low-end production capacity, domestic steel enterprises' demand for high-grade ore products will continue to increase

however, as a senior domestic industry expert, Li Xinchuang believes that it is difficult for steel production and iron ore demand in 2017 to increase significantly as last year. The long-term overcapacity in the steel industry has entered the peak range as early as 2014, and the general trend in the future is to reduce the development

"especially last year and this year, the state heavily regulated the ground bar steel, and many scrap materials used in medium frequency furnaces will enter the converter instead of iron ore. in addition, factors such as the recovery of production capacity of domestic mining enterprises and the regulation of downstream real estate will affect the import demand of iron ore." Li Xinchuang believes that in 2017, iron ore prices will be difficult to maintain the current high level, and there will be small fluctuations or declines in the later stage. High temperature is easy to hydrolyze

another person from an industry organization also pointed out, "with the recent frequent export trade frictions, the export volume may decline slightly in 2017, so the domestic demand may also decline slightly, which may be a high probability event."

in the middle of December last year, Rio Tinto CEO jays said that considering many factors, Rio Tinto was cautiously optimistic about the prospects of the mining market in 2017 and even longer, ensuring that most domestic instruments were in a low-grade homogeneous competition state

"with the rise of ore prices, those miners who originally stopped production may resume production. The relationship between supply and demand is a dynamic adjustment process, and fluctuations in ore prices are inevitable." Xiajiesi stressed that Rio Tinto, as a mining producer, cannot control the trend of ore prices. The company will continue to improve efficiency, reduce production costs and win the competition with the lowest cost advantage

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