Rio Tinto

About the author:

Author name:

By Tom Sartor

Job title:

Senior Analyst

Date posted:

14 February 2014, 10:04 AM

Sectors Covered:

Junior (Emerging) Resources, Bulk Materials

Rio Tinto's (RIO) full year 2013 underlying EPS of US$5.53 was a 10% increase on 2012 and beat consensus by 6%. The FY dividend of US$1.92 was a 15% increase on 2012.

Lower operating costs was the primary driver of the positive earnings surprise and, when combined with lower-than-expected capex, net debt reduced to US$18.1bn.

Three key points

• Aluminium - marked improvement in the aluminium sector of the business, with underlying earnings of US$557m compared to US$54m in 2012.
• Costs are down - costs in the iron ore division were 4% lower than consensus while revenue was in line.
• Gearing on the decline - net debt declined to US$18.1bn from US$22.6bn at 30 June 2013.

We reiterate our Add recommendation with an increased NPV-based target price of A$82.60 (previously A$80.60).

More information

If you are interested in Rio Tinto (RIO) please contact your nearest Morgans office.

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