MELBOURNE/SYDNEY – Rio Tinto (RIO.AX) (RIO.L) scrapped its generous payout policy in the face of a bleak outlook for the global economy after it slumped to a net loss for 2015 and posted its worst underlying earnings in 11 years.
The dividend decision also gives the world No. 2 miner flexibility to pursue acquisitions in future, analysts said, and Chief Executive Sam Walsh acknowledged his team was keeping an eye out for top-tier assets, particularly in copper.
“Getting the balance right between growth and shareholder return is important to us,” Walsh said on a conference call with analysts. The payout policy change paves the way for arch rival BHP Billiton (BHP.AX)(BLT.L) to take a similar step later this month, as miners come under pressure to shore up cash to weather the worst downturn to hit the sector in nearly two decades.
“Whilst 2015 was a volatile year, 2016 is shaping up to be even tougher. The macro outlook remains challenging,” Walsh told reporters.
The world No. 2 miner bowed to pressure from investors and credit rating agencies to give up its “progressive dividend” policy, under which it promised never to cut its payout from year to year, to better reflect commodity cycles.
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