Rio Tinto plc (NYSE:RIO) Q2 2019 Earnings Conference Call - Final Transcript

Aug 01, 2019 • 05:00 am ET


Rio Tinto plc (NYSE:RIO) Q2 2019 Earnings Conference Call - Final Transcript


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John Smelt

Good morning, everyone. Hello. Great. It's 10 o'clock. So, we'll get going. Thank you very much for coming along to our Half Year Results. [Operator Instructions]

Okay. With that, I will hand over to J-S. Thank you.

Jean-Sebastien Jacques

All right, thank you, John, and good morning, everyone. I am delighted together with Jakob and the team. So we've got Chris, we got Simon, Arnaud, Steve, Bold, Vera, I mean long list today, to welcome you to our 2019 half year results.

It has been a very strong financial performance. We have delivered an EBITDA margin of 47%, the highest in the last 10 years. And the return on capital employed of 23%, in line with the best-in-class industrial blue-chip companies. We have delivered free cash flow of $4.7 billion, up 65% compared to the same period last year.

We have maintained a very disciplined approach to capital allocation. We have paid $7.8 billion of cash return to our shareholders so far in 2019, delivering on our commitments. And we have just announced, we will return a further $3.5 billion in dividends. As a result, our shareholders will receive $12 billion in cash returns in 2019. We have invested $2.4 billion in our asset, a similar level to last year, and we have one of the strongest balance sheet in the sector with a net debt at $4.9 million, which highlight the financial strength of Rio Tinto.

So our financial performance was very strong. Thanks to a robust iron ore pricing environment. However, I want to acknowledge upfront, we have experienced operational challenges this year, including fully optimizing our iron ore system. This is not good enough and we are taking clear actions. I will take you through this. I will also cover our plans for you to go and update you on other growth options. As has already mentioned, a number of the team are here today with me, and they will be happy to take additional questions you may have after the presentation.

Now let me turn to one of our operational highlights of this half, safety. As I've said it before, safety is our number one priority. There is nothing more important. In 2019, we have had no fatalities, AIFR has improved, our severity rate has reduced, and there has been a reduction in process safety incidents. But we are not complacent.

We continue our focus on major hazard risk management, integrating our tailings and water storage management in even more detail. After the tragic incident in Brazil, we continue to look at everything we do. And as you know, in February, we disclosed our global tailings and water storage facilities, and our controls and approach to managing them. We provided even further information in June.

We are working with the ICMM and our peers in this space to develop an international standard on tailings storage facilities. Our aim is to continue to improve our safety performance, which is a core part of our approach to sustainability. Sustainability is an