EBITDA increase fails to satiate Rio Tinto investors
Rio Tinto has slipped after the release of its full year results but is the market overlooking the bigger structural growth story?
Rio Tinto Limited (ASX: RIO)
fell 3.25% on Friday by afternoon trade which is a reaction to its full year 2025 results on Thursday and now the market capitalisation is $60.63 billion.
The company reported consolidated sales revenue of US$57.6 billion which rose 7% while underlying EBITDA reached US$25.4 billion which increased 9% because of higher copper and aluminium prices.
The company generated US$16.8 billion in cash flow from operations which was up 8% due to disciplined capital allocation but Free cash flow declined 28% and profit after tax decreased 14%.
Iron ore prices fell 6% year-on-year while costs per tonne at the Pilbara operations increased slightly which put pressure on margins in the group’s largest earnings segment.
Iron ore EBITDA dropped 11% to US$15.2 billion even though production stayed strong at 327.3 million tonnes which shows how sensitive profits are to changes in commodity prices.
The copper division reported EBITDA of US$7.4 billion which surged 114% as higher prices and better unit costs supported results.
Copper prices increased because of tight concentrate markets and strong demand linked to AI driven data centre expansion and electrification trends.
Rio maintains a 60% payout ratio which extends its 10 year record of paying dividends at the top end of its policy range and the stock now provides an annual dividend yield of 3.64%.
Net debt rose to US$14.4 billion after higher capital investment and the Arcadium lithium acquisition though the balance sheet remains solid with a single A credit rating while diversification across copper, aluminium and lithium offers protection when specific commodity prices weaken.
The company's diversified portfolio provides exposure to long-term global demand for critical minerals which makes it a compelling long-term hold.
(Source: Company Announcements)
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