Top miners enjoy strong FY2018, says Fitch Solutions report

Rio Tinto and several of its large diversified rivals managed to further increase profit margins and cash flows during the 2018 financial year, according to a recent Fitch Solutions report.

The report outlined how improved financial performances were a result of miners streamlining their operations, cutting debt and expenditures, increasing production efficiencies, and incorporating advanced technology in operations to enhance productivity and reduce costs.

“Building on their recovery in FY2016, and stellar results in FY2017, top mining companies reported commendable FY2018 results yet again, including Rio Tinto’s 56% year-on-year increase in net income and shedding of all of its debt,” said the report.

Rio is now free from debt, in a net cash position and also gave shareholders a return on equity ratio of 31% in FY2018 – one of the highest in the industry.

“We expect continued outperformance from Rio due to strong management and good governance, as displayed by the company’s consistent capital discipline and strong balance sheets,” said the market intelligence firm in the report.

Fitch also referred to Freeport-McMoRan and Anglo American’s offloading of around half of their net debt levels from 2017, and Vale’s 17% year-on-year increase in profit margins.

Decisions to divest from non-core assets and implement stringent spending programmes have been key to these mining giants reducing their debt loads in recent years, according to Fitch.