Underlying earnings reached $US5.1 billion, beating RBC Capital Market’s forecast of $4.5 billion.
Net earnings were $4.6 billion, up from a net loss of $866 million, despite a 10% drop in net operating cash to $8.46 billion and a $1 billion drop in revenue to $33 billion.
The earnings before interest, tax, depreciation and amortisation margin improved to 38% from 34% due to productivity improvements.
Rio achieved $1.6 billion in pre-tax operating cash cost improvements in 2016 and divested $1.3 billion worth of assets.
Net debt at December 31 dropped by 30% to $9.58 billion, and the gearing ratio dropped to 17% from 24%.
The company declared a 170c per share dividend, down from last year, but above RBC’s estimate of 153c.
In addition to the $3.1 billion in dividends, the company also announced a $500 million UK buy-back.
The $3.6 billion in returns represents 70% of underlying earnings.
“Today’s results show we have kept our commitment to maximise cash and productivity from our world-class assets, delivering $3.6 billion in shareholder returns while maintaining a robust balance sheet,” Rio CEO J-S Jacques said.
“At the same time, we strengthened the portfolio and advanced our high-value growth projects as we look to the future.”
The company’s three key growth projects are the $338 million Silvergrass iron ore mine, the $5.3 billion Oyu Tolgoi underground expansion, and the $1.9 billion Amrun bauxite project.
Capital expenditure will be $5 billion this year before rising to $5.5 billion for the following two years.
Jacques said the company was entering 2017 in good shape.
“Our team will deliver $5 billion of extra free cashflow over the next five years from our productivity program,” he said.
“Our value over volume approach, coupled with a robust balance sheet and world-class assets, places us in a strong position to deliver superior shareholder returns through the cycle.”
Rio is forecasting operating cash cost improvements for 2016 and 2017 to reach $2 billion.
Rio shares closed 0.8% higher at $A65.69 in Australia, and were up by 1.5% in early London trade.
