The Board is committed to maintaining an appropriate balance between cash returns to shareholders and investment in the business, with the intention of maximising shareholder value.
At the end of each financial period, the Board determines an appropriate total level of ordinary dividend per share, taking into account the results for the financial year, the outlook for our major commodities, the Board's view of the long-term growth prospects of the business and the company's objective of maintaining a strong balance sheet. The intention is that the balance between the interim and final dividend be weighted to the final dividend.
The Board expects total cash returns to shareholders over the longer term to be in a range of 40-60% of underlying earnings in aggregate through the cycle. Acknowledging the cyclical nature of the industry, in periods of strong earnings and cash generation, it is the Board's intention to supplement the ordinary dividends with additional returns to shareholders. They determine dividends in US dollars. They declare and pay Rio Tinto plc dividends in pounds sterling and Rio Tinto Limited dividends in Australian dollars. The 2020 interim dividend has been converted at exchange rates applicable on 28 July 2020 (the latest practicable date prior to the declaration of the dividend). American Depository Receipt (ADR) holders receive dividends at the declared rate in US dollars.
Other financial highlights include:
• Sustained improvement in safety performance, with the all injury frequency rate declining to 0.37 (0.42 in 2019), a reduction in the severity rate and fewer process safety incidents.
• They remain committed to their relationship with communities, following the Juukan Gorge events in the Pilbara. They are engaging extensively with Traditional Owners, including the Puutu Kunti Kurrama and Pinikura people, and indigenous leaders in the Pilbara and across Australia. A board-led review of their heritage management processes is underway. We will make a submission to the Inquiry by the Joint Standing Committee on Northern Australia by 31 July.
• $5.6 billion operating cash flow was 12% lower than 2019 first half, mainly due to lower prices and the effect of timing differences. In June 2020 we made a final payment of $1.0 billion in Australian income tax with respect to 2019 profits.
• $2.8 billion free cash flow was 28% lower than 2019 first half, reflecting the lower operating cash flow and a 13% rise in capital expenditure to $2.7 billion due to an increase in development capital.
• $9.6 billion underlying EBITDA was 6% lower than 2019 first half, primarily due to lower prices for aluminium and copper. Iron ore prices were stable, reflected in underlying EBITDA margin of 47%.
• $4.8 billion underlying earnings was 4% lower than 2019 first half. Taking exclusions into account, net earnings of $3.3 billion mainly reflected $1.0 billion of impairments, of four aluminium smelters and the Diavik diamond mine, and exchange rate movements.
• Maintained strength in their balance sheet with $4.8 billion of net debt, an increase of $1.2 billion, which mainly reflects $3.8 billion of cash returns paid to shareholders in 2020 first half, partly offset by the free cash flow of $2.8 billion.
• $2.5 billion interim ordinary dividend declared today, with interim pay-out ratio at 53% of first half underlying earnings, equivalent to 155 US cents per share, 3% higher than 2019 first half.