The 13.6 percentage point decline in gross margin since the 2021 peak underscores the cyclicality of Rio Tinto's earnings power, with operating leverage amplifying the impact of softer commodity prices. Despite the compression, the 28.0% gross margin in 2026Q2 remains above the 25.0% trough seen in 2025Q2, suggesting a stabilization above prior cycle lows. Net margin of 21.5% in 2026Q2, up from 13.6% in 2022Q4, indicates that cost controls and product mix have partially offset revenue pressures, though investors should monitor whether this resilience persists if iron ore prices weaken further.

The halving of ROIC from its 2021 peak highlights the impact of both lower margins and a 30% expansion in the asset base, driven by heavy investment in Simandou and Oyu Tolgoi. While ROE has recovered to 9.6% in 2026Q2 from a low of 6.7% in 2022Q4, it remains well below the 15.7% peak, indicating that capital deployed in new projects has yet to generate returns commensurate with historical levels. The divergence between ROE and ROIC suggests that leverage, though modest, is amplifying equity returns relative to underlying operational efficiency.

The shift from a positive CCC of 18 days in 2024Q2 to -3 days in 2026Q2 reflects a deliberate extension of payment terms to suppliers, improving cash generation without sacrificing sales collection. DSO has been reduced to 8 days from 13 days in 2024Q2, suggesting tighter credit management, while DIO remains stable around 30 days, indicating consistent inventory turnover. This negative CCC is a sign of operational efficiency, but investors should note that such improvements may have limits and could reverse if supplier terms are renegotiated under stress.

The increase in leverage, driven by debt-funded growth capex, has lifted D/EBITDA from 0.89 to 1.79 over the same period, yet this remains conservative relative to peers like BHP (D/E 0.47) and Vale (D/E 0.56). Interest coverage of 20.28x in 2026Q2, though down from 45.25x in 2022Q2, still provides a substantial buffer against earnings volatility. The rising debt load warrants monitoring, particularly as Simandou and Oyu Tolgoi require continued capital outlays, but current coverage suggests refinancing risk is low.

The decline in the current ratio reflects a combination of stable cash balances and rising current liabilities, likely tied to increased payables and accruals. The quick ratio of 0.93, below 1.0, suggests that inventory is a meaningful component of current assets, which could be a concern if commodity prices fall and inventory becomes harder to liquidate. However, given the company's strong operating cash flow and access to capital markets, the liquidity position appears sufficient to meet near-term obligations, though investors should watch for further deterioration if cash flow weakens.