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Rio Tinto announced its first-half results:
- Underlying EBITDA of $6.1 billion, 47 per cent below first half 2008
- Underlying earnings of $2.6 billion, 54 per cent below first half 2008
- Net earnings of $2.5 billion, 65 per cent below first half 2008
- Cash flow from operations down 38 per cent to $5.5 billion
- Delivering on commitments made in December 2008:
- Net debt of $39.1 billion at 30 June 2009 was reduced by $14.8 billion following successful completion of the rights issues on 3 July 2009. All of Facilities A and B of the Alcan acquisition facility have now been repaid
- Operating cost savings of $0.8 billion in first half of 2009. On target to achieve $2.5 billion in 2010
- Achieved global headcount reduction of around 16,000 roles in the first half of 2009, ahead of target of 14,000
- Net capital expenditure of $2.8 billion, 22 per cent lower than first half 2008. 2009 capital expenditure forecast to be approximately $5 billion
- $3.7 billion of divestments announced during 2009. In addition, binding offer of $2.025 billion for the majority of the Alcan Packaging businesses announced on 18 August
- No interim dividend, as announced on 5 June 2009
On 5 June 2009, Rio Tinto announced that it had entered a non-binding agreement with BHP Billiton to establish a production joint venture of both companies' Western Australian iron ore assets.
Chairman’s comments
Rio Tinto’s chairman Jan du Plessis said: “The Group has taken swift and decisive action in
response to the global economic crisis and sharp falls in metals and minerals prices. As a
result of our successful rights issues, we have reduced net debt by $14.8 billion. There is more
work to do, but we are better positioned with renewed financial strength and a leaner cost
base.
“We are currently working closely with BHP Billiton to conclude binding agreements for the
iron ore production joint venture that will cover our operations in Western Australia and which
we believe will deliver substantial synergies.
“On 5 June we announced the 2009 interim dividend would not be paid. We expect to make a
2009 final dividend payment subject to satisfactory trading results, progress on divestments
and prevailing market conditions. We expect that the total cash dividend for the 2010 financial
year will be at least equal to the total cash dividend payment for 2008 of $1.75 billion, albeit
over an increased number of shares. From that point on, the Group is committed to the
resumption of a progressive dividend policy over the longer term.”
”We remain cautious about the recent rally in prices. However, the expectation that
development in emerging markets will generate underlying strength in metals and minerals
demand over the long term remains broadly unchanged. Rio Tinto has a strong business with
some of the best assets in the industry and we will continue to take the actions necessary to
ensure we are well placed to deliver value for our shareholders whatever the timing of a
recovery.”
Chief executive’s comments
Tom Albanese, Rio Tinto’s chief executive said, “Despite difficult markets, our businesses are
running smoothly. We are on track to meet the commitments we made in December last year
to reduce operating expenditure and the capital expenditure estimate has been revised in line
with market conditions.
“Our Pilbara iron ore operations set a new quarterly record in the second quarter of this year,
consistently operating at a run rate exceeding 200 million tonnes per annum. Benchmark iron
ore contracts for the year commencing 1 April 2009 have now been settled with Japanese,
Korean and Taiwanese customers. Prices are below last year’s record benchmark but are still
the second highest ever achieved. Delivered spot prices strengthened during the first half
reflecting tightening market conditions.
“The iron ore production joint venture with BHP Billiton will create an unrivalled iron ore
operation with world class assets and infrastructure. It will be able to serve growing markets
with unparalleled efficiency. We believe that our joint venture with BHP Billiton will deliver
substantial value to shareholders as we seek out and deliver synergy benefits to the joint
venture in excess of $10 billion in net present value.
“Rio Tinto Alcan was impacted by very tough trading conditions as a result of a dramatic
decline in prices. We have acted aggressively to push costs down, including curtailing
production at our higher cost operations. The benefits of these steps are starting to emerge
but we expect the greatest effect to be felt in the second half of the year. High cost alumina
has been curtailed and by the end of 2009 we expect approximately 12 per cent of smelting
capacity will have been idled, divested or shut down, representing 42 per cent of our capacity
in the top half of the cost curve. In addition, annual bauxite production at the Weipa mine has
been cut by five million tonnes following a sharp fall in alumina and aluminium demand in
recent months.
“We have continued to make good progress on asset divestments with $3.7 billion announced
to date this year. All of these divestments were at fair values, given current market conditions,
which demonstrate the quality of Rio Tinto’s assets.
“Rio Tinto is taking the right steps to emerge from this challenging period as a stronger, fitter
business. We will continue to focus rigorously on operational excellence, delivering reliable
supply to our customers and value to our shareholders, while preserving future growth options.
We look to the future with confidence.”
About Rio Tinto
Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and NYSE listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.
Rio Tinto’s business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, energy (coal and uranium), gold, industrial minerals (borax, titanium dioxide, salt, talc) and iron ore. Activities span the world but are strongly represented in Australia and North America with significant businesses in South America, Asia, Europe and southern Africa. |