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11 February
MELBOURNE,
Press Release
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Rio Tinto announced results for 2009. Excluding LME and foreign currency movements, 2009 earnings were $445 million higher than the prior year. Restructuring initiatives leading to lower headcount, reduced freight and alloy costs, lower energy and input prices for caustic, pitch and coke and a general reduction in site production costs all contributed to the favourable cost performance. Synergies of $924 million were realised in 2009 with a run rate of $1.1 billion achieved by the end of 2009. Second half underlying earnings of $111 million compared with a loss of $689 million in the first half of 2009. The turnaround in Aluminium’s earnings was primarily from higher prices Price The 2009 spot aluminium price averaged $1,665 per tonne, a decline of 35 per cent on 2008. The decline in LME prices that commenced in mid 2008 continued into 2009 with some improvement in the second half of 2009. Bauxite 2009 bauxite production was 12 per cent lower than 2008. Production at Weipa was down 19 per cent year on year although it increased by 25 per cent in the fourth quarter compared with the third quarter due to rising third party demand. Alumina Alumina production was two per cent lower in 2009, following production cuts at the Vaudreuil (Jonquiere) and Gardanne alumina refineries announced in early 2009. These production cuts offset record annual production at the Queensland Alumina, Yarwun, Gove and Sao Luis (Alumar) refineries. Gove and Alumar continued to ramp up their expansions and presented annual production increases of eight per cent and ten per cent, respectively. Aluminium Annual production was four per cent lower than 2008 as production was closed or curtailed due to market conditions. During 2009 Rio Tinto announced the sale of the Ningxia smelter in China, the closure of the Beauharnois smelter in Quebec, the cessation of smelting activities at the Anglesey smelter in Wales and various other curtailments. At the end of 2009 the Aluminium group’s annual run rate of aluminium production was nine per cent lower than at the start of the year. Rio Tinto’s chairman Jan du Plessis said: “Achieving underlying earnings of $6.3 billion is a commendable result for the Group, especially during a year of rapidly changing macro economic conditions. During 2009 we took decisive actions to recapitalise the balance sheet and to reduce operating costs. Significant progress in our divestment programme and strong operating cash flows, together with the proceeds from the rights issues, have enabled us to cut net debt by more than half – a $20 billion reduction in 2009. Our renewed financial strength gives us the opportunity to focus on growth through disciplined investment in capital growth projects. “We have made good progress towards the creation of the Western Australian iron ore production joint venture with BHP Billiton. We expect it to deliver over $10 billion of synergies through reduced costs and increased production. Following the signing of binding agreements in December, we are now moving forward with the joint regulatory filings. “The Boards have announced a final dividend of 45 cents per share. This reflects the Group’s strong operating performance, excellent progress with divestments and our positive outlook. “We have witnessed a substantial recovery in the pricing of most of our key commodities over the past twelve months, driven largely by government measures in response to the global financial crisis. The bottoming out of the global economy and cutbacks in production have also influenced commodity prices. Looking forward, we believe that the factors that drove price recovery in 2009 will continue through 2010. We expect that China will grow at over nine per cent and the emergence of the OECD from recession will provide further support. However, we are mindful that the wind down of stimulus packages across the globe and speculative asset bubbles could produce volatility. Rio Tinto, with its suite of low cost, tier one assets, recapitalised balance sheet and options for growth is well positioned to benefit from a sustained recovery in the world economy.” Tom Albanese, Rio Tinto’s chief executive said, “The Group delivered exceptional operational performance, either meeting or exceeding our production targets, and our rigorous cost reduction programme delivered $2.6 billion in savings, beating our target one year in advance. Whilst trading conditions were tough in the first half, the second half was much improved, with the benefits of our decisive actions on costs, increased production and better markets all making a contribution. “Our iron ore business in the Pilbara consistently operated above its nameplate capacity of 220 million tonnes per annum during the second half of the year and set new sales and production records for the year as a whole. “We embarked on a wholesale transformation of our aluminium business, which put it back into profit in the second half of the year. Production cutbacks were maintained throughout the year with the Group’s annual aluminium run rate nine per cent lower by the end of the year. “Following the recapitalisation of the balance sheet, we are bringing forward some of our premier growth options through a disciplined programme of investment. For 2010 we expect our capital expenditure to be at least $5 billion with potential for this to rise to $6 billion. “Progress on asset divestments has continued apace with $7.2 billion announced in 2009 of which $5.7 billion has since completed, including $1.948 billion from the sale of the majority of the Alcan Packaging businesses which completed on 1 February 2010. The bulk of the programme we began two years ago is now complete, with total receipts of $8.8 billion received to date of the $10.3 billion of agreed sales. “Despite the volatility of the past year, we still believe that we are experiencing a secular uplift in demand for commodities. Our long term outlook remains strong as China, followed by India, continues to urbanise and industrialise over the next two decades. “We have emerged from the past year a leaner and more flexible business. We will maintain our rigorous focus on operational excellence in 2010, and start the year with enhanced options | |||