Rio Tinto posts first ever annual loss

Mining heavyweight Rio Tinto swung into its first ever full-year loss in 2012, dragged down by impairments against its aluminium and Mozambique coal assets.

Mining heavyweight Rio Tinto swung into its first ever full-year loss in 2012, dragged down by impairments against its aluminium and Mozambique coal assets.

The world's second largest iron ore producer posted a $2.9bn net loss, a 151% drop from the $5.8bn net profits reported the year before.

Losses reflected writedowns on its Alcan takeover in 2007 and a coal acquisition in Mozambique, where transport challenges have slowed development and coal output estimates have been cut.

Capital expenditure rose 42% to $17.4bn, compared to $12.3bn the previous year, as the group was negatively affected by higher energy and maintenance costs.

The group was also hit by iron ore prices, which have nearly doubled from a trough of around $87 a metric ton last September to the current price of around $155.

Sam Walsh, who was appointed Chief Executive last month, vowed to slash costs and spend more carefully on shareholder value following the results.

Rio is targeting more than $5.0bn of cumulative cash cost savings over the next two years, he said.

Walsh took over from Tom Albanese, who was fired for misjudged aluminum and coal acquisitions that led to $14.4bn in writedowns and left the company in the red.

"Today I am setting out how we can build on our strengths and improve this great company," he said in a statement alongside the financial results.

"Under my leadership, Rio Tinto will have an unrelenting focus on pursuing greater value for shareholders.

"To do this we need to run the business as owners not managers and my immediate priority is to build more focus, discipline and accountability throughout the organisation. Demonstrating this commitment, we will deliver our capital reduction and cost savings targets and improve performance across our business."

Underlying earnings for the year fell 40% to $9.3bn from $15.5bn in 2011, while underlying earnings per share tumbled 38% to $5.03 from $8.08.

It missed forecasts by analysts at JP Morgan, who expected the group to report underlying earnings of $48.9bn.

Cash flows from operations were also down by 40% to $16.4bn, a big dip from $427.3bn.

Nevertheless, the company's dividend rose 15% to $1.67 per share from $1.45, beating market estimates of $1.525 as management gave a positive outlook for the future of the business.

Net debt increased from $8.5bn to $19.3bn as operating cash inflows were offset by capital expenditure, acquisitions, the increase in dividend and share buy-back programme.

The group's aluminium and energy business faced a deterioration in market conditions and rising costs, while Rio generated strong margins in copper, iron ore and minerals.

"Throughout 2013 and 2014 we will seek to enhance margins at our existing businesses by unlocking substantial productivity improvements, aggressively reducing costs and better managing our sustaining capital," Walsh said.

Chairman Jan du Plessis said the "quality of our assets combined with our positive long term outlook" provided confidence in the sustainable cash-generating potential of the business.

"Today's increase of 15% in our full year dividend reflects that confidence," Plessis added.

RD

Recommended

Broker safety – your questions answered
Investment strategy

Broker safety – your questions answered

Cris Sholto Heaton answers more of your questions about the safety of stockbroker accounts
25 Mar 2020
How demographics affects stock valuations
Investment strategy

How demographics affects stock valuations

New research suggests that stock and bond valuations are driven by the age of the population – at least in the US.
24 Feb 2020
Do you own shares in Sirius Minerals? Here’s what you need to do now
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020
Why investors should be “cautiously bullish” for 2020
Stockmarkets

Why investors should be “cautiously bullish” for 2020

Analysts have been out in force making rosy predictions for stockmarkets in 2020, but while there is certainly a case for optimism, investors should r…
17 Jan 2020

Most Popular

How the stamp duty holiday is pushing up house prices
Stamp duty

How the stamp duty holiday is pushing up house prices

Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb…
25 Sep 2020
Can Rishi Sunak’s winter plan save the UK economy?
UK Economy

Can Rishi Sunak’s winter plan save the UK economy?

With his Winter Economic Plan, chancellor Rishi Sunak is hoping to support the economy through the dark months ahead as restrictions tighten again. Jo…
25 Sep 2020
The electric-car bubble could get an awful lot bigger from here
Renewables

The electric-car bubble could get an awful lot bigger from here

The switch to electric cars is driving a huge investment bubble. But that’s not necessarily a bad thing, says John Stepek. Fortunes will be made and l…
24 Sep 2020