Rio posts $3b loss but offers dividend gift
MINING powerhouse Rio Tinto has reported a net loss of $US2.99 billion - the first in its history - dragged down by well-flagged impairments against its aluminium and Mozambique coal assets.
After one-offs, Rio's operating profit exceeded expectations, reporting underlying earnings of $US9.3 billion in 2012, above the consensus of analysts' estimates of $US9.1 billion.
Rio gifted investors by lifting its annual dividend to $US1.67 a share, up 15 per cent on the previous year.
The miner said the 2012 underlying earnings, down significantly on the $US15.5 billion reported in 2011, reflected record iron ore production and shipments and a second-half recovery in copper volumes.
Iron ore dominated the results, delivering $US9.2 billion in net earnings, down from $US13.3 billion a year ago. Copper delivered $US1.1 billion in net earnings followed by energy ($US283 million), diamonds and other minerals ($US119 million) and aluminium ($US3 million).
One lead broking analyst, speaking off the record, said Rio's results were "a good set of numbers, across the board". The higher dividend, he said, was "a nice surprise. It's good to see them returning cash. It's what the market wants."
Rio chief executive Sam Walsh said his immediate priority was to "build more focus, discipline and accountability throughout the organisation".
"In 2012, we generated strong margins in copper, iron ore and minerals," Mr Walsh said.
"But our aluminium and energy businesses faced a deterioration in market conditions coupled with rising costs which we are addressing through our cost saving and value enhancement programs.
"Looking ahead, we see the positive momentum in the fourth quarter of last year being sustained into 2013, with Chinese GDP growth returning to above 8 per cent in 2013."
"We expect market uncertainty and price volatility to persist as long as the structural issues in Europe and the United States remain unresolved."
Rio also announced the appointment of Andrew Harding as the new chief executive of its iron ore division. Mr Harding, a 21-year veteran at Rio, was previously head of copper.
His successor as copper chief was Jean-Sebastien Jacques, formerly president of Rio's international copper operations. Both men will join Rio's executive committee.
Mr Walsh confirmed Rio Tinto had paid no mining tax in its first six months, when it raised just $126 million.
The miner's net loss follows the shock "dismiss-ignation" of former chief executive Tom Albanese in mid-January, and his replacement by Australian Mr Walsh, the long-serving iron ore chief executive.
Rio announced the surprise departure of Mr Albanese and energy chief Doug Ritchie on January 17, along with impairments of $US14.4 billion, including about $US2.9 billion against the Mozambique coal assets acquired in the 2011 takeover of Riversdale Mining, and a further $US11 billion against its aluminium assets, a legacy of the disastrous debt-funded acquisition of Alcan for $US38 billion in July 2007, which almost destroyed the company during the financial crisis.
Rio has since decided to sell or spin-off Pacific Aluminium and its prospects improved on Wednesday after the Northern Territory government offered to make cheap gas available to keep its struggling Gove alumina refinery at Nhulunbuy up and running. Rio is also trying to exit diamonds.
Mr Walsh said Rio was targeting cumulative cash cost savings of more than $US5 billion to be achieved over the next two years, equivalent to an annual run rate of $US3 billion by 2014, assuming stable market and operating conditions, with significant additional cash savings in sustaining capital expenditure and exploration and evaluation spend.