Cost cutting at Rio Tinto after $3billion loss
Rio Tinto has reported a $3bln loss - its first ever full-year loss. But its new chief is promising to cut costs and put it back on track.PT1M1S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2egkd 620 349 February 15, 2013
Rio Tinto has done a ''lot of soul-searching'', according to new chief executive Sam Walsh, after $US14.4 billion in writedowns dragged the company to report its first net loss.
Rio on Thursday reported a $US2.99 billion loss for 2012, though underlying earnings were above consensus analyst forecasts at $US9.3 billion.
As flagged in January, when former CEO Tom Albanese was summarily dismissed, Rio took hefty writedowns against its aluminium ($US11 billion) and Mozambique coal assets ($US2.9 billion), as well as $US460 million against the Argyle diamond mine in Western Australia.
But Rio gifted investors by declaring a surprise 15 per cent increase in its full-year dividend, which rose to US167¢ a share.
Market reaction was positive with Rio's London-listed shares rising 1.7 per cent to 3821p in early trade overnight, following a strong Australian lead. Deutsche Bank's mining analyst Paul Young said the dividend jump represented a ''very positive demonstration of a focus on shareholder returns''.
In his first profit result at the helm Mr Walsh, formerly the iron ore chief, said the company had shown ''poor judgment'' in the past ''and both I and the board are saying that is unacceptable''.
Mr Walsh said his job was to reshape Rio to ensure there would not be a repeat of the disastrous acquisitions of Alcan in 2007, and Riversdale in 2011, which led to the writedowns in 2012.
''The biggest opportunity is picking up the learnings from the iron ore business and [applying them] over the entire operation,'' he said.
Rio's underlying earnings in 2012 were down significantly on the $US15.5 billion reported a year earlier, but reflected record iron ore production and shipments and a second half recovery in copper volumes.
Iron ore dominated, 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 ($119 million) and aluminium ($3 million).
Rio appointed Andrew Harding as the new CEO of iron ore. Mr Harding, a 21-year veteran at Rio, was previously head of copper. His replacement was Jean-Sebastien Jacques, formerly president of Rio's international copper. Both men will join Rio's executive committee.
Mr Walsh said commodity price volatility would persist in 2013 but there were positive signs, with China's recovery continuing to gain momentum.
He was ''concerned'' for the future of the Oyu Tolgoi copper project in Mongolia and said Rio's agreement with the country was ''the foundation for any future development … or indeed any other investment in the country''.
Mr Walsh confirmed Rio had paid no mining tax in Australia in the December half-year, when the impost raised just $126 million.