Rio cans Pacific Aluminium sale

A slowdown in the Chinese economy was primarily responsible for weakening prices for key industrial inputs. Admittedly, Rio managed to partially offset a fall of around 4 per cent in iron ore prices by driving up volumes through the ongoing Pilbara expansion in Western Australia. Rio also had to contend with a 7 per cent fall in copper prices, while average receipts for both its aluminium and gold segments fell by 8 per cent. With output from Asian steel mills on the wane, benchmark prices for hard coking coal were down by almost a quarter from their February highs, which pushed segmental earnings from Rio's energy business into the red during the first half. The price falls effectively wiped $1.28bn (£828m) off Rio's underlying earnings, which came in at $4.2bn for the period. Rio's bottom line was constrained through a non-cash currency conversion loss of $1.85bn and a $300m write-off linked to a landslide at its Bingham Canyon copper mine in the US.

Revenues within Rio's troubled aluminium division were up by 5 per cent to $5.29bn, with net earnings of $123m, against $24m in the corresponding period. This represents a modicum of progress, especially given that the group has had to write-down the bulk of the $38bn it paid for Alcan in a disastrously ill-timed acquisition in 2007. However, the continued depressed state of the global aluminium market has resulted in Mr Walsh having to shelve the planned sale of Pacific Aluminium, which runs five aluminium smelters, a bauxite mine and an alumina refinery in Australia and New Zealand. Rio had been hoping to generate $2bn-$3bn from the sale, but it will now be reintegrated within Rio Tinto Alcan. The failure to hive-off the loss-making subsidiary will frustrate management, particularly after it was forced to drop plans to sell its diamond business earlier this year.

Prior to these figures JPMorgan Cazenove had anticipated 2013 EPS of $4.94 ($5.04 in 2012).