Rio's Albanese departs after $14bn write-down


Rio's Albanese departs after $14bn write-down


Tip Update: Buy at 3389p

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We said BUY at 4,164p on 05 Nov 2010
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Tom Albanese has stepped down as chief executive of Rio Tinto (RIO) after the group revealed a $14bn (£8.7bn) write-down ahead of the publication of its full-year results in February. The carrying value of the group’s aluminium assets was hit to the tune of $10bn-$11bn, while another $3bn was stripped off the value of Rio Tinto's coal mining operations in Mozambique, which only began exporting midway through last year.

Mr Albanese, a Rio Tinto veteran, had been at the helm since 2007, and has been replaced by Sam Walsh, who has been heading up the group’s core iron division.

Despite the hefty write-down, shares in Rio Tinto fell by a relatively modest 2.2 per cent on the news; an indication, perhaps, that the market was probably anticipating another hit on the group’s aluminium assets, following on from last year’s $8.9bn charge. The board obviously felt, however, that this latest write-down would have made it very difficult for Tom Albanese to continue as chief executive, given his association with the damaging $38bn acquisition of Alcan, which was acquired at the height of the commodities boom.

IC View

At 3,389p, we still maintain that Rio offers long-term value. Near-term prospects are improving on the back of a rise in Chinese industrial demand, and a slight easing in Australian labour costs. Long-term buy.

Last IC view: Buy, 3,162p, 8 Aug 2012


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