A combination of faltering commodity prices and $14.4bn (£9.3bn) in impairment charges propelled Rio Tinto (RIO) to its first annual net loss ($3bn) since it became a dual listed entity in 1995. Nevertheless, Rio's new chief executive, Sam Walsh, was able to take some solace from the fact that the Anglo-Australian miner's underlying profits were marginally better than the market had been expecting, while shareholders were the beneficiaries of a solid rise in the full-year dividend.
Rio's underlying pre-tax profits came in at $9.3bn; representing a 40 per cent decline on 2011, of which $5.3bn was attributable to a sharp dip in commodity prices. Iron ore prices fell by 24 per cent on the record average attained through 2011, while copper was 10 per cent lower and aluminium 16 per cent adrift of the previous year. Full-year earnings were also held in check by industry-wide cost pressures, particularly the price of fuel. Lower prices were also to blame for a 40 per cent deterioration in operating cash flow through 2012, which, along with a $5.1bn rise in capital expenditure, were the principal reasons why Rio's net debt more than doubled from $8.5bn to $19.3bn.
The mining group is now looking to offload several non-core businesses this year to bolster its cash reserves and free up capital for the continued expansion of its iron ore business in Australia's Pilbara region. Rio remains in talks with the government of Mongolia in relation to the Oyu Tolgoi gold/copper project ahead of initial commercial production in June.
Since taking over from Tom Albanese last month, chief executive Sam Walsh has targeted cost efficiencies that he believes will generate annual savings of more than $5bn by the end of 2014. Mr Walsh is confident that the recovery in Chinese industrial markets will continue through 2013, although he warned that shareholders should expect "market uncertainty and price volatility to persist as long as the structural issues in Europe and the United States remain unresolved".
Credit Suisse estimates 2013 adjusted EPS of 565¢, up from 503¢ in 2012.
| RIO TINTO (RIO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 3,801p | MARKET VALUE: | £74.6bn | |
| TOUCH: | 3,801p-3,802p | 12-MONTH HIGH: | 3,838p | LOW: 2,650p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | NA | |
| NET ASSET VALUE: | 2537¢* | NET DEBT: | 34% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2008 | 58.1 | 9.2 | 287 | 111 |
| 2009 | 44.0 | 7.9 | 302 | 45.0 |
| 2010 | 55.2 | 20.5 | 731 | 108 |
| 2011 | 60.5 | 13.2 | 304 | 145 |
| 2012 | 51.0 | -2.6 | -161 | 167 |
| % change | -16 | - | - | +15 |
Ex-div: 6 Mar Payment: 11 Apr £1 = $1.55 *Includes intangible assets of $9.4bn, or 509¢ a share. NAV and market value reflect both UK and Australian listed shares | ||||
