Rio Tinto emerging from darkness

MORNINGSTAR VIEW: 2009 was a pleasing result from a company still recovering from Alcan-debt-inspired woes

Mark Taylor 3 March, 2010 | 3:39PM
Facebook Twitter LinkedIn

Rio Tinto's underlying fiscal 2009 earnings fell 39% to $6.3 billion, close to our $6.5 billion forecast. Net operating cash flow fell 40% to $8.9 billion, again close to our $9.2 billion prediction. Headline profit rose 33% to $4.9 billion and included negative $1.4 billion of exceptional items, including yet another impairment charge relating principally to Alcan, which was surprising as Rio had already written off $7.6 billion in 2008.

Weaker earnings reflect higher volume and admirable cost reduction flailing against a tide of weaker commodity prices, particularly for the bulks. The iron ore contract fell 40% to $63 per tonne, and the coal benchmarks halved. Aluminium and copper declined by one third, with falls most severe in the first half. Controllable operating cost savings of $2.6 billion exceeded the target, while iron ore sales volume was at record levels and copper and gold also enjoyed gains.

Compared with our forecasts, a stronger-than-expected performance from iron ore and thermal coal offset weaker-than-anticipated copper--and to a lesser extent, aluminium--performance. Cost control featured, but a higher proportion of bulk sales into a strong spot market (though not quite to the extent of BHP Billiton) was offset by unexpectedly low translation of higher second-half copper prices to the bottom line, basically a similar trend to BHP.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Mark Taylor  is an equity analyst at Morningstar.