Rio Tinto results for the year ended 31 December 2012
Rio Tinto chief executive Sam Walsh said "Today I am setting out how we can build on our strengths and improve this great company. Under my leadership, Rio Tinto will have an unrelenting focus on pursuing greater value for shareholders. To do this we need to run the business as owners not managers and my immediate priority is to build more focus, discipline and accountability throughout the organisation. Demonstrating this commitment, we will deliver our capital reduction and cost savings targets and improve performance across our business."
• Reinforcing capital allocation discipline
- Pursuing greater value for shareholders by investing capital only in assets that, after prudent assessment, offer attractive returns that are well above our cost of capital.
- Balancing the use of capital between returns to shareholders and capital expenditure, while aiming to maintain a strong balance sheet with a single A credit rating.
• Improving performance at existing businesses
- Targeting cumulative cash cost savings of more than $5 billion by the end of 2014, equivalent to an annual run rate of $3 billion by 2014, assuming stable market and operating conditions.
- Reducing capital expenditure on approved and sustaining projects to approximately $13 billion in 2013.
- Lowering exploration and evaluation spending by $750 million (pre-tax) in 2013 compared with 2012.
• Delivering approved growth projects with two significant milestones in 2013:
- Phase one Pilbara iron ore expansion to 290 Mt/a has been accelerated and is now scheduled for completion during the third quarter of 2013. Phase two expansion to 360 Mt/a to be operational by the first half of 2015.
- Oyu Tolgoi copper-gold mine now being commissioned with first commercial production scheduled by the end of June 2013. Discussions with the Government of Mongolia regarding the continuing implementation of the Investment Agreement are ongoing.
2012 financial results
2012 underlying financial results reflect record iron ore production and shipments and a second half recovery in copper volumes. This was in the context of lower average market prices in 2012 which reduced underlying earnings by $5.3 billion compared with 2011:
- Underlying earnings1 of $9.3 billion.
- Net loss of $3.0 billion after impairments of $14.4 billion, primarily relating to aluminium businesses as well as coal assets in Mozambique.
- 15 per cent increase in full year dividend to 167 cents per share.
The financial results are prepared in accordance with IFRS and are unaudited. 1Underlying earnings is the key financial performance indicator which management uses internally to assess performance. It is presented here to provide greater understanding of the underlying business performance of the Group's operations attributable to the owners of Rio Tinto. Net earnings and underlying earnings relate to profit attributable to owners of Rio Tinto. Underlying earnings is defined and reconciled to net earnings on page 12.