12/02/2009 - 15:38

50% profit fall for Rio

12/02/2009 - 15:38

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Rio Tinto has reported a 50 per cent drop in net earnings for the 2008 calendar year which includes an asset impairment charge of $8.4 billion, mostly attributed to a write down of its aluminium business.

Rio Tinto has reported a 50 per cent drop in net earnings for the 2008 calendar year which includes an asset impairment charge of $8.4 billion, mostly attributed to a write down of its aluminium business.

In its full year results released today, Rio reported its net earnings for 2008 reached $3.67 billion, down from the previous year's $7.3 billion.

It said its net earnings included a charge of $8.4 billion related to asset impairments, with the group's aluminium business suffering a $7.9 billion write down.

Underlying earnings, however, reached a record $10.3 billion, up 38 per cent from the previous year's $7.4 billion.

Analysts had tipped Rio's underlying earnings to reach $14.8 billion.

Cash flow from operations were up 64 per cent to $20.6 billion.

Chief executive Tom Albanese said the strong cash flow had allowed the group to reduce its net debt by $6.5 billion during the year.

He said the company is now focusing on maximising and conserving cash generation and paying down its multi-billion dollar debt, incurred from its aquisition of Alcan in 2007.

In December last year, Rio announced that it will reduce capital spend in 2009 from $9 billion to $4 billion and reduce its global work force of employees and contractors by 14,000.

However in light of today's Chinalco deal, some of Rio's terminated and suspended programs will be reviewed along with capital expenditure, which could increase by 10 per cent this year, Mr Albanese said.

Today Rio announced that Chinalco will buy minority interests in some its assets, including a 15 per cent indirect interest in Hamersley Iron, totaling $US19.5 billion.

Rio said it had already cut 7000 contractor jobs out of the planned 8500 jobs on the chopping block and had reduced its employee numbers by 2000. Rio plans to reduce its employee numbers by 5500.

Over the 2008 year, Rio's iron ore operations netted the company $6 billion in earnings, up from $2.6 billion. Production was up slightly from 144.7 million tonnes to 153.4mt.

Earnings from its Argyle diamond operation dropped from $58 million to $29 million. Last month, the company shut down the processing facility for three months and slowed operations to critical development activities.

Its aluminium division reported underlying earnings of $1.18 billion, down from $2.8 billion.

Rio said the lower result was due to higher costs and the impact of adverse exchange rate movements.

For the overall copper and diamonds division, net earnings fell from $3.9 billion to $2 billion while the energy and minerals arm netted $2.5 billion, up from $746 million.

Rio maintained its full year dividend of $US1.36.


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