BLBG:Rio Tinto Posts Loss on $8.9B Aluminum Charge
Rio Tinto Group (RIO), the world’s third- largest mining company, swung to a second-half loss, its first in four years, after taking a $8.9 billion one-time charge on the value of its aluminum business.
The loss was $1.76 billion in the six months ended Dec. 31, London-based Rio said today in an e-mailed statement. That compares with a record of profit $8.5 billion a year earlier. Deutsche Bank AG estimated on Feb. 6 the company would take a charge of $6 billion on the unit.
Aluminum, used in cars, packaging and houses, has declined 12 percent in the past year, hurting producers such as United Co. Rusal and Alcoa Inc., which last month booked its first loss in two years. Chief Executive Officer Tom Albanese and Chief Financial Officer Guy Elliott declined an annual bonus because the charge related to the $38 billion acquisition in 2007 of Alcan Inc., Chairman Jan du Plessis said in a statement.
“The impairment charges were bigger than expected,” said Ric Ronge, who helps manage the equivalent of $1.3 billion in stocks, including Rio and BHP Billiton Ltd. (BHP), at Pengana Global Resources Fund in Melbourne.
Rio fell 16 cents or 0.2 percent to A$71.60 at the close of Sydney trading today, before the announcement. The stock has gained 19 percent since the start of the year. The company increased its full-year dividend by 34 percent to 145 cents.
October Plan
Rio in October said it planned to sell 13 aluminum assets, including smelters and alumina plants in Australia, the U.S. and U.K., to improve its finances. It has cut debt after borrowings ballooned to $40 billion with its purchase of Alcan. The sale may draw bids from Chinese buyers, Deutsche Bank said.
“At our November investor seminar, we noted that uncertain macroeconomic conditions, together with stronger currencies in some regions and high raw material costs would result in impairments of our aluminum business,” Albanese said in the statement. “Growth in demand for aluminum remains strong but the industry has been running surpluses for the past five years.”
Rio (RIO) reported a 59 percent drop in full-year profit of $5.8 billion, with record underlying earnings of $15.5 billion, driven by its biggest earning iron ore unit, Rio said. Underlying earnings in the second half were $7.8 billion, according to the company’s e-mail.
“The operating performance of the assets themselves seems to be pretty good,” Pengana’s Ronge said. “The full-year number is better than expected. The dividend looks to be better than consensus, as well.”
To contact the reporters on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net; Soraya Permatasari in Melbourne at soraya@bloomberg.net
To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net
