Slide 1: Notice to ASX: 2015 half year results presentation
Notice to ASX 2015 half year results presentation For personal use only 6 August 2015 Attached is the Rio Tinto 2015 half year results presentation to be given today by Rio Tinto chief executive Sam Walsh, and chief financial officer Chris Lynch. The presentation slides will also be available at www
Slide 2: 2015 half year results: Generating value through the cycle
6 August 2015 Highlights Financial performance Outlook Appendix For personal use only 2015 half year results Generating value through the cycle
Slide 3: Cautionary statement
2 Cautionary statement For personal use only This presentation has been prepared by Rio Tinto plc and Rio Tinto Limited (“Rio Tinto”). By accessing/attending this presentation you acknowledge that you have read and understood the following statement. Forward-looking statements This document contains
Slide 4: Sam Walsh, Chief executive
6 August 2015 Highlights Financial performance Outlook Appendix For personal use only Sam Walsh Chief executive
Slide 5: Our commitment to shareholders
4 Our commitment to shareholders For personal use only To deliver industry-leading, sustainable shareholder returns through the cycle from our: Tier 1 assets Disciplined allocation of capital Operating and commercial excellence Culture of safety and integrity ©2015, Rio Tinto, All Rights Reserved
Slide 6: The 'New Normal'
5 The ‘New Normal’ For personal use only Global growth continues • Period of economic adjustment Real GDP (US$ trillion) Real GDP growth (%) 100 10% • Developed markets recovering • China transitioning to major 80 8% developed economy Other developing economies 60 6% − Lower growth on a higher base
Slide 7: H1 2015 highlights
6 H1 2015 highlights For personal use only Underlying earnings of $2.9 billion Net cash from operating activities of $4.4 billion Returned $3.2 billion of cash to shareholders Reduced costs by $0.6 billion Reduced capex spend to $2.5 billion Strong balance sheet with net debt of $13.7 billion ©2015,
Slide 8: $3.2 billion returned to shareholders in H1 2015
7 $3.2 billion returned to shareholders in H1 2015 For personal use only Total cash returns to shareholders US$ billion • Expected to return over $6 billion to shareholders in 2015 1.0 6.1 • $2 billion share buy-back on track for completion by 2015 year end 1.9 − Funded from 2014 cash flows • Total
Slide 9: Chris Lynch, Chief financial officer
6 August 2015 Highlights Financial performance Outlook Appendix For personal use only Chris Lynch Chief financial officer
Slide 10: Cost reductions, exchange rates and lower energy costs offset price decline
9 Cost reductions, exchange rates and lower energy costs have offset almost 40% of the price decline For personal use only Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 6,000 5,116 5,000 Total cost reductions of $460m post-tax or $641m pre-tax 4,000 3,000 396 64 2,923 74 79 847 2,417
Slide 11: Net earnings
10 Net earnings For personal use only US$m H1 2015 underlying earnings 2,923 Impairments (421) Losses/gains on disposals 11 Exchange losses on (1,306) debt and derivatives Increased closure provision (242) for legacy operations Restructuring costs and (135) global headcount reductions Other (24) H1
Slide 12: Succeeding in a challenging market
11 Succeeding in a challenging market For personal use only Iron Ore Aluminium • Pilbara operating FOB EBITDA margins • Integrated operations EBITDA margins of 61% of 35% • Cash flows from operations of $2,065m • Cash flows from operations of $1,556m • Underlying earnings of $2,099m • Underlying ear
Slide 13: Balance sheet remains strong and flexible
12 Balance sheet remains strong and flexible For personal use only Net debt and gearing ratio1 • Maintain strong balance sheet amid US$ billion challenging market 22.1 • Targeting 20-30% gearing ratio through the cycle 18.1 • $11.2 billion of cash on hand as at 30 28% June 2015 13.5 13.7 12.5 25% H1
Slide 14: Strong operating cash flows
13 Strong operating cash flows For personal use only Net cash generated from operating activities • $1 billion reduction in cash flows, as US$ million price impact partially offset by: − Operating cash cost reductions 5,456 − Working capital cash release − Volume increases 4,435 − Lower taxes − Favo
Slide 15: Cost culture continues
14 Cost culture continues – 85% of original 2015 target achieved in H1 and target increased For personal use only Pre-tax operating cash cost improvements Reduction vs. 2014 (US$ million) 359 1,000 750 90 551 Original 2015 target H1 2015 H1 2015 E&E H2 2015 target Total (operating and E&E) operating
Slide 16: Focus on capital efficiency
15 Focus on capital efficiency For personal use only Capital discipline… • Capital allocation discipline requires Capital expenditure profile (US$ billion)1 project IRR >15% 17.6 • Two major projects completed in H1 2015: 13.0 − Kitimat − Pilbara infrastructure 8.2 ~7 <6 ~5.5 2012A 2013A 2014A 2015F
Slide 17: Our capital allocation framework maximises shareholder value
16 Our capital allocation framework maximises shareholder value For personal use only 1. Essential 2. Progressive 3. Iterative cycle of sustaining capex dividends Further cash Compelling returns to growth shareholders Debt management ©2015, Rio Tinto, All Rights Reserved
Slide 18: Sam Walsh, Chief executive
6 August 2015 Highlights Financial performance Outlook Appendix For personal use only Sam Walsh Chief executive
Slide 19: Safety and our values are fundamental
18 Safety and our values are fundamental For personal use only All injury frequency rates Per 200,000 hours worked Accountability • Relentless pursuit of shareholder value 2.0 • Disciplined decision-making 1.8 1.6 Respect 1.4 • For the environment and communities 1.2 • For health, safety and wellbei
Slide 20: Tier 1 iron ore assets and operational excellence
19 Tier 1 iron ore assets… 140 2015 second quarter delivered iron ore cost curve (WoodMac) For personal use only $/dmt CFR China 62% Equivalent 120 RTIO Pilbara Third Quartile Producer 100 80 60 40 20 0 - 250 500 750 1,000 1,250 1,500 Mtpa …and operational excellence deliver through the cycle 80% Av
Slide 21: Pilbara: our low-cost advantage has been sustained
20 Pilbara: our low-cost advantage has been sustained over many years For personal use only Pilbara cash unit cost • H1 2015 cash unit cost of $16.2/t US$ per tonne (21% lower than $20.4/t in H1 2014) • Maintain consistently attractive FOB EBITDA margins (61% in H1 2015) 20.4 18.7 • Average realised
Slide 22: Operational and commercial excellence embedded across our businesses
21 Operational and commercial excellence is embedded across our businesses For personal use only Iron ore material 166,000 tonnes of rehandling reduced concentrate tolled by 16Mt in 2014 in H1 2015 at RTK to optimise smelter utilisation and increase revenues Autonomous trucks (Utilisation) Aluminium
Slide 23: Delivering our major projects
22 Delivering our major projects For personal use only Iron Ore Aluminium Copper Fe Al Cu OT Underground Pilbara infrastructure Kitimat expansion Development Plan1 Ramp up to 420kt nameplate Next steps to approve of feasibility Ramp up to generate maximum value from integrated system expected
Slide 24: Building the world's best mining company
23 Building the world’s best mining company For personal use only World-class portfolio Free Quality cash flow growth generation Sustainable shareholder returns Operating Capital and allocation commercial discipline excellence Balance sheet strength ©2015, Rio Tinto, All Rights Reserved
Slide 25: 2015 half year results: Appendix
6 August 2015 Highlights Financial performance Outlook Appendix For personal use only 2015 half year results Generating value through the cycle
Slide 26: Cost reductions and exchange rates offset over half of price impact
25 Cost reductions, exchange rates and lower energy costs have offset over half of the price impact For personal use only Underlying earnings H2 2014 vs H1 2015 US$ million (post tax) 5,000 4,189 4,000 126 319 2,923 3,000 79 2,846 702 (213) (155) 2,000 (2,124) 1,000 0 H2 2014 Price Exchange Energy &
Slide 27: Weaker prices significantly reduced underlying earnings
26 Weaker prices significantly reduced underlying earnings in H1 2015 For personal use only Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 6,000 5,116 5,000 4,000 139 2 3,000 (14) (19) (23) (46) (75) (58) (85) 2,000 (241) (3,620) 1,000 (3,200) 0 H1 2014 Price underlying earnings ©2015
Slide 28: Partly offset by favourable exchange rates, energy costs and volumes
27 … partly offset by favourable exchange rates, lower energy costs and higher volumes For personal use only Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 6,000 150 5,116 5,000 73 26 4,000 12 2 (4) (14) 3,000 (33) 74 2,417 79 847 2,000 (133) (3,620) 1,000 0 H1 2014 Price Exchange Ene
Slide 29: Working capital cash release offset by non-cash movements
28 Working capital cash release offset by non-cash movements and lower payables as capex reduces For personal use only Working capital balance reconciliation US$ million Net increase of $243m 273 Working capital cash movements US$ million 30 (30) 1,609 1,366 (579) (636) (678) (791) (795) H1 2010 H1
Slide 30: Iron Ore: increased volumes and cost reductions against lower prices
29 Iron Ore: increased volumes and cost reductions delivered against lower prices For personal use only Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 5,000 4,683 4,000 3,000 150 176 2,099 349 80 1,912 2,000 (1) (138) 1,000 (3,200) 0 H1 2014 Price Exchange Energy & Flexed Volumes Cash
Slide 31: The world's best aluminium business
30 The world’s best aluminium business For personal use only Clear focused strategy: Bauxite and first quartile smelters are key pillars Bauxite Alumina Aluminium Industry-leading bauxite position Provides competitive security Sector-leading primary metal H1 of supply for our first cost 2015 EBITDA
Slide 32: Aluminium: exchange rates, prices and cost improvements doubled earnings
31 Aluminium: exchange rates, prices and cost improvements more than doubled earnings For personal use only Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 1,000 1 104 793 279 758 12 750 (82) (33) 139 500 373 250 - H1 2014 Price Exchange Energy & Flexed Volumes Cash cost Exploration &
Slide 33: Significant growth in copper ahead
32 Significant growth in copper ahead For personal use only Kennecott Oyu Tolgoi volumes start to underground will recover in 2016 deliver significant following value (>80% of total de-weighting/ de- value) watering east wall New 152 ktpd Rio Tinto expects concentrator metal share from completed in
Slide 34: Copper & Coal: cost savings and exchange rates offset lower prices
33 Copper & Coal: cost savings and exchange rates partially offset lower prices For personal use only Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 750 658 500 41 107 393 41 348 86 (57) 250 (46) (437) 0 H1 2014 Price Exchange Energy & Flexed Volumes Cash cost Exploration & Tax & othe
Slide 35: Diamonds & Minerals: delivering strong margins
34 Diamonds & Minerals: delivering strong margins For personal use only Well positioned for consumer-driven growth Diamonds Borates Titanium Dioxide Salt & Uranium 42% FOB EBITDA 27% FOB EBITDA 26% FOB EBITDA 44% EBITDA margins margins margins margins in salt Argyle underground Stable borate demand
Slide 36: Diamonds & Minerals: earnings in line with H1 2014
35 Diamonds & Minerals: earnings in line with H1 2014 despite challenging market conditions For personal use only Underlying earnings H1 2014 vs H1 2015 US$ million (post tax) 150 104 101 100 76 (12) 14 75 27 50 (38) (29) 0 (67) H1 2014 Price Exchange Energy & Flexed H1 Volumes Cash cost Exploration
Slide 37: Other movements in underlying earnings
36 Other movements in underlying earnings For personal use only Underlying earnings impact Epl'n eval'n Interest, FX/ Energy & Cash Epl'n 2014 Non tax & US$ million H1 2014 price Inflation Volumes Costs eval'n disp Cash other H1 2015 Other operations (181) (54) (2) 1 15 - - 47 154 (20) Central Explo
Slide 38: Earnings reconciliations
37 Earnings reconciliations For personal use only H1 2015 Energy Resources of Australia US$m Total comprehensive loss per ERA press release (A$255m) (200) Increased depreciation of closure asset (6) 1 Tax and unwinding of discount 155 Less: Minority interests (31.6%) 17 Other (3) Underlying earnings
Slide 39: Modelling earnings
38 Modelling earnings For personal use only H1 2015 ($m) impact on FY 2015 average price/ underlying earnings of 10% Earnings sensitivity rate price/rate change Copper 268c/lb 183 Aluminium $1,783/t 441 Gold $1,206/oz 23 Iron ore (62% Fe FOB) $56/dmt 1,005 Coking coal (benchmark) $113/t 74 Thermal c