Slide 1: ASX cover letter for half year results presentation
Rio Tinto Limited 120 Collins Street Melbourne 3000 Australia Postal Address: GPO Box 384D Melbourne 3001 Australia T +61 (0) 3 9283 3333 F +61 (0) 3 9283 3707 For personal use only ASX Market Announcements Australian Securities Exchange SYDNEY NSW 2000 7 August 2014 Dear Sir, Attached is the Rio Ti
Slide 2: 2014 interim results
7 August 2014 Safety Highlights Performance Delivery For personal use only 2014 interim results Delivering greater value for shareholders
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”) and consisting of the slides for a presentation concerning Rio Tinto. By reviewing/attending this presentation you agree to be bound by the following conditions. Forw
Slide 4: Sam Walsh, Chief executive
7 August 2014 Safety Highlights Performance Delivery For personal use only Sam Walsh Chief executive
Slide 5: Delivering results
4 Delivering results For personal use only Underlying earnings of $5.1 billion (+21%) Increased cash flows from operations of $8.7 billion $4.4 billion of net earnings Net debt reduced by $6 billion vs. H1 2013 Interim dividend increased by 15% ©2014, Rio Tinto, All Rights Reserved
Slide 6: Safety is critical to operating effectively
5 Safety is critical to operating effectively For personal use only All injury frequency rate 2003 – H1 2014 Per 200,000 hours worked 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 '14 H1 Safety assessment at Yandicoogina ©2014, Rio Tinto, All Rights Reserved
Slide 7: Transforming our business performance
Delivering greater value for shareholders For personal use only Transforming our business performance 6 Increased underlying Net debt reduced Strong cash flows earnings to by from operations of $5.1bn $6bn $8.7bn Net earnings of $4.4bn Achieved $3.2bn cash vs. 30 June 2013 Reduced capex Record p
Slide 8: Chris Lynch, Chief financial officer
7 August 2014 Safety Highlights Performance Delivery For personal use only Chris Lynch Chief financial officer
Slide 9: 21% increase in underlying earnings
8 21% increase in underlying earnings as volume growth and cost improvements offset lower prices For personal use only Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 156 5,116 5,000 219 661 4,402 4,229 911 4,000 505 3,169 3,000 (173) (1,392) 2,000 1,000 0 H1 2013 Price Exchange Energ
Slide 10: Product group earnings were higher
9 Product group earnings were higher, driven by increases in Iron Ore, Copper and Aluminium For personal use only Underlying earnings ($m) H1 2013 H1 2014 Change Key drivers Volume growth offsetting Iron Ore 4,273 4,683 +10% lower prices Cost reductions and higher market Aluminium 214 373 +74% and v
Slide 11: Optimising the value of our high quality iron ore growth
10 Optimising the value of our high quality iron ore growth For personal use only Annualised half year sales by product • Demand for steel remains strong in Million tonnes per annum China: 3-4% increase expected 250 in 2014 • ~125 Mt of high cost global iron ore 200 supply expected to exit in 2014 1
Slide 12: Delivering significant value through marketing leadership
11 Delivering significant value through marketing leadership For personal use only Iron ore spot performance • $99 per wet metric tonne (FOB) Premium over index achieved (c/dmtu) average realised price in H1 2014 10 Premium • Pilbara Blend fines spot sales consistently achieve a premium 5 above the
Slide 13: Exceeded full year operating cost reduction targets
12 Exceeded our full year operating cost reduction targets ahead of schedule For personal use only Pre tax operating cash cost variance • $3.2 billion of operating cash cost Reduction vs. 2012 (US$ million) improvement vs. $3 billion target 929 3,208 • Exceeded target six months ahead of schedule •
Slide 14: A leading portfolio of high quality assets
13 A leading portfolio of high quality assets For personal use only Portfolio split by asset quality • High quality, low cost assets reduce Percentage of revenue (H1 2014) volatility of earnings and cash flow 100% • Almost half of our sales generate EBITDA margins in excess of 60% 75% • Businesses e
Slide 15: Strong cash flows from operations
14 Strong cash flows from operations For personal use only Cash flows from operations • 8% increase in cash flows from US$ billion operations vs. H1 2013 • Cash flows from operations affected 12.1 in H1 2014 by: − Lower dividend from Escondida − Increase in working capital 8.6 8.7 7.9 8.0 • Signific
Slide 16: We have strengthened our balance sheet
15 We have strengthened our balance sheet For personal use only Gross and net debt profile • Net debt reduced to $16.1 billion US$ billion − In line with ‘mid-teens’ target 29.4 28.3 • Reduced adjusted total borrowings 26.3 25.7 by $2.5 billion since 31 Dec 2013 22.1 • Robust liquidity 19.2 18.1 − $
Slide 17: Capital allocation framework: 2014 focus
16 Our capital allocation framework to maximise shareholder value For personal use only 1 Essential sustaining 2 Progressive dividends 3 Iterative cycle of: capex 2014 focus Further cash Compelling returns to growth shareholders Debt reduction ©2014, Rio Tinto, All Rights Reserved
Slide 18: Capital allocation framework: 2015 focus
17 Our capital allocation framework to maximise shareholder value For personal use only 1 Essential sustaining 2 Progressive dividends 3 Iterative cycle of: capex 2015 focus Further cash Compelling returns to growth shareholders Debt reduction ©2014, Rio Tinto, All Rights Reserved
Slide 19: We have reduced capital expenditure
18 We have reduced capital expenditure For personal use only Expected capital expenditure profile • 2014 guidance lowered by $2 billion US$ billion to around $9 billion, 30% lower 20 than 2013 17.6 26% • 2015 guidance remains ~$8 billion 15 • Expect capex beyond 2015 to remain 12.9 30% at around $8
Slide 20: Delivering the highest quality projects
19 Delivering the highest quality projects For personal use only Rio Tinto copper equivalent production • Growth to 2015 includes: 2012 = 100 − Pilbara ramp-up towards 140 360 Mt/a capacity CAGR 120 > 8% − Oyu Tolgoi open pit − Kitimat modernisation 100 − Continued ramp-up of Kestrel 80 − Second cru
Slide 21: Strong cash flows will increase cash returns to shareholders
20 Strong cash flows will result in material increase in cash returns to shareholders For personal use only Underlying earnings of $5.1 billion Strong cash flows from operations of $8.7 billion Growth across a low-cost, diversified portfolio Capital expenditure has been reduced Solid foundation for
Slide 22: Sam Walsh, Chief executive
7 August 2014 Safety Highlights Performance Delivery For personal use only Sam Walsh Chief executive
Slide 23: Our businesses are well placed to meet global demand growth
22 Our businesses are well placed to meet global demand growth For personal use only China GDP growth and income levels OECD recovery underway Percentage US$(‘000) Regional contribution to global PPP GDP growth 5% 20% 25 PPP GDP per capita (RHS) 18% PPP GDP growth (LHS) 4% 16% 20 14% 3% 12% 15 10% 2
Slide 24: Pilbara iron ore business delivers industry-leading margins
23 Our Pilbara iron ore business delivers industry-leading margins For personal use only Pilbara EBITDA per tonne • H1 2014 cash unit cost in the US$ per tonne Percentage Pilbara was US$20.40/t, 11% lower 180 80% than H1 2013 160 70% • H1 2014 Pilbara EBITDA margin of 140 60% 66% (2013: 71%) as a re
Slide 25: Pilbara growth: delivering exceptional returns on investment
24 Pilbara growth: delivering exceptional returns on investment For personal use only Mine capacity potential (average annualised) • All in capital intensity of $120-130/t Million tonnes per annum (100% basis) 380 • 290 Mt/a system run rate achieved in 360 May, two months ahead of schedule 340 • 360
Slide 26: Copper delivers 23% volume growth
25 Copper delivers 23% volume growth and 71% improvement in underlying earnings For personal use only • Significant earnings improvement driven by almost $290 million of cash cost reductions in H1 2014 • Kennecott Utah Copper − Concentrator recoveries improved following flotation circuit expansion H
Slide 27: Aluminium: earnings improved through cost reductions
26 Aluminium: earnings improved through cost reductions and productivity gains For personal use only Aluminium EBITDA margin and LME prices • Well positioned to take advantage of Percentage US$ per tonne attractive outlook for bauxite and 25% 2,500 aluminium • Record market premiums 20% 2,000 • >60%
Slide 28: Bauxite: unrivalled resource position
27 Bauxite: unrivalled resource position offering strong growth options For personal use only China net aluminium unit imports • Strong growth in bauxite demand Million tonnes from China 15 13 11 2 • Rio Tinto has the strongest bauxite 9 7 5 3 2 3 2 1 3 13 position in the industry 3 4 8 7 4 5 5 1 (1
Slide 29: The Rio Tinto commitment
28 The Rio Tinto commitment For personal use only • To generate world-class returns • To sustain and build on our cost and productivity improvements • To significantly grow free cash flow • To maintain discipline in our allocation of capital • To deliver materially increased cash returns to sharehol
Slide 30: Pursuing greater value for shareholders
7 August 2014 Safety Highlights Performance Delivery For personal use only 2014 interim results Pursuing greater value for shareholders
Slide 31: Reconciliation of underlying to net earnings
30 Reconciliation of underlying to net earnings For personal use only Underlying earnings H1 2014 to net earnings H1 2014 US$ million (post tax) 6,000 5,116 5,000 589 4,402 4,000 (843) (116) (187) (157) 3,000 2,000 1,000 0 Underlying Impairment Impacts of Exchange diffs & IFRS 2 charge in Other Net
Slide 32: Underlying earnings impacted by lower commodity prices
31 Underlying earnings impacted by lower commodity prices For personal use only Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 6,000 5,000 Thermal 4,229 Iron ore Met coal Aluminium Ind mins Copper Coal Other 4,000 43 (80) (64) (63) (132) (122) 3,000 (1,392) 2,000 (974) 1,000 0 H1 201
Slide 33: Significant growth in iron ore volumes from Pilbara expansion
32 Significant growth in iron ore volumes from Pilbara expansion For personal use only Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 4,500 4,229 878 911 4,000 3,500 505 Other Includes: 3,000 Copper*, 31 (173) Diamonds and Minerals, 11 (1,392) Aluminium, 7 2,500 Others, 38 2,000 (54)
Slide 34: Modelling earnings
33 Modelling earnings For personal use only 2013 first half 2014 first half Impact on 2014 full average price/ average price/ 10% change in year underlying Earnings sensitivity rate rate 2014 average earnings ($m) Copper 343c/lb 312c/lb +/-31c/lb 322 Aluminium $1,919/t $1,753/t +/-$175/t 444 Gold $1
Slide 35: Iron ore: achieving record sales in H1 2014
34 Iron ore: achieving record sales in H1 2014 while delivering expansions on time and budget For personal use only Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 5,000 211 4,683 4,273 878 181 10 4,000 149 3,000 (974) (45) 2,000 1,000 - H1 2013 Price Exchange Energy & Volumes Cash co
Slide 36: Copper: cost focus and improved volumes
35 Copper: cost focus and improved volumes more than offset lower prices For personal use only Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 700 151 594 600 205 500 (89) 400 348 66 300 15 200 (91) (11) 100 - H1 2013 Price Exchange Energy & Volumes Cash cost Exploration & Tax, one of
Slide 37: Aluminium: cost improvements and exchange rates
36 Aluminium:(1) cost improvements and exchange rates more than offset lower prices For personal use only Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 400 162 3 373 350 (2) 300 141 250 214 7 200 150 (51) 100 (101) 50 - H1 2013 Price Exchange Energy & Volumes Cash cost Exploration &
Slide 38: Energy: lower prices and volumes
37 Energy: lower prices and volumes partly offset by exchange rates and cost saving initiatives For personal use only Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) - 92 -50 (19) (52) -100 130 32 91 -150 -200 (39) -250 (68) (205) -300 H1 2013 Price Exchange Energy & Volumes Cash cost
Slide 39: Diamonds & Minerals: cost reductions
38 Diamonds & Minerals: cost reductions partially offset lower prices and higher taxes For personal use only Underlying earnings H1 2013 vs. H1 2014 US$ million (post tax) 250 15 192 43 200 53 11 160 150 (27) (58) 100 (69) 50 - H1 2013 Price Exchange Energy & Volumes Cash cost Exploration & Tax, one
Slide 40: Provisional pricing
39 Provisional pricing For personal use only Open shipments Provisional pricing effect (million lbs) (US$m) 30 31 June Dec H1 H1 2014 2013 2014 2013 Escondida 215 240 (18) (66) Oyu Tolgoi 48 14 (3) (0) Grasberg JV/Other 3 0 (1) (5) 266 254 (22) (71) ©2014, Rio Tinto, All Rights Reserved
Slide 41: Other movements in underlying earnings
40 Other movements in underlying earnings For personal use only Underlying earnings impact Epl'n Interest, FX/ Cash Epl'n Eval'n Non tax & US$ million H1 2013 price Volumes CPI Energy Costs Eval'n disp Cash other H1 2014 Intersegment (4) – – – – 4 – – – – – Other operations (158) 51 17 – – (64) – –
Slide 42: Earnings reconciliations
41 Earnings reconciliations For personal use only 2014 Energy Resources of Australia US$m Earnings per ERA press release (A$127m) (116) Tax and unwinding of discount 3 Less: Minority interests (31.6%) 37 Other (2) Underlying earnings as reported by Rio Tinto (78) ©2014, Rio Tinto, All Rights Reserve