Slide 1: Notice to ASX: 2015 full year results presentation
Notice to ASX 2015 full year results presentation For personal use only 11 February 2016 Attached is the Rio Tinto 2015 full 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 h
Slide 2: 2015 full year results
11 February 2016 Highlights Performance Outlook Financial targets Summary For personal use only 2015 full year results
Slide 3: Cautionary statements
2 Cautionary statements 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 contain
Slide 4: Sam Walsh, Chief executive
11 February 2016 Highlights Performance Outlook Financial targets Summary For personal use only Sam Walsh Chief executive
Slide 5: Safety and our values are fundamental
4 Safety and our values are fundamental For personal use only All injury frequency rates Per 200,000 hours worked Accountability 2.0 • Relentless pursuit of shareholder value • Disciplined decision-making 1.8 1.6 Respect 1.4 • For the environment and communities • For health, safety and wellbeing 1.
Slide 6: Continued delivery of our promises in 2015
5 Continued delivery of our promises in 2015 For personal use only Underlying earnings of $4.5 billion Net cash from operating activities of $9.4 billion Reduced costs by $1.3 billion and working capital by $1.5 billion Reduced capex spend to $4.7 billion Returned $6.1 billion of cash to shareholder
Slide 7: Rio Tinto has taken decisive early action
6 Rio Tinto has taken decisive early action… For personal use only Reduced costs Decreased capex 1.3 6.2 17.6 1.5 13.0 3.3 8.2 4.7 ~4 2013 2014 2015 Total savings 2012 2013 2014 2015 Operating, exploration & evaluation cost reductions achieved by 31 December 2015 vs 2012 base Total capital expen
Slide 8: Returns to shareholders, strengthened balance sheet
7 …which has enabled returns to shareholders, strengthened the balance sheet… For personal use only Shareholder returns Net debt and gearing ratio1 US$ billion US$ billion 6.1 13.1 22.1 8.3 2.0 4.1 3.7 28% 13.8 24% 3.3 2013 2014 2015 Total Jun-13 Dec-15 Dividends Share buy-backs Net debt Gearing rat
Slide 9: Maintained 34% Group EBITDA margins
8 … and maintained 34% Group EBITDA margins For personal use only Iron Ore Aluminium • Pilbara operating FOB EBITDA margins • Integrated operating EBITDA margins of 60% of 31% • Cash flows from operations of $6,061m • Cash flows from operations of $2,413m and free cash flow of $4,335m and free cash
Slide 10: Full year dividend maintained year-on-year
9 Full year dividend maintained year-on-year For personal use only Dividends declared per share • Final dividend of 107.5 cents per US cents share declared by the board 215 107.5 215 − To be paid in April 2016 • Total full year 2015 dividend declared of 215 cents per share − In pounds, equates to 6%
Slide 11: Chris Lynch, Chief financial officer
11 February 2016 Highlights Performance Outlook Financial targets Summary For personal use only Chris Lynch Chief financial officer
Slide 12: Prices reduced earnings by over 80%
11 Prices reduced earnings by over 80%, partially offset by exchange, energy and management actions For personal use only Underlying earnings 2014 vs 2015 US$ million (post tax) 10,000 9,305 8,000 Total cost reductions of $953m post-tax or $1,336m pre-tax 6,000 833 120 4,540 359 3,791 132 4,000 2,00
Slide 13: Net earnings
12 Net earnings For personal use only US$m 2015 underlying earnings 4,540 Impairments (1,802) Losses/gains on disposals 48 Exchange losses on (3,282) debt and derivatives Increased closure provision (233) for legacy operations Restructuring costs and (258) global headcount reductions Other 121 2015
Slide 14: Continued focus on costs generating significant savings
13 Continued focus on costs generating significant savings in 2015 For personal use only Pre-tax operating cash cost improvements Reduction vs. 2014 (US$ million) +34% 110 1,336 585 1,000 Increased target 90 Original 551 target: $750m Increased 2015 target H1 2015 H1 2015 E&E H2 2015 H2 2015 E&E Tot
Slide 15: Achieved $6.2 billion of cost reductions against 2012 base
14 Achieved $6.2 billion of cost reductions against 2012 base For personal use only Pre-tax operating cash cost improvements Reduction vs. 2012 (US$ billion) • Cost performance helped deliver a 7 2015 EBITDA margin of 34% (39% in 2014) 6 • Strong delivery across all Product 5 Groups • Cost culture e
Slide 16: Track record of balanced capital allocation
15 Track record of balanced capital allocation For personal use only Demonstrable capital discipline Leads to more balanced allocation US$ billion Capital to cash returns to shareholders (Percentage) 79% 80% 69% 44% 17.6 13.0 19% 8.2 56% 4.7 7% 37% 31% 21% 20% 14% 2012 2013 2014 2015 2012 2013 2014
Slide 17: Low net debt levels keep gearing at lower end
16 Low net debt levels keep gearing ratio at the lower end of our guidance range For personal use only Net debt and gearing ratio1 • $2 billion share buy-back completed US$ billion funded from 2014 cash flows 22.1 • Net debt levels almost flat half-on- half in 2015, despite buy-back 18.1 • $9.4 bill
Slide 18: Sam Walsh, Chief executive
11 February 2016 Highlights Performance Outlook Financial targets Summary For personal use only Sam Walsh Chief executive
Slide 19: Preserving and creating value
18 Preserving and creating value For personal use only Long-life, low-cost and Commercial excellence expandable assets Strong customer relationships, high Strong cash flow generation throughout quality benchmark products, technical the cycle from our key commodities marketing and value-in-use pricin
Slide 20: Significant deterioration in the macro environment
19 There has been a significant deterioration in the macro environment… For personal use only 2015 1 Oct 2015 to date FX USD Index(1) 9.3% (0.1%) Index(2) (23.4%) (18.7%) Commodities Brent Oil (35.0%) (36.4%) Developed economies Copper (25.3%) (11.5%) Iron ore (38.9%) (18.4%) MSCI Global (2.7%) (6.3
Slide 21: Further pre-emptive actions to protect shareholder value
20 …so further pre-emptive actions are required to protect shareholder value For personal use only Operating and Capital allocation commercial excellence discipline Reduce costs Additional capex reductions by by $2bn $3bn $1 billion in 2016 and a further over 2016 and 2017 against $1 billion in 2017
Slide 22: New dividend policy and capital allocation commitment
21 New dividend policy and capital allocation commitment For personal use only • Progressive policy replaced with new At the end of each financial period, the board will determine an appropriate total level of ordinary dividend policy dividend per share, taking into account the results for the finan
Slide 23: Chris Lynch, Chief financial officer
11 February 2016 Highlights Performance Outlook Financial targets Summary For personal use only Chris Lynch Chief financial officer
Slide 24: Current volatility demands further pre-emptive actions
23 Current volatility demands further pre-emptive actions For personal use only 2015 underlying earnings flexed for iron ore prices US$ billion • Macro, market and commodity weakness 4.5 • Reduces outlook for near-term cash 4.1 (1.8) flows • Dividends sustainability determined by earnings and cash f
Slide 25: Targeting a further $2 billion reduction in costs
24 Targeting a further $2 billion reduction in costs For personal use only Pre-tax operating cash cost improvements Reduction vs. 2012 (US$ billion) • Achieved $6.2 billion in operating, exploration and evaluation costs since 31 December 2012 1.0 8.2 • Cost culture embedded across the 1.0 entire org
Slide 26: Further $3 billion capex reduction
25 Further $3 billion capex reduction to preserve capital and sustain operations For personal use only Capital expenditure profile • Completed two projects in 2015 US$ billion1 7 • 2016 capex reduced by a further $1 billion to around $4 billion 6 • 2017 capex reduced by $2 billion to ~5.5 5 ~$5 bill
Slide 27: Our capital allocation framework
26 Our capital allocation framework For personal use only 1. Essential 2. Ordinary 3. Iterative cycle of sustaining capex dividends Further cash returns to Compelling shareholders growth Debt management ©2016, Rio Tinto, All Rights Reserved
Slide 28: Sam Walsh, Chief executive
11 February 2016 Highlights Performance Outlook Financial targets Summary For personal use only Sam Walsh Chief executive
Slide 29: Preserving and creating shareholder value
28 Preserving and creating shareholder value For personal use only World-class portfolio Free Quality cash flow growth generation Sustainable shareholder returns Operating Capital and allocation commercial discipline excellence Balance sheet strength ©2016, Rio Tinto, All Rights Reserved
Slide 30: 2015 full year results
11 February 2016 Highlights Performance Outlook Financial targets Summary For personal use only 2015 full year results
Slide 31: Exchange rates, lower energy costs and volumes partially offset lower prices
30 Exchange rates, lower energy costs and volumes partially offset impact of lower prices For personal use only Underlying earnings H1 2015 vs H2 2015 US$ million (post tax) 3,000 2,923 2,000 212 118 1,616 402 60 1,410 (82) (17) (42) 1,000 (1,958) 0 H1 2015 Price Exchange Energy Inflation H1 2015 Vo
Slide 32: Weaker prices significantly reduced underlying earnings
31 Weaker prices significantly reduced underlying earnings in 2015 For personal use only Underlying earnings 2014 vs 2015 US$ million (post tax) 10,000 9,305 8,000 6,000 (37) (52) (79) (128) (136) (141) (164) 4,000 (548) 2,000 (855) (5,555) (7,695) 0 2014 Price underlying earnings ©2016, Rio Tinto,
Slide 33: Partly offset by favourable exchange rates, energy and volumes
32 … partly offset by favourable exchange rates, lower energy costs and higher volumes For personal use only Underlying earnings 2014 vs 2015 US$ million (post tax) 10,000 9,305 8,000 398 81 6,000 39 25 (20) (26) (89) 2,007 359 3,791 4,000 (276) (185) 132 2,000 (7,695) 0 2014 Price Exchange Energy I
Slide 34: $1.5 billion of cash released from working capital
33 $1.5 billion of cash released from working capital For personal use only Working capital balance reconciliation US$ million Net decrease of $1,122m 841 377 658 1,366 Price Non-price 244 (1,499) Opening Non-cash Cash Closing balance balance 31 Dec. 2015 31 Dec. 2014 ©2016, Rio Tinto, All Rights Re
Slide 35: Pilbara: low-cost advantage sustained
34 Pilbara: our low-cost advantage has been sustained over many years For personal use only Pilbara cash unit cost US$ per tonne • 2015 cash unit cost of $14.90/t (24% lower than $19.50/t in 2014) • Maintain consistently attractive FOB EBITDA margins (60% in 2015) 20.4 18.7 • Average realised FOB pr
Slide 36: Iron Ore: increased volumes and cost reductions
35 Iron Ore: increased volumes and cost reductions delivered against lower prices For personal use only Underlying earnings 2014 vs 2015 US$ million (post tax) 10,000 8,107 8,000 6,000 398 3,952 4,000 772 230 3,506 314 (266) (62) 2,000 (5,541) 0 2014 Price Exchange Energy Inflation Flexed Volumes Ca
Slide 37: The world's best aluminium business
36 The world’s best aluminium business For personal use only Clear focused strategy: Bauxite and first quartile smelters are key pillars Bauxite Alumina Aluminium Provides competitive security Sector-leading primary metal Industry-leading bauxite position of supply for our first cost 2015 EBITDA mar
Slide 38: Aluminium: exchange rates and cost improvements
37 Aluminium: exchange rates and cost improvements almost completely offset lower prices For personal use only Underlying earnings 2014 vs 2015 US$ million (post tax) 2,000 1,248 239 25 1,118 661 11 910 1,000 (7) (49) (52) 0 (958) 2014 Price Exchange Energy Inflation Flexed Volumes Cash cost Explora
Slide 39: Delivering increased copper volumes through existing mines
38 Delivering increased copper volumes through growing existing mines For personal use only H2 2015: Higher grade areas exploited in the mine plan for Oyu Tolgoi open pit Oyu Tolgoi 2020+: First production from Oyu Tolgoi underground1 2016/2017: Metal share expected from Grasberg, with continued inv
Slide 40: Copper & Coal: cost savings and exchange rates
39 Copper & Coal: cost savings and exchange rates partially offset lower prices For personal use only Underlying earnings 2014 vs 2015 US$ million (post tax) 1,000 831 750 500 110 248 85 274 250 267 157 (26) (15) 0 (201) -250 (934) 2014 Price Exchange Energy Inflation Flexed Volumes Cash cost Explor
Slide 41: Diamonds & Minerals: delivering strong margins
40 Diamonds & Minerals: delivering strong margins For personal use only Well positioned for consumer-driven growth Diamonds Borates Titanium Dioxide Salt & Uranium 34% FOB EBITDA 29% FOB EBITDA 33% FOB EBITDA 42% EBITDA margins margins margins margins in salt Production up 25% with Uranium market hi
Slide 42: Diamonds & Minerals: favourable exchange and cost reductions
41 Diamonds & Minerals: favourable exchange and cost reductions partially offset lower prices and volumes For personal use only Underlying earnings 2014 vs 2015 US$ million (post tax) 400 266 5 295 300 269 52 (45) 3 189 200 (99) (62) 100 (200) 0 2014 Price Exchange Energy Inflation Flexed 2014 Volum
Slide 43: Other movements in underlying earnings
42 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 2014 price Inflation Volumes Costs eval'n disp Cash other 2015 Other operations (240) (51) 3 9 2 - - 16 173 (88) Central Exploration (n
Slide 44: ERA earnings reconciliations
43 ERA earnings reconciliations For personal use only 2015 Energy Resources of Australia US$m Total comprehensive loss per ERA press release (A$275m) (207) Lower depreciation following impairment recognised by Rio Tinto 29 1 Tax and unwinding of discount 147 Less: Minority interests (31.6%) 11 Other
Slide 45: Modelling earnings
44 Modelling earnings For personal use only 2015 ($m) impact on FY 2015 average price/ underlying earnings of 10% Earnings sensitivity rate price/rate change Copper 249c/lb 213 Aluminium $1,661/t 416 Gold $1,160/oz 39 Iron ore (62% Fe FOB) $50/dmt 843 Coking coal (benchmark) $102/t 60 Thermal coal (