Rio Tinto Plc · LSE:RIO
Rio Tinto — H1 2005 Earnings Presentation
44 slides from Rio Tinto's earnings presentation, Aug 3, 2005
Slide 1: Record earnings from strong operational performance and markets
2005 Half Year Results presentation Record earnings from strong operational performance and markets 1 2005 Half Year Results presentation 3 August 2005
Slide 2: Cautionary statement
Cautionary statement For the purposes of the Forward-Looking Statements Safe Harbor provisions of the US securities laws This presentation contains statements which constitute forward-looking statements within the meaning of the US securities laws. Such statements include, but are not limited to, st
Slide 3: Paul Skinner
Paul Skinner 3 2005 Half Year Results presentation 3 August 2005
Slide 4: Presentation outline
Presentation outline Paul Skinner Results and outlook Leigh Clifford Overview of performance Guy Elliott Financial results Leigh Clifford Projects Questions 4 2005 Half Year Results presentation 3 August 2005
Slide 5: Underlying earnings more than double
Underlying earnings more than double Underlying earnings* $ millions 2200 2000 1800 First half IFRS 1600 Second half 1400 1200 1000 800 600 400 200 0 96 97 98 99 00 01 02 03 04 05 * 1996 to 2003 data are adjusted earnings under UKGAAP. 2004 and 2005 data are underlying earnings under IFRS. 5 2005 Ha
Slide 6: Record half year earnings
Record half year earnings $m 2004 2005 Underlying earnings 993 2,087 +110% Excluded items 618 78 Net earnings 1,611 2,165 +34% • $774 million buyback of Rio Tinto Limited shares • Cash flow of $3.4 billion in first half • Gearing of 21% at end of first half • Strong balance sheet and capital flexibi
Slide 7: Outlook
Outlook • Continuing strength in most markets • Chinese growth supported by fundamentals • Alert to macro-economic risks • Portfolio diversity • Outlook remains positive 7 2005 Half Year Results presentation 3 August 2005
Slide 8: Madagascar – a key project in the developing world
Madagascar – a key project in the developing world • Reflects Rio Tinto’s commitment to sustainable development • Developed in full consultation with stakeholders since 1996 • Strengthens Rio Tinto’s position in the titanium dioxide sector • Enhances competitiveness for new resources in developing c
Slide 9: Leigh Clifford
Leigh Clifford 9 2005 Half Year Results presentation 3 August 2005
Slide 10: Earnings improvement in all product groups
Earnings improvement in all product groups H1 2004 H1 2005 2,400 2,200 Diamonds +10% 2,000 1,800 Ind. Minerals +41% 1,600 Aluminium +25% $m 1,400 1,200 Energy +96% 1,000 800 Iron Ore +165% 600 400 Copper +112% 200 0 2004 2005 Underlying earnings under IFRS. 10 2005 Half Year Results presentation 3 A
Slide 11: Operations performing strongly
Operations performing strongly • Maximising operational performance in a strong pricing environment • Delivering record volumes • Managing industry wide cost pressures 11 2005 Half Year Results presentation 3 August 2005
Slide 12: Iron ore
Iron ore Iron ore 70 • Record production in the Pilbara while 60 building capacity expansion 50 40 • Enhanced customer portfolio mix 30 20 • Improved working practices at IOC 10 0 H1 04 H1 05 Million tonnes Rio Tinto share 12 2005 Half Year Results presentation 3 August 2005
Slide 13: Aluminium
Aluminium Alumina Aluminium 1600 • Stable and efficient smelter operations 1200 800 • CAR I delivering into strong market 400 0 H1 04 H1 05 ‘000 tonnes Rio Tinto share 13 2005 Half Year Results presentation 3 August 2005
Slide 14: Energy
Energy Other coal USA Coking coal Other coal Australia 60 4 • Mines performing well 3 40 • Hail Creek delivering 2 • Infrastructure constraints 20 1 0 0 H1 04 H1 05 H1 04 H1 05 Million tonnes Rio Tinto share 14 2005 Half Year Results presentation 3 August 2005
Slide 15: Industrial minerals
Industrial minerals Borates TiO2 800 • Richards Bay Minerals back to full capacity 600 • Upgraded slag plant approaching rate 400 of 325,000 tonnes per annum 200 • Good demand for chloride feedstocks 0 H1 04 H1 05 • Co-products strong ‘000 tonnes Rio Tinto share 15 2005 Half Year Results presentatio
Slide 16: Diamonds
Diamonds Argyle Diavik 20 • Rough diamond market remains firm 15 • Argyle production at historic levels 10 • Underground option being studied 5 • Diavik optimisation work continuing 0 H1 04 H1 05 Million carats Rio Tinto share 16 2005 Half Year Results presentation 3 August 2005
Slide 17: Copper
Copper Copper mined (lhs) Copper refined (lhs) Molybdenum (rhs) • Very strong copper and moly markets 400 8 • Grasberg back on track 300 6 • Palabora and Northparkes mines 200 4 operating at design capacity 100 2 • Kennecott Utah Copper 0 H1 04 H1 05 molybdenum focus ‘000 tonnes Rio Tinto share 17 2
Slide 18: Kennecott Utah Copper delivers record profits
Kennecott Utah Copper delivers record profits • Mine restructured to provide options 40.0 30.0 • Mine plan flexed to optimise results 20.0 • Moly plant expansion completed 10.0 • Smelter maintenance completed 0.0 Jan-00Jan-01 Jan-02Jan-03 Jan-04Jan-05 • Pushback underway for life extension Molybdenu
Slide 19: Operational summary
Operational summary • Company performing well overall • Operations delivering at full stretch • Managing industry wide cost pressures • Assets show their quality 19 2005 Half Year Results presentation 3 August 2005
Slide 20: Guy Elliott
Guy Elliott 20 2005 Half Year Results presentation 3 August 2005
Slide 21: Impact of strong markets
Impact of strong markets 2200 1004 85 2000 73 1839 1800 1600 $m 1400 1200 993 1000 800 600 400 200 0 2004 H1 Prices Exchange Inflation 21 2005 Half Year Results presentation 3 August 2005
Slide 22: Prices were stronger across the board
Prices were stronger across the board Iron ore 400 380 Other products Traded metals 350 300 Energy 250 $m Copper 202 200 151 150 Moly Industrial Aluminium minerals 100 100 Diamonds 69 Gold 43 Alumina 50 34 17 20 Other 0 -50 -12 Earnings impact from price $1004 million 22 2005 Half Year Results prese
Slide 23: Exchange rate effect not significant
Exchange rate effect not significant 20 10 A$ C$ Rand NZ$ Euro Other (47) (14) (4) (5) (4) (11) $m 0 -10 -20 -30 Total non A$ (38) -40 -50 Earnings impact $(85) million 23 2005 Half Year Results presentation 3 August 2005
Slide 24: Volumes were higher in all product groups
Volumes were higher in all product groups 2400 460 2200 1004 85 2000 73 1839 1800 $m 1600 1400 1200 993 1000 800 600 400 200 0 2004 H1 Prices Exchange Inflation Volumes 24 2005 Half Year Results presentation 3 August 2005
Slide 25: Moly and iron ore contribute most
Moly and iron ore contribute most Volume contribution to earnings ($m) 500 400 $m 300 200 100 0 Moly/gold Iron ore Coal Aluminium Diamonds Ind. Min. Other Total 300 87 22 26 7 15 3 460 25 2005 Half Year Results presentation 3 August 2005
Slide 26: Industry wide cost pressures continue
Industry wide cost pressures continue 2400 460 125 2200 60 1004 85 2000 73 1839 1800 1600 $m 1400 1200 993 1000 800 600 400 200 0 2004 H1 Prices Exchange Inflation Volumes Costs Energy 26 2005 Half Year Results presentation 3 August 2005
Slide 27: 'Other' category not material
‘Other’ category not material 2400 460 125 2200 60 27 2087 2000 1004 85 73 1839 1800 1600 $m 1400 1200 1000 993 800 600 400 200 0 2004 H1 Prices Exchange Inflation Volumes Costs Energy Other Underlying Earnings 27 2005 Half Year Results presentation 3 August 2005
Slide 28: Fewer asset sales in 'Excluded Items'
Fewer asset sales in ‘Excluded Items’ 2400 460 125 2200 60 27 78 2165 2087 2000 1004 85 73 1839 1800 1600 $m 1400 1200 1000 993 800 600 400 200 0 2004 H1 Prices Exchange Inflation Volumes Costs Energy Other Underlying Exc’d Net Earnings Items Earnings 28 2005 Half Year Results presentation 3 August
Slide 29: Record half year cash flow
Record half year cash flow 3,500 Cash flow from operations 3,000 Dividends from associates & JVs 2,500 2,000 $m 1,500 1,000 500 0 99 99 00 00 01 01 02 02 03 03 04 04 05 Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun 1999 to 2003 data are under UKGAAP. 2004 and 2005 data are under IFRS. 29 2005
Slide 30: Capital management
Capital management • Dividend increase of 20% announced in February 2005 • $1.5 billion capital management programme • Over half of programme completed in May 2005 • Rio Tinto Limited stock acquired via off-market tender • Significant discount to the prevailing market price • 27.3 million shares can
Slide 31: Balance sheet remains strong
Balance sheet remains strong $m Net debt Net debt / total capital (%) 7,000 Interest cover (times) 45 40 6,000 35 5,000 30 4,000 25 3,000 20 15 2,000 10 1,000 5 0 0 93 94 95 96 97 98 99 00 01 02 03 04 05 Net debt, interest cover and gearing ratios are as at the period ending 31 December, except June
Slide 32: Use of cash reflects three priorities
Use of cash reflects three priorities Cash inflow of $3.4b Tax paid $0.4b Minorities+interest Capital expenditure $1.1b $0.1b Dividends $0.6b Buyback $0.8b Reduction in net debt $0.4b 32 2005 Half Year Results presentation 3 August 2005
Slide 33: Leigh Clifford
Leigh Clifford 33 2005 Half Year Results presentation 3 August 2005
Slide 34: Iron Ore expansion projects well advanced
Iron Ore expansion projects well advanced • Current $1.6 billion investment programme • Planned port and rail capacity increase 40 million tonnes • Mine, port and rail expansions on schedule • Port and rail to be completed in Q4 34 2005 Half Year Results presentation 3 August 2005
Slide 35: Projects are using new technology
Projects are using new technology HIsmelt • First hot metal produced mid June • 3 year ramp up • Target production 800,000 tonnes per annum • Underpins future iron ore sales Upgraded Slag Plant (UGS) • Approaching expanded capacity 35 2005 Half Year Results presentation 3 August 2005
Slide 36: Future growth opportunities
Future growth opportunities Conceptual projects Advanced studies Committed projects Simandou iron Corumba expansion Hamersley mine capacity Cortez Hills HIsmelt® Corumba iron to 15mtpa Northparkes E48 West Angelas expansion Pilbara expansion options Grasberg underground devpts Hamersley infrastructu
Slide 37: Future growth opportunities
Future growth opportunities Conceptual projects Advanced studies Committed projects Pilbara expansion PRC potash QMM: Madagascar options ilmenite 37 2005 Half Year Results presentation 3 August 2005
Slide 38: Further expansion through Hope Downs joint venture
Further expansion through Hope Downs joint venture • Creative M&A adding value ! 50km Cape Lambert • Significant expansion of iron ore assets Dampier in the Pilbara • 450 mt reserves plus 850 mt resources Hope Downs Mesa A • Infrastructure synergies Mesa J • Annual production of 30 million tonnes Na
Slide 39: Potash market opportunity for PRC
Potash market opportunity for PRC • Rio Tinto has acquired 100% of project • Very large in situ resource • In pre-feasibility study • Solution mining trials progressing well • Brazilian fertilizer market opportunity 39 2005 Half Year Results presentation 3 August 2005
Slide 40: Madagascar ilmenite project goes ahead
Madagascar ilmenite project goes ahead • Largest known undeveloped high grade ilmenite deposit (60% TiO2) • $775 million investment • Large scale dredging operation • Smelting at Quebec Iron and Titanium • First phase 750,000 t of ilmenite per annum by 2012 • Feeds growing high grade chloride feedst
Slide 41: Development issues are carefully managed
Development issues are carefully managed • Madagascar has major development needs • Considered approach required to mitigate project impacts • Stakeholder engagement over many years • Regional development plan drawn up • World Bank participation in port development 41 2005 Half Year Results presenta
Slide 42: A strong portfolio of exploration projects
A strong portfolio of exploration projects Alaska copper / gold Coking Coking coal coal Eagle nickel Turkey copper Resolution copper Sari Gunay gold Simandou iron Diamonds Diamonds Ilmenite Ilmenite Nickel Nickel Diamonds Coking Coking & & Pilbara iron ore Rio Rio Colorado Colorado Potash Potash the
Slide 43: Summary
Summary • Organic growth opportunities excellent • M&A where it adds value • Exploration delivering resources • Operations delivering • Capital projects delivering 43 2005 Half Year Results presentation 3 August 2005
Slide 44: Record earnings from strong operational performance and markets
2005 Half Year Results presentation Record earnings from strong operational performance and markets 44 2005 Half Year Results presentation 3 August 2005