Slide 1: 2014 full year results
12 February 2015 Highlights Financial performance 2015 objectives Appendix 2014 full year results Delivering sustainable shareholder returns
Slide 2: Cautionary statement
2 Cautionary statement 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 certain forward-looki
Slide 3: Sam Walsh, Chief executive
12 February 2015 Highlights Financial performance 2015 objectives Appendix Sam Walsh Chief executive
Slide 4: Delivering our transformation programme
4 Delivering our transformation programme Improve Strengthen Deliver Reduced costs Decreased capex Reduced net debt by by $4.8bn $9.4bn $9.6bn Operating, exploration and evaluation cost reductions achieved Since net debt peaked by 31 December 2014 vs 2012 Full year 2014 spend vs 2012 at 30 Jun
Slide 5: 2014 highlights
5 2014 highlights Underlying earnings of $9.3 billion Net earnings of $6.5 billion Net cash from operating activities of $14.3 billion Net debt reduced by $5.6 billion to $12.5 billion ©2015, Rio Tinto, All Rights Reserved
Slide 6: Material increase in cash returns to shareholders
6 Material increase in cash returns to shareholders Total cash returns to shareholders Dividends declared US$ billion US cents per share 5.9 +64% +12% 215 +15% 192 3.6 +15% 167 145 2013 2014 2011 2012 2013 2014 Dividends1 Share buy-back 1 Dividend numbers are based on total dividends declared for ea
Slide 7: Chris Lynch, Chief financial officer
12 February 2015 Highlights Financial performance 2015 objectives Appendix Chris Lynch Chief financial officer
Slide 8: Delivering on our promises in 2014
8 Delivering on our promises in 2014 Reduced costs Decreased capital expenditure by $1.5bn $4.8bn Incremental operating, exploration & evaluation cost reductions achieved by 31 December 2014 vs 2013 31 December 2014 vs 2013 Released working capital Strengthened balance sheet $1.5bn $5.6bn ne
Slide 9: Management actions significantly offset price impact
9 Management actions significantly offset price impact Underlying earnings 2013 vs 2014 US$ million (post tax) 12,000 Total cost reductions of $1,175m post-tax 10,217 10,000 188 9,305 958 217 1,431 8,000 691 6,511 6,000 (251) (4,146) 4,000 2,000 0 2013 Price Exchange Energy & Flexed 2013 Volumes Cas
Slide 10: Net earnings
10 Net earnings US$m 2014 underlying earnings 9,305 Impairments (1,187) Impairment reversals 1,049 Losses on disposals (349) MRRT repeal (362) Exchange losses on (1,850) debt and derivatives Other (79) Net earnings 6,527 ©2015, Rio Tinto, All Rights Reserved
Slide 11: Robust product group earnings and cash flows
11 Robust product group earnings and cash flows Net cash generated from Underlying earnings ($bn) operating activities ($bn) 2013 2014 2013 2014 Iron Ore 9.85 8.11 14.01 10.27 Aluminium 0.55 1.25 1.70 2.55 Copper 0.82 0.91 0.38 1.70 Diamonds & Minerals 0.35 0.40 0.84 1.20 Energy 0.03 (0.21)1 0.92 0.
Slide 12: Continual cost improvement
12 Continual cost improvement Pre-tax operating cash cost improvements Reduction vs. 2012 (US$ billion) 5.58 0.75 1.53 4.83 0.40 0.93 3.30 3.61 Iron ore 0.71 1.30 Aluminium 0.81 Copper 0.92 D&M and other 0.37 Energy 0.80 0.98 TOTAL 3.61 H1 2013 H2 2013 2013 total H1 2014 H2 2014 2014 total Two-year
Slide 13: Pilbara – continual cost improvement
13 Pilbara – continual cost improvement Pilbara cash unit cost / EBITDA margin • Our low-cost advantage has been US$ per tonne Percentage sustained over many years: 30 80% − 2014 cash unit cost of $19.5/t 70% 25 − H2 2014 cash unit cost of $18.7/t 23.9 60% (8% lower than $20.4/t in H1 2014 ) 20 21.8
Slide 14: Maintained Group EBITDA margin of 39%
14 Maintained Group EBITDA margin of 39% Portfolio split by asset quality • High quality, low cost assets reduce Percentage of revenue (2013 vs 2014) volatility of earnings and cash flow 100% • In 2014, the percentage of revenues generating at least 30% EBITDA 75% margins increased to 80% through: −
Slide 15: Strong operating cash flows
15 Strong operating cash flows Net cash generated from operating activities • $0.8 billion reduction in cash flows, US$ billion as $4 billion price impact largely offset by: 15.1 14.3 − operating cash cost reductions − exploration and evaluation savings − 6% volume growth1 − $1.5 billion of working
Slide 16: $1.5 billion of cash released from working capital
16 $1.5 billion of cash released from working capital Working capital cash release US$ billion • $1.5 billion cash unlocked now available for more productive uses • Significant release of working capital achieved through: 1.1 1.5 − Optimising inventory levels − Tighter management of receivables • Co
Slide 17: Focus on capital efficiency
17 Focus on capital efficiency Capital discipline… • Capital allocation discipline requires Capital expenditure profile (US$ billion)1 project IRR >15% 17.6 • All projects ranked against each other and buy-backs 13.0 • Two major projects expected to complete in first half of 2015: 8.2 − Kitimat mode
Slide 18: Balance sheet strength and flexibility
18 Balance sheet strength and flexibility 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 • Ratio expected to remain at lower 28% 14.5 end of the range in near term Share 12.5 25% buy-back •
Slide 19: Our capital allocation framework maximises shareholder value
19 Our capital allocation framework maximises shareholder value 1. Essential 2. Progressive 3. Iterative cycle of sustaining capex dividends Further cash returns to Compelling shareholders growth Debt management ©2015, Rio Tinto, All Rights Reserved
Slide 20: Sam Walsh, Chief executive
12 February 2015 Highlights Financial performance 2015 objectives Appendix Sam Walsh Chief executive
Slide 21: Our commitment to shareholders
21 Our commitment to shareholders 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 22: Safety is fundamental to our business
22 Safety is fundamental to our business Injury frequency rates 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 All injury frequency rate Lost time injury frequency rate Vehicle safety check in the Pilbara, Australia ©2015, Rio Tin
Slide 23: Succeeding in a challenging market
23 Succeeding in a challenging market Long-life, low-cost Commercial excellence and expandable assets Strong customer relationships, Strong cash flow generation high quality benchmark products, throughout the cycle from our technical marketing and key commodities value-in-use pricing Operating excel
Slide 24: Managing a world-class portfolio…
24 Managing a world-class portfolio… Iron Ore Aluminium Copper Cash generated: Cash generated: Cash generated: $10.3 billion $2.6 billion $1.7 billion 2014 achievements Sector-leading primary Completed 290Mt/a metal 2014 EBITDA Maintained EBITDA ramp-up margin of 25% margins at 42% Maintain industry
Slide 25: … of sector-leading assets
25 … of sector-leading assets Diamonds & Minerals Energy Cash generated: Cash generated: $1.2 billion $0.4 billion 2014 achievements Commissioned MDDK plant Disposals of Rio Tinto Coal Simandou Investment Framework Mozambique and Clermont Maximise cash flow generation Further cost reductions and pro
Slide 26: Building the world’s best mining company
26 Building the world’s best mining company World-class portfolio Free Quality cash flow growth generation Sustainable shareholder returns Operating Capital and allocation commercial discipline excellence Balance sheet strength ©2015, Rio Tinto, All Rights Reserved
Slide 27: 2014 full year results
12 February 2015 Highlights Financial performance 2015 objectives Appendix 2014 full year results Delivering sustainable shareholder returns
Slide 28: Increased volumes and cost reductions partially offset lower prices in the second half
28 Increased volumes and cost reductions partially offset lower prices in the second half Underlying earnings H1 2014 vs H2 2014 US$ million (post tax) 6,000 5,116 5,000 157 53 4,189 396 4,000 3,627 (44) 227 22 (1,738) 3,000 2,000 1,000 0 H1 2014 Price Exchange Energy & H1 2014 Volumes Cash cost Exp
Slide 29: Weaker prices significantly impacted underlying earnings in 2014
29 Weaker prices significantly impacted underlying earnings in 2014 Underlying earnings 2013 vs 2014 US$ million (post tax) 12,000 10,217 Aluminium Other, net Gold Minerals Thermal coal Copper Met. coal Iron ore 10,000 412 8,000 6,000 (4,146) (14) (25) (84) (138) 4,000 (223) (276) 2,000 (3,798) 0 20
Slide 30: … partly offset by favourable exchange rates and higher volumes
30 … partly offset by favourable exchange rates and higher volumes Underlying earnings 2013 vs 2014 US$ million (post tax) 12,000 1,286 10,217 85 10,000 69 37 1,431 17 11 8 8,000 691 6,511 (11) 6,000 (251) (4,146) (71) 4,000 2,000 0 2013 Price Exchange Energy & Flexed Volumes underlying rates inflat
Slide 31: $1.5 billion of cash released from working capital
31 $1.5 billion of cash released from working capital Working capital movements US$ million 1,108 4,079 1,519 $2.7bn 411 1,194 Price Inventory & (1,501) receivables release 668 1,366 (1,880) 2013 Inventories Receivables Payables 2014 Other Total working working working non-cash capital cash capital
Slide 32: Iron Ore: increased volumes and cost reductions partially offset lower prices
32 Iron Ore: increased volumes and cost reductions partially offset lower prices Underlying earnings 2013 vs 2014 US$ million (post tax) 10,000 9,858 356 8,107 259 9 8,000 1,286 186 6,197 6,000 (3,798) (49) 4,000 2013 Price Exchange Energy & Flexed 2013 Volumes Cash cost Exploration & Tax & other 20
Slide 33: The world’s best aluminium business
33 The world’s best aluminium business Clear focused strategy: Bauxite and first quartile smelters are key pillars Bauxite Alumina Aluminium Industry-leading bauxite Sector-leading primary metal Provides competitive security position 2014 EBITDA margin of 25% of supply for our smelters Third party s
Slide 34: Aluminium: exchange rates, strong price premiums and cost improvements more than doubled earnings
34 Aluminium:(1) exchange rates, strong price premiums and cost improvements more than doubled earnings Underlying earnings 2013 vs 2014 US$ million (post tax) 1,500 3 1,248 168 247 1,103 17 (43) 1,000 377 (78) 557 500 - 2013 Price Exchange Energy & Flexed 2013 Volumes Cash cost Exploration & Tax &
Slide 35: Copper: a clear strategy to create long-term value
35 Copper: a clear strategy to create long-term value Four key operating assets $923 million of cash cost improvements since 2012 42% EBITDA margin preserved in 2014 despite 7% lower average LME price Oyu Tolgoi Kennecott Significant progress in simplifying the portfolio since 2012 Clear strategy to
Slide 36: Copper: cost savings and improved volumes more than offset lower prices
36 Copper: cost savings and improved volumes more than offset lower prices Underlying earnings 2013 vs 2014 US$ million (post tax) 1,200 121 294 1,000 912 821 120 800 149 (224) 30 572 600 (131) (244) (24) 400 200 0 2013 Divested Absence of Price Exchange Energy & Flexed 2013 Volumes Cash cost Explor
Slide 37: Diamonds & Minerals: delivering free cash flow
37 Diamonds & Minerals: delivering free cash flow Improve Strengthen Deliver Reduced costs Reducing capex Increasing free cash flow $40 $674 million million $677 million Operating cost reductions achieved by Cumulative year on year capex 31 December 2014 vs 20121 reductions since 20123 $1,325 millio
Slide 38: Diamonds & Minerals: 15% higher underlying earnings
38 Diamonds & Minerals: 15% higher underlying earnings from cost reductions and increased volumes Underlying earnings 2013 vs 2014 US$ million (post tax) 500 21 401 91 37 36 400 350 327 (20) 300 (53) (61) 200 100 0 2013 Price Exchange Energy & Flexed 2013 Volumes Cash cost Exploration & Tax & other
Slide 39: Energy: large, high-quality Hunter Valley resource
39 Energy: large, high-quality Hunter Valley resource RTCA has a large footprint • Significant progress in reshaping the portfolio in 2014 Mt Pleasant project Bengalla − Sale of Clermont for US$1 billion Hunter Valley − Sale of Rio Tinto Coal Mozambique Operations (HVO) • Rio Tinto Coal Australia ge
Slide 40: Energy: cash cost reductions and lower E&E spend offset by weaker prices
40 Energy: cash cost reductions and lower E&E spend offset by weaker prices Underlying earnings 2013 vs 2014 US$ million (post tax) 100 33 - (100) 33 (200) 62 114 (210) 107 (300) (400) (47) (334) (434) (78) (500) 2013 Price Exchange Energy & Flexed 2013 Volumes Cash cost Exploration & Tax & other 20
Slide 41: Other movements in underlying earnings
41 Other movements in underlying earnings Underlying earnings impact Epl'n eval'n Interest, FX/ Energy & Cash Epl'n 2014 Non tax & US$ million 2013 price Inflation Volumes Costs eval'n disp Cash other 2014 Intersegment (4) - - - 4 - - - - - Other operations (281) 17 - 20 36 - - (12) (23) (243) Centr
Slide 42: Earnings reconciliations
42 Earnings reconciliations 2014 Energy Resources of Australia US$m Earnings per ERA press release (A$188m) (170) Increased depreciation of closure asset (3) Tax and unwinding of discount 1 Less: Minority interests (31.6%) 58 Other (5) Underlying earnings as reported by Rio Tinto (119) ©2015, Rio Ti
Slide 43: Modelling earnings
43 Modelling earnings 2014 ($m) impact on 2014 average price/ underlying earnings of 10% Earnings sensitivity rate price/rate change Copper 310c/lb 340 Aluminium $1,867/t 462 Gold $1,266/oz 46 Iron ore (62% Fe FOB) $88/t 1,303 Coking coal (benchmark) $126/t 110 Thermal coal (average spot) $74/t 117
Slide 44: Rio Tinto Limited off-market share buy-back: indicative timetable
44 Rio Tinto Limited off-market share buy-back: indicative timetable February 2015 12 Feb Announcement of buy-back Last day that shares can be acquired to participate in the buy-back with franking 17 Feb credit entitlements 18 Feb Shares quoted ex-entitlement to participate in the buy-back on the AS