Slide 1: Well positioned after a challenging year
Well positioned after a challenging year 2003 Full Year Earnings Presentation
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
Slide 4: Presentation outline
Presentation outline Paul Skinner Results, outlook and dividend Leigh Clifford Overview of performance Guy Elliott Financial Results Leigh Clifford Projects and markets Questions
Slide 5: Full year earnings
Full year earnings $m 2002 2003 Adjusted Earnings 1,530 1,382 - 10% • US dollar weakness • Commodity price improvement late in year • Strong demand from China • Significant capital investment programme • Sound financial position and cash flow
Slide 6: Net earnings benefited from divestments
Net earnings benefited from divestments $m 2002 2003 Net Earnings 651 1,508 • Gains on divestments of $126 million in 2003 • Kaltim Prima Coal • Peak and Alumbrera • 2002 impairment provisions
Slide 7: The global outlook is improving
The global outlook is improving • US economy recovering • Europe slow but improving • Japan benefiting from Asian buoyancy • Continued strong growth in China
Slide 8: The outlook justifies a 4 cent dividend increase
The outlook justifies a 4 cent dividend increase % 2002 2003 change Dividends per share - US cents - Interim 29.5 30.0 - Final 30.5 34.0 - Total 60.0 64.0 +7% Total dividends UK - pence 37.47 37.13 (1)% Australia - A cents 105.93 89.70 (15)%
Slide 9: Leigh Clifford
Leigh Clifford
Slide 10: Solid earnings in a challenging year
Solid earnings in a challenging year Second half earnings Adjusted Earnings US$ millions First half earnings 2000 1,662 1,507 1,530 1600 1,382 1,220 1,282 1,070 1,103 821 1200 830 828 741 625 773 800 518 552 400 841 595 677 702 641 552 551 509 0 96 97 98 99 00 01 02 03
Slide 11: A strong performance from iron ore
A strong performance from iron ore US$m 1,750 1,500 1,250 1,000 750 500 250 Iron Ore +10% 0 2002 2003
Slide 12: Copper benefited from prices….but could have been better
Copper benefited from prices….but could have been better US$m 1,750 1,500 1,250 1,000 750 Copper +29% 500 250 0 2002 2003
Slide 13: Diamonds – an important area of growth
Diamonds – an important area of growth US$m 1,750 1,500 1,250 1,000 Diamonds +79% 750 500 250 0 2002 2003
Slide 14: Aluminium – stable business, but hit by currency
Aluminium – stable business, but hit by currency US$m 1,750 1,500 1,250 Aluminium (22)% 1,000 750 500 250 0 2002 2003
Slide 15: Energy and Industrial Minerals undermined by weak markets
Energy and Industrial Minerals undermined by weak markets US$m 1,750 Industrial 1,500 Minerals (46)% 1,250 Energy (56)% 1,000 750 500 250 0 2002 2003
Slide 16: Non-ferrous metal prices did not react to the exchange rate
Non-ferrous metal prices did not react to the exchange rate in the first half of 2003…. Index: January 1st = 100 150 140 130 120 Australian dollar 110 100 Copper Aluminium 90 80 J F M A M J J A S O N D 2003
Slide 17: …but copper moved sharply up in the last quarter
…but copper moved sharply up in the last quarter Index: January 1st = 100 150 140 Copper 130 Australian dollar 120 110 100 90 80 J F M A M J J A S O N D 2003
Slide 18: The aluminium price showed only marginal improvement
The aluminium price showed only marginal improvement Index: January 1st = 100 150 140 130 Australian dollar 120 110 Aluminium 100 90 80 J F M A M J J A S O N D 2003
Slide 19: Key operational challenges – KUC and Grasberg
Key operational challenges – KUC and Grasberg Kennecott smelter – acid plant failure
Slide 20: Grasberg open pit
Grasberg open pit 1kilometre 1kilometre 8N Overburden & Low 6N Grade Phases 7S Access 6S 5S to 6S High grade ore phases Safety Corridor Slide Area N 20
Slide 21: The Asia Pacific market for thermal coal was weak in 2003
The Asia Pacific market for thermal coal was weak in 2003……… Energy Group net earnings $m 400 300 200 100 0 96 97 98 99 00 01 02 03 • Thermal coal oversupply in Asia Pacific region • Unsatisfactory Coal & Allied performance • Actions underway in Australia and the US ……..but showed clear signs of imp
Slide 22: Conditions for industrial minerals remain difficult
Conditions for industrial minerals remain difficult Industrial Minerals Group $m net earnings 400 300 200 100 0 96 97 98 99 00 01 02 03 • Generally weak markets (US and EU) • Overcapacity in core markets • Ti02 market particularly difficult
Slide 23: But the portfolio is in excellent shape for 2004
But the portfolio is in excellent shape for 2004 • New projects commissioned • Iron ore • Diamonds • Hard coking coal • Copper • New projects under construction • Portfolio management
Slide 24: Guy Elliott
Guy Elliott
Slide 25: The depreciation of the US dollar offset price improvements
The depreciation of the US dollar offset price improvements $m 2000 1900 1800 442 412 1700 1600 1500 106 1400 1300 1530 1454 1200 1100 1000 2002 Prices Exchange Inflation Volumes Energy Costs Other 2003
Slide 26: Prices were generally positive, especially late in the year
Prices were generally positive, especially late in the year…... Traded metals Other products $m 200 Copper 163 150 Gold 92 Aluminium Iron ore 100 76 Alumina 63 Diamonds Other 40 50 34 Other 26 8 0 -50 (60) -100 Coal Profit impact $442 million
Slide 27: …but the US dollar depreciated against all important currencies
…but the US dollar depreciated against all important currencies $m 0 -50 Canadian dollar Rand NZ dollar Other -100 (44) (35) (29) (30) -150 -200 Total non A$ (138) -250 -300 Profit impact $(412) million Australian dollar (274)
Slide 28: Analysis of currency movements
Analysis of currency movements $m 50 0 -50 Hedges 40 -100 -150 Monetary items (100) -200 -250 -300 -350 -400 Operating costs Profit impact $(412) million (352)
Slide 29: Volumes were positive…
Volumes were positive… $m 2000 1900 1800 442 412 1700 1600 1500 106 38 1400 1300 1530 1454 1200 1100 1000 2002 Prices Exchange Inflation Volumes Energy Costs Other 2003
Slide 30: …with new projects and Hamersley starting to add volume growth
…with new projects and Hamersley starting to add significant volume growth…………… $m 200 180 160 Diavik 41 140 120 Escondida 36 100 80 Robe 22 60 HI 40 31 20 0
Slide 31: ….but partly offset by KUC by-product grades and weak TiO2 market
….but this was partly offset by KUC by-product grades and the weak Ti02 market $m 200 Other KUC 180 19 (83) Diavik 160 41 140 120 Escondida 36 100 Ti02 (28) 80 Robe 22 60 HI 40 31 38 20 0
Slide 32: Higher energy costs reduced earnings by $54 million
Higher energy costs reduced earnings by $54 million….. $m 2000 1900 1800 442 412 1700 1600 1500 106 38 54 1400 1300 1530 1454 1200 1100 1000 2002 Prices Exchange Inflation Volumes Energy Costs Other 2003
Slide 33: …and costs increased….
…and costs increased…. $m 2000 1900 1800 442 412 1700 1600 1500 106 38 54 1400 82 1300 1530 1454 1200 1100 1000 2002 Prices Exchange Inflation Volumes Energy Costs Other 2003
Slide 34: …reflecting operational events….
…reflecting operational events…. Business units with major operational issues (29) • KUC cash costs (20) • Grasberg cash costs …. and problems in energy and industrial minerals $122m Energy and Industrial Minerals (20) • Coal & Allied cash costs (18) • Other Energy • RIT unit costs and one offs (35)
Slide 35: RIT's performance was undermined by currency, volumes and one off items
RIT’s performance was undermined by currency movements, lower volumes and one off items $m 200 Includes a significant 180 one off component 160 37 140 120 28 100 80 161 35 60 14 40 20 47 0 2002 Exchange Volumes Costs Other 2003
Slide 36: "Other" is the net of some significant items
“Other” is the net of some significant items • Pension financing costs $m 2000 • Interest charges 1900 1800 • Fortaleza impairment write back 442 412 1700 • Other tax and provision movements 1600 1500 106 38 54 1400 82 26 1300 1530 1454 1200 1382 1100 1000 2002 Prices Exchange Inflation Volumes Ener
Slide 37: Net debt, interest cover & gearing
Net debt, interest cover & gearing US$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 Net debt, interest cover and gearing ratios are as at the period ending 31 December
Slide 38: Cash flow and capital expenditure
Cash flow and capital expenditure Cash flow Dividends from Net Group capital US$m from associates & JVs expenditure operations 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 91 92 93 94 95 96 97 98 99 00 01 02 03 Cash from operations excludes cash flows relating to capital expenditure, acquisitions
Slide 39: Financial summary
Financial summary • Prices offset by US dollar • Volume growth • Cost performance marred by one off events • Solid balance sheet position • Consistently strong cash flow
Slide 40: Leigh Clifford
Leigh Clifford
Slide 41: Looking forward – 2004 and beyond
Looking forward – 2004 and beyond • Quality projects • Changing markets
Slide 42: Strong demand for iron ore
Strong demand for iron ore • 2004 price increase of 18.6% • Hamersley and Robe co-operation • Major investment programme
Slide 43: Major expansion of the Hamersley port
Major expansion of the Hamersley port
Slide 44: Major expansion of the Hamersley port
Major expansion of the Hamersley port
Slide 45: Significant increase in exposure to hard coking coal
Significant increase in exposure to hard coking coal
Slide 46: Significant increase in exposure to hard coking coal
Significant increase in exposure to hard coking coal
Slide 47: The Asia Pacific energy market is showing signs of improvement
The Asia Pacific energy market is showing signs of improvement US$/tonne 40 35 Reference price 30 25 GlobalCoal spot price 20 15 Q1 Q2 Q3 Q4 Jan 2003 2004 FOB Newcastle 6,700 kcal/kg
Slide 48: Construction of the new alumina refinery is well advanced
Construction of the new alumina refinery is well advanced
Slide 49: Construction of the new alumina refinery is well advanced
Construction of the new alumina refinery is well advanced
Slide 50: Construction of the new alumina refinery is well advanced
Construction of the new alumina refinery is well advanced
Slide 51: Construction of the new alumina refinery is well advanced
Construction of the new alumina refinery is well advanced
Slide 52: Diamonds – a growing part of the portfolio
Diamonds – a growing part of the portfolio
Slide 53: Diamonds – a growing part of the portfolio
Diamonds – a growing part of the portfolio
Slide 54: Rio Tinto is well positioned
Rio Tinto is well positioned • Currency – US Dollar direction • Markets – Supply and demand for most products in better balance – Commodity price increases • Rio Tinto – Newly commissioned projects going well – New projects close to completion
Slide 55: Questions & Answers
Questions & Answers
Slide 56: Well positioned after a challenging year
Well positioned after a challenging year 2003 Full Year Earnings Presentation
Slide 57: Handouts only
Handouts only
Slide 58: Changes in net earnings (handout only)
Changes in net earnings (handout only) $millions 2002 Selling Exchange Sales Inflation Costs Tax & 2003 prices rates vols Energy other Iron ore 452 76 (92) 56 (16) 10 13 499 Energy 353 (71) (70) (4) (22) (34) 5 157 Industrial Minerals 286 (5) (35) (25) (25) (46) 4 154 Aluminium 256 103 (111) 14 (34)
Slide 59: Earnings reconciliations (handout only)
Earnings reconciliations (handout only) US$m Freeport Earnings per FCX Press Release 154 Average Rio Tinto shareholding 15.8% Rio Tinto share of FCX reported earnings 24 Premium amortisation (8) UK GAAP adjustments 7 Rio Tinto earnings from FCX shareholding 23 Joint Venture earnings 104 Net earnings
Slide 60: Earnings reconciliations (handout only)
Earnings reconciliations (handout only) US$m Coal & Allied Earnings per Coal & Allied Press Release (A$0.1m) - Less: UK GAAP accounting adjustments (3) Less: forex gain on US$ debt (20) Add: interest shown centrally by Rio Tinto 6 Less: tax consolidation credit shown centrally by (11) Rio Tinto Add:
Slide 61: Analysis of interest (handout only)
Analysis of interest (handout only) (US$m) 2003 2002 Per cash flow statement Interest received 30 80 Interest paid (231) (264) Net Interest Paid per the cash flow (201) (184) Interest capitalised 39 22 Changes in accruals 23 1 1 Subsidiary Interest per profit and loss (139) (161) Taxation and outsid