Rio Tinto Plc · LSE:RIO
Rio Tinto — H1 2019 Earnings Presentation
44 slides from Rio Tinto's earnings presentation, Aug 1, 2019
Slide 1: 2019 half year results
For personal use only 2019 half year results 1 August 2019 London
Slide 2: Cautionary and supporting statements
Cautionary and supporting 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 doc
Slide 3: J-S Jacques, Chief executive
For personal use only J-S Jacques Chief executive
Slide 4: A strong first half
A strong first half Delivering superior cash flows and cash returns For personal use only Financial Balance Value performance sheet creation $10.3bn $4.9bn $2.5bn Underlying EBITDA Net debt at June 30 Interim dividend – Pro forma net debt of 47% $1.0bn $5.6 billion** Underlying EBITDA margin Special
Slide 5: Safety is our highest priority
Safety is our highest priority For personal use only Safety Performance Health and Safety Rio Tinto AIFR 2.78 ICMM (23 companies) AIFR Improved AIFR of 0.41 in H1 2019 Rollout of new safety maturity model while reinforcing strong focus on CRM* with 710,000 verifications in H1 2019 All injury frequen
Slide 6: Sustainable development in action
Sustainable development in action For personal use only Running a safe, Collaborating to Pioneering responsible and enable long term materials for human profitable business economic benefits progress 0.41 Taxes paid report 4 released Additional aluminium assets AIFR in H1 2019 undergoing ASI certifi
Slide 7: Jakob Stausholm, Chief financial officer
For personal use only Jakob Stausholm Chief financial officer
Slide 8: Strong financial results
Strong financial results For personal use only ($bn) H1 2019 H1 2018 Comparison Gross revenue 21.8 21.2 + 3% Underlying EBITDA 10.3 9.2 + 11% Cash flow from operations* 7.2 5.2 + 39% Free cash flow* 4.7 2.9 + 64% Underlying earnings 4.9 4.4 + 12% Net earnings 4.1 4.4 - 6% Dividends and share buy-bac
Slide 9: Growing with increasing profitability
Growing with increasing profitability For personal use only Return on Capital Employed* kt Growth and EBITDA margin % % 5.2 50% 24 2.5% CAGR 22 5.0 20 45% 18 4.8 16 40% 14 4.6 12 35% 4.4 10 8 30% 4.2 6 4 25% 4.0 2 LTM ROCE HY ROCE LTM margin LTM Production Growth (LHS) 0 3.8 20% H1 16 H2 16 H1 17 H2
Slide 10: Strong iron ore prices partly offset by challenging aluminium and copper market conditions
Strong iron ore prices partly offset by challenging aluminium and copper market conditions For personal use only Iron Ore* (36% increase YoY) Aluminium** (17% decrease YoY) Copper** (11% decrease YoY) $/t $/t c/lb 120 2700 500 340 450 100 400 80 2200 350 290 300 60 250 40 1700 200 240 Jan 18 Apr 18
Slide 11: Strong EBITDA driven by price
Strong EBITDA driven by price For personal use only Underlying EBITDA Coal EBITDA $ billion EBITDA excl. Coal Total impact from iron ore weather disruptions 0.4 of $0.6 billion 1.9 (0.2) 0.3 (0.2) (0.5) 9.2 0.6 10.7 10.3 8.6 H1 2018 Price Exchange CPI & energy Flexed H1 2018 Incremental Unit cash co
Slide 12: Productivity programme challenged by Iron Ore disruptions
Productivity programme challenged by Iron Ore disruptions For personal use only Post-tax mine-to-market (M2M) productivity programme $ billion (free cash flow) M2M free cash flow target of 1.0-1.5 $1-1.5 billion run-rate from 2021, dependent on: – Increase in Iron Ore volume (subject to market condi
Slide 13: Iron Ore
Iron Ore world-class returns underpinned by robust price environment For personal use only H1 2019 H1 2018 2019 Higher pricing driving increase in Operating metrics comparison guidance EBITDA and margin Average realised price* $85.3 / t + 35% 14Mt shortfall due to Tropical Shipments (100% basis) 154
Slide 14: Aluminium
Aluminium profitability impacted by challenging price and cost environment For personal use only H1 2019 H1 2018 2019 Operating metrics comparison guidance Lower prices impacted EBITDA by Average aluminium price* $2,174 / t - 15% $0.8 billion, notably primary metal Average alumina price** $375 / t -
Slide 15: Copper & Diamonds
Copper & Diamonds stable performance against strong prior year For personal use only H1 2019 H1 2018 2019 EBITDA and margin impacted by Operating metrics comparison guidance lower LME price Copper price 280 c/lb - 11% Production – mined copper 281kt - 5% 550-600kt Further productivity improvements P
Slide 16: Energy & Minerals
Energy & Minerals* strong recovery from 2018 disruptions For personal use only H1 2019 H1 2018 2019 Strong pricing and operational Operating metrics comparison guidance recovery driving 113% increase in IOC pellets price $141 / t + 24% EBITDA TiO2 slag price** $692 / t + 10% Improved performance at
Slide 17: Disciplined investment of capital
Disciplined investment of capital For personal use only Capital expenditure profile H1 2019 capex of $2.4 billion $ billion – Sustaining capex of $1.2 billion ~6.5 – Development capex of $1.2 billion ~6.5 ~6.0 5.4 Pilbara replacement capital includes Koodaideri and Robe River Development capital del
Slide 18: A strong balance sheet
A strong balance sheet For personal use only Net debt Increase in reported net debt reflects operating $ billion cash flows of $7.2* billion, net of: – Payment of dividends of $6.8 billion 15 14.1 13 – Share buy-back of $1.0 billion 12.9 11.3 11 10.0 9.3 9.3 – Capex of $2.4 billion 9 9.6 8.0 – Tax o
Slide 19: Delivering superior returns
Delivering superior returns For personal use only 2019 cash returns paid to shareholders* Interim 2019 returns to shareholders of $3.5 billion $ billion announced – Interim dividend of $2.5 billion or 151 US cents per 1.0 12.0 share to be paid in September 2019 2.5 Paid – Special dividend of $1.0
Slide 20: Strong financial results
Strong financial results For personal use only ($bn) H1 2019 H1 2018 Comparison Gross revenue 21.8 21.2 + 3% Underlying EBITDA 10.3 9.2 + 11% EBITDA margin (%) 47% 43% + 4pp Cash flow from operations* 7.2 5.2 + 39% Free cash flow* 4.7 2.9 + 64% Underlying earnings 4.9 4.4 + 12% Net earnings 4.1 4.4
Slide 21: J-S Jacques, Chief executive
For personal use only J-S Jacques Chief executive
Slide 22: Stable Chinese indicators
Stable Chinese indicators For personal use only Global GDP & IP 8% Forecast* Global economic growth 6% – Global growth tracking at 2015/16 cyclical lows – Trade tension weighing on global industrial growth YoY 4% 2% – Major economy central banks becoming more accommodative 0% 1Q15 1Q16 1Q17 1Q18 1Q1
Slide 23: Robust iron ore and steel fundamentals
Robust iron ore and steel fundamentals >1Btpa steel production in China Above-average iron ore offtake at Chinese ports For personal use only Million tonnes per annum Mt Mt 1,100 180 0.4 1,050 160 1,000 950 0.2 140 900 850 120 0.0 800 100 750 700 80 -0.2 650 Jan 17 Jul 17 Jan 18 Jul 18 Jan 19 Jul 19
Slide 24: Delivering quality through system blending
Delivering quality through system blending For personal use only Mines Port Terminals Products Mesa J RVL Cape RVF Mesa A Lambert HIY A Yandicoogina Silvergrass HIY West Angelas Cape PBL Lambert PBF Hope Downs 1 B Nammuldi Fe Alumina Marandoo Brockman 4 PBL Parker PBF Mt Tom Price Point Paraburdoo S
Slide 25: Improving Iron Ore system performance
Improving Iron Ore system performance Product quality and For personal use only Protecting the Pilbara Blend Mine sequencing challenges and deficit in overburden removal customer relationships Additional waste movement programme – 2019 material movement increase – Expected cost of ~$80 million in 20
Slide 26: Longer-term fundamentals remain positive for aluminium and copper
Longer-term fundamentals remain positive for aluminium and copper For personal use only Firm primary aluminium demand outlook Financial shorts contributing to copper weakness Mt 350 150 CFTC Managed Money Net 80 330 125 Position (k contracts) 70 310 100 LME Cash (c/lb) APAC 75 60 290 China 50 50 270
Slide 27: Our growth pipeline
Our growth pipeline 2% Cu equivalent growth to 2023 For personal use only Iron Ore Resolution Oyu Tolgoi Kennecott South Zulti South Jadar replacement Copper Underground Wall Pushback Mineral Sands (unapproved) mines (unapproved) High quality Additional $0.3bn* World-class copper Mine development to
Slide 28: Critical infrastructure progresses at Oyu Tolgoi
Critical infrastructure progresses at Oyu Tolgoi Above ground Shafts & below ground For personal use only 1 2 3 Mine development infrastructure hard infrastructure Mine dry building Load commissioning of Jaw Crusher Lateral mine footprint development Mine dry and control centre Shaft 5 sinking t
Slide 29: Schedule and cost ranges are driven by four key factors
Schedule and cost ranges are driven by four key factors For personal use only Footprint development Location of ore Panel boundary 1 Mid access drives 2 3 4 productivity handling infrastructure transitions Shaft #4 Panel 1 Rim Drives Panel boundary Shafts Shaft #1 #2 #3 #5 Panel 0 Panel 0 0 Panel Pr
Slide 30: Winu drilling continues at pace
Winu drilling continues at pace For personal use only Results from 42 new drill holes at Winu Results continue to indicate relatively wide intersections of mineralisation Drilling with 8 diamond rigs and 3 RC rigs: – RC rigs focused on supergene – Diamond rigs focused on testing depth extent Strike
Slide 31: Strong base for future growth and profitability
Strong base for future growth and profitability For personal use only Consistent Attractive growth financial discipline opportunities Safety is our #1 priority $12bn 2% CuEq Paid* to shareholders in 2019, Annual growth rate to cash generative assets and 2023 from broad pipeline strong balance sheet
Slide 32: Appendix
For personal use only Appendix 1 August 2019 London
Slide 33: Higher iron ore prices partly offset by lower copper and aluminium prices
Higher iron ore prices partly offset by lower copper and aluminium prices For personal use only Underlying EBITDA H1 2019 vs H1 2018 $ million 12,000 1,878 Iron ore Iron & Titanium Diamonds Copper Aluminium Other, net 10,000 9,198 3,000 2,780 8,000 2,000 1,000 6,000 80 83 0 4,000 (48) (256) -1,000 (
Slide 34: Strong sales in diamonds, gold and bauxite offset by lower iron ore sales
Strong sales in diamonds, gold and bauxite offset by lower iron ore sales For personal use only Underlying EBITDA H1 2019 vs H1 2018 $ million 86 83 59 12,000 386 11,287 1,878 (25) (150) (232) (20) 10,000 (37) (39) 9,198 8,000 6,000 (364) Iron & Titanium Aluminium Iron Ore Diamonds Gold Copper Other
Slide 35: Iron Ore: higher prices partly offset by disruptions
Iron Ore higher prices partly offset by disruptions For personal use only Underlying EBITDA H1 2019 vs H1 2018 $ million 10,000 2,704 182 8 8,542 8,000 (37) 7,552 (493) (382) (115) 5,685 6,000 4,000 H1 2018 Price Exchange rates Energy Inflation Flexed H1 2018 Volumes Cash costs Other H1 2019 underly
Slide 36: Aluminium: lower prices partly offset by improved volumes and costs
Aluminium lower prices partly offset by improved volumes and costs For personal use only Underlying EBITDA H1 2019 vs H1 2018 $ million 3,000 2,000 1,831 142 1,099 59 47 1,127 1,000 (78) (3) (55) (816) 0 H1 2018 Price Exchange rates Energy Inflation Flexed H1 2018 Volumes Cash cost Other H1 2019 und
Slide 37: Copper & Diamonds
Copper & Diamonds solid operational performance offset by lower prices For personal use only Underlying EBITDA H1 2019 vs H1 2018 $ million 3,000 2,000 1,360 147 33 1,213 5 2 1,106 1,000 (237) (21) (52) (24) 0 H1 2018 Price Exchange rates Energy Inflation Flexed H1 2018 Volumes Cash cost Exploration
Slide 38: Energy & Minerals
Energy & Minerals strong operational recovery from 2018 disruptions For personal use only Underlying EBITDA H1 2019 vs H1 2018 $ million 2,000 169 55 1,185 54 1,008 315 47 954 1,000 (12) (35) (87) (560) 0 H1 2018 Price Exchange Energy Inflation Flexed H1 Volumes Cash costs Coal disposal One-offs Oth
Slide 39: Other movements in underlying EBITDA
Other movements in underlying EBITDA For personal use only Underlying EBITDA impact Energy & Cash Interest, $ million H1 2018 FX/ price Inflation Volumes costs E&E Non-cash tax, other H1 2019 Other operations (27) 56 (21) 1 (117) - (7) 27 (88) Exploration & Evaluation (net) (100) - - - - (38) - - (1
Slide 40: Debt maturity profile
Debt maturity profile For personal use only 30 June 2019 debt maturity profile* $ million Reported gross debt increased by $1.3 billion 3,500 to $14.3 billion at 30 June, mainly attributable to the implementation of IFRS 16 leases 3,000 2,500 Average outstanding debt maturity of 2,000 corporate bond
Slide 41: Modelling EBITDA
Modelling EBITDA For personal use only Underlying EBITDA sensitivity H1 2019 ($m) impact on FY 2019 underlying average price / rate EBITDA of 10% price/rate change Copper 280c/lb 281 Aluminium $1,826/t 462 Gold $1,307/oz 61 Iron ore (62% Fe FOB) $84.9/dmt 1,862 A$ 0.71US$ 550 C$ 0.75US$ 345 Oil (Bre
Slide 42: Modelling aluminium costs
Modelling aluminium costs For personal use only ($/t) Impact a $100/t change in Canadian* smelting unit cash** cost sensitivity each of the input costs below will have on our H1 2019 Canadian smelting unit cash cost of $1,406/t Alumina (FOB) 191 Green petroleum coke (FOB) 34 Calcined petroleum coke
Slide 43: Application of the returns policy
Application of the returns policy For personal use only Capital return considerations Comments Operating cash flow of $7.2 billion* Results for HY 2019 FCF of $4.7 billion* Underlying earnings up 12% to $4.9 billion Focused on Oyu Tolgoi Long term growth prospects Investing in replacing high quality
Slide 44: Schedule and cost ranges for OT are driven by four key factors
Schedule and cost ranges for OT are driven by four key factors For personal use only Footprint development Location of ore Panel boundary 1 Mid access drives 2 3 4 productivity handling infrastructure transitions Shaft #4 One of the best undeveloped copper resources in the world Assessing a number o