Rio Tinto posts annual loss; new CEO vows to cut costs – by Sonali Paul ( – February 14, 2013)

MELBOURNE (Reuters) – Rio Tinto’s (RIO.L) new chief flagged he would slash costs, focus on selling weak assets, and spend capital more carefully after the world’s no.3 miner reported a $3 billion loss, its first ever full-year loss.

Chief Executive Sam Walsh was anointed last month when his predecessor was sacked for misjudged aluminium and coal acquisitions that led to $14.4 billion in writedowns and left the company in the red.

“We can do better and I will improve this great company further,” Walsh told reporters, saying he would take a more aggressive approach to selling assets that no longer fitted with the company’s goals.

Rio reported a 47 percent plunge in half-year underlying profit, its worst since 2009 due to sharp falls in commodity prices, although the result was slightly better than expected and the company raised its dividend more than expected.

Underlying profit, which excludes writedowns, fell to $4.149 billion for July-December 2012 from $7.768 billion a year earlier, based on Reuters calculations. Analysts on average had forecast a half-year underlying profit of $3.93 billion. Investors were generally upbeat about the result.

“The dividend is better and the company is showing a renewed focus on pleasing its shareholders through better capital discipline,” said Tim Schroeders, portfolio manager at Pengana Capital. “Managing costs is going to be a challenge, in terms of meeting their prescribed targets,” he added.

Ahead of his first outing as chief executive, investors said the biggest tasks facing Walsh are to decide what to do with the group’s Pacific Aluminium and diamonds businesses, both stuck on the auction block for over a year, and how to drive growth outside its powerhouse iron ore business, which generates nearly all of Rio’s profits.

The company is considering selling the Pacific Aluminium business, with assets in Australia and New Zealand, as a whole or in parts, or floating it on the Australian stock market, but has yet to make a decision.

“I’m not a person that knee-jerk reacts, and I’m not a person that’s going to give assets away below their expected value,” Walsh said.


Walsh, 63, led the iron ore unit for nine years, slashing costs, securing stakes in high quality deposits, and automating operations with driverless trucks and trains run from a high-tech centre 1,500 kilometres (940 miles) away from the mines.

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