Hot Features
Premium
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
Newly appointed Chief Executive, Sam Walsh, has laid out his plans to ensure that Rio Tinto plc (LSE:RIO) “will have an unrelenting focus on pursuing greater value for shareholders” after the global mining giant took a huge hit and posted an annual loss for the first time in years.
“I am setting out how we can build on our strengths and improve this great company,” Walsh, who has been with the company for 22 years and became Group chief executive in January of this year, said after a US$14.4 billion write-off wiped out the firm’s underlying earnings, itself down 40% compared in 2011, putting the company at a loss of US$3 billion from a long streak of profit.
The impairment mostly came from Rio Tinto’s aluminum unit, headed by Walsh back in 2001 to 2004, at US$11 billion, following “deteriorating” prices, strong Australian and Canadian currencies, high energy and material costs, and an oversupply of the non-ferrous metal in the market.
Rio Tinto also wrote-off US$2.86 billion for its coal project in Mozambique as infrastructure development became “more challenging” than initially anticipated coupled by a revised lower recovery of coking coal volumes, leading Walsh to take closer look at the company’s capital expenditure moving forward.
“We are reinforcing our capital allocation processes, and will only invest in assets that, after prudent assessment, offer attractive returns that are well above our cost of capital, and which offer a superior return when compared to returning cash to shareholders,” he stated.
Walsh said that in order to achieve greater value for its shareholders, the management should act as owners and not as managers in running the business.
Under his watch, he vowed to impose capital allocation discipline, reducing its capital expenditure to US$13 billion whilst targeting cash cost savings of US$5 billion by 2014.
“This pursuit of greater value for our shareholders is a serious commitment that will inform all of the decisions and actions taken across the organisation. These are the right steps to take, and I believe they will help build a stronger, better company,” Walsh stated in closing.
Despite the losses, Rio Tinto offered a dividend for the concluded year at 15% premium compared to that in 2011 to US$0.167.
In London, however, investors snobbed the offer and shares of Rio Tinto, a FTSE 100 constituent, fell by 62 pence, or -1.6%, to £36.95 at 11:15 GMT.
