Rio Tinto Announces Challenging 2015 Results; Group Will Cut Operating Costs by $1 Billion in 2016
Rio Tinto recently released its financial results for 2015. Consolidated sales revenues were $34.8 billion, $12.8 billion lower than last year, reflecting a $13.1 billion reduction from the decline in commodity prices. The earnings before interest, taxes, depreciation, and amortization (EBITDA) margin dropped to 34%, down 5% from 2014. Underlying earnings were $4.5 billion, $4.8 billion lower than 2014, with cash cost improvements, higher volumes, lower energy costs, positive currency and other movements (totalling $2.9 billion) partly offsetting the $7.7 billion (post-tax) impact of lower prices.
Underlying earnings per share fell to $2.48, compared with $5.03 in 2014. The company reported a net loss of $0.9 billion, reflecting non-cash exchange rate and derivative losses of $3.3 billion and impairment charges of $1.8 billion. The impairments mainly related to the Simandou iron ore project, Energy Resources of Australia (ERA) and the Roughrider uranium project. In addition, the group recognized legacy remediation costs of $0.2 billion and general restructuring and headcount reduction costs of $0.3 billion.
“Against a highly challenging environment, Rio Tinto delivered a strong performance in 2015 with underlying earnings of $4.5 billion,” said Sam Walsh, CEO. “We continued to take decisive action to preserve cash through further cost reductions, lower capital expenditure and the release of working capital. This focus on cash resulted in operating cash flows of $9.4 billion. At the same time, we have significantly strengthened our balance sheet and finished 2015 with net debt of $13.8 billion, which is $700 million better than the $14.5 billion pro-forma position at the end of 2014.
“The continued deterioration in the macro environment has generated widespread market uncertainty. We are embarking on a new round of proactive measures to cut our operating costs by a further $1 billion in 2016, followed by an additional goal of $1 billion in 2017. We are also reducing our capital expenditure to $4 billion in 2016 and $5 billion in 2017, an overall reduction of $3 billion compared with our previous guidance. These significant actions provide us with the confidence that we remain robustly positioned to maintain both balance sheet strength and deliver shareholder returns through the cycle.”
For more information, visit www.riotinto.com.