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Sam Walsh, Chief Executive Officer for mining giant Rio Tinto/AFP

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Rio Tinto bounces back with US$3.67 bln annual profit

Sam Walsh, Chief Executive Officer for mining giant Rio Tinto/AFP

Sam Walsh, Chief Executive Officer for mining giant Rio Tinto/AFP

SYDNEY, February 13- Anglo-Australian mining giant Rio Tinto staged a dramatic turnaround in 2013 to report a US$3.67 billion annual net profit Thursday after a major cost-cutting drive that saw thousands of workers sacked and capital spending slashed.

Rio’s return to the black caps a concerted belt-tightening drive by new chief Sam Walsh, who was brought in with a mission to turn around the firm, which lost US$3.03 billion in 2012 its first loss in 18 years after US$14.36 billion in writedowns.

That disaster claimed the scalp of former boss Tom Albanese.

“These strong results reflect the progress we are making to transform our business and demonstrate how we are fulfilling our commitments to improve performance, strengthen the balance sheet and deliver greater value for shareholders,” said Walsh.

“We have achieved underlying earnings of US$10.2 billion, exceeded our cost reduction targets and set production records. In turn, this has enhanced our cash flow generation and lowered net debt.”

The results were again weighed by writedowns worth US$3.43 billion on projects including Mongolia’s Oyu Tolgoi copper and gold mine and the Gove Alumina project in northern Australia.

Rio said it had slashed 4,000 jobs across its operations in 2013 and divested a further 3,300 positions out of the company through asset sales.

The jettisoning of underperforming assets continued apace, with divestments worth US$3.5 billion announced or completed in 2013 as Rio narrows its focus to its major businesses of iron ore, coal, copper and petroleum.

Capital expenditure was reduced by 26 percent to US$12.9 billion and forecast to be curtailed further in 2014 to an estimated US$11 billion and US$8 billion the year after.

The company also set annual production records in its key iron ore and electricity coal businesses as well as bauxite, with copper also rallying strongly.

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Increased volumes added US$538 million, primarily due to expansion of capacity at Rio’s flagship Pilbara iron ore operations in western Australia.

Underlying iron ore earnings were up seven percent on 2012 at US$9.86 billion due to record sales volumes, “marginally” higher prices, an easing in the Australian dollar and cost-cutting in the business.

Commodity price movements wiped US$1.29 billion off the bottom line compared with 2012, but improvements in the US dollar exchange rate boosted results by US$1.01 billion.

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