Global miner Rio Tinto took an $8.9 billion charge on its struggling aluminium business on Thursday, triggering a second-half net loss amid a gloomy medium-term outlook for the metal. Five straight years of surpluses in aluminium and rising input costs have hammered margins in the industry, sharply reducing the book value of Rio's Alcan unit, purchased for $38 billion at the height of the commodities boom in 2007.
The write-off and losses prompted Chief Executive Tom Albanese and Chief Financial Officer Guy Elliott to forego their bonuses. "As the acquisition of Alcan happened on my watch, I felt it only right not to be considered for an annual bonus this year," Albanese said.
Total one-off charges including a writedown on its diamonds business totalled $9.3 billion, causing net results for July-December to swing to a loss of $1.76 billion following a profit of $8.4 billion the previous year. Excluding the write-off, Rio's underlying earnings fell 5 percent to $7.77 billion, with booming iron ore sales making up the lion's share of the profits. Analysts on average had expected a second-half profit of $7.5 billion before one-offs.
While stepping up its dividend, Rio Tinto also flagged higher spending on projects for 2012, budgeted at $16 billion, up from $12.3 billion last year, with more spending on iron ore expansions likely to increase that even further. Second-half profit from iron ore jumped 14 percent to $6.9 billion.
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