Weak Sales Prices Hamper Earnings For Rio Tinto’s Aluminium Sector In Front Half Of 2019

Weak Sales Prices Hamper Earnings For Rio Tinto’s Aluminium Sector In Front Half Of 2019

Anglo-Australian mining giant Rio Tinto Group released results for the first half of 2019 late last week. The firm’s aluminium business was stable from an operational perspective in the opening half, but price declines took their toll on the segment.

In the year’s first half Rio Tinto saw a 1-percent bump in bauxite ore production on the year to 26,171 thousand metric tons. Production at managed operations rose by 3 percent, and Amrun’s ramp-up continued apace despite weather problems.

Alumina production for the first half totaled 3,886 thousand metric tons, down by 3 percent on the year. Major maintenance at QAL and lower bauxite supply from MRN, which limited production at Vaudreuil, accounted for the lion’s share of the fall-off in the first half.
Rio Tinto’s aluminium production for the first half held steady on the year, coming to 1,599 thousand metric tons. Discounting the curtailed production at ABI, production in the half rose by 1 percent.

Overall, Rio Tinto’s aluminium segment turned in a gross sales revenue of US$5,100 million, a 17-percent fall on the year from last year’s total of US$6,148 million. Underlying EBITDA for the segment fell by 38 percent to US$1,127 million, while Underlying EBITDA margin dropped by 8 percent to 27 percent. Weaker prices was the main reason for the decline, but it was partially offset by volume, mix, and cost gains achieved through improved productivity.

Rio Tinto’s aluminium segment posted underlying earnings of US$315 million in the first half, off by 64 percent in the period. Aluminium generated US$1,043 million in the half, off by 8 percent on the year. The firm spent US$635 million on capex for the aluminium segment in the half, 21 percent less than last year’s first half, and the segment generated US$391 million in free cash flow, 20 percent less than last year.

“We have delivered strong financial results with underlying EBITDA of $10.3 billion and EBITDA margin of 47%,” said Rio Tinto chief executive J-S Jacques of the firm’s overall returns. “Our financial performance was driven by our Pilbara operations with a 72% EBITDA margin, underpinned by strong iron ore prices.”

“Our world-class portfolio and strong balance sheet serve us well in all market conditions. This, together with our disciplined capital allocation, underpins our ability to continue to invest in our business and deliver superior returns to shareholders in the short, medium and long term. Our delivery is in evidence today, with our record interim returns of $3.5 billion.”

For the entirety of the year Rio Tinto expects bauxite production to total between 56 million and 59 million metric tons, alumina refined to equal between 8.1 million and 8.4 million metric tons, and total smelted primary aluminium to come to between 3.2 million and 3.4 million metric tons.