Earnings Call Excerpt
Rio Tinto (RTP)
Q4 2005 Earnings Conference Call
February 2nd 2006, 5:00 AM.
Executives:
Paul Skinner, Chairman
Leigh Clifford, Chief Executive Officer
Guy Elliott, Chief Financial Officer
Analysts:
Heath Janson, analyst
Jeremy Gray, CSFB
Sophia Hares, UBS
John MacKinnon, Deutsche Bank
John Komets, West-tech
Tom Louis from Deutsche Bank
Steve, Liberty
Presentation
Paul Skinner, Chairman
Good morning everybody and welcome to the presentation of Rio Tinto’s results for 2005. Leigh Clifford here with me in London; and Guy Elliott, our CFO joins us from Melbourne. Good morning, well good evening to you Guy. The sequence of the presentation today is that I will start with a summary of the results and outlook. Leigh will then provide an overview of our performance during the year. Before he hands over to Guy for a detailed review of our financial results, and then Leigh will do a wrap-up with some comments on a development project and growth opportunities before we take questions.
Underlying earnings grew strongly in 2005 to almost $5 billon, a rise of 118%
on the previous year. And as you can see from the chart on the right-hand side of the screen here, this level of earnings is well above the trend of recent years. The rise in earnings reflects very strong demand and good operational performance overall and record production levels at many business units. The contribution to earnings from increased production was in excess of $1.1 billion, I think it’s a very important point. We benefited significantly from recent investments in capacity expansion, particularly in Iron ore in the Pilbara and coking coal at Hail Creek and Alumina at the new Comalco refinery. The prices of most products were strong throughout the year although there was some softening of molybdenum and Asian thermal coal towards the yearend. This was offset by a firming in Aluminum, copper and gold over the same period.
Net earnings rose 58% to 5.2 billion, the earnings contribution from excluded items were smaller than in 2004 as we made fewer asset sales than in the previous year. So it was very good year for Rio Tinto. In addition to record earnings, cash flows from operations plus dividends were also at a record of $8.3 billion, a rise of 85%, and the effects of these strong cash flows on the business cannot be understated. It enables the group to fund our growing investment program and significantly strengthens our balance sheet. Remember with this follows a 20% rebasing of our ordinary dividend and the impact of our recent capital management program.
Now we remain committed to managing industry cost pressures, but we are not adhering to them. And cost increases impacted earnings negatively by $598 million in 2005. As Leigh pointed out, the word ?costs
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