REG - Rio Tinto - Rio Tinto 2017 annual results <Origin Href="QuoteRef">RIO.L</Origin> - Part 3
07/02/2018 07:05
- Part 3: For the preceding part double click ID:nRSG1467Eb
Rio Tinto LimitedLevel 7, 360 Collins StreetMelbourne 3000Australia T +61 3 9283 3333Registered in AustraliaABN 96 004 458 404
Registered in England No. 719885
Investor Relations, Australia
Natalie WorleyT +61 3 9283 3063M +61 409 210 462 Rachel StorrsT +61 3 9283 3628M +61 417 401 018
Rio Tinto plc
6 St James's SquareLondon SW1Y 4ADUnited Kingdom T +44 20 7781 2000
Registered in England No. 719885
Rio Tinto Limited
Level 7, 360 Collins StreetMelbourne 3000Australia T +61 3 9283 3333Registered in AustraliaABN 96 004 458 404
Group income statement
Years ended 31 December
2017US$m 2016US$m
Consolidated operations
Consolidated sales revenue 40,030 33,781
Net operating costs (excluding items shown separately) (26,983) (26,799)
Impairment charges (a) (796) (249)
Net gains on disposal of interests in businesses (b) 2,344 515
Exploration and evaluation costs (445) (497)
(Loss)/profit relating to interests in undeveloped projects (15) 44
Operating profit 14,135 6,795
Share of profit after tax of equity accounted units 339 321
Profit before finance items and taxation 14,474 7,116
Finance items
Net exchange (losses)/gains on external debt and intragroup balances (601) 611
Net gains/(losses) on derivatives not qualifying for hedge accounting 33 (24)
Finance income 141 89
Finance costs (c) (848) (1,111)
Amortisation of discount (383) (338)
(1,658) (773)
Profit before taxation 12,816 6,343
Taxation (d) (3,965) (1,567)
Profit after tax for the year 8,851 4,776
- attributable to owners of Rio Tinto 8,762 4,617
- attributable to non-controlling interests 89 159
Basic earnings per share (e) 490.4c 256.9c
Diluted earnings per share (e) 486.9c 255.3c
Status of financial information
This preliminary announcement does not constitute the Group's full financial statements for 2017. This report is based on
accounts which are in the process of being audited and will be approved by the Board and subsequently filed with the
Registrar of Companies in the United Kingdom and the Australian Securities and Investments Commission. Accordingly, the
financial information for 2017 is unaudited and is not statutory accounts within the meaning of Section 434 of the United
Kingdom Companies Act 2006.
Unless stated otherwise, financial information for the year to 31 December 2016 has been extracted from the full financial
statements for that year prepared under the historical cost convention, as modified by the revaluation of certain
derivative contracts and financial assets, the impact of fair value hedge accounting on the hedged items and the accounting
for post-retirement assets and obligations, as filed with the Registrar of Companies.
The Auditors' report on the full financial statements for the year to 31 December 2016 was unqualified and did not contain
a statement under section 498 (2) (regarding adequacy of accounting records and returns), or under section 498 (3)
(regarding provision of necessary information and explanations) of the United Kingdom Companies Act 2006.
Notes to the Group income statement
(a) An impairment indicator was identified at the Rössing Uranium cash-generating unit as a result of structural
changes in the forecast prices for uranium due to oversupply in the market. In assessing the recoverable amount of the
assets, it was determined that the property, plant and equipment and certain other non-current assets were fully impaired
resulting in a pre-tax impairment charge of US$267 million.
In 2016, an impairment trigger assessment at the Argyle cash-generating unit resulted in the identification of impairment
indicators as a result of lower production volumes compared with forecast and lower prices achieved for bulk diamonds. The
recoverable amount for Argyle was determined to be US$191 million, resulting in a pre-tax impairment charge of US$241
million to property, plant and equipment and intangible assets.
In 2017, an impairment trigger assessment at the Argyle cash-generating unit resulted in the identification of impairment
indicators because of lower production volumes compared with forecast, a smaller than expected contribution from
productivity improvements and lower realised prices. In assessing the recoverable amount of the assets, it was determined
that the property, plant and equipment, including an updated closure asset, was fully impaired resulting in a pre-tax
impairment charge of US$172 million. The impairment charge resulted in the recognition of deferred tax assets of US$34
million; these will be recovered by other business units in the same tax group.
Following a reassessment of planned exploration spend in the six months ended 30 June 2017, substantive expenditure to
evaluate the Roughrider deposit in Canada is neither budgeted nor planned. These circumstances were identified as an
impairment indicator under IFRS 6 and the recoverable amount for the evaluation and exploration assets was determined to be
US$nil due to the significant uncertainty over whether commercially viable quantities of mineral resources could be
identified at a future date. Accordingly an impairment charge of US$357 million was recorded in 2017 to fully write-off
the mineral interests recognised on acquisition.
(b)
On 1 September 2017 a pre-tax gain of US$2,367 million (US$2,044
million after tax) was recognised on the sale of Coal & Allied Industries Limited. This was partially offset by net losses
on a number of smaller disposals.
In 2016 the net gains on disposal of interests in businesses related mainly to the sale of Rio Tinto's 40 per cent interest
in the Bengalla joint venture and the sale of the Lochaber assets. This was partially offset by a loss on disposal of the
100 per cent interest in Carbone Savoie.
(c) Finance costs in the income statement are net of amounts capitalised of US$224 million (2016: US$111 million).
(d) Deferred tax assets have been re-measured to reflect lower corporate income tax rates in the US and France as a
result of tax legislation changes substantively enacted in December 2017.
(e) For the purposes of calculating basic earnings per share, the weighted average number of Rio Tinto plc and Rio
Tinto Limited shares outstanding during the year was 1,786.7 million (2016: 1,797.3 million), being the weighted average
number of Rio Tinto plc shares outstanding of 1,364.5 million (2016: 1,373.7 million) and the weighted average number of
Rio Tinto Limited shares of 422.3 million (2016: 423.6 million). The profit and loss figures used in the calculation of
basic and diluted earnings per share are based on the profits and losses for the year attributable to owners of Rio Tinto.
For the purpose of calculating diluted earnings per share, the effect of dilutive securities is added to the weighted
average number of shares. This effect is calculated under the treasury stock method.
Group statement of comprehensive income
Years ended 31 December
2017US$m 2016US$m
Profit after tax for the year 8,851 4,776
Other comprehensive income/(loss):
Items that will not be reclassified to profit or loss:
Actuarial gains/(losses) on post-retirement benefit plans 6 (90)
Tax relating to these components of other comprehensive income (12) 29
Adjustments to deferred tax due to changes in corporate tax rates in the US and France (140) -
(146) (61)
Items that have been/may be subsequently reclassified to profit or loss:
Currency translation adjustment (a) 3,096 (157)
Currency translation on companies disposed of, transferred to the income statement 78 99
Fair value movements:
- Cash flow hedge gains/(losses) 62 (88)
- Cash flow hedge (gains)/losses transferred to the income statement (62) 116
- Gains on revaluation of available for sale securities 19 13
- Losses on revaluation of available for sale securities transferred to the income statement 8 -
Tax relating to these components of other comprehensive income (1) 4
Share of other comprehensive income of equity accounted units, net of tax 34 11
Other comprehensive income/(loss) for the year, net of tax 3,088 (63)
Total comprehensive income for the year 11,939 4,713
- attributable to owners of Rio Tinto 11,691 4,504
- attributable to non-controlling interests 248 209
(a) Excludes a currency translation gain of US$310 million (2016: charge of US$35 million) arising on Rio Tinto
Limited's share capital for the year ended 31 December 2017, which is recognised in the Group statement of changes in
equity. Refer to Group statement of changes in equity on page 39.
Group cash flow statement
Years ended 31 December
2017US$m 2016US$m
Cash flows from consolidated operations(a) 16,670 11,368
Dividends from equity accounted units 817 253
Cash flows from operations 17,487 11,621
Net interest paid (b) (897) (1,294)
Dividends paid to holders of non-controlling interests in subsidiaries (399) (341)
Tax paid (2,307) (1,521)
Net cash generated from operating activities 13,884 8,465
Cash flows from investing activities
Purchases of property, plant and equipment and intangible assets (c) (4,482) (3,012)
Disposals of subsidiaries, joint ventures and associates (d) 2,675 761
Purchases of financial assets (e) (723) (789)
Sales of financial assets (e) 40 582
Sales of property, plant and equipment and intangible assets (f) 138 354
Net funding of equity accounted units (3) (12)
Other investing cash flows (18) 12
Net cash used in investing activities (2,373) (2,104)
Cash flows before financing activities 11,511 6,361
Cash flows from financing activities
Equity dividends paid to owners of Rio Tinto (4,250) (2,725)
Proceeds from additional borrowings 18 4,413
Repayment of borrowings (2,795) (9,361)
Proceeds from issue of equity to non-controlling interests 170 101
Own shares purchased from owners of Rio Tinto (2,083) -
Purchase of non-controlling interests (g) (194) (23)
Other financing cash flows (b) (7) 104
Net cash flow used in financing activities (9,141) (7,491)
Effects of exchange rates on cash and cash equivalents (12) (35)
Net increase/(decrease) in cash and cash equivalents 2,358 (1,165)
Opening cash and cash equivalents less overdrafts 8,189 9,354
Closing cash and cash equivalents less overdrafts (h) 10,547 8,189
(a) Cash flows from consolidated operations
Profit after tax for the year 8,851 4,776
Adjustments for:
Taxation 3,965 1,567
Finance items 1,658 773
Share of profit after tax of equity accounted units (339) (321)
Net gains on disposal and consolidation of interests in businesses (2,344) (515)
Impairment charges 796 249
Depreciation and amortisation 4,375 4,794
Provisions (including exchange differences on provisions) 535 1,417
Utilisation of provisions (714) (627)
Utilisation of provision for post-retirement benefits (339) (370)
Change in inventories (482) 292
Change in trade and other receivables (138) (794)
Change in trade and other payables 421 229
Other items (i) 425 (102)
16,670 11,368
Group cash flow statement (continued)
(b) Rio Tinto completed a US$2.5 billion (nominal value) bond buy-back programme in June 2017. Net interest paid includes
US$259 million being the payment of the premiums and the accelerated interest associated with the bond redemption. In
addition, US$7 million was paid relating to the close out of interest rate swaps and was recognised in other financing cash
flows.
In 2016, Rio Tinto completed three bond purchase programmes totalling US$7.5 billion (nominal value). These transactions
resulted in net interest paid of US$493 million, which represents the payment of the premiums and the accelerated interest
associated with these bond redemptions. In addition, US$88 million was received relating to the close out of interest rate
swaps and was recognised in other financing cash flows.
(c) Capital expenditure includes US$215 million (31 December 2016: US$232 million) capitalised in accordance with IFRIC 20
'Stripping costs in the production phase of a surface mine'; a significant proportion of stripping costs capitalised relate
to the Group's Copper operations.
(d) Disposals of subsidiaries, joint ventures and associates in 2017 mainly related to the cash proceeds received to date
for the sale of Coal & Allied Industries Limited of US$2.54 billion (net of working capital adjustments and cash
transferred on disposal) and also included receipts of the second and final instalment of funds for Rio Tinto's disposal of
its 100 percent interest in Lochaber, which was completed in November 2016.
Disposals of subsidiaries, joint ventures and associates in 2016 related primarily to Rio Tinto's disposal of its 40 per
cent interest in the Bengalla Joint Venture for US$599 million (net of working capital adjustments, transaction costs and
cash disposed of in the Joint Venture) and the first US$224 million instalment in respect of the disposal of its Lochaber
assets for total consideration of US$410 million (before finalisation of closing adjustments and transaction costs).
Disposals in the cash flow statement are presented net of cash on disposal and after adjusting for working capital and
other items as specified under the relevant sales agreements.
(e) During 2016, the Group invested US$250m in a separately managed portfolio of fixed income instruments. These
investments are classified as assets held for trading in the balance sheet. The purchases and sales of the investments were
reported on a gross cash flow basis.
In 2017 the Group invested a further US$705 million. As there has been significant turnover, management has elected to
report the purchases and sales of these securities on a net cash flow basis in the current year within 'Purchases of
financial assets'.
(f) Sales of property, plant and equipment and intangible assets in 2016 included US$192 million for the disposal of 100
per cent interest in the Mount Pleasant thermal coal project to MACH Energy Australia Pty Ltd on 5 August 2016.
(g) In May 2017, the Group's subsidiary Simfer Jersey Limited (Rio Tinto 53%) purchased a 4.25% interest in Simfer SA from
International Finance Corporation for US$194 million.
(h) Closing cash and cash equivalents less overdrafts at 31 December 2017 differ from cash and cash equivalents on the
balance sheet as they include overdrafts of US$3 million (31 December 2016: US$12 million) reported within 'Borrowings and
other financial liabilities'.
(i) Includes adjustments to add back mark to market losses of US$501 million (2016: gains of US$29 million) mainly
relating to derivatives embedded in operational contracts and not designated in a hedge relationship.
Group balance sheet
At 31 December
2017US$m 2016US$m
Non-current assets
Goodwill 1,037 951
Intangible assets 3,119 3,279
Property, plant and equipment 62,093 58,855
Investments in equity accounted units 4,486 5,019
Inventories 160 143
Deferred tax assets 3,395 3,728
Trade and other receivables 1,724 1,342
Tax recoverable 30 38
Other financial assets (including loans to equity accounted units) 510 822
76,554 74,177
Current assets
Inventories 3,472 2,937
Trade and other receivables 3,443 3,460
Tax recoverable 129 98
Other financial assets (including loans to equity accounted units) 1,084 359
Cash and cash equivalents 10,550 8,201
18,678 15,055
Assets of disposal groups held for sale (a) 494 31
Total assets 95,726 89,263
Current liabilities
Borrowings and other financial liabilities (904) (922)
Trade and other payables (7,061) (6,361)
Tax payable (1,985) (764)
Provisions including post-retirement benefits (1,275) (1,315)
(11,225) (9,362)
Non-current liabilities
Borrowings and other financial liabilities (15,148) (17,470)
Trade and other payables (856) (789)
Tax payable (263) (274)
Deferred tax liabilities (3,628) (3,121)
Provisions including post-retirement benefits (13,367) (12,479)
(33,262) (34,133)
Liabilities of disposal groups held for sale (a) (124) (38)
Total liabilities (44,611) (43,533)
Net assets 51,115 45,730
Capital and reserves
Share capital (b)
- Rio Tinto plc 220 224
- Rio Tinto Limited 4,140 3,915
Share premium account 4,306 4,304
Other reserves 12,284 9,216
Retained earnings 23,761 21,631
Equity attributable to owners of Rio Tinto 44,711 39,290
Attributable to non-controlling interests 6,404 6,440
Total equity 51,115 45,730
Group balance sheet (continued)
(a) Assets and liabilities held for sale at 31 December 2017 comprise of Rio Tinto's interest in the Dunkerque
aluminium smelter and certain other separate assets.
Assets and liabilities held for sale at 31 December 2016 comprised of Rio Tinto's interests in the Blair Athol coal project
and certain other separate assets.
(b) At 31 December 2017, Rio Tinto plc had 1,342.1 million ordinary shares in issue and held by the public, and Rio
Tinto Limited had 412.4 million shares in issue and held by the public. No shares in Rio Tinto Limited were held by Rio
Tinto plc at 31 December 2017 (31 December 2016: nil). As required to be disclosed under the ASX Listing Rules, the net
tangible assets per share amounted to US$23.12 (31 December 2016: US$19.49).
.
Group statement of changes in equity
Year ended 31 December 2017
Attributable to owners of Rio Tinto
Share capital Share Other Retained Total Non-controlling Total
US$m premium reserves earnings US$m interests equity
US$m US$m US$m US$m US$m
Opening balance 4,139 4,304 9,216 21,631 39,290 6,440 45,730
Total comprehensive income for the year (a) - - 3,078 8,613 11,691 248 11,939
Currency translation arising onRio Tinto Limited's share capital 310 - - - 310 - 310
Dividends - - - (4,250) (4,250) (403) (4,653)
Share buyback (b) (89) - 4 (2,312) (2,397) - (2,397)
Companies no longer consolidated - - (124) 130 6 (8) (2)
Own shares purchased from Rio Tinto shareholders to satisfy share options (c) - - (64) (18) (82) - (82)
Change in equity interest held by Rio Tinto - - - 43 43 (43) -
Treasury shares reissued and other movements - 2 - - 2 - 2
Equity issued to holders of non-controlling interests - - - - - 170 170
Employee share options and other IFRS 2 charges to the income statement - - 41 57 98 - 98
Transfers and other movements - - 133 (133) - - -
Closing balance 4,360 4,306 12,284 23,761 44,711 6,404 51,115
Year to 31 December 2017US$ Year to 31 December 2016US$
Dividends per share: paid during the year 235.0c 152.5c
Dividends per share: proposed in the announcement of the results for the year 180.0c 125.0c
Year ended 31 December 2016
Attributable to owners of Rio Tinto
Share capital Share Other Retained Total Non-controlling Total
US$m premium reserves earnings US$m interests equity
US$m US$m US$m US$m US$m
Opening balance 4,174 4,300 9,139 19,736 37,349 6,779 44,128
Total comprehensive income for the year (a) - - (49) 4,553 4,504 209 4,713
Currency translation arising onRio Tinto Limited's share capital (35) - - - (35) - (35)
Dividends - - - (2,725) (2,725) (352) (3,077)
Companies no longer consolidated - - - - - 8 8
Own shares purchased from Rio Tinto shareholders to satisfy share options (c) - - (43) (37) (80) - (80)
Change in equity interest held by Rio Tinto (d) - - 108 40 148 (313) (165)
Treasury shares reissued and other movements - 4 - - 4 - 4
Equity issued to holders of non-controlling interests - - - - - 109 109
Employee share options and other IFRS 2 charges to the income statement - - 61 64 125 - 125
Closing balance 4,139 4,304 9,216 21,631 39,290 6,440 45,730
Group statement of changes in equity (continued)
(a) Refer to the Group statement of comprehensive income for further details. Adjustments to other reserves include
currency translation attributable to owners of Rio Tinto, other than that arising on Rio Tinto Limited share capital.
(b) In 2017 the total amount of US$2,397 million includes own shares purchased from the owners of Rio Tinto plc as per
the cash flow statement of US$2,083 million and a financial liability recognised in respect of an irrevocable contract in
place as at 31 December 2017 to cover the share buy-back programme.
(c) Net of contributions received from employees for share options.
(d) The restructure of Coal & Allied Industries Limited completed on 3 February 2016. The restructure involved the
exchange of a 32.4 per cent interest in Hunter Valley Operations for an additional 20 per cent shareholding in Coal &
Allied Industries Limited, increasing Rio Tinto's shareholding of Coal & Allied Industries Limited from 80 per cent to 100
per cent. Rio Tinto sold its 100 per cent interest in Coal & Allied Industries Limited on 1 September 2017.
Reconciliation with Australian Accounting Standards
The financial information in this report has been prepared in accordance with IFRS as defined in the accounting policies'
notes in this report, which differs in certain respects from the version of International Financial Reporting Standards
that is applicable in Australia, referred to as Australian Accounting Standards (AAS).
Prior to 1 January 2004, the Group's financial statements were prepared in accordance with UK GAAP. Under IFRS, goodwill
on acquisitions prior to 1998, which was eliminated directly against equity in the Group's UK GAAP financial statements,
has not been reinstated. This was permitted under the rules governing the transition to IFRS set out in IFRS 1. The
equivalent Australian Standard, AASB 1, does not provide for the netting of goodwill against equity. As a consequence,
shareholders' funds under AAS include the residue of such goodwill, which amounted to US$557 million at 31 December 2017
(2016: US$561 million).
Save for the exception described above, the financial information in this report drawn up in accordance with IFRS is
consistent with the requirements of AAS.
Consolidated net debt
Financing liabilities (b) Other assets
Year ended 31 December Borrowings (including finance leases) excluding overdraft (a) Debt-related derivatives (included in Other financial assets/liabilities) Cash/Overdraft (b) Other investments (c) 2017Net debtUS$m 2016Net debtUS$m
Analysis of changes in consolidated net debt
Opening balance (17,618) (408) 8,189 250 (9,587) (13,783)
Foreign exchange adjustment (303) 245 (12) - (70) 90
Cash movements excluding exchange movements 2,777 7 2,370 705 5,859 3,915
Other non-cash movements (29) (21) - 3 (47) 191
Closing balance (15,173) (177) 10,547 958 (3,845) (9,587)
2017US$m 2016US$m
Exchange gains/(losses) on US dollar net debt and intragroup balances
Exchange gains on US dollar net debt 554 160
Exchange (losses)/gains on intragroup balances (1,154) 449
Exchange (losses)/gains on settlement of dividends (1) 2
(Charged)/credited to income statement (601) 611
(a) Borrowings (including finance leases) at 31 December 2017 differ from total borrowings on the balance sheet as
they exclude overdrafts of US$3 million (31 December 2016: US$12 million), other current financial liabilities of US$352
million (31 December 2016: US$205 million) and other non-current financial liabilities US$524 million (31 December 2016:
US$557 million).
(b) Closing cash/overdrafts at 31 December 2017 differ from cash and cash equivalents on the balance sheet as they
include overdrafts of US$3 million which have been classified as a financial liability (31 December 2016: US$12 million).
(c) Other investments comprise US$958 million (2016: US$250 million) of highly liquid financial assets held in managed
investment funds classified as held for trading.
Geographical analysis (by destination)
Years ended 31 December
2017 % Adjusted2016(b)% 2017US$m Adjusted 2016(b)US$m
Consolidated sales revenue by destination (a)
China 44.2 43.6 17,706 14,742
Other Asia 12.8 13.9 5,108 4,692
United States of America 14.3 13.9 5,716 4,709
Japan 11.7 11.3 4,701 3,809
Europe (excluding United Kingdom) 7.5 7.6 3,015 2,579
Canada 2.8 3.0 1,111 1,024
Australia 1.8 2.0 710 675
United Kingdom 1.1 1.2 449 391
Other 3.8 3.5 1,514 1,160
Consolidated sales revenue 100.0 100.0 40,030 33,781
(a) Consolidated sales revenue by geographical destination is based on the ultimate country of destination of the
product, if known. If the eventual destination of the product sold through traders is not known then revenue is allocated
to the location of the product at the time when the risks and rewards of ownership are transferred. Rio Tinto is domiciled
in both the UK and Australia.
(b) The 2016 comparatives above have been amended to correct the allocation of revenues by region. The most
significant impacts are an increase in the amount allocated to China by US$337 million and a decrease to Other Asia (which
excludes China and Japan) of US$319 million. There is no impact on the total consolidated sales revenue.
Prima facie tax reconciliation
Years ended 31 December
2017US$m 2016US$m
Profit before taxation 12,816 6,343
Deduct: share of profit after tax of equity accounted units (339) (321)
Parent companies' and subsidiaries' profit before tax 12,477 6,022
Prima facie tax payable/(receivable) at UK rate of 19 per cent (2016: 20 per cent) 2,371 1,204
Higher rate of taxation on Australian earnings 1,069 604
Impact of items excluded in arriving at underlying earnings (a):
Impairment charges 10 (16)
Gains and losses on disposal of businesses (123) 30
Exchange and gains/losses on derivatives (48) (33)
Onerous port and rail contracts - (46)
Closure provision for legacy operations - (40)
Tax provision - 380
Adjustment to deferred tax relating to expected divestments 202 -
Changes in corporate tax rates in the US and France 439 -
Other exclusions 14 (48)
Impact of changes in tax rates and laws 21 (9)
Other tax rates applicable outside the UK and Australia on underlying earnings (92) (283)
Resource depletion and other depreciation allowances (33) (15)
Research, development and other investment allowances (13) (15)
Recognition of previously unrecognised deferred tax assets (40) (154)
Write-down of previously recognised deferred tax assets (b) 160 -
Unrecognised current year operating losses 26 25
Other items (c) 2 (17)
Total taxation charge (d) 3,965 1,567
(a) The impact for each item includes the effect of tax rates applicable outside the UK.
(b) The write-down of previously recognised deferred tax assets primarily relates to a reduction in recognised
deferred tax assets on brought forward losses in Grasberg.
(c) Other items include various adjustments to provisions for taxation of prior periods.
(d) This tax reconciliation relates to the Group's parent companies, subsidiaries and joint operations. The Group's
share of profit of equity accounted units is net of tax charges of US$191 million (2016: US$156 million).
Acquisitions and Disposals
2017 and 2016 Acquisitions
There were no material acquisitions during the years ended 31 December 2017 or 31 December 2016.
2017 Disposals
On 1 September 2017, Rio Tinto disposed of its 100 per cent shareholding in Coal & Allied Industries Limited to Yancoal
Australia Limited for total consideration of US$2.69 billion (before working capital adjustments). The US$2.69 billion
comprises US$2.45 billion in cash paid on the closing date and a further US$240 million of unconditional guaranteed royalty
payments. During 2017, US$110 million of the unconditional guaranteed royalty payments has been received;total net cash
proceeds received in 2017, net of working capital adjustments, transaction costs and cash transferred, were US$2.54
billion. Rio Tinto expects to receive the remaining US$130 millionof unconditional guaranteed royalty payments between 2018
and 2021.
2016 Disposals
On 1 March 2016, Rio Tinto disposed of its 40 per cent interest in the Bengalla Joint Venture to New Hope Corporation
Limited for US$616.7 million (before finalisation of net debt and working capital adjustments).
On 31 March 2016, Rio Tinto disposed of its 100 per cent interest in Carbone Savoie to Alandia Industries.
Rio Tinto transferred its 53.83 per cent shareholding in Bougainville Copper Limited ("BCL") to Equity Trustees Limited
(independent trustee) on 30 June 2016 for nil consideration. Equity Trustees Limited subsequently distributed the shares in
accordance with the trust deed to nominees of each of the Autonomous Bougainville Government (36.4 per cent) and the
Independent State of Papua New Guinea (17.4 per cent) such that each party now controls an equal share of BCL (36.4 per
cent). The Group did not previously consolidate BCL as it was determined that in accordance with IFRS, as defined under
Accounting Policies, that the Group does not control the relevant activities, being the mining of copper at the Panguna
mine, which was brought to a halt by militant activity in 1989. The carrying value has previously been fully impaired and
therefore the transfer resulted in no financial impact for the year ended 31 December 2016.
On 2 September 2016, Rio Tinto disposed of its interest in Zululand Anthracite Colliery.
On 23 November 2016, Rio Tinto disposed of its 100 per cent interest in Lochaber to SIMEC for US$410 million (before
finalisation of closing adjustments and transaction costs) of which US$224 million was received in December 2016. The
second and final instalment of funds was received during April 2017.
Events after the balance sheet date
On 10 January 2018, the Group announced it had received a binding offer from Liberty House to acquire the Group's Aluminium
Dunkerque smelter in northern France for US$500 million, subject to final adjustments. In accordance with French law, the
Group will launch a consultation process with employees, relevant European works councils and other stakeholders in
relation to the bid. Subject to satisfactory completion of these consultations, the Group expects to complete the sale of
Aluminium Dunkerque in the second quarter of 2018. As at 31 December 2017 Rio Tinto's interest in the Aluminium Dunkerque
smelter was classified as held for sale.
Accounting policies
The financial information included in this report has been prepared in accordance with applicable UK law, applicable
Australian law as amended by the Australian Securities and Investments Commission Order dated 14 December 2015, Article 4
of the European Union IAS regulation and with:
- International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) and
interpretations issued from time to time by the IFRS Interpretations Committee (IFRS IC) both as adopted by the European
Union (EU) and which are mandatory for EU reporting as at 31 December 2017; and
- International Financial Reporting Standards as issued by the IASB and interpretations issued from time to time by the
IFRS IC which are mandatory as at 31 December 2017.
The above accounting standards and interpretations are collectively referred to as 'IFRS' in this report. Whilst the
financial information included in this report has been prepared in accordance with IFRS the report does not contain all the
information required to comply with IFRS. The Group will publish full financial statements that comply with IFRS in March
2018.
The Group has not early adopted any amendments, standards or interpretations that have been issued but are not yet
mandatory. The financial information has been prepared on the basis of accounting policies consistent with those applied in
the financial statements for the year ended 31 December 2016.
The Group already complied with the amendment to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses which is
mandatory for 2017. This amendment clarifies the accounting treatment for deferred tax assets related to debt instruments
measured at fair value. There is an amendment to IAS 7 Statement of Cash Flows: Disclosure Initiative, which is mandatory
for 2017, which requires entities to provide disclosures about changes in their liabilities arising from financing
activities, including changes arising from financing cash flows and non-cash changes (such as foreign exchange gains or
losses). The Group has expanded the net debt reconciliation on page 42 to comply with this amendment. Both of these
amendments have been endorsed by the EU.
IFRS 15 "Revenue from Contracts with Customers", IFRS 9 "Financial Instruments" and IFRIC 22 "Foreign Currency Transactions
and Advance Consideration" are mandatory in 2018. IFRS 16 ''Leases'' and IFRIC 23 "Uncertainty over Income Tax Treatments"
are mandatory in 2019 in addition to "Annual Improvements to IFRS Standards 2015-2017 Cycle" and amendments to IFRS 9
"Prepayment Features with Negative Compensation Financial Instruments" and IAS 28 "Long-term Interests in Associates and
Joint Ventures". IFRS 17 "Insurance Contracts" is mandatory in 2021. IFRS 15, IFRS 9 and IFRS 16 have been endorsed by the
EU.
The impact on the Group's net assets of transition to the three new accounting pronouncements which are mandatory in 2018
is currently expected to be immaterial, however, practice continues to develop on application of these standards. IFRS 16
will have a significant impact on the Group's primary statements and on its systems and processes. Information on the
US$1.8 billion undiscounted amount of the Group's non-cancellable operating lease commitments as at 31 December 2016 as
defined under IAS 17, the current leasing standard, is disclosed in note 31 of the Group's 2016 accounts. The present
value of the Group's operating lease payments as defined under the new standard will be shown as lease liabilities on the
balance sheet and included in net debt. There are a number of differences in definitions between the two standards.
More detailed information on transition for the 2018 standards and progress to date on the other new accounting
pronouncements will be included in the Group's 2017 financial statements.
Non-GAAP measures
The Group presents certain non-GAAP financial measures, including underlying earnings, which are reconciled to directly
comparable IFRS financial measures on page 49 of this report. These non-GAAP measures are used internally by management to
assess the performance of the business and may therefore be useful to investors. They are not a substitute for the IFRS
measures and should be considered alongside those measures.
Summary financial data in Australian dollars, Sterling and US dollars
2017A$m 2016A$m 2017£m 2016£m 2017US$m 2016US$m
54,373 47,467 32,455 26,043 Gross sales revenue 41,867 35,336
51,987 45,401 31,031 24,909 Consolidated sales revenue 40,030 33,781
16,644 8,525 9,935 4,677 Profit before tax from continuing operations 12,816 6,343
11,495 6,419 6,861 3,522 Profit for the year from continuing operations 8,851 4,776
11,379 6,205 6,792 3,404 Net earnings attributable to owners of Rio Tinto 8,762 4,617
11,204 6,854 6,688 3,761 Underlying earnings (a) 8,627 5,100
636.9c 345.2c 380.2p 189.4p Basic earnings per share (b) 490.4c 256.9c
627.1c 381.4c 374.3p 209.2p Basic underlying earnings per share (a), (b) 482.8c 283.8c
Dividends per share to Rio Tinto shareholders (c)
301.34c 211.02c 183.69p 108.01p - paid 235.00c 152.50c
228.53c 163.62c 129.43p 100.56p - proposed 180.00c 125.00c
14,949 8,549 8,923 4,690 Cash flow before financing activities 11,511 6,361
(4,929) (13,281) (2,869) (7,836) Net debt (3,845) (9,587)
57,322 54,428 33,366 32,116 Equity attributable to owners of Rio Tinto 44,711 39,290
(a) Underlying earnings exclude net gains on disposal of businesses and other charges of US$135 million (31 December
2016: net losses on impairment and other charges of US$483 million).
(b) Basic earnings per share and basic underlying earnings per share do not recognise the dilution resulting from
share options on issue.
(c) The Australian dollar and Sterling amounts are based on the US dollar amounts, retranslated at average or closing
rates as appropriate, except for the dividends which are the actual amounts paid or payable.
Metal prices and exchange rates
2017 2016 Increase/(decrease)
Metal prices - average for the year
Copper - US cents/lb 281c 221c 27%
Aluminium - US $/tonne US$1,969 US$1,605 23%
Gold - US$/troy oz US$1,257 US$1,250 1%
Average exchange rates in US dollar
Sterling 1.29 1.36 (5%)
Australian dollar 0.77 0.74 4%
Canadian dollar 0.77 0.76 1%
Euro 1.13 1.11 2%
South African rand 0.075 0.068 10%
Year-end exchange rates in US dollar
Sterling 1.34 1.22 10%
Australian dollar 0.78 0.72 8%
Canadian dollar 0.79 0.74 7%
Euro 1.20 1.05 14%
South African rand 0.081 0.073 11%
Reconciliation of net earnings to underlying earnings
Exclusions from underlying earnings Pre-tax (m) Taxation Non-controlling Net Net
2017 2017 interests amount amount
US$m US$m 2017 2017 2016
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