REG - Rio Tinto - Rio Tinto announces first half underlying earnings <Origin Href="QuoteRef">RIO.L</Origin> - Part 4
29/10/2014 11:01
- Part 4: For the preceding part double click ID:nRSG5022Oc
Other disclosures (continued)
Contingent assets
The Group has various insurance claims outstanding with reinsurers including claims relating to the Manefay slide at
Kennecott Utah Copper in April 2013. An interim progress payment was received on this claim in 2013 and engagement with
insurers continues.
Related party matters
Purchases relate largely to amounts charged by equity accounted units for toll processing of alumina and purchases of
bauxite and aluminium. Sales relate largely to charges for supply of coal to jointly controlled marketing entities for
onward sale to third party customers. Details of the Group's principal equity accounted units are given in the 2013 Annual
report.
Income statement items Six monthsto 30 June2014US$m Six monthsto 30 June2013US$m
Purchases from equity accounted units (1,051) (963)
Sales to equity accounted units 422 858
Cash flow statement items
Dividends from equity accounted units 42 531
Net funding of equity accounted units (84) (93)
Balance sheet items 30 June2014US$m 31 December2013US$m
Investments in equity accounted units 4,412 3,957
Loans to equity accounted units 91 94
Loans from equity accounted units (51) (86)
Trade and other receivables: amounts due from equity accounted units 638 615
Trade and other payables: amounts due to equity accounted units (275) (290)
Rio Tinto plc guarantees to pay the Rio Tinto Pension Fund (UK) any contributions due from Group companies participating in
that fund, pro rata to its ownership of those companies and subject to certain conditions, in the event that the companies
fail to meet their contribution requirements. Furthermore, Rio Tinto plc has in place a guarantee for the Rio Tinto Pension
Fund, in the standard form required by the Pension Protection Fund ('PPF'), to cover 105 per cent of the Fund's liabilities
measured on the PPF's prescribed assumptions. Other similar guarantees in place include a Rio Tinto plc guarantee to the
Rio Tinto 2009 pension fund, with no limit on liabilities.
In February 2011 an agreement between Alcan Holdings Switzerland and the Alcan Schweiz pension fund was executed whereby
the funding deficit as at 31 December 2010 in relation to the pensioner population will be funded by Alcan Holdings
Switzerland over a six year period.
Events after the statement of financial position date
Rio Tinto Coal Mozambique
On 30 July 2014, Rio Tinto announced that it had reached an agreement to sell Rio Tinto Coal Mozambique, which comprises
the Benga coal mine and other projects in the Tete province of Mozambique, to International Coal Ventures Private Limited
for US$50 million. The sale is subject to certain conditions precedent and regulatory approvals. The transaction is
expected to close in the third quarter of 2014.
SouthGobi Resources Ltd
On 29 July 2014, Turquoise Hill announced that it had entered into a share purchase agreement with National United
Resources Holdings Limited, for the sale of a 29.95 per cent stake in SouthGobi Resources Ltd. ('SouthGobi'). Turquoise
Hill has a 55.95 per cent interest in SouthGobi and Rio Tinto has 50.8 per cent ownership of Turquoise Hill. The
transaction is expected to close during the second half of 2014.
Basis of preparation
The condensed consolidated interim financial statements included in this report have been prepared in accordance with
International Accounting Standard ('IAS') 34 'Interim financial reporting' as adopted by the European Union ('EU'), the
Disclosure and Transparency Rules ('DTR') of the Financial Conduct Authority ('FCA') applicable to interim financial
reporting and an Order under section 340 of the Australian Corporations Act 2001 issued by the Australian Securities and
Investments Commission on 22 December 2010 (as amended on 17 February 2012).
These condensed interim financial statements represent a 'condensed set of financial statements' as referred to in the DTR
issued by the FCA. Accordingly, they do not include all of the information required for a full annual financial report and
are to be read in conjunction with the Group's annual financial statements for the year ended 31 December 2013. These
annual financial statements were prepared in accordance with International Financial Reporting Standards ('IFRS') and
interpretations issued from time to time by the IFRS Interpretations Committee and adopted by the EU that were mandatory
for calendar year 2013 or, in certain cases permitted to be early adopted.
The condensed financial statements are unaudited and do not constitute statutory accounts as defined in Section 434 of the
United Kingdom Companies Act 2006. The financial information for the year to 31 December 2013 included in this report has
been extracted from the full financial statements filed with the Registrar of Companies and does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. The Auditors' report on these full financial statements was
unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis of matter
and did not contain statements 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 Companies Act 2006.
Accounting policies
The EU IFRS condensed consolidated interim financial statements have been drawn up on the basis of accounting policies,
methods of computation and presentation consistent with those applied in the financial statements for the year ended 31
December 2013 except that the Group has early adopted IFRIC 21 'Levies' which has been endorsed by the EU and a number of
amendments issued by the International Accounting Standards Board ('IASB') which apply for the first time in 2014. These
new pronouncements do not have a significant impact on the accounting policies, methods of computation or presentation
applied by the Group and therefore the prior period consolidated financial statements have not been restated. The Group has
not early adopted any other amendments, standards or interpretations that have been issued but are not yet effective.
The critical accounting judgements and key sources of estimation uncertainty for the half year are the same as those
disclosed in the Group's consolidated financial statements for the year ended 31 December 2013.
In the interim financial statements for the six months ended 30 June 2013, a balance of US$1,080 million was included in
Trade and other receivables which should have been offset against an amount of US$1,080 million included in Trade and other
payables to comply with the group's accounting policies.
The financial information by business unit and the geographic analysis of sales by destination provided on pages 10 to 12
and 36 of this press release respectively, satisfy the disclosure requirements of IFRS 8 'Operating Segments' for interim
financial statements and also provide additional voluntary disclosure which the Group considers is useful to the users of
the financial statements.
Going Concern
After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in
preparing its condensed consolidated interim 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. They are not a substitute for the IFRS measures and should be considered alongside
those measures.
Directors' statement of responsibility
In the directors' opinion:
The condensed consolidated interim financial statements on pages 30 to 43 including the notes have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union, the Disclosure and Transparency
Rules ('DTR') of the Financial Conduct Authority in the United Kingdom, applicable accounting standards and the Australian
Corporations Act 2001 as modified by an order of the Australian Securities and Investments Commission issued on 22 December
2010 (as amended on 17 February 2012), using the most appropriate accounting policies for Rio Tinto's business and
supported by reasonable and prudent judgements.
The condensed consolidated interim financial statements give a true and fair view of the Rio Tinto Group's financial
position as at 30 June 2014 and of its performance, as represented by the results of its operations, comprehensive income
and expense and its cash flows for the six months then ended.
There are reasonable grounds to believe that each of the Rio Tinto Group, Rio Tinto Limited and Rio Tinto plc will be able
to pay its debts as and when they become due and payable.
The interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
- an indication of important events that have occurred during the first six months and their impact on the condensed
set of consolidated financial statements, and a description of the principal risks and uncertainties for the remaining six
months of the financial year; and
- material related-party transactions in the first six months and any material changes in the related-party
transactions described in the last annual report.
Signed in accordance with a resolution of the Board of Directors.
Sam Walsh
Chief executive
7 August 2014
Jan du Plessis
Chairman
7 August 2014
Auditor's Independence Declaration
As lead auditor for the review of Rio Tinto Limited for the period ended 30 June 2014, I declare that to the best of my
knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review;
and
b) no contraventions of any applicable code of professional conduct in relation to the review.
This declaration is in respect of Rio Tinto Limited and the entities it controlled during the period.
Paul Bendall
Partner
PricewaterhouseCoopers
Melbourne
7 August 2014
Liability limited by a scheme approved under Professional Standards Legislation
Independent review report of PricewaterhouseCoopers LLP to the members of Rio Tinto plc and PricewaterhouseCoopers to the
members of Rio Tinto Limited
Introduction
For the purpose of this report, the terms 'we' and 'our' denote PricewaterhouseCoopers LLP in relation to UK legal,
professional and regulatory responsibilities and reporting obligations to Rio Tinto plc and PricewaterhouseCoopers in
relation to Australian legal, professional and regulatory responsibilities and reporting obligations to Rio Tinto Limited.
We have been engaged by Rio Tinto plc and Rio Tinto Limited (the 'Companies') to review the interim financial information
in the interim report of the Rio Tinto Group comprising the Companies and their subsidiaries, associates and joint ventures
(the 'Group') for the six months ended 30 June 2014, which comprises the Group income statement, Group statement of
comprehensive income, Group statement of cash flows, Group statement of financial position, Group statement of changes in
equity and related notes (including the financial information by business unit). We have read the other information
contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies
with the information in the interim financial information.
Directors' responsibilities
The interim report is the responsibility of, and has been approved by, the directors of the Companies. The directors are
responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority and Corporations Act 2001 in Australia as amended by the Australian Securities and
Investments Commission Order dated 22 December 2010, as amended on 17 February 2012 (the 'ASIC Order' described in the
Australian Corporations Act - Summary of ASIC relief) and for such internal control as the directors determine necessary to
enable the preparation of the interim report that gives a true and fair view and is free from material misstatement,
whether due to fraud or error.
As disclosed in Note 1 Principal Accounting Policies of the 2013 Annual Report, the financial statements of the Group are
prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. The
interim financial information included in this interim report has been prepared in accordance with International Accounting
Standard IAS 34, Interim Financial Reporting, as adopted by the European Union.
Our responsibility
Our responsibility is to express a conclusion on the interim financial information in the interim report based on our
review. PricewaterhouseCoopers LLP have prepared this review report, including the conclusion, for and only for Rio Tinto
plc for the purpose of the Disclosure and Transparency Rules of the Financial Conduct Authority and PricewaterhouseCoopers
have prepared this review report, including the conclusion, for and only for Rio Tinto Limited for the purpose of the
Corporations Act 2001 in Australia as amended by the ASIC Order and for no other purpose. We do not, in producing this
report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) ISRE 2410, Review
of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board
for use in the United Kingdom and the Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report
Performed by the Independent Auditor of the Entity. As the auditor of the Group, ISRE 2410 and ASRE 2410 require that we
comply with the ethical requirements relevant to the audit of the annual financial report.
A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on Auditing (UK and Ireland) or Australian Auditing Standards
and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 in Australia.
Conclusion of PricewaterhouseCoopers LLP for Rio Tinto plc
Based on our review, nothing has come to our attention that causes us to believe that the interim information in the
interim financial report of the Group for the six months ended 30 June 2014 is not prepared, in all material respects, in
accordance with International Accounting Standard IAS 34 Interim Financial Reporting as adopted by the European Union and
the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Conclusion of PricewaterhouseCoopers for Rio Tinto Limited
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim
financial report of Rio Tinto Limited is not in accordance with the Corporations Act 2001 in Australia as amended by the
ASIC Order, including:
a) giving a true and fair view of the Group's financial position as at 30 June 2014 and of its performance for the half
year ended on that date; and
b) complying with International Accounting Standard IAS 34 Interim Financial Reporting as adopted by the European Union
and the Corporations Regulations 2001 in Australia.
Paul Bendall
Partner
PricewaterhouseCoopers LLP PricewaterhouseCoopers
Chartered Accountants Chartered Accountants
London Melbourne
7 August 2014 7 August 2014
in respect of Rio Tinto plc in respect of Rio Tinto Limited
Liability limited by a scheme
approved under Professional
Standards Legislation
Summary financial data in Australian dollars, Sterling and US dollars
30 June2014A$m 30 June 2013A$m 30 June2014£m 30 June 2013£m 30 June2014US$m 30 June 2013US$m
27,959 26,135 15,324 17,194 Gross sales revenue 25,570 26,563
26,611 24,116 14,585 15,866 Consolidated sales revenue 24,337 24,511
6,661 3,159 3,651 2,078 Profit before tax 6,092 3,211
4,685 1,658 2,568 1,091 Profit for the period 4,285 1,685
Net earnings attributable to
4,813 1,692 2,638 1,113 owners of Rio Tinto 4,402 1,720
5,594 4,161 3,066 2,737 Underlying earnings (a) 5,116 4,229
260.4c 91.6c 142.7p 60.3p Basic earnings per ordinary share (b) 238.2c 93.1c
302.7c 225.2c 165.9p 148.2p Basic Underlying earnings per ordinary share (a), (b) 276.8c 228.9c
Dividends per share to owners of Rio Tinto (c)
120.14c 91.67c 65.82p 60.34p - paid 108.50c 94.50c
103.09c 93.00c 56.90p 54.28p - proposed 96.00c 83.50c
2,996 (1,403) 1,642 (923) Cash flow before financing activities 2,740 (1,426)
30 June 31 December 30 June 31 December 30 June 31 December
2014 2013 2014 2013 2014 2013
A$m A$m £m £m US$m US$m
(17,121) (20,240) (9,468) (10,929) Net debt (16,135) (18,055)
51,974 51,438 28,742 27,775 Equity attributable to owners 48,981 45,886
of Rio Tinto
(a) Underlying earnings exclude impairment charges and other net charges of US$714 million (30 June 2013: charges of
US$2,509 million).
(b) Basic earnings per ordinary share and basic Underlying earnings per ordinary share do not recognise the dilution
resulting from share options in issue.
(c) Australian dollar and Sterling amounts are based on the US dollar amounts, retranslated at average or closing
rates as appropriate, except for the dividends which are the actual amounts payable.
Metal prices and exchange rates
Six months to 30 June2014 Six months to 30 June2013 ChangeH1-14 v H1-13 Year to 31December2013
Metal prices - average for the period
Copper - US cents/lb 312c 343c (9)% 333c
Aluminium - US$/tonne US$1,753 US$1,919 (9)% US$1,845
Gold - US$/troy oz US$1,290 US$1,523 (15)% US$1,410
Average exchange rates in US$
Sterling 1.67 1.54 8% 1.56
Australian dollar 0.91 1.02 (10)% 0.97
Canadian dollar 0.91 0.99 (7)% 0.97
Euro 1.37 1.31 4% 1.33
South African rand 0.094 0.109 (14)% 0.104
Period end exchange rates in US$
Sterling 1.70 1.52 12% 1.65
Australian dollar 0.94 0.93 2% 0.89
Canadian dollar 0.94 0.95 (2)% 0.94
Euro 1.36 1.30 5% 1.38
South African rand 0.094 0.100 (6)% 0.096
Availability of this report
This report is available on the Rio Tinto website (www.riotinto.com).
Reconciliation of Net earnings to Underlying earnings
Pre-taxHY2014US$m TaxHY2014US$m Non-controllinginterestsHY2014US$m NetamountHY2014US$m Net amount HY2013US$m
Exclusions from Underlying earnings
Impairment charges (a) (1,142) 299 - (843) (119)
Losses and gains on disposal of interests in businesses (b) (362) 194 11 (157) 114
Exchange and derivative gains/(losses):
- Exchange gains/(losses) on US dollar net debt and intragroup balances 709 (236) 7 480 (2,052)
- Gains on currency and interest rate
derivatives not qualifying for hedge accounting (c) 21 - 5 26 5
- Gains on commodity derivatives not qualifying for
hedge accounting (d) 114 (31) - 83 193
Other exclusions (e) (420) 19 98 (303) (650)
Total excluded from Underlying earnings (1,080) 245 121 (714) (2,509)
Net earnings 6,092 (1,807) 117 4,402 1,720
Underlying earnings 7,172 (2,052) (4) 5,116 4,229
Underlying earnings is reported by Rio Tinto to provide greater understanding of the underlying business performance of its
operations. Underlying earnings and Net earnings both represent amounts attributable to owners of Rio Tinto. Exclusions
from Underlying earnings relating to equity accounted units ('EAUs') are stated after tax and included in the column
'Pre-tax'. Items (a) to (e) below are excluded from Net earnings in arriving at Underlying earnings.
(a) Charges relating to impairment of non-current assets other than undeveloped projects.
Impairment charges of US$843 million net of tax relate to the Group's aluminium business. As a result of further revisions
to future capital required to complete the modernisation project at Kitimat in British Columbia, and related impacts on the
project, the value of the Kitimat assets diminished. Other impairment charges relate to site closure and an anticipated
disposal in the Aluminium portfolio.
In 2013, the post-tax impairment charge of US$119 million represented adjustments to reduce the carrying value of the Eagle
nickel-copper project to fair value less cost of disposal ('FVLCD') after the signing of a binding sales agreement, and the
impact of commodity prices on certain short-lived copper-gold assets.
(b) Net post-tax losses on disposal of interests in businesses of US$157 million arise mainly from indemnities provided
in respect of prior disposals, and further adjustments in respect of contractual obligations for product sales and delivery
which remain with the Group following sale of the Clermont mine on 29 May 2014.
Gains on disposal of interests in businesses in 2013 mainly relate to the Group's disposal of part of its remaining
interest in Constellium (formerly Alcan Engineered Products).
(c) Valuation changes on currency and interest rate derivatives, which are ineligible for hedge accounting, other than
those embedded in commercial contracts, and the currency revaluation of embedded US dollar derivatives contained in
contracts held by entities whose functional currency is not the US dollar.
(d) Valuation changes on commodity derivatives, including those embedded in commercial contracts, that are ineligible
for hedge accounting, but for which there will be an offsetting change in future Group earnings.
(e) Other credits and charges that individually or in aggregate, if of a similar type, are of a nature or size to
require exclusion in order to provide additional insight into business performance.
Other exclusions include, in addition to corporate project expenditure and restructuring costs, a charge of US$230 million
before non-controlling interests, calculated in accordance with IFRS 2 'Share-based Payment', which reflects the discount
to an estimate of fair value at which shares are transferrable to the Government of Guinea under the Investment Framework
ratified on 26 May 2014. Refer to other disclosures on page 41.
Other exclusions in 2013 included the estimate at 30 June 2013 of charges relating to a pit-wall slide at Kennecott Utah
Copper, in addition to the adjustments relating to inventory sold by Richards Bay Minerals ('RBM') during the period which
had been revalued on initial consolidation in 2012, and corporate project expenditure incurred in order to achieve cost and
headcount reductions.
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