08 AUGUST 2013Reuters
Rio hangs on to loss-making aluminium business as profit falls
Edited by : AL CIRCLE
2 min read
Mining group Rio Tinto Ltd/Plc has scrapped efforts to sell its loss-making Pacific Aluminium business, blaming poor market conditions as weaker iron ore, copper and coal prices dragged first-half profit down 18 percent.
Rio - which has put a handful of assets on the block as it concentrates on core operations and battles a $22 billion (14 billion pounds) debt burden - said in 2011 it could hive off Pacific Aluminium, known as Pac Al. But it said on Thursday it had not found a buyer and would not pursue a spin-off to shareholders.
Instead it will bring Pac Al back into the fold of Rio Tinto Alcan.
Some analysts said it was a negative that the group had been forced to scrap a sale so soon after shelving the sale of its diamond assets, and as questions grow over its ability to sell larger operations like Canadian iron ore.
But others welcomed a decision not to sell at all costs.
"It's a clear indication that while ... all of the majors see an opportunity to try to bolster their balance sheets by getting rid of their non-core assets, it's not the ideal market to be selling assets in," said analyst Hunter Hillcoat at brokerage Investec in London.
In 2011 it put Pac Al into a separate business, which analysts at Credit Suisse had valued at between $2 billion and $3 billion, and considered selling, closing or spinning off the business to shareholders.
Rio will decide on a further push to production capacity of 360 million tonnes later this year. "If you look at market fundamentals, they're strong," Walsh said.
On its closely watched campaign to slash $5 billion in costs over two years, Rio said it had cut $1.5 billion in the first half of this year at its operations and in exploration spending, putting it on track to hit a $2 billion 2013 target.
Rio's Australia-listed shares have fallen 10 percent this year against a 9 percent gain in the broader market, on worries about slowing growth in China, a potential oversupply of iron ore and its loss-making aluminium operations.
Rio - which has put a handful of assets on the block as it concentrates on core operations and battles a $22 billion (14 billion pounds) debt burden - said in 2011 it could hive off Pacific Aluminium, known as Pac Al. But it said on Thursday it had not found a buyer and would not pursue a spin-off to shareholders.
Instead it will bring Pac Al back into the fold of Rio Tinto Alcan.
Some analysts said it was a negative that the group had been forced to scrap a sale so soon after shelving the sale of its diamond assets, and as questions grow over its ability to sell larger operations like Canadian iron ore.
But others welcomed a decision not to sell at all costs.
"It's a clear indication that while ... all of the majors see an opportunity to try to bolster their balance sheets by getting rid of their non-core assets, it's not the ideal market to be selling assets in," said analyst Hunter Hillcoat at brokerage Investec in London.
In 2011 it put Pac Al into a separate business, which analysts at Credit Suisse had valued at between $2 billion and $3 billion, and considered selling, closing or spinning off the business to shareholders.
Rio will decide on a further push to production capacity of 360 million tonnes later this year. "If you look at market fundamentals, they're strong," Walsh said.
On its closely watched campaign to slash $5 billion in costs over two years, Rio said it had cut $1.5 billion in the first half of this year at its operations and in exploration spending, putting it on track to hit a $2 billion 2013 target.
Rio's Australia-listed shares have fallen 10 percent this year against a 9 percent gain in the broader market, on worries about slowing growth in China, a potential oversupply of iron ore and its loss-making aluminium operations.
Previous article
China Aluminum up in Base Metal Market
Next articleRio drops plans for Pacific Aluminium unit sale
Grow with
AL Circle
