THE TOP two executives at Rio Tinto will not take a bonus this year after the mining company was forced to take a $8.8 billion hit on its aluminium business Alcan.
The news came as the Australian miner yesterday reported record annual profits but disappointed investors by not extending its share buy-back programme.
“As the acquisition of Alcan happened on my watch, I felt it only right not to be considered for an annual bonus this year,” said chief executive Tom Albanese, who along with finance director Guy Elliott, have told Rio’s remuneration committee they would not take a bonus.
In 2010, Mr Albanese was paid a bonus of £1.6 million in cash and shares and Mr Elliott £1.26 million.
Rio paid $44 billion, including debt, to buy Canada-based Alcan in June 2007 shortly before the worst of the global financial crisis hit in 2008. The deal saddled Rio with large debts and led to a $15.2 billion rights issue. The company has been seeking to improve the performance of the division by focusing on low-cost production. In October, Rio announced plans to divest an estimated $8 billion of aluminium assets.
“We are working hard on improving the performance of our aluminium business and during the year we completed a strategic review,” Mr Albanese said.
The bigger-than-expected writedown came as Rio announced an 11 per cent rise in underlying net income to a record $15.5 billion for the year ending December 2011. Net income including impairment charges fell 59 per cent to $5.8 billion. Rio announced a final dividend of 91 US cents a share.
On Wednesday, Rio said it would invest a further $3.4 billion to expand its iron ore operations in Western Australia, where the miner has plans to lift capacity by more than 50 per cent. Rio expects production capacity of 283 million tonnes a year in Australia’s Pilbara iron ore belt will be reached in the second half of 2013.
In addition to the $8.8 billion impairment charge against its aluminium assets, Rio also wrote down the value of its diamond business by $344 million. – Copyright The Financial Times Limited 2012
