AN UPBEAT Rio Tinto is in cautious expansion mode after a combination of savage cost-cutting, a $US20 billion ($A22.8 billion) debt reduction program and a turnaround in its aluminium division enabled the Anglo-Australian miner to post a better than expected annual profit of $US6.29 billion.
Although it beat consensus for a $US6.1 billion result, the profit was nevertheless down by a hefty 39 per cent on the record $US10.3 billion result for 2008.
Rio chief executive Tom Albanese described 2009 as a year of contrasting halves, with the first-half collapse in commodity demand and prices caused by the financial crisis giving way to a rally in commodity prices in the second half.
There was no more important improvement in the second half for Rio and Mr Albanese's ongoing tenure than the $US800 million earnings turnaround experienced by Rio's aluminium unit.
The unit was greatly enlarged when Rio paid way over the odds for Canadian aluminium group Alcan in 2007. The $US38 billion acquisition proved ill-timed, forcing Rio into a drastic debt-reduction program last year when aluminium prices crashed.
Rio Tinto Alcan, as the division as it is now called, still made a loss for 2009. But the $US578 million loss for the year masks the turnaround from a first-half loss of $US689 million to the second-half profit of $US111 million. Aluminium prices continue to trade at prices better than Rio averaged in 2009, raising hopes that the Alcan acquisition will finally begin paying its way.
Job cuts by Rio as part of its cost-cutting fell most heavily on the aluminium division. Across the entire group, 16,000 employees and contractors lost their jobs as Rio set about reducing its mountain of debt from $38.7 billion to $US18.9 billion by its December 31 balance date.
Mr Albanese said the improved market conditions and Rio's repaired financials meant it could look at some rehirings, with the group now in a more comfortable position to bring forward some of its ''premier'' growth options in a 2010 capital expenditure program of $US5-$US6 billion.
But echoing BHP Billiton's warning at the release of its $US5.7 billion December-half profit on Wednesday, Rio sounded a note of caution on the world economy and its impact on commodity prices. It said the winding back of stimulus packages and the rise of speculative asset bubbles could cause volatility in the world economy.
But it expects China to continue powering ahead, tipping 9 per cent growth for its economy compared with BHP's 8 per cent growth forecast.
And like BHP again, Rio believes that despite the near-term volatility, a ''secular uplift in demand'' in commodities is taking place.
Rio is resuming dividend payments on the strength of second-half improvement and its balance sheet repairs. It will pay a final interim dividend of US45¢ on April 1. There was no interim, but Rio said it expected the 2010 interim to also be US45¢ a share.
Rio shut down discussion of the Stern Hu case at media and analyst briefings on the result. In a statement released before the briefings, Rio iron ore chief Sam Walsh said Rio was concerned about the latest developments in the case. ''However, as this is part of an ongoing legal process, it is inappropriate to comment any further."
On Wednesday, Chinese prosecutors stepped up their case against Mr Hu, an Australian citizen, and three of his Chinese colleagues by formally charging them for ''illegally accepting huge amounts of money'' and obtaining commercial secrets at the expense of Chinese steel mills.
The four have been detained since July 5.
