Rio Tinto posts 43% jump in 2006 net earnings at $7.44 billion

Rio Tinto posted Thursday net earnings of $7.44 billion for 2006, which was a 43% increase year on year from $5.22 billion achieved in 2005. Underlying earnings totaled $7.34 million for the year, which was up 48% from a year ago.

Cashflow from operations rose 36% year on year to $11.2 billion in 2006, and the full year ordinary dividend increased 30% to 104 cents.

Net earnings from the company's iron ore division reached $2.28 billion in 2006, up from $1.72 billion in 2005, while the aluminium sector saw net earnings of $746 million, up from $392 million a year ago. The company's copper division posted net earnings of $3.56 billion for the year, up from $2.02 billion in 2005, while the industrial minerals unit had earnings of $243 million, up from $187 million a year ago.

The energy and diamond divisions, however, saw a decline in 2006 net earnings to $711 million and $205 million, respectively, down from $733 million and $281 million in 2005.

Rio Tinto's chairman Paul Skinner attributed the overall record results to strong global economic growth in 2006 which resulted in continued strong demand for most commodities. "Combined with supply side constraints, this led to tight markets and strong prices for most Rio Tinto products," he said.

The company said in a statement that average copper prices were 84% higher whilst average aluminium prices were 35% higher. The strength of the global iron ore market was reflected in the 19% increase in the benchmark price, mainly effective from April 1, 2006.

Molybdenum prices, however, averaged $25/lb throughout 2006, a decline of 20% compared with the prior year.

Rio Tinto added that there was movement in the US dollar in 2006 relative to the currencies in which Rio Tinto incurs the majority of its costs. The Australian dollar was 1% weaker, the Canadian dollar was 7% stronger and the South African rand 6% weaker. The effect of these currency movements was to decrease underlying earnings relative to 2005 by $35 million.

"Looking to 2007, there are a number of uncertainties in the global economy, not least the direction of inflation and interest rates in major economies. We expect some moderation of global economic growth, although confidence in Japan and Europe is increasing. Growth in China, which is critical to the demand outlook for many of our products, remains strong and well balanced," Skinner said. "We continue to view the overall outlook for commodities as positive, with prices remaining well above their long run averages in 2007," he added.