Global miner Rio Tinto took an $8.9bn (£5.6bn) charge on its struggling aluminium business yesterday, triggering a second-half net loss amid a gloomy medium-term outlook for the metal.
Five straight years of surpluses in aluminium and rising input costs have hammered margins in the industry, sharply reducing the book value of Rio’s Alcan unit, purchased for $38bn at the height of the commodities boom in 2007.
The write-off and losses prompted chief executive Tom Albanese and chief financial officer Guy Elliott to forego their bonuses.
“As the acquisition of Alcan happened on my watch, I felt it only right not to be considered for an annual bonus this year,” Mr Albanese said.
Total one-off charges including a writedown on its diamonds business totalled $9.3bn, causing net results for July-December to swing to a loss of $1.76bn following a profit of $8.4bn the previous year.
The aluminium division, which the company plans to shrink by hiving off most of its Australia and New Zealand assets, just broke even with earnings of $63m in the half year.
Mr Albanese painted a dismal picture for aluminium in the short and medium term after China has been adding new capacity in the west despite the oversupplied market.
“These pressures, together with the strengthening of some currencies and escalating raw materials, may continue to squeeze our margins in the medium term,” he said.
“The current environment in the aluminium industry is tough.”