The world’s third-largest miner, Rio Tinto, said on Wednesday its full-year net profit fell almost 2% in 2007 to $7,312-billion as it again rejected a takeover bid by rival BHP Billiton.
But underlying profit rose 1,4% from 2006 to $7,443-billion as the firm said it produced record amounts of iron ore, bauxite, aluminium, gold and copper amid strong Asian demand and booming China’s thirst for commodities.
Saying the results showed Rio was well placed to go it alone, chairperson Paul Skinner reiterated the firm’s rejection of the $147-billion hostile takeover bid by BHP, the world’s biggest miner.
“Our boards believe that these strong 2007 annual results illustrate that Rio Tinto is ideally placed to continue to create substantial future value for shareholders, which remains its first priority,” he said.
Skinner said BHP’s improved offer of 3,4 shares for every Rio Tinto share had been unanimously rejected by the Anglo-Australian firm’s boards.
The bid has raised fears in China of a merged giant with too much control over commodity prices, and Chinese state-owned firm Chinalco recently weighed in by buying $14-billion worth of Rio shares along with United States firm Alcoa.
Skinner said Rio expected commodity prices to stay high in 2008 and well beyond given strong demand in developing nations like China and India, and despite fears of a global economic slowdown as a recession looms in the US.
“These long-term trends are driven by domestic developments, and are therefore largely insulated from any potential near-term weakness in Western economies,” he said in a statement, adding there were supply constraints.
Rio had generated record sales for a fourth consecutive year of record underlying earnings and record cash flows, Skinner said.
The company had invested at unprecedented levels in the growth of the business, with the $38,1-billion Alcan acquisition, he said.
“We believe that the group’s pipeline of growth projects is second to none, and the proven capability of Rio Tinto management in project execution and efficient operational performance gives the board great confidence in our ability to deliver substantial value to shareholders,” he said.
Chief executive Tom Albanese said the value of the group’s assets stood out for their long resource lives, competitive cost positions and options for value-adding expansions.
“This is especially clear in products such as iron ore and aluminium, where prices are based on high marginal costs of production in China,” he said.
But he said rising costs offset the surging demand from Asia.
“To counter these effects, we are focused on overhead cost reduction, while also investing in cutting-edge technology,” he said.
Rio’s modest drop in annual net profit mirrors that of its suitor BHP, which reported on February 6 that its first-half net profit dropped 2,4% to $6,01-billion as rising costs and exchange rates hurt earnings. — AFP