Performance
Financial performance
2008 compared with 2007 (combined)
In 2008, Rio Tinto Alcan's contribution to underlying earnings was US$1,184 million, an increase of US$87 million from 2007. If, for illustrative purposes only, the underlying earnings of Rio Tinto Alcan for 2007 were presented on a combined basis, including the results of Alcan from 1 January 2007, Rio Tinto Alcan's contribution to underlying earnings would have been US$2,825 million (unaudited). Rio Tinto Alcan's contribution to underlying earnings in 2008 was lower than its contribution in 2007 on a combined basis principally as a result of higher costs, the absence of tax benefits and a sharp decline in LME prices during the second half of 2008, coupled with the continuing economic downturn in most markets. The average aluminium price in 2008 was US$2,595 per tonne compared with US$2,646 per tonne in 2007. The average ingot product realisation for 2008 was US$2,753 compared to US$2,745 in 2007. These results exclude Alcan Packaging as it is classified as a discontinued operation, but include downstream operations of Engineered Products.
In terms of revenue and prices, the first nine months of 2008 were in line with expectations, until the fourth quarter saw a dramatic collapse in aluminium prices from above US$2,000 per tonne to the region of US$1,500. Depressed demand is expected to continue in 2009 and Rio Tinto has delayed plans to introduce new production capacity. In terms of production volumes, the portfolio of assets operated well, although there was a one month interruption at the Yarwun alumina refinery and two aluminium smelters were affected by power failures.
2007 compared with 2006 (not combined)
In 2007, Rio Tinto Alcan's contribution to underlying earnings was US$1,097 million, an increase of 47 per cent compared with 2006. The higher contribution was due mainly to the one off impact of the reduction in the Canadian tax rates attributable to the Alcan businesses, but was also supported by higher aluminium prices. The average aluminium price in 2007 was US$2,646 per tonne compared with US$2,557 per tonne in 2006. These results exclude Alcan Packaging as it is classified as a discontinued operation.
