Rio Tinto’s core objective and strategy dictate key performance indicators (KPIs) that the Group monitors, targets and measures. These KPIs fulfil three roles:
- To give senior management a means to evaluate the Group’s overall performance from an operational, growth and sustainable development perspective.
- To provide managers and their teams with clarity and focus on the areas that are critical for the successful achievement of the Group’s goals.
- To give guidance to the Remuneration committee in framing the Group’s remuneration policy.
KPI trend data
The Group’s performance against each KPI is covered in detail in later sections of the Annual report. Supporting the data is an explanation of the actions taken by management to maintain and improve the performance of each KPI.
Definition
Performance
All injury frequency rate
Per 200,000 hours worked
- Rio Tinto
- Rio Tinto including former Alcan
Rio Tinto’s continuous focus on safety in the workplace means that the AIFR is one of the Group’s most important non financial KPIs.
It is calculated based on the number of injuries per 200,000 hours worked. This includes medical treatment cases, restricted work day and lost day injuries for employees and contractors.
At the end of 2009 our AIFR was 0.82, an improvement of 16 per cent from 2008.
Underlying earnings(a)(b)
(US$m)
Underlying earnings is the key financial performance indicator used across the Group.
It is a measure of earnings that provides insight into the underlying business performance of the Group’s operations. Items excluded from net earnings to arrive at underlying earnings are explained in note 2 of the 2009 financial statements.
Underlying earnings in 2009 of US$6,298 million were US$4,005 million below the comparable measure for 2008. This was largely due to a US$6,879 million decrease due to price movements on all major commodities, partially offset by a US$484 million increase due to favourable movements in foreign exchange rates; a US$652 million increase from greater iron ore, copper and gold volumes; a US$742 million increase due to a reduction in cash costs; and an US$890 million increase from the reduction of exploration and evaluation expenditure.
Total shareholder return (TSR)
(%)
TSR measures the Group’s performance in terms of shareholder wealth generation through dividends and the share price. Rio Tinto’s TSR is calculated by an independent third party. The Group’s TSR performance compared to the FTSE 100 Index, the ASX All Ordinaries Index and the HSBC Global Mining Index, as well as the relationship between TSR and executive remuneration, is shown in the Executive remuneration section.
Due to the rights issues in 2009, the adjusted share prices of Rio Tinto plc and Rio Tinto Ltd have changed, so the TSR values in the 2009 Annual report do not match up to the TSR values in the 2008 Annual report. At the end of 2009, the Group’s TSR was an increase of 172.5%, compared with a decrease of 71.5% for 2008.
Net debt(a)
(US$m)
In December 2008, Rio Tinto announced its commitment to reduce net debt by US$10 billion in 2009.
Net debt is calculated as: the net total of borrowings, cash and cash equivalents, other liquid resources and derivatives related to net debt.
During 2009, net debt decreased from US$38.7 billion to US$18.9 billion following the proceeds from the divestment programme, strong operating cash flows and net proceeds of US$14.8 billion from the rights issues. Net debt to total capital was significantly reduced to 29.1 per cent at 31 December 2009, compared with 63.3 per cent at 31 December 2008.
Capital expenditure(a)
(US$m)
Capital expenditure tracks new and continuing investment in value adding sustaining and growth projects.
The Group’s capital projects are listed in the in the Capital projects section.
Capital expenditure was US$5,356 million in 2009, a decrease of US$3,132 million over 2008. Capital expenditure included the Brockman 4 and Mesa A iron ore mine developments in Western Australia, the expansion of the Yarwun alumina refinery, the construction of the Clermont thermal coal mine, the expansion of the Kestrel coking coal mine, the development of the underground diamond mines at Diavik and Argyle and the completion of the Madagascar ilmenite mine.
Operating cash flows(a)
(US$m)
Operating cash flows were introduced as a key element of the short term incentive plan in 2009. This measure is the same as that in the consolidated cash flow statement.
Operating cash flows, including dividends from equity accounted units, was US$13,834 million, 33 per cent lower than 2008, primarily as a consequence of lower commodity prices.
Greenhouse gas
emissions intensity
Indexed relative to 2008
- Group intensity (excluding former Alcan)
- Group intensity (including former Alcan)
Rio Tinto accepts the urgent need for climate change action. Improvement in intensity is a reduction in total greenhouse gas emissions per unit of commodity production over time. Broadly consistent with the WBCSD/WRI Greenhouse Gas Protocol, we calculate total greenhouse gas emissions as direct emissions (Scope 1) plus emissions from imports of electricity (Scope 2) minus electricity and steam exports and net carbon credits voluntarily purchased from, or sold to, recognised sources. We index our performance relative to 2008 as the base year.
During 2009 we achieved a 7.5 per cent reduction in total greenhouse gas emissions intensity. This was largely as a result of divesting the Ningxia aluminium smelter in China, which is powered by coal based electricity, and reduced production at a number of operations with a higher than average emissions intensity.
Notes
- (a)The accounting information in these charts is drawn up in accordance with EU IFRS.
- (b)Underlying earnings is the key financial performance indicator which management uses internally to assess performance. It is presented here as an additional measure of earnings to provide greater understanding of the underlying business performance of the Group’s operations. Items excluded from net earnings to arrive at underlying earnings are explained in note 2 to the 2009 Financial statements. Both net earnings and underlying earnings deal with amounts attributable to equity shareholders of Rio Tinto. However, EU IFRS requires that the profit for the year reported in the income statement should also include earnings attributable to outside shareholders in subsidiaries.