Rio Tinto Rio Tinto

2010 Annual report

Note 31 – Operating segments

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Notes

Group income statement

Group statement of financial position

Capital and reserves

Additional disclosures

Gross sales revenue(a) 2010 US$m 2009
US$m
2008
US$m
Iron Ore 24,024 12,598 16,527
Aluminium 15,206 12,038 18,297
Copper 7,782 6,206 5,748
Energy 5,652 4,869 5,984
Diamonds & Minerals 3,035 2,618 3,820
Other Operations 5,734 6,563 9,405
Reportable segments total 61,433 44,892 59,781
Inter-segment transactions (1,110) (856) (1,716)
Gross sales revenue 60,323 44,036 58,065
Share of equity accounted units and adjustments for intra-subsidiary/equity accounted units sales (3,747) (2,211) (3,801)
Consolidated sales revenue per income statement 56,576 41,825 54,264
 
Underlying earnings(b)
Iron Ore 10,189 4,126 6,017
Aluminium 773 (560) 1,281
Copper 2,534 1,878 1,615
Energy 1,187 1,167 2,432
Diamonds & Minerals 328 800 474
Other Operations 71 71 13
Reportable segments total 15,082 7,482 11,832
Inter–segment transactions (15) (28) 25
Other items (554) (577) (391)
Exploration and evaluation not attributed to product groups (52) 5 (133)
Net interest (474) (584) (1,030)
Underlying earnings 13,987 6,298 10,303
Items excluded from Underlying earnings (note 2) 337 (1,426) (6,627)
Net earnings attributable to owners of Rio Tinto per income statement 14,324 4,872 3,676
 
Depreciation and amortisation(c)
Iron Ore 993 763 705
Aluminium 1,563 1,551 1,543
Copper 565 541 442
Energy 367 296 415
Diamonds & Minerals 268 290 361
Other Operations 89 315 332
Reportable segments total 3,845 3,756 3,798
Other items 114 111 91
Less: depreciation and amortisation of equity accounted units (522) (440) (414)
Depreciation and amortisation per note 3 3,437 3,427 3,475
Tax charge(d) 2010 US$m 2009
US$m
2008
US$m
Iron Ore 4,602 1,868 2,869
Aluminium (110) (565) 875
Copper 705 582 261
Ener 537 521 944
Diamonds & Minerals (39) 37 287
Other Operations 10 70 4
Reportable segments total 5,705 2,513 5,240
Other items (216) (270) (99)
Exploration and evaluation not attributed to product groups 1 (30) (31)
Net interest (152) (228) (380)
  5,338 1,985 4,730
Tax charge excluded from Underlying earnings (note 2) (42) 91 (988)
Tax charge per income statement 5,296 2,076 3,742
 
Capital expenditure
Iron Ore 1,716 2,148 2,996
Aluminium 1,328 1,690 2,417
Copper 958 553 804
Energy 685 510 666
Diamonds & Minerals 300 519 1,283
Other Operations 237 404 662
Reportable segments total 5,224 5,824 8,828
Other items 75 54 151
Less: capital expenditure of equity accounted units (746) (522) (491)
Capital expenditure per Financial information by business units 4,553 5,356 8,488
Add: Proceeds from disposal of property, plant and equipment 38 32 90
Less: Funding of equity accounted units for major capital expenditure (4)
Capital expenditure per cash flow statement 4,591 5,388 8,574

Rio Tinto’s management structure is based on the principal product groups shown above together with the global functions that support the business. The chief executive of each product group reports to the chief executive of Rio Tinto. The chief executive of Rio Tinto monitors the performance of each product group based on a number of measures including capital expenditure and operating cash flows, with Underlying earnings being the key financial performance indicator. Interest costs and net debt are managed on a group basis.

Generally, business units are allocated to product groups based on their primary product. The Energy product group includes both coal and uranium businesses. The Diamonds & Minerals product group includes businesses with products such as borates, talc and titanium dioxide feedstock together with diamonds operations. The Copper group includes certain gold operations in addition to copper. The Aluminium group excludes Alcan Engineered Products which is included in “Other Operations”. Other Operations includes Rio Tinto’s interests in its US coal operations formerly reported under Rio Tinto Energy America within the Energy product group. 2009 and 2008 comparatives have been restated accordingly.

The financial information by business unit provided additional voluntary disclosure which the Group considers is useful to the users of the financial statements.

(a) Gross sales revenue

Product group gross sales revenue includes the Group’s share of the sales revenue of equity accounted units after adjusting for sales to subsidiaries. Rio Tinto’s share of the sales revenue of equity accounted units is deducted in arriving at consolidated sales revenue as shown on the face of the income statement.

Inter-segment transactions relate to sales between Aluminium and Alcan Engineered Products which is included in Other Operations.

(b) Underlying earnings

As discussed in note 2, “Underlying earnings” is an alternative measure of earnings which provides a greater understanding of the underlying business performance of the Group’s operations. The measure of Underlying earnings is used by the chief executive of Rio Tinto to assess the performance of the product groups.

Product group earnings include earnings of subsidiaries and equity accounted units stated before finance items but after the amortisation of discount.

Rio Tinto’s share of the Underlying earnings of equity accounted units amounts to US$1,202 million in 2010 (2009: US$864 million; 2008: US$1,047 million). This amount is attributable as follows: US$1,016 million profit to the Copper group and US$186 million profit to other product groups (2009: US$750 million profit attributable to the Copper product group and US$114 million profit to other product groups; 2008: US$852 million profit attributable to the Copper product group and US$195 million profit to other product groups). These amounts are included in Underlying earnings of the relevant product groups and include the Underlying earnings of the Group’s tolling entities which process bauxite and alumina. Tolling entities recharge the majority of their costs and would generally have minimal earnings.

The Energy product group’s Underlying earnings in 2010 included US$229 million profit after tax in relation to the divestment of Maules Creek and Vickery coal projects. The Diamonds & Minerals product group’s Underlying earnings in 2009 included US$797 million profit after tax in relation to the divestment of undeveloped potash assets in Argentina and Canada. In 2008, the Energy product group’s Underlying earnings included a US$483 million profit after tax in relation to divestment of the undeveloped Kintyre uranium project in Western Australia.

(c) Depreciation and amortisation

Product group depreciation and amortisation totals include 100 per cent of subsidiaries’ depreciation and amortisation and include Rio Tinto’s share of the depreciation and amortisation of equity accounted units. Rio Tinto’s share of the depreciation and amortisation charge of equity accounted units is deducted to arrive at depreciation and amortisation excluding equity accounted units as shown in note 3. These figures exclude impairment charges, which are excluded from Underlying earnings.

(d) Tax charge

This relates to the tax charge on the product group’s Underlying earnings. The reconciling item is the tax on amounts that are excluded in arriving at Underlying earnings. Within product groups, tax of subsidiaries is stated before tax on finance items but after tax on the amortisation of the discount related to provisions. The tax charge excludes tax on the earnings of equity accounted units of US$737 million (2009: US$491 million; 2008: US$596 million) of which US$677 million (2009: US$498 million; 2008: US$515 million) relates to the Copper product group.

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