Overview
KPI trend data
The Group’s performance against each KPI is covered in more detail in later sections of this Annual report. Explanations of the actions taken by management to maintain and improve performance against each KPI support the data.
KPIs used as a key measure
in the remuneration of
executives are identified
with this symbol: 
All injury frequency rate (AIFR)
Per 200,000 hours worked
- including former Alcan
Relevance to strategic drivers
Our commitment to zero harm means that the AIFR is one of the Group’s most important non financial KPIs. Safety is a leading indicator of management performance. It is central to our focus on operational excellence and our licence to operate. A reputation for being a safe employer and neighbour helps us to gain access to the people and resources we need.
Definition
AIFR 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.
Performance
Our AIFR has improved 39 per cent over the last five years, with an 18 per cent improvement from 2009.
Underlying earnings
US$ millions
Relevance to strategic drivers
Underlying earnings is a measure that provides insight into the underlying business performance of the Group’s operations and is the key financial performance indicator used across the Group. This KPI provides insight to cost management, performance efficiency and production growth. It is therefore an indicator of financial and operational excellence and growth.
Definition
Items excluded from net earnings to arrive at underlying earnings are explained in note 2 of the 2010 financial statements.
Performance
Underlying earnings in 2010 of US$13,987 million were US$7,689 million above the comparable measure for 2009. This was largely due to the strong recovery in prices during the year.
Total shareholder return (TSR)
%
Relevance to strategic drivers
TSR measures the Group’s performance in terms of shareholder wealth generation through dividends and changes in the share price. As a measure of how we maximise shareholder return, this KPI measures our performance against our strategy as a whole. Relative TSR is also monitored, which gives insight into our performance against our peers.
Definition
TSR combines share price appreciation and dividends paid to show the total return to the shareholder.
Performance
The Group’s average total shareholder return for the year ended 31 December 2010 was 32.6 per cent reflecting a combination of strong commodity markets and excellent operational performance. These translated into higher operating cashflows which, together with divestment proceeds, enabled the Group to pay down US$14.6 billion of debt during the year and pay dividends totalling US$1.8 billion.
Net debt(a)
US$ millions
Relevance to strategic drivers
A strong balance sheet gives us resilience in a volatile global economy. Net debt is a measure of how we are managing our balance sheet and capital structure, and is closely linked to our financial and operational excellence strategic driver.
Definition
Net debt is calculated as: the net total of borrowings, cash and cash equivalents, other liquid resources and derivatives related to net debt.
Performance
During 2010, net debt decreased from US$18.9 billion to US$4.3 billion due to strong operating cash flows and proceeds from the divestment programme. Net debt to total capital was significantly reduced to 6.2 per cent at 31 December 2010, compared with 29.1 per cent at 31 December 2009.
Capital expenditure(a)(c)
US$ millions
Relevance to strategic drivers
Our capital expenditure KPI connects to our growth strategic driver. It measures our level of investment in protecting and maintaining our existing assets, as well as our investment in the growth projects that will be our future Tier 1 operating assets. The geographic distribution of our capital expenditure is also a measure of how we are globalising the business.
Definition
Capital expenditure comprises the net cash outflow on purchases less disposals of property, plant and equipment, capitalised evaluation costs and purchases less disposals of other intangible assets.
Performance
Capital expenditure was US$4,553 million in 2010, a decrease of US$803 million from 2009. Capital expenditure included the Brockman 4 iron ore mine development in Western Australia, the expansion of the Yarwun alumina refinery, the commissioning of the Clermont coal mine and the extension and expansion of the Kestrel coking coal mine.
Operating cash flows
US$ millions
- Dividends from equity accounted units
- Cash flow from consolidated operations
Relevance to strategic drivers
Operating cash flow is a complementary measure to underlying earnings. It is employed as a measure of business performance and links to two of our strategic drivers: growth, and financial and operational excellence.
Definition
Operating cash flow represents the cash generated by the Group’s operations, before payment of interest, taxes, capital expenditure, and cash flows relating to financing activities. The measure is equivalent to “cash flows from operations” in the Group cash flow statement.
Performance
Operating cash flows, including dividends from equity accounted units, were US$23,530 million, 70 per cent higher than 2009 primarily as a consequence of higher commodity prices.
GHG emissions intensity
Indexed relative to 2008
- Including former Alcan
Relevance to strategic drivers
We use greenhouse gas (GHG) emissions intensity as a KPI because of the urgent need for climate action, and because it is one of the most widely recognised environmental issues. The KPI links to our licence to operate and our technology and innovation work, which are key drivers of our strategy.
Definition
Our GHG emissions intensity measure is the change in total GHG emissions per unit of commodity production relative to a base year. Total GHG emissions are direct emissions plus emissions from imports of electricity minus electricity and steam exports and net carbon credits purchased from, or sold to, recognised sources.
Performance
Since 2008 our GHG emissions intensity has reduced by 3.7 per cent. This is largely a result of the Ningxia aluminium smelter divestment in 2009. The impact of closure or reduced production at older aluminium smelters that had low GHG emitting power sources offset some intensity reductions achieved during 2009.
- (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 a 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 2010 financial statements. Both net earnings and underlying earnings deal with amounts attributable to the owners of Rio Tinto. However, EU IFRS requires that the profit for the year reported in the income statement should also include earnings attributable to non-controlling interests in subsidiaries.
- (c)Amount include 100 per cent of subsidiaries’ capital expenditures and Rio Tinto’s share of the capital expenditure of equity accounted units.
