Economic contributions

Overview

We assess our financial performance not just on our profits, but also by the economic contributions we make.

Looking at the total economic contribution is appropriate at the company level.  However, care must be taken when looking at revenues across different industries and countries as some outputs are inevitably counted more than once.  For example, iron ore mined in Australia is used to produce steel in Japan, and the steel is used to make cars sold to Europe.

Thus, it is better to measure our economic contributions in terms of "value added". That is the sum of the payments we make to employees, our taxes and royalties, interest payments, dividends, retained profits and depreciation. 

Although we exclude payments to suppliers from the calculation, they provide strong additional benefits by generating employment and creating wealth in other sectors.

Many social and economic benefits also arise from our investment in socio-economic programmes in the communities we neighbour, such as local education and health programmes.

There are also indirect contributions to the economy as a result of our business.  These include the effects of our workers spending their wages, governments distributing their tax revenues, shareholders spending their profits, export revenues generated from international sales of our products and investment in local infrastructure such as roads, power or telecommunications for our operations.

Our results

Our total economic contribution is measured by our gross sales revenue.

In 2007, our gross sales revenue was US$ 33,518 million, including Alcan's contribution to the Group for the 69 day post-acquisition period. This represents a 32 per cent increase from the 2006 gross sales revenue of US$25,440 million.

Our gross sales revenue for 2007 (and 2006) can be broken down as follows:

• Payments to suppliers - 49 per cent  (43 percent in 2006)
• Taxes and royalties - 13 per cent  (16 percent in 2006)
• Payments to employees - 12 per cent  (10 percent in 2006) 
• Dividends and interest - 5 per cent  (10 percent in 2006) 
• The remainder was reinvested 21 per cent (21 percent in 2006)

The total amount of value added by our Group in 2007 was US$ 17.2 billion.  This was 51 per cent of the total turnover, and represents a 19 per cent increase on the 2006 value added of US$14.4 billion.  Rio Tinto's total economic contribution to North America rose by approximately two thirds, primarily due to the acquisition of Alcan and increased production at Kennecott Utah Copper.