Raw materials, energy prices hit Rio's aluminium profits
RAW materials costing $500,000 more than expected and energy prices hit Rio Tinto's aluminium sector's profits last year in what would have been a strong 12 months.
In its annual report, Rio Tinto said its Australian aluminium businesses - including Boyne Smelters Limited, Queensland Alumina Limited and Rio Tinto Yarwun - took a financial hit due to increase raw material costs and energy prices.
It said last year there was a "significant impact" from raw material costs, including caustic soda, petroleum coke and tar pitch.
"In addition higher priced energy relating to stronger thermal coal pricing negatively impacted our Pacific Aluminium smelters in Australia," the report said.
"These headwinds resulted in around $0.5billion (pre-tax) of cost inflation relative to the 2017 pricing of these inputs."
Rio Tinto's estimated higher energy prices compared to 2017 reduced the underlying EBITDA (earnings before interest, taxes, depreciation and amortization) by $436million.
It said the Pacific Aluminium Smelters, BSL and Bell Bay and Tomago, were affected by higher coal prices and a new power contract.
Rio Tinto's underlying EBITDA for the aluminium sector was $3.1billion, a 10 per cent decrease compared to 2017.
During 2018 the average prices for copper and aluminium were up six and 7 per cent respectively, compared to 2017, in what Rio Tinto described as a "stronger pricing environment".
The report said Queensland Alumina's production was 3.69Mt last year, a decrease from 3.75Mt in 2017.
Yarwun and Boyne Smelters' productions were also down from 2017, at 3.1Mt and 4.9Mt respectively.