Rio Tinto Cuts 14,000 Jobs, Lower Debt

123jump.com Staff
10 Dec, 2008
New York City

Rio Tinto, Australia based mining giant will eliminate 14,000 jobs and lower its debt further by $10 billion by the end of 2009. Falling metals prices and weakening demand is expected to cut sales and profit at the company in 2009. Australian stocks gained 1%.

[R]3:00AM New York, 7:00PM Sydney - Australian consumer sentiment rises as interest rate falls. Rio Tinto plans to cut 14,000 jobs and lower debt by $10 billion ad hold dividend at 2007 level.[/R]

Australian stocks rose 1% driven by a surge in commodity stocks as metal prices rallied on expectations that global stimulus packages will stimulate demand.

A surprise rise in consumer sentiment in December also helped strengthen consumer sentiment.

In Sydney trading ASX 200 index gained 1% or 36.4 to 3,640.70.

Of the ASX 200 index stocks, 115 rose, 66 declined, and 19 were unchanged. Babcock & Brown led advancers in the index shares with a rise of 20%.

Australian Consumer Sentiment Rises

Westpac Banking Corp. reported today that the Westpac-Melbourne Institute Index of Consumer Sentiment rose 7.5% to 92 in December from 85.5 in November as “the good news in interest rates is finally getting some traction”.

The index is now 12% up over the last two months and 3.3% above the average for 2008.
Households are now responding to the 2.7% and 3% rate cuts passed on by banks over the last three months.

Confidence of mortgage holders surged 11% in December, while confidence for tenants soared 1.6%.

According to the report, four of the five components in the index increased in December.

Opinions on family finances gained 4.6% in December, expectations for finances over the
next twelve months soared 5.3%, while the one-year outlook for economic conditions edged up 5.7%.

However the five-year economic outlook dropped 3.5% in December despite gaining 15.7% in November.

There was a 28.2% increase in positive sentiment towards whether now is a good time to buy a major household item from 15.8% last month.

The “Time to Buy a Dwelling Index” rose by 39.4% from its September level, indicating that there could a revival in the residential construction cycle from the second half of 2009.

Also the “Time to Buy a Car” Index gained 28.8% from the September level. Households preferring bank deposits rose to 36.9% from 20.1% a year earlier, while preferences for shares slid go 8.1% from 14.7% a year ago.

Westpac forecasts that the Reserve Bank Board will slash interest rates by a further 0.5% when it meets on February 3.

Rio Tinto to Cut 14,000 Jobs, Divest More Assets

Rio Tinto announced today that it plans to cut expenses, cut 14,000 jobs and divest assets to pay down $10 billion of debt by the end of 2009. The company will reduce capital expenditures by more than $9 billion to $4 billion and hold 2008 and 2009 dividend at 136 U.S. cents.

The company will eliminate 8,500 contractor workers and 5,500 employees.

Tom Albanese, chief executive, Rio Tinto, said ""Given the difficult and uncertain economic conditions, and the unprecedented rate of deterioration of our markets, our imperative is to maximise cash generation and pay down debt.”

Rio will cut the global worker headcount by 14,000 to generate savings of $1.2 billion.

Rio has lowered its net debt by $3.2 billion between July and October of this year and plans to lower $10 billion of more debt by the end of 2009.

Aussie Falls

The Australia dollar fell to 65.63 against the U.S. dollar today.

Gainers & Losers

Babcock & Brown led gainers in the ASX 200 index shares with a rise of 20% followed by rises in Babcock & Brown of 19.7%, in Macquarie Countrywide of 19.4%, in Fortescue Metals of 16.7%, and IOOF Holdings of 16.7%.

Financial stocks rose after news that Commonwealth Bank of Australia, Westpac Corp. and New Zealand Banking Group raise A$6.7 billion this week selling bonds and stocks in order to boost their balance sheet.

Fortescue Metals rose after metal prices increased. Gold prices advanced $4.90 to $774.2 per ounce and copper prices gained 0.7%.

Murchison Metals edged up 12.3%, Felix Resources soared 12.2%, Rio Tinto jumped 12.1% and Sino Gold climbed 10.9%.

Westpac Banking Corp. led decliners in the ASX 200 index shares with a drop of 8.5% followed by losses in Aquila Resources Ltd. of 6.8%, in One Steel Ltd. of 6.4%, in Tishman Speyer of 5.4%, and Macquarie DDR Trust of 5.2%.