Rio Tinto Swot Analysis

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  • Topic: Iron ore, Rio Tinto Group, Currency
  • Pages : 3 (587 words )
  • Download(s) : 704
  • Published : February 13, 2011
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Strengths:

* Strong Market Position:
It is among the world leaders in the production of many commodities, including aluminium, iron ore, copper, uranium, coal, and diamonds. Although primarily focused on extraction of minerals, Rio Tinto also has significant operations in refining, particularly for refining bauxite and iron ore. As of March 2009, Rio Tinto is the fourth-largest publicly listed mining company in the world

* Wide Product Range:
The company produces aluminium, copper, diamonds, coal, iron ore, uranium, gold and industrial minerals (borates, titanium dioxide, salt, talc and zircon)

* Efficient Use of Resources

* Strong Growth Prospects:
A strong balance sheet, high quality assets and positive long term outlook enable Rio Tinto to undertake their largest ever growth programme.

* Expanding Market Share in Sector

* Strong Operating Margin: 
In 2010, by safely running many of its operations at full capacity Rio Tinto more than doubled their underlying earnings to $14 billion

* Surplus cash:
Rio Tinto is to buy back $5bn of shares, underlining the extent of its cash accumulation after a year when soaring iron ore prices allowed it to slash debt and more than double profits.

Weaknesses:

* Confined production centres:
Even though the company operates in more than 50 countries, its production is mainly centred in Australia and North America. This means large overheads are incurred in transporting metals and minerals to emerging markets.

* Long term debt:
Its net debt, which at the end of 2008 stood at $38.6bn, was $4.3bn at the end of 2010. That compares with $18.9bn last year. Even with this large reduction in net debt, large cash flows are needed to ensure Interest payment covenants are met.

* Limited Liquidity Position: 
Most assets (in the form of machinery and mining infrastructure) are illiquid

Opportunities:

* Surging demand for commodities:
Demand from developing countries exceeded expectations....
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