Bluff smelter posts loss despite rise in revenue

BUSINESSDESK: Rio Tinto's aluminium smelter at Bluff turned in an operating loss before revaluations of financial instruments of $19.56 million for the year to December 31, close to the previous year's losses despite a 7.2% lift in total revenues to $704.33 million.

That increase wasn't enough to offset $712.34 million of expenses at the Tiwai Point smelter, which is New Zealand's largest single user of electricity and is up for sale by its Canada-based majority owners, Rio Tinto, who are looking to sell a suite of 13 older refineries in Australasia, the US and Europe.

The company also confirmed it stopped production at its fourth pot-line in April, reflecting the strong New Zealand dollar, volatile wholesale electricity prices and the downturn in global metal prices.

The fourth pot-line accounts for about 15% of the smelter's annual production capacity and opportunities to restart it were constantly being assessed, acting general manager Paula Checketts said.

The accounts filed with the New Zealand Companies Office show New Zealand Aluminium Smelters declared a tax-paid profit of $46.33 million for the year, compared to a loss of $22.11 million the previous year.

However, that result included unrealised gains of $65.89 million on financial derivatives, which are typically stripped out of comparisons because their impact can mask underlying performance.

In the 2010 result, some $4.76 million in unrealised losses on financial instruments weighed on the bottom line.

The accounts also show NZAS made payments totalling $318.28 million to RTA Power (NZ), a Rio Tinto subsidiary which governs the electricity contracts supplying the smelter.

That was down 7.7% on the previous year's payments, despite the smelter consuming more total energy through the year, at 625 Megawatts, than the 603MW used in 2010.

The Companies Office has also published the accounts for the year to December 31 of RTA Pacific (NZ), the company that owns Rio's 79.36% share of NZAS. It reported total revenue for the year of $1.19 billion, down from $1.23 billion in 2010.

However, a dramatic reduction in expenses from $922.69 million in 2010 to $714.57 million in the latest year saw after-tax profit of $186.36 million declared, compared to a loss of $26.92 million the previous year.