25557 Corporate Finance Theory and Practice Oz Assignments

25557 Corporate Finance Theory and Practice Oz Assignments

25557 Corporate Finance Theory and Practice Oz Assignments

Introduction

Rio Tinto is an Anglo Australia multinational corporation which is structured as the dual listed company with the listings on both the London Stock Exchange and the Australian Securities Exchange and is engaged in the business of the metals and mining. The company was incorporated in the year 1873 when the cluster of the investors purchased the complex of the mine on the Rio Tinto. Currently the company is operating under the income of US$ 14.474 billion. The revenue of the company is US$ 40.030 billion for the financial year 2017. Not only this, the company is engaged in the business of refining which specifically includes the refining of the bauxite and iron ore (Rio Tinto, 2018). Apart from this the company also operates for the aluminium and related products, coal and uranium which are also used to produce the energy, diamonds and other industry experience minerals. Moreover the company is also enhancing itself in the iron products and the titanium.

Analysing sustainability

The Rio Tinto has been pioneering the production of the materials which are essential for human progress. The minerals and the metals that are produced by the Rio Tinto play a vital role in meeting the needs of the consumers. According to the sustainability report the safety and the elimination of the fatalities is the prime value that is available for the purpose of the business. The report is also involved in Rio Tinto’s annual corporate reporting suite. The sustainability report is also prepared in accordance with the Global Reporting Initiative, the GRI mining & Metals Sector Supplement and the International Council on Mining & Metals. The sustainability report discusses the issues relating to the environment, social and governance issues to ensure the long term and the prosperous community factor of the organisation (Rio Tinto, 2018).

Environmental

Climate change is one good example of the environmental issue that covers both the internal and the external issues. The company faced the impacts of the climate change and the company is also facing the challenge of the low carbon future. Rio Tinto business life cycle deliberately extends through the exploration, development and the closure of the assets and the company also believes in leaving the legacy behind. In the year 2017 the environment strategy the current resources are pooled and aligned with the purpose to be careful with the environment. In the financial year 2017 the company improved the performances of the health and safety by 5%. The company also extended CRM to cover the three critical health risks which could be fatal for the business (Smyth, et al 2015). The environmental standards are also revised and the introduction of the new environmental and the natural resource management is what keep the company on going with the business. The major changes that the company brought in relation to the environmental protection change are reduction in the greenhouse gas emissions by 27. 69% of the electricity is in the form of the renewable energy and the decarbonisation plant. Moreover the Paris agreement to limit the global is warming to less than 2 degree Celsius above the pre-industrial levels. The company also achieved the GHG emissions in the 30.6 million tonnes of carbon id oxide which is equivalent to 1.4 million in comparison to the year 2016 (Rio Tinto, 2018).

Social

The major response to the Communities and the social performance is to secure and maintain the relationships that longs for last with those communities and the same is affected by the operations and the activities. Regional economic development is a crucial part of the community. In the financial year 2017 the company contributed 1336 programmes which cover the health education and the environmental protection, housing agricultural and the business development. In total the business made an expenditure of US $176 million on the community contribution. All the sites of the Rio Tinto achieved the CSP targets in 2016 and 2017. According to the sustainability report there is an increase of 5% compared to the year 2016. In order to survive in this competitive world the company made the divestment in the thermal coal assets in Australia did not create much on the local communities in the Hunter valley (Fonseca, McAllister and Fitzpatrick, 2014).

(Source: Rio Tinto, 2018)

Governance issues

The governance is the key that also decides the future prospect of the business process and the nature of the operations and the inherent risks with the recent factors which are of social and the economic nature. The Rio Tinto published the second statement of the slavery and the human tracking statement. The 25% of the land has been rehabilitated and the launch of the Talk to peggy campaign has helped in improvement of the Corporate Governance. The company also participated in the global initiatives such as Extractive Industries Transparency Initiative which aims to maintain the strong governance by blending the transparency and accountability (Boiral and Henri, 2017). Moreover the culture of the transparency has also been followed by the encouragement to the employees to speak up about the issues and concerns with the assistance of the management team or through the Speak Out program initiated by the management. The rolling out of the human rights training for all employees, which are functioning specific and therefore the governance of the company has also been improved.

Ethics and health of Rio Tinto

From the above analysis it can be concluded that the company is maintaining the ethics and the health of the Rio Tinto is sound as the liquidity position of the company is also sound. Moreover the company is also following the ethical principles. To put the ethical practices into action the company has also introduced the training sessions on the modern slavery which are conducted on the basis of the target with the assistance of the ethical and the compliance team (Warner and Sullivan, 2017). The health of the Rio Tinto is outstanding as the company’s net operating margin is 31.60% which increased from 19.44% in the year 2016. Moreover the return on the Equity and the return on the assets have also been increased from 5.11% to 9.47%. The return on equity also escalated from 12.05% to 20.86% (Sroufe and Joseph, 2017). However in comparison to the day’s sales outstanding the company performed a bit hard and shall improve the performance. The free cash flow income is also reduced in comparison to the previous year therefore the company shall take care of certain aspects and otherwise the Rio Tinto comes under the healthy umbrella (Gürtürk and Hahn, 2016).

Conclusion

After the analysis of the report and the financial statements of the company, it can be seen that the company is financially sound and according to the sustainability report of the Rio Tinto the company is highly sustainable and is making equal efforts in terms of improvement in the environmental and the social issues. Moreover by complying with the corporate governance rules the company is more ethical in terms of the set standards and the mission statement as depicted by the organisation.

References

1. Boiral, O. and Henri, J.F., (2017) Is sustainability performance comparable? A study of GRI reports of mining organizational behaviourBusiness & Society56(2), pp.283-317.
2. Fonseca, A., McAllister, M.L. and Fitzpatrick, P., (2014) Sustainability reporting among mining corporations: a constructive critique of the GRI approach. Journal of Cleaner Production84, pp.70-83.
3. Gürtürk, A. and Hahn, R., (2016) An empirical assessment of assurance statements in sustainability reports: smoke screens or enlightening information?Journal of cleaner production136, pp.30-41.
4. Rio Tinto, (2018) Financials [Online] Available from https://www.morningstar.com/stocks/xnys/rio/quote.html [Accessed on 28th September 2018]
5. Rio Tinto, (2018) Sustainability Report [Online] Available from http://www.riotinto.com/documents/RT_SD2017.pdf [Accessed on 28th September 2018]
6. Smyth, E., Steyn, M., Esteves, A.M., Franks, D.M. and Vaz, K., (2015) Five ‘big’issues for land access, resettlement and livelihood restoration practice: findings of an international symposium. Impact Assessment and Project Appraisal33(3), pp.220-225.
7. Sroufe, R. and Joseph, S., (2017) A comparison of environmental management system components and practices. In Strategic Sustainability (pp. 43-55). California: Routledge.
8. Warner, M. and Sullivan, R. eds., (2017) Putting partnerships to work: Strategic alliances for development between government, the private sector and civil society. California: Routledge.