Rio Tinto Doubles Payment Term to Help Free Up Cash
April 09 2016 - 4:48AM
Dow Jones News
By Rebecca Thurlow
Rio Tinto PLC (RIO) has doubled its payment terms in a move that
could make suppliers wait up to 90 days to be paid, as the
unprofitable mining giant seeks improve its cash flow.
"This initiative is designed to free up cash and reduce working
capital so that we can preserve and maintain jobs and suppliers in
[a] tough global environment for commodities," a spokesman for the
company said Saturday.
The move follows the miner's announcement at its results
presentation in February that it would be embarking on a further
round of measures to free up cash and reduce working capital, after
it swung to a loss of $866 million in 2015.
The spokesman said Rio Tinto is working with banks to use its
strong credit rating to establish financing that will help support
suppliers through the transition to longer payment terms. The
previous payment term was 45 days.
"This program is being piloted with several suppliers in our
aluminum business, and we intend to make it more broadly available
from midyear 2016," the spokesman said.
"Our goal is to continue to be a reliable business partner for
our customers and suppliers while continuing to run a strong
business for our shareholders and stakeholders," the spokesman
said.
The new policy applies to all suppliers with contracts of more
than 3 million Australian dollars (US$2.3 million) each. Those with
contracts of less than A$3 million will be paid within 60 days.
In February, Rio Tinto said it was cutting its dividend and
conceded that it had misread the strength of China's commodities
demand, signaling a new era of diminished returns for mining
investors.
Rio Tinto has spent billions of dollars expanding its mines and
output in recent years. But its business has been hit by a slowdown
in growth in China--especially in manufacturing and construction
industries--that has weighed on global demand for commodities just
as producers ramped up supply.
Write to Rebecca Thurlow at rebecca.thurlow@wsj.com
(END) Dow Jones Newswires
April 09, 2016 05:33 ET (09:33 GMT)
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