Local market gives warm reception to Rio's new chief

Published: 04:37:01 AM, Fri 18 January 2013 UTC

A financial market analyst says investors are embracing the choice of Rio Tinto's iron ore chief, Sam Walsh as the company's new chief executive.

Rio Tinto's share price had climbed 2.8 per cent to $66.41 by 3:24pm (AEDT), despite $US14 billion in asset writedowns being announced after the Australian share market closed yesterday.

Despite the big hit to profits from the writedowns, it appears investors are pleased with the replacement of Tom Albanese as chief executive.

IG Markets' strategist Evan Lucas says there is a strong impression Rio Tinto will be in more disciplined hands with Australian Sam Walsh at the helm.

"Rio Tinto obviously has unfortunately had two very public failed acquisitions," he observed.

"The Alcan acquisition back at the top of the market in 2007, which really has been quite a poor performer, considering that China has come in and been the largest aluminium producer in the world.

"The other one was obviously the Riversdale acquisition here in Australia back in 2011 for a little bit smaller amount."

Mr Lucas says more chief executives may resign over similar issues in the near future, as companies look for more conservative management.

"A lot of CEOs over probably the next 18 months to two years that have found themselves being a little bit sort of whimsical with funding during the boom time - particularly between 2004 and 2007 - may actually start taking the lead from Tom Albanese and stepping down," he said.

"Sam Walsh's steady hand will now probably move towards that kind of CEO rather than probably what Tom Albanese was."

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