United Company RUSAL Plc: Results Announcement for the Three and Nine Months Ended 30 September 2017

13-Nov-2017 Intellasia | BusinessWire | 7:20 AM Print This Post

HONG KONG–(BUSINESS WIRE)–Regulatory News:

United Company RUSAL Plc (Paris:RUSAL) (Paris:RUAL):

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of
Hong Kong Limited take no responsibility for the contents of this
announcement, make no representation as to its accuracy or completeness
and expressly disclaim any liability whatsoever for any loss howsoever
arising from or in reliance upon the whole or any part of the contents
of this announcement.

UNITED COMPANY RUSAL PLC

(Incorporated under the laws of Jersey with limited liability)

(Stock Code: 486)

RESULTS ANNOUNCEMENT FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER
2017

Key highlights

  • Recovery in the London Metals Exchange (“LME”) aluminium price
    in the nine months of 2017 by 22.6% to an average of USD1,924 per
    tonne as compared to USD1,569 per tonne in the nine months of 2016 as
    well as an increase in volumes of primary aluminum and alloys sold by
    2.0% between the same periods resulted in the growth of United Company
    RUSAL Plc (“UC RUSAL” or the “Company”, together with
    its subsidiaries, the “Group”) revenue in the nine months of
    2017 by 21.3% to USD7,224 million as compared to USD5,956 million in
    the nine months of 2016.
  • Revenue in the third quarter of 2017 increased by 19.4% to USD2,460
    million, as compared to USD2,060 million for the third quarter of
    2016, following the improvement in the LME aluminium price and
    increase in the share of value added products (“VAP”) in total
    aluminium sales to 50% in the third quarter of 2017 in comparison with
    45% in the same quarter of 2016.
  • UC RUSAL reported strong financial results thanks to the Company’s
    commitment to operational efficiency and cost discipline, supported by
    robust LME prices. The Group’s total Adjusted EBITDA in the third
    quarter of 2017 increased by 7.6% to USD549 million as compared to the
    second quarter of 2017 and increased by 42.4% to USD1,534 million in
    the nine months of 2017 compared to the same period of 2016. Aluminium
    segment cost per tonne increased by 1.5% to USD1,520 in the third
    quarter of 2017 in comparison with USD1,497 in the second quarter of
    2017 as a result of the increase in key raw materials costs.
  • The Company achieved Adjusted Net Profit and Recurring Net Profit of
    USD727 million and USD1,122 million, respectively, for the nine months
    of 2017 as compared to USD248 million and USD752 million for same
    period of 2016.
  • In August 2017 the board of directors approved an interim dividend of
    USD299.3 million (USD 0.0197 per ordinary share) for 2017. The interim
    dividend was paid on 10 October 2017.
  • The Company reduced its Net Debt to USD7.6 billion as at 30 September
    2017. As part of commitment to continuous deleveraging, UC RUSAL has
    directed part of its strong 3Q17 cash flow to repayment of debt
    facilities and accumulated significant cash balance for further debt
    reduction.
  • The Company’s weighted average nominal interest rate on the credit
    portfolio reduced to 5% following series of successful refinancing.

Statement of the Chief Executive Officer

3Q2017 was another successful period for UC RUSAL. On the back of
robust aluminium demand and growing LME price, the Company reported
strong financial results in the reporting quarter and in the first nine
months of 2017.

Revenue growth for the first nine months of the year was 21.3%, reaching
USD7.2 billion. In 3Q2017 UC RUSAL set another record in sales of value
added products with the latter reaching 50% in total sales for the first
time. The Company remains committed to its sales and marketing strategy
and is on track to increase its share of VAP in the product mix to 60%
by 2021.

3Q2017 EBITDA increased by 7.6% quarter-on-quarter (“QoQ”),
demonstrating a very healthy margin of 22.3%. Recurring net profit for
the third quarter impressively grew by 73.0% QoQ to USD436 million.
Respective figures for the nine months of the year are also very strong
with EBITDA growing by 42.4% year-on-year (“YoY”) to USD1.5
billion and recurring net profit advancing to USD1.1 billion, up by
49.2%.

As consumers become more demanding about the provenance of the products
they purchase and their associated carbon footprint, post reporting
period end, UC RUSAL launched its new bespoke brand for low carbon
aluminium — ALLOW with a certified carbon footprint of lower than 4
tonnes of CO2 per tonne of aluminium, significantly lower than the
industry average. ALLOW will provide consumers and manufacturers alike
with confidence that the aluminium from RUSAL used in their products has
one of the lowest carbon footprints in the industry.

Looking ahead towards the end of the year, we maintain our positive
forecast for global aluminium industry with the demand to reach 63.1
million tonnes and deficit to widen to 1.1 million tonnes.”

Vladislav Soloviev
Chief Executive Officer

13 November 2017

Financial and Operating Highlights

 

Three months

ended 30

September

 

Change

quarter on

quarter,

% (3Q to 3Q)

 

Three

months

ended

30 June

 

Change

quarter on

quarter, %

(3Q to 2Q)

 

Nine months

ended 30

September

 

Change

nine months

on nine

months, %

2017   2016 2017 2017   2016
unaudited unaudited unaudited unaudited unaudited
 
Key operating data
(‘000 tonnes)
Aluminium 931 920 1.2% 921 1.1% 2,762 2,755 0.3%
Alumina 1,965 1,865 5.4% 1,928 1.9% 5,782 5,589 3.5%
Bauxite 2,742 3,211 (14.6%) 3,090 (11.3%) 8,701 9,346 (6.9%)
 
Key pricing and performance data
(‘000 tonnes)
Sales of primary aluminium and alloys 968 981 (1.3%) 1,002 (3.4%) 2,955 2,896 2.0%
 
(USD per tonne)
Production cost per tonne in Aluminium segment1 1,520 1,330 14.3% 1,497 1.5% 1,477 1,330 11.1%
Aluminium price per tonne quoted on the LME2 2,011 1,621 24.1% 1,911 5.2% 1,924 1,569 22.6%
 
Average premiums over LME price3 162 150 8.0% 174 (6.9%) 163 161 1.2%
Average sales price 2,124 1,754 21,1% 2,081 2.1% 2,051 1,711 19.9%
Alumina price per tonne4 310 234 32.5% 296 4.7% 315 236 33.5%
 

1 For any period, “Production cost per tonne in Aluminium
segment” is calculated as aluminium segment revenue (excluding sales of
third parties’ metal and other products sales) less aluminium segment
results less amortisation and depreciation (excluding margin on sales of
third parties’ metal and intersegment margin) divided by sales volume of
the aluminium segment (excluding volumes of third parties’ aluminium
sold).
2 Aluminium price per tonne quoted on the LME
represents the average of the daily closing official London Metals
Exchange (“LME”) prices for each period.
3 Average
premiums over LME realized by the Company based on management accounts.
4
The average alumina price per tonne provided in this table is based on
the daily closing spot prices of alumina according to Non-ferrous Metal
Alumina Index FOB Australia USD per tonne.

 

Three months

ended 30

September

 

Change

quarter on

quarter, %

(3Q to 3Q)

 

Three

months

ended

30 June

 

Change

quarter on

quarter, %

(3Q to 2Q)

 

Nine months

ended 30

September

 

Change

nine months

on nine

months, %

2017   2016 2017 2017   2016
unaudited unaudited unaudited unaudited unaudited
 
Key selected data from the consolidated interim condensed
statement of income
(USD million)
Revenue 2,460 2,060 19.4% 2,467 (0.3%) 7,224 5,956 21.3%
Adjusted EBITDA 549 421 30.4% 510 7.6% 1,534 1,077 42.4%
margin (% of revenue) 22.3% 20.4% NA 20.7% NA 21.2% 18.1% NA
Net Profit for the period 312 273 14.3% 283 10.2% 782 534 46.4%
margin (% of revenue) 12.7% 13.3% NA 11.5% NA 10.8% 9.0% NA
Adjusted Net Profit for the period 262 181 44.8% 202 29.7% 727 248 193.1%
margin (% of revenue) 10.7% 8.8% NA 11.5% NA 10.1% 4.2% NA
Recurring Net Profit for the period 436 327 33.3% 252 73.0% 1,122 752 49.2%
margin (% of revenue) 17.7% 15.9% NA 10.2% NA 15.5% 12.6% NA
 

Key selected data from consolidated interim condensed statement of
financial position

  As at  

Change nine

months on

year end, %

30 September 2017   31 December 2016
(unaudited)
 
(USD million)
Total assets 15,602 14,452 8.0%
Total working capital5 1,748 1,691 3.4%
Net Debt6 7,592 8,421 (9.8%)
 

Key selected data from consolidated interim condensed statement of
cash flows

  Nine months ended  

Change nine

months on

nine months, %

30 September 2017   30 September 2016
(unaudited) (unaudited)
 
(USD million)
Net cash flows generated from operating activities 1,181 966 22.3%
Net cash flows (used in)/generated from investing activities 112 (49) NA
of which dividends from Norilsk Nickel 622 320 94.4%
of which CAPEX7 (547) (407) 34.4%
Interest paid (385) (325) 18.5%
 

5 Total working capital is defined as inventories plus trade
and other receivables minus trade and other payables.
6
Net Debt is calculated as Total Debt less cash and cash equivalents as
at the end of any period. Total Debt refers to UC RUSAL’s loans and
borrowings and bonds outstanding at the end of any period.
7
CAPEX is defined as payment for the acquisition of property, plant and
equipment and intangible assets.Global aluminium market trends for
the first 9 months of 2017

  • UC RUSAL estimates that global aluminium demand grew by 5.9% YoY in
    the nine months of 2017 to 47.8 million tonnes as a result of strong
    demand in China, Europe, Asia ex-China, North America and India.
  • UC RUSAL forecasts that global aluminium demand will increase by 5.9%
    YoY to 63.1 million tonnes in 2017, driven by growth of 3.9% to 29.3
    million tonnes ex-China and China growth of 7.7% to 33.8 million
    tonnes.
  • Based on CRU estimates, global aluminium demand ex-China rose to 22.1
    million tonnes while production (estimated based on IAI data plus
    CRU’s estimate for production of eight non-reporting countries)
    increased by 0.9% year-on-year to 20.3 million tonnes. This left the
    rest of the world (ROW) aluminium market with approximately 1.8
    million tonnes in deficit in the nine months of 2017.
  • Announced smelting cuts by Chinese Regulators, driven by the necessity
    to stem industrial pollution, are expected to result in an annualized
    production loss of 1.1 million tonnes, according to UC Rusal’s
    estimates. Deeper losses may take place in carbon materials supply
    including anodes, coking coal etc, including 100% closures in 26+2
    cities during the winter season.
  • Chinese semis export are expected to drop in 4Q17- 1H18 due to a tight
    domestic market and negative export arbitrage. China’s exports of
    aluminium semis fell by 7.6% M-M (adjusted by a number of days in the
    months) to 358 thousand tonnes in August 2017 and for a second month
    in a row, fake extrusions exports dropped by 31% YoY during the eight
    months of 2017.

UC RUSAL estimates global demand for primary aluminium of 47.8 million
tonnes during the first three quarters of the year, representing growth
of 5.9% compared to the same period of 2016. This has been led by
developed economies maintaining their solid pace of growth from earlier
in the year, while demand in developing economies has accelerated in
many cases. ROW aluminium demand in the nine months 2017 grew by 3.9%
YoY to 22.1 million tonnes. Demand for aluminium in China in the nine
months 2017 grew by 7.7% to 25.7 million tonnes compared to the same
period of last year.

North America’s industrial recovery is advancing apace, reflected by
September’s manufacturing PMI in the US, hitting its highest level since
2004. This is driving demand for aluminium across a range of end use
sectors, in particular the construction and the transport sectors, which
are also enjoying the intensity of use gains, outweighing sluggish auto
sales and production. Overall, North American demand is estimated at 5.1
million tonnes in the first nine months of this year, an increase of
3.4% on the same period a year ago.

In the Eurozone, manufacturing PMIs are at multiyear highs. Demand for
aluminium has mirrored the underlying economic improvement as
consumption accelerated through the year, with residential construction
supporting strong growth in building sheet and extrusions. In other end
use sectors, the consumption of aluminium is running ahead of underlying
activities, with substitution boosting both the automotive and can stock
sectors in Europe. The net result is that primary demand has risen by an
estimated 3.6% in Europe to 7.2 million tonnes in the first nine months
of the year.

In Asia, industrial activity in Japan began to re-accelerate in August,
before extending gains in September, as evidenced by manufacturing PMI
reaching its highest level in four months. It has been the automotive
sector that has been the key driver of demand though, amid strength in
automotive production and the intensity of use gains. In the rest of
Asia region Ex China & India, growth has followed a similar pattern,
with light-weighting trends in automotive applications leading demand.
As a consequence, demand in the region grew to 4.8 million tonnes, an
increase of 3.6% on the first three quarters of last year. In the other
regional major, India, demand has accelerated through the year, with the
packaging sector particularly strong amid the increasing domestic
production of foil. This has resulted in Indian demand growth of 6.7% in
the January to September period to 1.7 million tonnes.

In the rest of the world, South America is enjoying a strong recovery,
led by a sharp increase in vehicle production, which surged by 27% in
the first three quarters of the year. This has lifted demand for
castings, rolled products and extrusions from the sector and breathed
new life into the region after a period of stagnation. This has led to
growth in demand for aluminium of 3.6% in South America as a whole,
amounting to 0.8 million tonnes.

The Chinese economy continued to show strong growth through the nine
months of 2017. The official PMI reached 52.4 in September 2017, its
highest since April 2012, and the Caixin Manufacturing PMI stood at a
51.0 level in September. GDP grew by 6.8% in 3Q17 YoY after 6.9% growth
in 2Q17. Industrial profits grew 6.6% YoY, while retail sales jumped
10.3% YoY in September. Fixed-asset investment climbed 7.5% YoY in the
nine months of 2017. Infrastructure investment surged 19.8% YoY in the
nine months of 2017. Investment in property development expanded at a
faster pace of 8.1% in the nine months 2017, up from 7.9% in the eight
months of 2017. The fixed asset investment in urban in China totaled RMB
45,850 billion in the nine months of 2017, representing a 7.5% YoY
growth. Investment in power grid was RMB 325 billion, up by 7.9% YoY.

Demand of the primary aluminium on the Russian market is growing +17.5%
as the result for the nine months 2017 YoY due to: the recovery of
industries after the recession, development of export and the growth on
the cable market. The light vehicle production has grown by 18% in
September and by 10.6% in total for the nine months of 2017.

The reported inventories of aluminium in the World ex-China declined
further to 3.0 million tonnes at the end of September 2017, down 0.99
million tonnes from the inventories level at the end of 2016. The days
of consumption continued to decline at a steady rate during the nine
months of 2017 and at the end of September 2017 it fell to 36 days as
compared to 58 days at the end of 2016.

On the contrary, during the eight months 2017 China`s total reported
stocks including social warehouses stocks rose by 1.0 million tonnes to
3.0 million tonnes, the highest since March 2015. The growth of stocks
can be attributed to the expectation of capacity cuts with the result
being a push to secure future materials supply. As expected most of
accumulated stocks are to be consumed during the winter supply shortage.

Aluminium supply out of China continue to be very modest. According to
IAI production figures and CRU’s estimation of 8 countries production
data, ROW primary aluminium annualized production fell by 0.11 million
tonnes M-M to 27.02 million tonnes in August 2017. At the same time the
possible restarts of closed smelting capacity is limited due to a lack
of competitive power supply, the high restarting cost and the shortage
of carbon raw materials supply.

The announcement by the Chinese regulator regarding winter capacity cuts
which is now underway in several provinces was implemented due to the
necessity to curb industrial pollution. As expected winter smelting cuts
will result in an annualized production loss of around 1 million tonnes
and alumina around 3.3 million tonnes, according to UC Rusal estimates.
Deeper losses may take place in carbon materials supply including
anodes, coking coal etc, including 100% closures in 26+2 cities during
the winter season.

When considering the expected curtailments of the so-called “illegal
capacities” on top of winter cuts, UC Rusal expects that during the
winter season, the Chinese aluminium market balance may become very
tight. As of the date of this announcement, according to SMM, around 4.2
million tonnes of illegal operating capacity have been closed.

As expected Chinese semis export are to drop in 4Q17- 1H18 due to the
tight domestic market and negative export arbitrage. Thus China’s
exports of aluminium semis fell by 7.6% M-M (adjusted by a number of
days in the months) to 0.36 million tonnes in August 2017 and for second
month in a row, fake extrusions exports dropped 31% YoY during the eight
months of 2017.

Forecast for 2017

• Global aluminium demand is expected to grow by 5.9% from 5.7% in 2017
to 63.1 million tonnes as a result of strong growth in Russia and EU.
Chinese demand to grow by 7.7% to 33.8 million tonnes and ex-China by
3.9% to 29.3 million tonnes driven by growth in EMEA, EU and Asian
economies;

• Global aluminium supply will grow by 5.3% to 62.4 million tonnes;

• The global aluminium market deficit is expected to grow 1.1 million
tonnes in 2017 as compared to 0.4 million tonnes in 2016.

Business review

Aluminium production

• Aluminium production in 3Q17 totaled 931 thousand tonnes (+1.1% QoQ),
with Siberian smelters representing 94% of total aluminium output. The
total production dynamics remained largely stable with capаcity
utilization rate standing at 95%;

• In 3Q17 sales of value added products (VAP) stood at 479 thousand
tonnes. The Company as per its strategy continued to grow the VAP’s
share in total sales, which now stands at 50% in comparison with 49% in
2Q17 sales;

Alumina production

• In 3Q17, total alumina production increased by 1.9% QoQ, totaling
1,965 thousand tonnes.

• The continuation of capacities ramp up at Russia-based refineries post
completion of upgrades earlier in 2017 couple with growing production at
Aughinish refinery on improved quality of purchased bauxites were
largely behind the QoQ production increase for the Company overall,
while Nikolaev refinery output was 3.5% down QoQ on the back of
scheduled maintenance works.

Bauxite production

• In 3Q17 nepheline output was stable marginally growing by 1.2% QoQ to
1,125 thousand tonnes, while consolidated bauxites output decreased by
11.3% totaling 2,742 thousand tonnes. The Company covered alumina
refineries consumption needs in relevant feedstock using the available
inventory at its operations at Achinsk, Bogoslovsk, Urals and Windalco
operations and additional purchased bauxite elsewhere.

• Production volumes at Timan decreased by 5.4% QoQ totaling 839
thousand tonnes and Kindia production volumes decreased by 11.0% QoQ to
717 thousand tonnes due to scheduled operational equipment care and
maintenance works.

• The abnormal weather conditions affected operational performance of
Bauxite Company of Guyana production which decreased to 161 thousand
tonnes (-41.7% QoQ) and Windalco production which decreased to 476
thousand tonnes (-5.6% QoQ).

• North Urals bauxite production declined by 11.0% QoQ to 548 thousand
tonnes to match the needs of Urals alumina refinery where as part of
working capital management the feed from accumulated inventory was
prioritized during the quarter.

Financial Overview

Revenue

 

Three months ended

30 September

 

Change

quarter

on quarter,

% (3Q to 3Q)

 

Three months

ended 30 June

 

Change

quarter on

quarter,

% (3Q to 2Q)

 

Nine months ended 30

September

 

Change

nine months

on nine

months,%

2017   2016 2017 2017   2016
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
 
Sales of primary aluminium and alloys
USD million 2,056 1,721 19.5% 2,085 (1.4%) 6,061 4,955 22.3%
Kt 968 981 (1.3%) 1,002 (3.4%) 2,955 2,896 2.0%
Average sales price (USD/t) 2,124 1,754 21.1% 2,081 2.1% 2,051 1,711 19.9%
Sales of alumina
USD million 172 157 9.6% 175 (1.7%) 536 458 17.0%
Kt 502 566 (11.3%) 515 (2.5%) 1,526 1,697 (10.1%)
Average sales price (USD/t) 343 277 23.8% 340 0.9% 351 270 30.0%
Sales of foil and other aluminium products (USD million) 91 62 46.8% 82 11.0% 232 175 32.6%
Other revenue (USD million) 141 120 17.5% 125 12.8% 395 368 7.3%
------- ------- ------- ------- ------- ------- ------- -------
 
 
Total revenue (USD million) 2,460 2,060 19.4% 2,467 (0.3%) 7,224 5,956 21.3%
============= ============= ============= ============= ============= ============= ============= =============
 

Total revenue increased by USD1,268 million, or 21.3% to USD7,224
million in the nine months ended 30 September of 2017, from USD5,956
million in the corresponding period of 2016. The increase in total
revenue was mainly due to the growth of sales of primary aluminium and
alloys, which accounted for 83.9% and 83.2% of UC RUSAL’s revenue for
the nine months ended 30 September of 2017 and 2016, respectively.

Revenue from sales of primary aluminium and alloys increased by USD1,106
million, or 22.3% to USD6,061 million in the nine months ended 30
September of 2017, from USD4,955 million for the corresponding period in
2016, primarily due to a 19.9% increase in the weighted-average realized
aluminium price per tonne driven by an increase in the LME aluminium
price (to an average of USD1,924 per tonne in the first nine months of
2017 from USD1,569 per tonne in the same period of 2016), as well as an
increase in the sales volumes by 2.0% and slight improvement in premiums
above the LME prices in the different geographical segments (to an
average of USD163 per tonne from USD161 per tonne in the first nine
months of 2017 and 2016, respectively).

Revenue from sales of alumina increased by 17.0% to USD536 million
during the nine months of 2017 from USD458 million in the corresponding
period of 2016 primarily due to an increase in the average sales price
by 30.0%, which was partially offset by a decrease in the sales volumes
by 10.1%.

Revenue from sales of foil and other aluminium products increased by
USD57 million, or by 32.6%, to USD232 million in the nine months ended
30 September of 2017, as compared to USD175 million for the
corresponding period in 2016, primarily due to a 20.2% increase in sales
volumes of foil.

Revenue from other sales, including sales of bauxite and energy services
increased by 7.3% to USD395 million for the nine months ended 30
September of 2017 from USD368 million in the same period of 2016, due to
an increase in sales of other materials.

Cost of sales

The following table demonstrates the breakdown of UC RUSAL’s cost of
sales for the nine months ended 30 September 2017 and 2016:

 

Nine months ended

30 September

  Change, %  

Share of

costs, %

2017   2016
(unaudited) (unaudited)
 
(USD million)
Cost of alumina 543 547 (0.7%) 10.3%
Cost of bauxite 340 267 27.3% 6.5%
Cost of other raw materials and other costs 1,878 1,579 18.9% 35.8%
Purchases of primary aluminium from JV 202 170 18.8% 3.8%
Energy costs 1,571 1,187 32.4% 29.9%
Depreciation and amortisation 351 334 5.1% 6.7%
Personnel expenses 430 358 20.1% 8.2%
Repairs and maintenance 51 44 15.9% 1.0%
Net change in provisions for inventories (3) 100% (0.1%)
Change in finished goods (115) 69 NA (2.2%)
------- ------- ------- -------
 
Total cost of sales 5,248 4,555 15.2% 100.0%
============= ============= ============= =============
 

Total cost of sales increased by USD693 million, or 15.2%, to USD5,248
million for the nine months of 2017, as compared to USD4,555 million for
the corresponding period of 2016.

Contacts

United Company RUSAL Plc

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