Global Aluminium Recovery Helps Buoy Rusal’s Second Quarter Numbers

Novokuznetsk Aluminium Smelter

Russian Federation aluminium titan U.C. Rusal released financial and production results for the second quarter of 2017 on Friday. A recovery in the global aluminium market coupled with cost-cutting and efficiency measures undertaken by the firm helped solidify the quarter’s bottom line.

Over the course of the second quarter Rusal produced 921 thousand metric tons of primary aluminium, a slight rise year-on-year from last year’s third-quarter output of 919 thousand metric tons. The firm produced 1,928 thousand metric tons of aluminium, also up year-on-year from last second quarter’s alumina production of 1,851 thousand metric tons. The firm produced 3,090 thousand metric tons of wet bauxite ore, a slight drop from last year’s second quarter production total of 3,126 thousand metric tons.

Rusal sold 1,002 thousand metric tons of primary aluminium and alloys in the quarter, slightly above last year’s second-quarter total sales of 958 thousand metric tons. Sales of primary aluminium totaled US$2,085 million, which averages out to a price per ton of US$2,081. Rusal sold 515 thousand metric tons of alumina in the quarter, earning US$175 million, or US$340 per metric ton on average.

Revenue in the quarter totaled US$2,467 million, up year-on-year from last year’s second-quarter total of US$1,982 million. Gross profit totaled US$677 million, also up year-on-year over last year’s gross profit of US$475 million. Adjusted EBITDA totaled US$510 million, a jump from last year’s second-quarter number of US$344 million.

Rusal chalks up the improved revenue numbers to an improvement of aluminium prices at the LME and an increase of value-added product offerings to 49.2 percent, a quarter-on-quarter increase from the first quarter’s value-added product total of 44.3 percent. Cost reduction and efficiency initiatives received credit for the improvement in adjusted EBITDA.

“RUSAL’s revenue in 2Q2017 was up by 24% YoY reaching USD2,467 million, while revenue for the first two quarters of 2017 was USD4,764 million compared to USD3,896 million in 1H2016,” explained Rusal’s CEO Vladislav Soloviev. “Apart from a favorable LME price environment, revenues strongly benefitted from stronger VAP sales in the reporting period. During 2Q2017, RUSAL reached a record of 49.2% share of VAP sales, thanks to the expansion of our product mix achieved as a result of continuous upgrades in relevant capacities. RUSAL is on target to further increase its VAP capacity in order to meet growing customer demand in various sectors from the automotive and electrical to construction and consumer sectors.”

Going forward Rusal expects continued growth in the global supply of aluminium, forecasting a 5.3 percent increase by the end of 2017 to 62.4 million metric tons. Though the People’s Republic of China is shuttering capacity, Rusal still expects a growth from the Middle Kingdom of 8.3 percent to 35 million metric tons. However, capacity cuts are still likely to pull China’s aluminium sector into balance, as the firm predicts closure of another 2 to 3 million metric tons per annum of capacity by year’s end.

“Looking ahead to the second half of the year, our outlook for the aluminium industry is positive,” opined Soloviev. “Consumption of aluminium is set to remain healthy until the end of the year, increasing by 5.9% for the whole 2017. On the supply side, the spotlight is now on China following the recent announcements from Chinese regulators regarding capacity cuts, which may result in global market deficit widening to around 1 million tonnes in 2017.”

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