Improved Demand and Better Cost Controls Boost Rusal’s Second Quarter Numbers

Improved Demand and Better Cost Controls Boost Rusal’s Second Quarter Numbers
Krasnoyarsk aluminium smelter Source: UC Rusal

Russian aluminium major UC Rusal released second quarter 2016 results on August 25. Numbers for the just-ended quarter show a ten-percent jump in profits thanks in part to global increased demand for aluminium.

The firm reported an adjusted EBITDA of US$344 million for the quarter, a 10.3% increase over Q1. Recurring net profit increased to US$276 million, an increase over last quarter’s US$149 million. Adjusted EBITDA margin also rose in the quarter, from 16.3% in Q1 to 17.4 in Q2.

Rusal chalks up the improved numbers for the quarter to a slight recovery of aluminium prices due to strong demand and a tighter supply from smelters outside of China. Additionally, growth from smelters in China was kept in check, increasing by only 1.1% in the first half year-on-year, which was offset somewhat by increased domestic demand. However, for its part, Rusal’s stronger value-added sales results (up to 47% of total sales in Q2) and tightened cost controls contributed to the improved bottom line in the quarter. Rusal management’s focus on cost control helped deliver a US$1,334 per metric ton cash cost, placing them in the first quartile of the global aluminium cost curve.

Rusal also benefited from the sale of Alpart in Jamaica to JISCO for US$299 million.

“In addition to already producing a wide range of primary aluminium and alloys, RUSAL is constantly seeking new markets to penetrate and new technologies to develop,” said Rusal’s CEO Vladislav Soloviev. “In particular, we announced a project to develop 3D printing technology for the industrial use of aluminium and aluminium alloys. The technology will be used to print aluminium parts for use by our customers in the machinery-producing, aerospace and automotive sectors.”

Rusal execs predict that the ex-China global aluminium market will run a deficit of around one million metric tons for the year due to a significant uptick in demand, a smaller increase in aluminium production, and a drop in aluminium semis from China. They expect that such a situation will help boost both global inventory levels and global aluminum prices.