Rusal’s Strong Finish Leads to Doubled Profits in 2016

Rusal’s Strong Finish Leads to Doubled Profits in 2016
Bratsk aluminium smelter. Source: Rusal

Russian Federation aluminium giant UC Rusal released financial results for the fourth quarter and full year of 2016 yesterday. Though results for the full year were not as strong as hoped, numbers posted for the final quarter surpassed expectations.

Citing a difficult commodities market, especially the 3.5% drop in aluminium prices and the 43.4% fall in average realized premiums at the LME, the firm’s revenue for the year fell by 8% to US$7.98 billion, down from 2015’s total of US$8.68 billion. However, net profit for the year more than doubled over that of 2015, rising from US$558 million to US$1.2 billion.

The 14.4% rise in LME aluminium prices in the final quarter of the year helped to boost Rusal’s revenue by 9.2% year-on-year, totaling US$2 billion in the quarter, up from US$1.8 billion in the last quarter of 2015. The fourth quarter turned out to be a bright spot for the firm, as the EBITDA for the period rose 35% year-on-year, from US$400 million in 2015 to US$412 million last year.

The firm’s cost per metric ton of aluminium fell by almost 5% in the fourth quarter, ending up at US$1,344, down year-on-year from last year’s fourth-quarter per-metric-ton cost of US$1,410. Rusal credits cost-control measures and a decrease in the price of raw materials.

Rusal’s adjusted net profit ended the year at US$590 million, down from 2015’s total of US$671 million. Recurring net profit was also off for the year, totaling US$1.3 billion, which was down from 2015’s total of US$1.1 billion.

Overall, Rusal sold 3,818 thousand metric tons of primary aluminium in 2016 at an average sales price of US$1,732 per metric ton. Those numbers are down from 2015, when the firm sold 3,638 thousand metric tons at an average price of US$2,001 per metric ton.

“Despite a challenging start of the year, with aluminium prices reaching multi-year lows, RUSAL achieved a solid financial performance in 2016,” explained Rusa’s CEO Vladislav Soloviev. “On the one hand, we saw improved market conditions in the second half of the year, supporting our key performance metrics and on the other, our solid results were down to our dedication to cost management, production discipline, and a stronger focus on innovation and value added products (VAP) development.”

He went on to highlight the moves made by Rusal last year that put the firm in a better position financially.

“I would also highlight that post the reporting period, RUSAL completed its debut offering of a 5-year Eurobond with a principal amount of USD600 million,” he went on. “While the bond proceeds were used to refinance some of RUSAL’s existing pre-export finance facility and improved the Company’s debt maturity profile, the successful debut placement is a testament to RUSAL’s credit strength and its name recognition in the investor community.”

Soloviev finished by positing that the aluminium market was poised to make at least modest gains over the course of the current year.

“Looking ahead into 2017, we expect the aluminium market to remain in a good shape with demand increasing by 5% and global market deficit widening to 1.1 mn tonnes.”