Sanctions And Weak Aluminium Prices At LME Weigh Down Rusal’s Q1 Results

Sanctions And Weak Aluminium Prices At LME Weigh Down Rusal’s Q1 Results

Russian Federation aluminium titan U.C. Rusal released results for the first quarter 2019 yesterday. Though United States sanctions were lifted in January, the lingering effects combined with a drop in aluminium prices at the London Metal Exchange to take a gouge out of the firm’s bottom line in the quarter.

The first quarter saw Rusal produce 928 thousand metric tons of aluminium, down by 3 thousand metric tons on the year and off by 1.6 percent on the quarter.Alumina production rose in the quarter, from 1,892 thousand metric tons in last year’s first quarter to 1,932 thousand metric tons in the just-ended quarter, but down slightly from the prior quarter’s total of 1.958 thousand metric tons. Bauxite production rose significantly last quarter, up by 29.4 percent on the year to 3,831 thousand metric tons, and up 3 percent from the fourth quarter of last year.

Sales of primary aluminium and alloys fell by 7.2 percent on the year to 896 thousand metric tons, but up by 2.2 percent from the fourth-quarter total of 877 thousand metric tons.

Rusal’s revenue for the quarter came to US$2,170 million, down by 20.9 percent on the year and off by 8.2 percent on the quarter. Adjusted EBITDA was down by 60.5 percent on the year to US$226 million, while adjusted loss for the quarter was US$103 million, down from the prior quarter’s loss of US$17 million. Financials in the quarter struggled mightily due to a 13.9-percent drop in aluminium prices at the LME.

“The first quarter of the year was significantly challenged by the past year’s events, including the OFAC sanctions which were only lifted on 27 January 2019,” said Rusal’s CEO Evgenii Nikitin.

“The short OFAC General License extensions impacted the sales structure: in the first quarter of 2019, sales of value added products (“VAP”) decreased by 29% to 259 thousand tonnes of total aluminium sales and resulted in a reduction of revenue and net profit, whereas in the first quarter of 2018, these sales accounted for 48% of total sales or 436 thousand tonnes.”

“In the coming months RUSAL will focus on restoring its market position, including the share of VAPs, which will be vital due to ongoing price uncertainty in the global aluminium market and continued US-China tensions,” Nikitin continued. “We will redouble our efforts on stronger interaction with our current customers, as well as development of new competitive technologies, whilst continuing our cost reduction programs. Moreover, in the coming years, the Company will allocate considerable funds to implement investment projects, which have already been announced, in order to continue modernizing key equipment at the Company’s facilities. In addition, RUSAL will promote its products to foreign markets, such as its low carbon aluminium brand ALLOW, to reestablish and reinforce its high quality customer service.”