Weak Aluminium Prices At LME Take Toll On Rusal Bottom Line In Q3

Weak Aluminium Prices At LME Take Toll On Rusal Bottom Line In Q3

Russian Federation aluminium behemoth U.C. Rusal released financial results for the third quarter and opening nine months of 2019 on Friday. Though production was generally level or better compared to prior periods, a decrease in aluminium prices teamed up with a reduction in value-added products sales to weigh down financial numbers for both periods.

For the third quarter Rusal produced 942 thousand metric tons of primary aluminium, up by 2 thousand metric tons on the year and better by 3 million metric tons on the quarter. Alumina production for the third quarter totaled 1,958 thousand metric tons, down 42 thousand metric tons from last year’s third quarter but better by 40 thousand metric tons over the second quarter. Rusal mined 3,948 thousand metric tons of bauxite in the third quarter, an increase of 100 thousand metric tons on the year but off by 294 thousand metric tons from the prior quarter.

The firm sold 1,091 thousand metric tons of primary aluminium in the third quarter, up by 4.3 percent from last year’s third quarter and up by 0.8 percent on the quarter. The third quarter’s revenue came in at US$2,486 million, down by 14.8 percent from last year’s third-quarter revenue of US$2,918 million and off by 3.1 percent on the quarter from the second quarter’s total revenue of US$2,566 million. Adjusted EBITDA for the quarter figured at US$237 million, falling 64.9 percent on the year and 21.5 percent from last quarter. Rusal attributed the fall in EBITDA to negative macroeconomic factors but were slightly buoyed by improvements in cash cost.

The third quarter’s profit totaled US$194 million, down from last year’s third-quarter profit of US$597 million and off on the quarter from the second quarter’s profit of US$352 million. Rusal showed an adjusted net loss for the third quarter of US$34 million, reversing an adjusted net profit of US$338 million last year and an adjusted net profit of US$5 million the previous quarter.

Turning to the first nine months’ totals, Rusal smelted 2,809 thousand metric tons of primary aluminium, essentially level on the year. The firm refined 5,808 thousand metric tons of alumina in the period, which was off by a mere 0.1 percent from last year. However, Rusal mined 12,021 thousand metric tons of bauxite in the first nine months, rising by 18.7 percent from last year’s first nine months’ total of 10,128 thousand metric tons.

Rusal sold 9.8 percent more primary aluminium in the first nine months, rising from 2,794 thousand metric tons last year to 3,069 thousand metric tons in the current year. Revenue was off by 8.8 percent through the opening nine months to US$7,222 million thanks to a decrease of 15.9 percent in the weighted-average aluminium price per metric ton, and adjusted EBITDA tumbled by 57.5 percent to US$765 million. Profit for the period dropped by 47.1 percent to US$819 million, while adjusted net profit for the period reversed from last year’s US$873 million to an adjusted net loss of US$132 million for this year’s opening nine months.

“In the first nine months of the year, the market environment was challenging with sharply falling aluminium price,” said Rusal’s CEO Evgenii Nikitin in a press release. “Coupled with the considerable decline of Rusal’s realized premiums by over 20% primarily due to reduced share of VAP sales influenced by the sanctions, this led to substantial decrease of Rusal’s revenue and EBITDA and affected our financial results. However, throughout this year we continued to gradually recover VAP sales and reached 40% in the third quarter, compared to just 29% in the first quarter. We expect the VAP share to restore in the beginning of 2020, following the results of the ‘mating season.’”

“While the potential for future price recovery and market growth is still largely undermined by the ongoing US-China trade tensions, positive signs in the automotive markets across Europe and South America and the interest rate cut in Russia should boost demand for end-use aluminium in the upcoming year.”

“Another source for future growth will come from the rising consumer demand for green aluminium as sustainability continues to advance as a major issue in the industry,” Nikitin continued. “Being one of the leading producers of green aluminium globally, Rusal is ready to provide new opportunities for environmentally concerned consumers and investors. For instance, Rusal has recently signed the first sustainability-linked pre-export finance facility in Russia for over US$1 billion. The interest rate is subject to either a discount or premium depending on the Company’s fulfillment of the sustainability KPIs. This demonstrates high level of trust towards the Company’s sustainability initiatives, including ALLOW low-carbon aluminium brand, from the investment and banking community.”