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14 May, 2010 08:07

Rusal posts 1Q 2010 net profit of $247 million

Russian aluminium producer Rusal, has posted a 1Q 2010 net profit of $247 million under IFRS.

The bottom line is s sharp turnaround from the net loss of $638 million posted for the same period 2009, with 1Q Adjusted EBITDA coming in at $485 million, compared with minus $78 million in 2009, as 1Q revenues increase 31% year on year to $2.331 billion.

The company attributed the result to a 59% year on year increase in aluminium prices, with aluminium production down 4% year on year, alumina production down 14%, and bauxite production down 15%. Rusal added that aluminium foil and packaging production volumes were up 57% year on year.

Rusal noted that net debt had been reduced to $12 billion, placing it ahead of its own debt reduction target.

Rusal CEO, Oleg Deripaska highlighted the turnaround in the value of Rusal’s stake in Norilsk Nickel, with the demand supply balance underpinned by Chinese urbanization boosting the price outlook as marking a turnaround for the company.

“Today we are announcing a significant turnaround in UC RUSAL’s fortunes. We delivered a positive outcome in the first quarter of 2010, with a 31% increase in revenues and a swing into positive territory for EBITDA and net profit. UC RUSAL has returned to profit, demonstrating a strong financial performance and is well placed for the future, with a planned gradual restoration of production volumes. We have reduced debt through our successful IPO and our strategic stake in Norilsk Nickel has shown a meaningful increase in value. Market conditions continue to improve, with the aluminium price benefiting from improving US demand and rising premiums, a stable picture in Asia and a continued
decrease in LME stocks.

Having regained its financial and operational stability, UC RUSAL plans to continue its sustainable development by introducing new, efficient aluminium and energy production capacities, reducing operating costs, diminishing our debt and further expanding our presence in Asia, the most promising market for aluminium. As the company has entered a new stage of maturity through its IPO, UC RUSAL is focusing its efforts on achieving the ultimate strategic objective of further enhancing shareholder value throughout 2010 and beyond.”

In an exclusive interview with Business RT, Rusal's First Deputy CEO, Vladislav Soloviev, elaborated on the more buoyant outlook for aluminium and the company’s production plans.

“The task for last year, when the crisis started, was cash control and working capital control. That’s what we’ve done last year and that’s how we achieved these results in this year. Definitely, the first quarter wasn’t so easy, because all of the economy comes back after the crisis and the prices for the raw material, for the oil goes up and this is part of our cost of production, but we found a way how to control that. Of course, increasing demand and increasing prices definitely helps us. Our revenue increased nearly 31% in the first quarter this year compared to last year, 2009. And we see in some directions, where we sell the metal for example in Asia, we see a lack of the metal, and we are more or less committed with all our volumes for this year, and we have no problem with selling the volume.

This is why, because of demand, we see that there is a quite strong demand on the market, despite some stocks in the warehouses; we do not worry about that now. We think that demand should continue to go up. Today, was a very interesting announcement from China NDRC Energy Agency, they are going to increase their tariffs for their power consumer economy, maybe 50% or 100% which will definitely be a driver for the cost up in China and will definitely drive the price up.

RT: “You have now returned to increasing production, due to returning demand. DO you see Rusal increasing production beyond your current capacity limit?”

First of all, what we’ve done is cut the production of smelters and refineries with a higher cost – we didn’t cut it, we mothballed them and now we can quickly restart. What we are going to do this year. First of all, we’re going to restart full and reach 4.1 million tonnes of aluminium and 8.1 in alumina – its 100,000 additional in aluminium and 800,000 in alumina. In alumina we agreed in April to restart Windalco. All of these capacities have a cost of production much less than the price, that’s why we have benefited from them. We will see on the market now, we are not going to change that and increase more, but we have 4.6 capacity in aluminium and 11 million in aluminium, that’s why we have another spare capacity which could be restarted.

Definitely, there are a number of risks, first of all the prices, demand, well, we see that demand is quite strong, that’s why we more or less sure what the price is. The main risk is the rising in the raw materials side and all the economy goes up and the oil goes up, but we know how to control that. We demonstrated that we have some measures on how to control these costs. That’s why I think we can go through, coming back to the previous level, within this or next year, I hope so, I am absolutely sure on that.”