UC RUSAL announces full year results for 2013

UC RUSAL, a leading, global aluminium producer, announces its results for the year ended 31 December 2013.

Key highlights

• Low LME aluminium price driven by the negative investor sentiment exerted further pressure on the aluminium industry throughout the year ended 31 December 2013. Average LME aluminium price decreased by 8.6% from USD2,018 per tonne for the year ended 31 December 2012 to USD1,845 per tonne for the same period of 2013. However, thanks to cost reduction measures, working capital optimization and ongoing rationalization programme undertaken by the management supported by product mix improvement, weakened local currency and continuously growing premiums, UC RUSAL demonstrated Aluminium segment EBITDA margin of 11.3%.

• Aluminium segment cost per tonne reduced to USD1,907 per tonne (by 2.0%) in 2013 as compared to USD1,946 in 2012 resulting from efficiency initiatives supported by depreciation of the Russian Rouble. Aluminium segment cost per tonne in the fourth quarter of 2013 achieved record low USD1,864 per tonne as compared to USD1,934 for the fourth quarter of 2012.

• Primary aluminium production decreased by 7.6% or by 316 thousand tonnes to 3,857 thousand tonnes for the year ended 31 December 2013 as compared to 4,173 thousand tonnes for the preceding year as a result of the Company’s expansion of inefficient capacity curtailment programme. Total aluminium output in the fourth quarter of 2013 decreased by 12.9% or by 134 thousand tonnes to 904 thousand tonnes compared to 1,038 thousand tonnes in the fourth quarter of 2012.

• Share of value-added products output comprised a record 42% of total aluminium production in comparison with 39% for the previous year.

• Revenue decreased by USD1,131 million or 10.4% to USD9,760 million in 2013 compared to USD10,891 million in 2012 following the drop in LME aluminium prices coupled with the 9.9% reduction on sales volumes. The decrease was partially offset with historically high average realized premiums of USD271 per tonne.

• The Company maintained a robust cash position with USD1,386 million of free cash flow[1] generated for the year ended 31 December 2013 and a reduction in working capital by 15.8% primarily due to the capacity curtailment measures.

• Loss for the year ended 31 December 2013 amounted to USD3,222 million resulting primarily from the impairment and one-off restructuring charges of USD1,919 million in respect of goodwill and certain non-current assets.

• The Company decreased its net debt by USD720 million or 6.6% as at 31 December 2013 as compared to the beginning of the year.

• During the period, UC RUSAL successfully completed the sale of 3,873,537 shares of Norilsk Nickel to Crispian Investments Limited for a consideration of approximately USD620 million. The net proceeds of the sale were utilised as partial prepayment of debt owing to Sberbank. In September 2013, a new dividend policy of Norilsk Nickel was agreed by the shareholders of Norilsk Nickel, which will provide UC RUSAL with a stable dividend flow up to 2017 and beyond.

Commenting on the full year results, Oleg Deripaska, CEO of RUSAL said:

“2013 was another challenging year for the aluminium industry, which, despite consumption growth of 6% to 51.7 million tonnes, saw negative investor sentiment continue to weigh on LME prices which fell by 8.6%, to USD 1,845 per tonne – a level which takes an ever greater share of global production capacity to or below break-even level. In the second half of the year, the all-in price of aluminium was also influenced by the LME’s proposed warehouse policy changes, which added further to the market uncertainty and negatively affected market premiums.

RUSAL has continued to implement a disciplined focus on maintaining operational efficiencies and cost controls in order to counter these conditions. In line with its stated strategy, the Company has suspended aluminium production at its least-efficient smelting facilities, resulting in a 7.6% decrease in metal output year-on-year. Whilst the Company has already begun to see the results of these efficiencies, their main effect is expected in the current year as RUSAL’s results in 2013 include operations at these non-efficient facilities, and their associated mothballing costs.”

Financial and operating highlights

UC RUSAL forecasts that:

• Global demand for aluminium will trend upwards its growth and is expected to increase by 6% reaching 55 million tonnes in 2014, primarily driven by China, other Asian countries, United States (US) and European Union (EU);
• Global aluminium deficit excluding China reaches 1.3 million tonnes in 2014 from 455 thousand tonnes in 2013. About 1.0-1.5 million tonnes of the global aluminium production out of China is expected to be idled in 2014;
• Aluminium premiums will continue to be strong in 2014 due to physical market tightness and robust financial demand;
• The Chinese aluminium market will remain balanced in 2014. Approximately 3.0 million tonnes of Chinese aluminum production is expected to be cut in 2014 as a result of low aluminum prices. Chinese semis exports are not expected to have a significant impact on the global primary metal balance outside of China.

Financial overview

Revenue

Total revenue decreased by USD1,131 million or 10.4% to USD9,760 million in 2013 compared to USD10,891 million in 2012. The decrease in total revenue was primarily due to the decreased sales of primary aluminium and alloys, which accounted for 83.6% and 85.6% of UC RUSAL’s revenue for the years 2013 and 2012, respectively.

Revenue from sales of primary aluminium and alloys decreased by USD1,164 million, or by 12.5%, to USD8,159 million in 2013, as compared to USD9,323 million in 2012, primarily due to a decrease in volumes of the primary aluminium and alloys sold. This decrease was a result of the Company’s inefficient capacity curtailment programme. The decline in weighted-average realised aluminium price by 2.9% in 2013 as compared to 2012, due to the weak LME aluminium price performance also contributed to revenue decrease. The decrease in average LME aluminium price by 8.6% to USD1,845 per tonne in 2013 from USD2,018 per tonne in 2012 was partially offset by a 30.3% growth in premiums above the LME price in the different geographical segments (to an average of USD271 per tonne from USD208 per tonne for the years 2013 and 2012, respectively).

Revenue from sales of alumina was flat during the reporting period as compared to the same period of 2012.

Revenue from sales of foil increased by 3.6% to USD313 million in 2013, as compared to USD302 million in 2012, primarily due to an increase in foil sales volume.

Revenue from other sales, including sales of other products, bauxite and energy services were almost flat during the reporting period as compared to the same period of 2012.

Cost of sales Total cost of sales decreased by USD803 million, or 8.7%, to USD8,429 million in 2013, as compared to USD9,232 million in 2012. The decrease was primarily driven by the 9.9% (or 415 thousand tonnes) reduction in the aggregate aluminium sales volumes following mothballing of production at the least efficient smelters in line with the ongoing capacity curtailment programme and continuing depreciation of the Russian Rouble against the US dollar.

Cost of alumina decreased in the reporting period (as compared to 2012) by 25.7%, primarily as a result of a decrease in both alumina purchase volumes and average alumina purchase price.

Cost of bauxite increased by 11.7% in 2013 as compared to 2012, due to 10.6% growth in purchased volume.

Cost of raw materials (other than alumina and bauxite) and other costs decreased by 5.0% following the aluminium sales volume dynamic that caused the decrease in purchased volumes partially compensated by the higher purchase prices for certain materials (such as coal tar pitch for 5.7%, caustic soda for 9.1%, ligature and legating materials for 15.3%) in 2013 as compared to 2012.

Energy cost decreased in 2013 by 8.4% to USD2,374 million compared to USD2,592 million in 2012 primarily due to the decrease in aggregate aluminium sales volumes and depreciation of the Russian Rouble against the US dollar partially compensated with the insignificant increase in the weighted-average electricity tariffs.

As a result of the factors discussed above the Company demonstrated a sharp decrease in the results from operating activities and Adjusted EBITDA for the year ended 31 December 2013 to negative USD1,804 million and positive USD651 million, respectively, as compared to the results from operating activities and Adjusted EBITDA of USD60 million and USD915 million, respectively, for the previous year.

Loss for the period

The Company recorded a loss of USD3,222 million in 2013, as compared to a loss of USD528 million in 2012.

Adjusted Loss for any period is defined as the loss adjusted for the net effect of the Company’s investment in Norilsk Nickel, the net effect of embedded derivative financial instruments, gains and losses recycled from other reserves and the net effect of non-current assets impairment and restructuring costs. Recurring Loss for any period is defined as Adjusted Loss plus the Company’s net effective share in Norilsk Nickel results. Increase in Adjusted and Recurring Losses in 2013 in comparison with the prior year were primarily driven by the decrease in the Company’s result from operating activities.

Segment reporting

The Company has four reportable segments, which are the Company’s strategic business units: Aluminium, Alumina, Energy, Mining and Metals. These business units are managed separately and results of their operations are reviewed by the CEO on a regular basis.

For the year ended 31 December 2013 and 2012 respectively, segment result margins (calculated as the percentage of segment result to total segment revenue) from continuing operations were 6.3% and 7.6% for the aluminium segment, and negative 13.3% and 9.3% for the alumina segment. Key drivers for the decrease in margin in the aluminium segment are disclosed in “Revenue”, “Cost of sales” and “Adjusted EBITDA and Results from operating activities” sections above. Detailed segment reporting can be found in the consolidated financial statements for the year ended 31 December 2013.

Copyright and Exemption Declaration :¢ÙAll articles, pictures and videos that are marked with "China Aluminum Network" on this website are copyright and belong to China Aluminium Network (www.alu.com.cn). When transshipment, any media, website or individual must list the source from "China Aluminium Network (www.alu.com.cn)". We seek legal actions against anyone that disobey this. ¢ÚArticles that marked as copy from others are for transferring more information to readers, do not represent or endorse their opinions or accuracy and reliability. When other media, website or individuals copy from our website, must keep the source. Anyone that changes the articles' sources will hold the responsibilities for copyright and law problems. We also seek legal actions against anyone that disobey this. ¢ÛIf any articles copied by our website concern the copyright and other problems, please contact us within one week.