Rusal warns sanctions ‘materially adverse’ to company; CEO, seven directors to resign

UC Rusal has warned shareholders that the US Treasury’s sanctions on the company may hamper its cashflow and its ability to obtain financing, according to a statement released on Thursday May 24.

A separate announcement was also released on Thursday announcing the resignation of the company's chief executive officer and seven directors.

The Russian aluminium company, which accounts for 7% of global aluminium production, was sanctioned by the US Treasury on April 6. Since then, the US has eased sanctions, giving Rusal customers until October to wind down their contracts with the Russian company.

Rusal said unless sanctions are lifted or the winddown period is extended after October 23, its customers are likely to discontinue any existing contracts after the date.

“[Rusal]’s production of metal and the sales would be severely impacted,” the company said.

The fall in sales and additional costs in rearranging the company’s supply chain, “may result in significant reduction of [earnings before interest, taxes, depreciation and amortization] and cashflows of the group.”

“The company may not be able to maintain its operating performance at a certain level required to service and repay its indebtedness and that may result in current creditors accelerating repayment,” it added.

Since the US enacted sanctions on the company, aluminium premiums have hit their highest in three years. In Europe, the benchmark Rotterdam P1020a in-warehouse premium soared to its highest since 2015 during April at $150-165 per tonne due to market tightness spurred by companies hesitating to use Russian metal.

Metal Bulletin assessed the premium at $120-135 per tonne on Wednesday May 23, down 20% since the start of May, with more participants willing to transact pre-sanctioned Russian metal due to pressure from spreads.

Should sanctions go into full effect after October 23, global aluminium ingot and product premiums could shoot back up later in the year. Metal Bulletin reported a significant amount of fresh Rusal metal was backed up in Russia, with the company having trouble exporting in large volumes.

CEO, directors to resign
Rusal has been seeking to find relief from the US sanctions, leading to a shakeup of its executives and directors.

"Since April 2018, the company, acting in the best interests of its creditors, shareholders and partners, has been in continuous discussions with various authorities in an attempt to seek relief from the sanctions regime imposed by [the Office of Foreign Assets Control] or to be removed from the Specially Designated Nationals ("SDN") List," Rusal said in a separate release Thursday.

"In the case of the company, absent other adverse information and consistent with the facts and circumstances of any petition for delisting from the SDN List, the path for the United States to provide sanctions relief is through divestment and relinquishment of control of the company by any relevant SDN, including Mr Oleg Deripaska," it added.

Deripaska had also been named in the US sanctions at the start of April.

The notice confirmed the resignation of CEO Alexandra Bouriko, who started in the post only three months ago.

“Ms Alexandra Bouriko has confirmed that she does not have any disagreement with the Board and that there is no other matter relating to her resignation which needs to be brought to the attention of the shareholders of the company,” Rusal said.

Evgeny Nikitin, previously Rusal’s head of aluminium, will take over as acting CEO, the company said.

Executive directors Vladislav Soloviev and Siegfried Wolf will resign from the board on June 28.

Non-executive directors Maxim Sokov, Dmitry Afanasiev, Gulzhan Moldazhanova, Olga Mashkovskaya and Ekaterina Nikitina, will also resign on June 28.

The directors have not offered themselves for re-election at parent company En+ Group plc's annual general meeting which will be held on or around June 28.

Justin Yang

justin.yang@fastmarkets.com

Published

Justin Yang

May 24, 2018

11:45 GMT

London