Rusal to ‘focus on restoring market position’ after revenues tumble by 21% in Q1

Russian aluminium producer Rusal said it will focus on restoring its market position after its first-quarter revenues plunged by 20.9% year on year in a period “challenged by the past year’s events”.

Rusal reported revenue in the first quarter of 2019 of $2.17 billion, a fall of 20.9% year on year from $2.744 billion. The company said the fall in revenue was due to the decrease in the London Metal Exchange aluminium price, which fell by 13.9% to $1,859 per tonne in the first three months of 2019 - compared with $2,159 per tonne in 2018.

The producer’s earnings before interest, tax, depreciation and amortization (Ebitda) also fell significantly, falling 60.5% to $226 million for the first quarter of 2019.

“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. The short OFAC General License extensions impacted the sales structure,” Evgenii Nikitin, chief operating officer of Rusal, said in its earnings report on Tuesday May 14.

The Office of Foreign Assets Control, part of the US Treasury Department, imposed sanctions against Rusal on April 6, 2018. The sanctions had been in place for 10 months by the time they were removed.

“In the coming months, Rusal will focus on restoring its market position, including the share of VAPs [value-added products], which will be vital due to ongoing price uncertainty in the global aluminium market and continued US-China tensions,” Nikitin said.

“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,” he added.

Revenue from sales of primary aluminium and alloys decreased by $499 million, 22.2%, to $1.746 billion in the first quarter of 2019, compared with $2.245 billion in the first quarter of 2018.

Rusal said this was primarily due to decreases in the weighted-average realized aluminium price, the LME aluminium price and premiums above the LME prices in the different geographical segments. Alongside this Rusal’s primary aluminium sales volume dropped by 7.2%.

Fastmarkets’ benchmark Rotterdam duty-unpaid P1020 aluminium premium averaged $74.42-82.92 per tonne in the first quarter of 2019, down from $96.15-103.92 per tonne in the same quarter of 2018.

Revenue from sales of alumina decreased by 27.4%, to $172 million in the first quarter of 2019 from $237 million in the same period of 2018.

The decrease was driven by a significant decrease in the sales volume by 28.6%, which was partially offset by a slightly increase in the average sales price of alumina by 1.4%.

Fastmarkets previously reported that Rusal’s sales of aluminium VAPs were down 22.2% year on year in the first quarter of 2019 amid US sanctions and high premiums.

Alice Mason

alice.mason@fastmarkets.com

Published

Alice Mason

May 14, 2019

11:36 GMT

London