Rusal profits sink under nickel weight

PUBLISHED : Tuesday, 20 March, 2012, 12:00am
UPDATED : Tuesday, 20 March, 2012, 12:00am


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Net profit at Hong Kong-listed aluminium giant Rusal nosedived 91.7 per cent to US$237 million last year, dragged down by its stake in Norilsk Nickel, the world's biggest nickel producer.

The world's biggest aluminium producer said yesterday that its 25 per cent shareholding in Norilsk had a market value of US$7.4 billion at the end of last year down from US$11.2 billion at the end of 2010.

The revaluation led to a fourth-quarter loss of US$974 million, according to Rusal's financial report.

Rusal paid US$14 billion for a quarter of Norilsk Nickel at the peak of the market in 2008, leaving it with an US$11 billion debt burden, and generating bitter conflict at the board level.

Former Rusal chairman Viktor Vekselberg, who quit last Monday, wants to sell the stake back to Norilsk but has been consistently overruled by Rusal's biggest shareholder and chief executive officer, Russian tycoon Oleg Deripaska.

Excluding Norilsk, Rusal said its adjusted net profit rose 24.6 per cent to US$987 million last year, while revenue rose 12 per cent to US$12.29 billion.

The boardroom conflict has spread to include the recent appointment of Rusal's Hong Kong chairman, Barry Cheung Chun-yuen.

Rusal has threatened to sue Vekselberg-controlled Sual Partners for criticising Cheung's appointment as chairman on Friday. Cheung is chairman of the Hong Kong Mercantile Exchange and Hong Kong's Urban Renewal Authority.

On Friday, Sual, which owns 15.8 per cent of Rusal, said Cheung's appointment as chairman was 'rushed and non-optimal'.

It argued that since 80 per cent of Rusal's assets were in Russia, Rusal's chairman should be a Russian citizen. But Rusal hit back on Sunday.

'Sual Partners' destructive actions not only damage the company's reputation, but destroy its shareholder value. None of the company's shareholders should impose any decision to the board,' Rusal said. 'Barry Cheung's election as a chairman was supported by a majority vote of the board.

'His appointment was also met by a marked rise in the company's share price, which had been declining over the past few days under pressure from the emotional and groundless statements by Sual.'

Guosen Securities analyst Gao Chengming said that with Cheung replacing Vekselberg as Rusal chairman, Deripaska had strengthened his control of the company, so the likelihood of Rusal selling its quarter-stake in Norilsk had lessened.

Vekselberg and Rusal's second biggest shareholder, Mikhail Prokhorov, who owns 17 per cent, wanted Rusal to sell its Norilsk stake to reduce Rusal's net debt of US$11 billion, but Deripaska refused.

BOC International analyst Robin Tsui said that if their conflict with Deripaska worsened, Vekselberg and Prokhorov, who lost to Vladimir Putin in the Russian presidential election earlier this month, might sell their Rusal shares, which would hit the share price because they owned such a large share of the firm.

'Prokhorov and Vekselberg will probably not sell their Rusal shares, because Rusal's IPO share price was HK$10.80 and is now HK$5.90,' Tsui said.

Rusal closed up 4.4 per cent to HK$5.90 yesterday.

'Rusal's core earnings last year were very much in line with market expectations. That's why its share price rose,' Tsui said.