Rusal shares gain after ‘robust’ quarterly results

Chief executive remains optimistic as year end approaches, with aluminium consumption growing ‘at a very healthy pace while supply remains tight’

PUBLISHED : Friday, 11 November, 2016, 11:53am
UPDATED : Friday, 11 November, 2016, 11:02pm

Shares in Rusal, the world’s second largest aluminium producer, rose as much as 11.9 per cent after it posted a 13.9 per cent year-on-year rise in third-quarter recurring net profit, thanks to a substantial fall in material and production costs.

The Moscow-based firm recorded recurring net profit of US$327 million for the three months to September 30, up from US$287 million in the year-earlier quarter, it said in a filing to Hong Kong’s stock exchange on Friday, better-than-expected.

Net profit, when including non-recurring items, amounted to US$273 million in the quarter, compared to a loss of US$54 million in the same quarter last year during which a US$236 million fair value loss on financial derivate instruments was booked.

For the year’s first nine months, it posted a net profit of US$534 million, down 35.3 per cent year-on-year, as an 18 per cent plunge in the average aluminium selling price failed to offset a 9.5 per cent reduction in its production costs, excluding fixed costs such as asset depreciation.

The company is forecast to record a net profit of US$780 million for the year and US$790 million next year, according to average estimate of 11 analysts polled by Thomson Reuters.

Rusal shares closed 3.7 per cent higher on Friday in Hong Kong at HK$3.32 after surging as much as 11.9 per cent, bucking the Hang Seng Index’s 1.3 per cent decline.

They jumped 15.9 per cent on Thursday as investors bid up base metal stocks on speculation of a surge in future demand after Donald Trump proposed raise investment substantially after he becomes president to renew the nation’s ageing infrastructure.

Citing “cost disciplines” as a factor behind the “robust” quarterly result, chief executive Vladislav Soloviev said Rusal’s aluminium cash production costs fell to “a multi-year low” of US$1,330 a tonne, which he said ranks the firm among “the most efficient global aluminium producers”.

Revenue decreased 0.6 per cent year-on-year to US$2.06 billion, as a 4.8 per cent decline in the average aluminium selling price to US$1,754 a tonne and a 21.3 per cent fall in that of intermediate raw material alumina to US$277 a tonne, were offset by a 7.6 per cent fall in aluminium production cost.

Sales volumes of aluminium and alloys increased 4.5 per cent year-on-year to 981,000 tonnes in the quarter.

“[Rusal] remains optimistic as we approach the year end, with aluminium consumption growing at a very healthy pace while supply remains tight due to stronger pressure from increasing cost inflation,” Soloviev said.

The firm lifted its global aluminium consumption growth forecast for this year to 5.5 per cent from 5.4 per cent projected in late August, when it expected 7.2 per cent growth in China to 31 million tonnes and 3.5 per cent growth elsewhere to 28.5 million tonnes.

Rusal said the automotive industry, which has been seeking to reduce the weight of vehicles and improve fuel economy of their products, is a key area of growth for the company.

“Increased global automotive demand has led to significant investments in rolling slab and large diameter extrusion billet, as we remain focused on producing alloys for the automotive

industry, in particular non-wheel aluminium application,” it said.