Rusal rises after first annual profit in three years
Shares of Rusal, the world’s largest aluminium producer, rose after it posted its first annual net profit in three years as production cost reduction and higher selling prices more than offset lower output.
The Moscow-based firm, controlled by Russian tycoon Oleg Deripaska, reported on Wednesday a net profit of US$293 million for last year, compared with a loss of US$3.32 billion in 2013. It had a net loss of US$55 million in 2012.
Excluding one-off asset valuation gains and losses, recurring net profit amounted to US$870 million, compared to a loss of US$598 million in 2013, the firm said in a filing to Hong Kong’s stock exchange.
“Rusal’s operating profit was 20 per cent ahead of our estimate for [last year’s fourth quarter] and implies an increase of 71 per cent [from the third quarter],” said Barlcay’s analysts in a note, adding it was driven by lower than expected production cost and sales and administration expenses.
“Rusal looks on track to deliver a significant improvement in earnings and cash flows on a full-year basis in 2015,” they said.
Rusal shares gained 1.42 per cent to HK$5.73 as of 2.15pm, outperforming a 0.1 per cent rise of the Hang Seng Index.
Cash production cost, which excludes non-cash items such as depreciation, fell 9.3 per cent to US$1,729 per tonne last year from 2013. Efficiency gains and the depreciation of the Russian rouble and Ukranian Hryvna contributed to cost reduction, while average aluminium selling price rose 3 per cent to US$2,219 a tonne.
Excluding one-off asset valuation gains and losses, recurring net profit amounted to US$870 million, compared to a loss of US$598 million in 2013
They more than offset a 6.9 per cent sales fall to 3.53 million tonnes, as the firm mothballed inefficient capacity to support prices amid global overcapacity.
“With the ramifications of the 2009 industry crisis firmly in our mindset, the company has no plans to restart any mothballed aluminium capacity, regardless of the [London Metals Exchange] price,” said chief executive Vladislav Soloviev in the filing. “Optimisation of production capacity is a long-term way of ensuring the industry does not face another over-production crisis.”
Rusal forecast global aluminium demand to rise 6.5 per cent this year to 59 million tonnes, while prices of metals will be hurt by oil price’s slump and the US dollar’s strengthening in the short term although the mid-term outlook is more positive as low oil price is expected to lift economic growth and metals demand.
While prices in North America and Europe will be supported by regional supply deficits, mainland China’s market’s oversupply is expected to continue this year since capacity addition could more than offset shutdowns.
After production capacity rose 4.5 million to 35.4 million tonnes that saw aluminium price drop 16 per cent in Shanghai since mid-September, some 1.5 million to 2 million tonnes of capacity closures on the mainland is expected this year, but some 3 million tonnes of new capacity may come on stream, Rusal said.
