US sanctions-hit Rusal rises in Hong Kong on new CEO appointment and board reshuffle

It remains unclear if the reshuffle and plan by its oligarch owner to relinquish control of Rusal’s parent firm will help it meet US demands to be extricated from imposed sanctions

PUBLISHED : Thursday, 24 May, 2018, 1:35pm
UPDATED : Thursday, 24 May, 2018, 5:34pm

Shares of Rusal soared on Thursday in Hong Kong after the embattled Russian aluminium giant appointed an interim chief executive and announced a sweeping board reshuffle as it seeks to be extricated from sanctions imposed by the United States.

But with execution of a plan by oligarch tycoon Oleg Deripaska to relinquish control over Rusal’s parent EN+ Group still unsettled, it remains unclear how far the company is from meeting US demands for trading restrictions that are crippling its operations.

“Rusal has been making progress in demonstrating it will meet conditions for relief from the US sanctions – without which it can’t operate normally,” said Helen Lau, a Hong Kong-based metals and mining analyst at Argonaut Securities.

“But the earlier commitment for Deripaska to relinquish control in parent EN+ is still pending execution.”

Deripaska agreed late last month to reduce his 70 per cent holding in EN+ to below 50 per cent, and resign from its board. London-listed energy and resource conglomerate EN+ owns around 48.1 per cent of Rusal.

Evgeny Nikitin was appointed acting chief executive from Wednesday after the resignation of Alexandra Bouriko and until the board appoints a new chief, said Rusal – the world’s second largest aluminium producer last year – in a filing to Hong Kong’s bourse on Thursday.

He has been the Moscow and Hong Kong-listed firm’s head of aluminium division since January 2014, rising through the ranks within the company since he joined in 1993.

But the earlier commitment for Deripaska to relinquish control in parent EN+ is still pending execution
Helen Lau, Argonaut Securities

In addition, executive directors Vladislav Soloviev and Siegfried Wolf, and Maxim Sokov, Dmitry Afanasiev, Gulzhan Moldazhanova, Olga Mashkovskaya and Ekaterina Nikitina – all non-executive directors nominated by En+ at the previous annual general meetings – tendered their resignation as directors from June 28.

They will not seek re-election in the board.

Rusal shares surged 6.9 per cent to close at HK$2.02 on Thursday. The stock has lost more than 64 per cent since the beginning of the year.

Deripaska resigned earlier this month as a director of En+ and has pledged not to seek re-election as a director of Rusal at the forthcoming annual general meeting to be held around June 28.

Rusal’s troubles began on April 6 when the US gave buyers a deadline of 30 days to exit dealings with the company, before transactions in dollars were prohibited. It sent a shock wave through much of the global aluminium supply chain, as Rusal is a major supplier of the metal as well as intermediate product alumina and raw material bauxite.

It formed part of the wider asset freezes and financial sanctions on various Russian government officials, oligarchs and their companies, which were the toughest since Moscow’s annexation of Crimea in Ukraine in 2014.

They were aimed at punishing Russia for a range of “worldwide malign activity, including continuing to occupy Crimea and instigate violence in eastern Ukraine, supplying the Assad regime with material and weaponry as they bomb their own civilians, attempting to subvert Western democracies, and malicious cyber activities,” the US Treasury said.

On April 23, the US Treasury said it would consider lifting sanctions on Rusal if Deripaska ceded control, while extending the deadline for companies to exit dealings with Rusal by almost five months, to October 23 this year.

Rusal posted a 22.4 per cent year-on-year rise in net profit for the year’s first quarter to US$531 million, before the sanctions were imposed.

Aluminium price closed at US$2,270 a tonne on Wednesday, after it spiked to US$2,718 on April 19, a seven-year high.