UPDATE 2-RUSAL expects China's aluminium demand to improve

Sun Nov 11, 2012 10:20pm EST

* Q3 recurring net loss $76 mln vs f'cast $35 mln loss

* Q3 adjusted EBITDA $130 mln vs $705 mln a year ago

* Expects demand to pick up in Q4, lifted by China rebound

By Alison Leung

HONG KONG, Nov 12 (Reuters) - Russia's United Company RUSAL Plc, the world's top aluminium producer, said it expected orders to pick up towards the year-end due to a rebound in China.

Tepid demand for aluminium in an oversupplied market has weighed on producers including Aluminum Corp of China Ltd . Prices have slumped 10 percent over the last 12 months and led RUSAL to report its biggest quarterly recurring net loss since its listing in 2010.

The outlook may improve from the final quarter of the year. RUSAL signalled a pick-up in China, the world's biggest consumer of aluminium, citing market speculation that the government will support infrastructure building and start stockpiling as it did in 2008 and 2009.

The company controlled by Russian billionaire Oleg Deripaska said it was optimistic thanks also to growing North American demand for the metal, used in drink cans, aircraft and iPads.

"This will be largely driven by a Chinese rebound in growth, a resilient USA automotive sector as well as new monetary stimulation steps taken by global central banks to support global economic growth and financial markets," RUSAL said.

RUSAL said China was expected to remain the largest growing market this year at 9 percent, followed by India at 7 percent and North America at 6 percent.

China said on Saturday it is effectively turning the corner on the economy and likely to meet its growth target for the year as a slowing trend had halted.

RUSAL revised down its Japanese consumption growth forecast for 2012 to 3 percent from 5 percent due to a drop in exports to Europe and the recent row between Tokyo and Beijing over disputed islands which it said had weighed on Japanese car makers.

Shares in the company, which have dropped nearly 60 percent since their IPO price of HK$10.80 in 2010, were flat in Hong Kong trade on Monday.

The market value of the company has declined by about 27 percent to $8.7 billion over the past 12 months.

EARNINGS LAG FORECASTS

Despite RUSAL's market-leading position, the weak operating environment has heaped pressure on the company, which is embroiled in a shareholder battle over its stake in Russian miner Norilsk Nickel.

Controlling shareholder Deripaska has resisted calls to dispose of RUSAL's 25 percent share in Norilsk Nickel to pay down debts at a time when aluminium markets are weak.

RUSAL has net debt of $10.85 billion, partly stemming from the purchase of the stake in 2008 for an estimated $14 billion. It has negotiated covenant holidays lasting until the end of 2013.

For the three months ended September, RUSAL posted a recurring net loss of $76 million, lagging the average forecast for a $35 million loss in a Reuters poll of nine analysts. That compares with a recurring net profit of $620 million a year earlier.

RUSAL on Monday also revised down slightly its 2012 global primary aluminium consumption forecast to 47.3 million tonnes from 47.5 million tonnes.

"The numbers reflected just how challenging an operating environment it is for the industry at the moment," said Andrew Driscoll, analyst at CLSA.

"We will have some strengthening in pricing towards year-end and you will expect to see some margin expansion on the prices."

Recurring net profit is defined as adjusted net profit plus the company's net effective share in the results of Norilsk Nickel.

RUSAL made a net loss of $118 million in the three-month period against a $432 million profit a year earlier.

It reported an adjusted net loss of $248 million versus a profit of $351 million a year ago.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), which indicates a company's ability to pay back what it owes, dropped 82 percent to $130 million.

That lagged an average forecast of $138 million, according to the Reuters poll.

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