August 6, 2018 / 2:11 AM / 10 days ago

CORRECTED-UPDATE 1-Rusal Q2 profit surges vs year-ago earnings despite U.S. sanctions

(Corrects to show adjusted EBITDA rose (not fell), paragraph 9)

* Q2 profit up 75 pct y/y, down 17 pct q/q

* Q2 EBITDA down 8.2 pct, revenue down 8.7 pct

* Stock up 5.9 pct after results; down 50 pct since sanctions

HONG KONG, Aug 6 (Reuters) - Russian aluminium giant Rusal posted a second-quarter profit of $440 million on Monday amid higher market prices for the metal, remaining well in the black despite sanctions imposed on the company earlier this year by Washington.

Recurring net profit at Hong Kong-listed Rusal was up 75 percent from a year ago, but down 17 percent from the first quarter of 2018. The earnings figures were the first to be released since sanctions were imposed in early April.

Its net profit was bolstered by an 18 percent rise in the LME aluminium price over the period, while Rusal’s aluminium and alloys sales fell 22 percent year-on-year to 783,000 tonnes.

The U.S. Treasury imposed sanctions against billionaire Oleg Deripaska and eight companies in which he is a large shareholder, including aluminum exporter Rusal, in response to what it termed “malign activities” by Russia.

The sanctions, the toughest since Moscow’s 2014 annexation of Crimea, roiled aluminum markets and were later watered down. The Treasury Department has since warmed to the idea of removing Rusal from the list altogether.

In July, Washington extended a delay for investors to divest holdings in Rusal and some other companies from Aug. 5 to Oct. 23, saying it was in talks with Deripaska on how he could cede his control of the company and try to remove it from the sanctions list.

“The sanctions had a tangible impact on the company’s export activities, logistics, and operations in the financial market,” said a Rusal representative. “The uncertainty generated by the U.S. sanctions remains a major risk for Rusal and the company continues to manage this situation.”

Rusal’s Hong Kong-listed shares were up 5.9 percent on Monday by 0132 GMT. Its shares, volatile in recent months partially due to relatively low liquidity, are still down 50 percent since the sanctions were announced on April 6.

The company said its second-quarter adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 8.2 percent year-on-year to $552 million in April-June on revenue that dropped 8.7 percent at $2.25 billion.

Rusal’s exports and finances may take another hit if Deripaska is unable to persuade Washington to lift sanctions on the aluminium producer by late August, industry sources told Reuters previously.

Under the sanctions, U.S. customers have until Oct. 23 to wind down business with Rusal. As some orders can take up to two months to process and deliver to customers, particularly for value-added aluminium products, the sources said many customers will start to shun the company from August.

U.S. sanctions may also bar Rusal from receiving a dividend from a mining giant Norilsk Nickel due in August. As Rusal holds a 27.8 percent stake in Norilsk, OFAC could treat the dividend as a significant transaction and require that it is paid into a blocked or escrow account, sources have said.

Deripaska controls 66 percent of En+ Group, which in turn controls 48 percent of Rusal.

The sanctions also have had a neutral effect on Rusal’s net debt, which stood at $7.88 billion at the end of June compared with $7.9 billion at the end of March.

Reporting By Polina Devitt in MOSCOW and Donny Kwok in HONG KONG, editing by Richard Pullin

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