March 7, 2019 / 12:32 AM / in 17 days

With sanctions lifted, Rusal says it's business as usual

HONG KONG/MOSCOW (Reuters) - Rusal, the world’s largest aluminum producer outside China, said on Thursday its business was back to normal after U.S. sanctions were lifted in January, and reiterated a positive outlook for the global aluminum market.

Aluminium ingots made at the Rusal Krasnoyarsk aluminium smelter are seen in this illustration picture taken January 28, 2019. REUTERS/Ilya Naymushin/Illustration

The company said sales were gradually returning to levels seen before the U.S. Treasury imposed sanctions on the company and other businesses linked to Russian tycoon Oleg Deripaska in April 2018.

The sanctions, and Rusal’s inability to fully take part in the industry’s annual “mating season”, when producers and clients seal 2019 metal supply agreements, weighed on U.S. and Asian sales last year, Rusal’s sales director Roman Andryushin said on a call after the company reported annual results.

With sanctions lifted, Andryushin said Rusal was confident it can restore sales in both regions to previous levels during the second half of 2019.

“In Asia we are already mostly there... 80 percent of normal performance in Asian region will be reachable in second half of the year,” he said.

The group is preparing to restore previous contracts with clients and is also talking to new clients.

“From the business point of view, after sanctions were lifted, we are back to normal course of business,” Oleg Mukhamedshin, director of strategy at Rusal, said.

The company’s shares, listed in Hong Kong, have surged 48.7 percent so far this year, against a 52.7 percent fall in 2018. On Thursday, the shares fell 2.6 percent in Hong Kong, lagging a 0.9 percent fall in the benchmark Hang Seng Index.

In Moscow, Rusal shares were down 2.9 percent.

FOURTH-QUARTER NET LOSS

Rusal reported a net loss for the fourth-quarter, when the company was still under sanctions.

Its adjusted net loss for the quarter was $17 million, compared with a $338 million profit in the previous quarter and a $350 million profit in the final quarter of 2017.

The company said recurring net profit fell 83.8 percent from the previous three months, but rose 7.8 percent year-on-year.

Recurring net profit is defined as adjusted net profit plus the company’s net effective share in results of Russian mining group Norilsk Nickel.

Rusal, the world’s second-biggest aluminum producer after China’s Hongqiao, said 2018 revenues were up 3.1 percent to $10.28 billion, compared to the previous year’s $9.97 billion.

This reflected gains in the London Metal Exchange aluminum price, which rose 7.2 percent year-on-year, supporting company revenues despite a 7.2 percent drop in sales of primary aluminum and alloys across 2018.

In the fourth quarter, aluminum prices were at $1,968 per ton on the London Metal Exchange (LME), Rusal said, down 6.3 percent year-on-year.

The lifting of U.S. sanctions on Rusal in January depressed aluminum prices on concerns that global supply would rise.

UPBEAT ALUMINUM OUTLOOK

Rusal said last month it expected aluminum demand to grow this year and prices to rise.

“Looking ahead into 2019 and the year ahead, we expect aluminum demand to recover after the trade wars and supply shocks of late 2018,” chief executive officer Evgenii Nikitin said in a statement on Thursday.

Rusal expects global aluminum demand to rise by 3.7 percent year-on-year in 2019 to 68 million tonnes, compared to the 3.6 percent demand seen in 2018. It also forecast that markets outside China would be in heavy deficit in 2019.

“We expect the overall deficit in the world ex-China at around 1 million tonnes this year,” Mukhamedshin said.

Rusal’s fourth-quarter aluminum production was 943,000 tonnes, down 0.2 percent year-on-year, while primary aluminum and alloys sales fell 12.3 percent year-on-year to 877,000 tonnes.

The company has previously said it expects output of 3.8 million tonnes in 2019.

Rusal said its fourth-quarter adjusted earnings before interest, tax, depreciation and amortization (EBITDA) fell 38.1 percent from the year ago period to $363 million, while revenue was down 13.8 percent year on year to $2.37 billion.

Rusal’s net debt stood at $7.44 billion at the end of December 2018 compared with $7.65 billion at the end of 2017.

Writing by Polina Ivanova in MOSCOW and Donny Kwok in HONG KONG; editing by Richard Pullin/James Pomfret/Jane Merriman

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