United Company RUSAL Plc: Results Announcement for the Three and Nine Months Ended 30 September 2016

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United Company RUSAL Plc (Paris:RUSAL) (Paris:RUAL):

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UNITED COMPANY RUSAL PLC
(Incorporated under the laws of Jersey with limited liability)
(Stock Code: 486)

RESULTS ANNOUNCEMENT
FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2016

Key highlights

• The London Metals Exchange (“LME”) aluminium price recovered in the third quarter of 2016 by 3.2% to USD1,621 per tonne as compared to USD1,571 per tonne in the second quarter of the year, partially offset by 7.4% decrease in the average realized product premiums (to an average USD150 per tonne in the third quarter of 2016 from USD162 per tonne in the preceding quarter of the year) resulted in the growth of United Company RUSAL Plc (“UC RUSAL” or the “Company”, together with its’ subsidiaries, the “Group”) revenue in the third quarter of 2016 by 3.9% to USD2,060 million as compared to USD1,982 million in the second quarter of 2016.

• Aluminium segment cost per tonne decreased by 7.6% to USD1,330 in the third quarter of 2016 in comparison with USD1,440 in the same period of 2015 as a result of continuing focus on efficiency and cost reduction initiatives and external factors such as fluctuation of Russian Ruble to the US dollar and decrease of raw materials price.

• Despite appreciation of Russian Ruble from average RUB65.9/1 US dollar in the second quarter of 2016 to RUR 64.6/1 US dollar in the third quarter of the year the Company managed to decrease aluminium segment cost per tonne to USD1,330 from USD1,334 per tonne between the reporting periods.

• The Company achieved Adjusted Net Profit and Recurring Net Profit of USD181 million and USD327 million, respectively, for the third quarter of 2016 as compared to USD40 million and USD276 million for the second quarter of the year.

• In September 2016 the Board of Directors of the Company approved an interim dividend in the aggregate amount of USD250 million (USD0.01645 per ordinary share) for the financial year ending 31 December 2016. Payment of the interim dividend was subject to the Company obtaining prior consents from certain lenders of the Company. On 25 October 2016, the required consents have been obtained by the Company. The interim dividend was paid on 31 October 2016.

Statement of the Chief Executive Officer

“In Q3 2016, RUSAL reported robust financial results thanks to the Company’s commitment to operational efficiency and cost discipline, supported by stronger LME prices. Adjusted EBITDA grew by 22.4% quarter-on-quarter to USD421 million while Recurring Net Profit for the period reached USD327 million, up 18.5% quarter-on-quarter. Our aluminium cash cost decreased to a multi-year low of USD1,330 per tonne whereas adjusted EBITDA margin stood at 20.4% in Q3 2016 highlighting RUSAL´s leading position among the most efficient global aluminium producers.

RUSAL continues to focus on the higher value end of the upstream business through implementing improvements to our smelters. Increased global automotive demand has led to significant cast house investments into rolling slab and large diameter extrusion billet as we remain focused on producing alloys for the automotive industry, in particular non-wheel aluminium applications. While better fuel economy is on top of the global agenda, RUSAL makes its contribution by producing aluminium in Siberia where our smelters benefit from access to clean, renewable hydro power.

The Company remains optimistic as we approach the year end, with aluminium consumption growing at a very healthy pace while supply remains tight due to stronger pressure from increasing cost inflation. Therefore RUSAL has reviewed its global aluminium consumption growth forecast for the current year lifting it to 5.5%. Domestic demand for aluminium is also growing at a very healthy pace and RUSAL intends to boost its domestic sales reflecting the expected increase in consumption for aluminium in Russia and CIS, the market with significant potential for growth.”

Vladislav Soloviev
Chief Executive Officer

11 November 2016

Financial and Operating Highlights

	Three months ended 30 September		Change quarter on quarter, % (3Q to 3Q)	Three months ended 30 June	Change quarter on quarter, % (3Q to 2Q)	Nine months ended 30 September		Change nine months on nine months, %
	2016	2015		2016		2016	2015
	unaudited	unaudited		unaudited		unaudited	unaudited
Key operating data
(‘000 tonnes)
Aluminium	920	916	0.4%	919	0.1%	2,755	2,724	1.1%
Alumina	1,865	1,870	(0.3%)	1,851	0.8%	5,589	5,496	1.7%
Bauxite	3,211	3,290	(2.4%)	3,126	2.7%	9,346	9,262	0.9%
Key pricing and performance data
(‘000 tonnes)
Sales of primary aluminium and alloys	981	939	4.5%	958	2.4%	2,896	2,762	4.9%
(USD per tonne)
Aluminium segment cost per tonne^1	1,330	1,440	(7.6%)	1,334	(0.3%)	1,330	1,469	(9.5%)
Aluminium price per tonne quoted on the LME^2	1,621	1,589	2.0%	1,571	3.2%	1,569	1,719	(8.7%)
Average premiums over LME price^3	150	206	(27.2%)	162	(7.4%)	161	313	(48.6%)
Average sales price	1,754	1,843	(4.8%)	1,712	2.5%	1,711	2,087	(18.0%)
Alumina price per tonne^4	234	294	(20.4%)	253	(7.5%)	236	326	(27.6%)

¹ For any period, “Aluminium segment cost per tonne” is calculated as aluminium segment revenue less aluminium segment results less amortisation and depreciation divided on sales volume of the aluminium segment.

² Aluminium price per tonne quoted on the LME represents the average of the daily closing official LME prices for each period.

³ Average premiums over LME realized by the company based on management accounts.

⁴ The average alumina price per tonne provided in this table is based on the daily closing spot prices of alumina according to Non-ferrous Metal Alumina Index FOB Australia USD per tonne.

	Three months ended 30 September		Change quarter on quarter, % (3Q to 3Q)	Three months ended 30 June	Change quarter on quarter, % (3Q to 2Q)	Nine months ended 30 September		Change nine months on nine months, %
	2016	2015		2016		2016	2015
	unaudited	unaudited		unaudited		unaudited	unaudited
Key selected data from the consolidated interim condensed statement of income
(USD million)
Revenue	2,060	2,073	(0.6%)	1,982	3.9%	5,956	6,823	(12.7%)
Adjusted EBITDA	421	420	0.2%	344	22.4%	1,077	1,709	(37.0%)
margin (% of revenue)	20.4%	20.3%	NA	17.4%	NA	18.1%	25.0%	NA
Net Profit/(Loss) for the period	273	(54)	NA	135	102.2%	534	825	(35.3%)
margin (% of revenue)	13.3%	(2.6%)	NA	6.8%	NA	9.0%	12.1%	NA
Adjusted Net Profit for the period	181	181	0.0%	40	352.5%	248	616	(59.7%)
margin (% of revenue)	8.8%	8.7%	NA	2.0%	NA	4.2%	9.0%	NA
Recurring Net Profit for the period	327	287	13.9%	276	18.5%	752	1,137	(33.9%)
margin (% of revenue)	15.9%	13.8%	NA	13.9%	NA	12.6%	16.7%	NA

Key selected data from consolidated interim condensed statement of financial position

	As at		Change nine months on year end, %
	30 September 2016	31 December 2015
	(unaudited)
(USD million)
Total assets	13,599	12,809	6.2%
Total working capital^5	1,615	1,606	0.6%
Net Debt^6	8,303	8,372	(0.8%)

Key selected data from consolidated interim condensed statement of cash flows

	Nine months ended		Change nine months on nine months, %
	30 September 2016	30 September 2015
	(unaudited)	(unaudited)
(USD million)
Net cash flows generated from operating activities	966	1,400	(31.0%)
Net cash flows (used in)/generated from investing activities	(49)	221	NA
of which dividends from Norilsk Nickel	320	535	(40.2%)
of which CAPEX^7	(407)	(362)	12.4%
Interest paid	(325)	(403)	(19.4%)

⁵ Total working capital is defined as inventories plus trade and other receivables minus trade and other payables.

⁶ Net Debt is calculated as Total Debt less cash and cash equivalents as at the end of any period. Total Debt refers to UC RUSAL’s loans and borrowings and bonds outstanding at the end of any period.

⁷ CAPEX is defined as payment for the acquisition of property, plant and equipment and intangible assets.

Global aluminium market trends for the first 9 months of 2016

• Global aluminium demand grew by 5.5% in the nine months to 30 September of 2016 year-on-year (YoY), as a result of strong demand in China, Europe, other Asia, North America and India.

• UC RUSAL has raised its forecasts for global aluminium demand to 5.5% year-on-year to 59.5 million tonnes in 2016, driven by Chinese growth improvement to of 7.5% to 31.2 million tonnes.

• Global aluminium supply is now growing at a slower pace with strong pressure coming from increasing cost inflation. IAI and CRU data shows that during January — September 2016 primary aluminium production in the world (excluding China) rose by 2.1% year-on-year (days adj.) to 20.1 million tonnes.

• During the January-September 2016 period China’s primary aluminum production fell 2.7% YoY to 23.223 million t. Despite the new Chinese capacity launches that have been taking place since the middle of 2015, the net rise in capacity since August 2015 to August 2016 was only 0.9 million tonnes.

• Chinese aluminum smelting costs continue to be under strong pressure from rising coal, power, alumina and logistic costs.

• Alumina prices in China witnessed upwards momentum from the beginning of this year, increasing by above 50% in October from the beginning of the year. Steam coal prices have moved all the way up this year, up as much as 56% (January-October), pushing up power costs.

• Global reported aluminum inventories fell to 4.975 million tons in September, the lowest since January 2009, and to 29.9 days of consumption - significantly below the pre-crisis level in August 2009 of 76.0 days of consumption, making aluminium the best positioned in the base metals universe.

• Aluminum premiums in the key consuming regions started to improve during Q316 with 10-13% rise in September-October supported by strong demand and improved metal financing conditions.

Aluminum demand

UC RUSAL has raised its global aluminium demand forecasts to 5.5% in 2016 year-on-year (from previous 5.4%) to 59.5 million tonnes in 2016, as a result of ex-China demand increasing by 3.3% to 28.3 million tonnes, while in China the aluminium demand will grow by 7.5% to 31.2 million tonnes.

Worldwide demand excluding China amounted to 21.2 million tonnes (+3.3% year-on-year) in the nine months to 30 September 2016.

Industrial activity continued to improve during the third quarter with the Markit US Manufacturing PMI preliminary October reading climbed to 53.2, its highest mark this year, rising from 51.5 in September. European manufacturing activity growth accelerated to a 10-month high, with Eurozone PMI reaching 53.3 in October. Japan´s Nikkei Flash Manufacturing PMI increased to 51.7 in October, the sharpest improvement in nine months, after a final reading of 50.4 in September 2016.

In North America, new house construction remained well above 1m units through Q3. Though there was a fall in construction of multifamily homes in September, single-family starts, which are more aluminium intensive, rose by 8.2% on a monthly basis. The number of new homes built in the first nine months of the year outpaced the volume of the previous year by over 4%. In addition, the latest building permit figures suggest good foundations for construction activity in the upcoming year. The other key indicator for the consumer market, the automotive industry, witnessed a slight increase in light vehicle production in September. While for the first nine months of the year, there was substantial growth by more than 2% in North America including Mexico, which is experiencing a boom in the automotive industry.

Overall, the improvement in European permit and housing data is encouraging as is the firm demand which has been seen in the automotive sector. In the UK, automotive production continues to see multi year highs. In the first nine months of the year, there were also robust car output in France (7.7%), Italy (7.8%) and Germany (2.4%). In Turkey, January - September car production saw a significant 13% pick up.

In Japan, January - August production of rolled products stabilized while their shipments to the automobile segment jumped by 16% despite a decline in car production, proving the ongoing trend of BIW (body in white) service. Extruded products showed a healthy 6% rise, which was supported by new constructions starts, which saw a strong 5.3% rise in the same period.

India became the world’s fifth largest car manufacturer during the first seven months of the year overtaking South Korea. In the January-August period domestic automotive production grew by 7.2%.

In Russia, improving oil prices helped GDP to slow down its contraction in the first nine months of the year. The third quarter number stabilized at +0.1% on a quarterly basis, which is the highest since mid-2014. The upturn in Russia’s manufacturing sector continued for a second successive month during September. Manufacturing PMI further expanded up to 51.1.

Construction gained 6.3% in September on a monthly basis however the volume for the first nine months of the year is still far away from the previous year’s number. Automotive production declined by 11% in the January-August period, while sales of domestic brand cars grew by 4.7% in September.

China’s primary aluminium consumption increased 7.5% year-on-year to 24.4 million tonnes for the nine months up to 30 September2016.

China’s economic growth remained stable in the Q3, ensuring the government’s full-year growth target. Gross domestic product rose 6.7% in 3Q16 YoY (higher than the 6.1% growth forecast by analysts), China´s industrial output rose 6.1% YoY and retail sales increased 10.7%. Fixed-asset investment in the first nine months grew 8.2% YoY. China produced 2.53 million units of vehicles in September (+32.8% YoY, and +26.8% month-to-month), according to monthly data released by the CAAM.

Aluminium supply

IAI and CRU data shows that during January — September 2016 primary aluminium production in the world (excluding China) rose by 2.1% year-on-year (days adj.) to 20.1 million tonnes.

Global aluminium supply is now growing at a slower pace with strong pressure coming from increasing cost inflation including power and alumina. Still around 1.3 Mtpy (5% of the global production capacity outside China) of aluminium production capacity is loss making at current LME price (including premiums) and around 30% operate at low margin.

Chinese aluminum smelting costs continue to be under strong pressure from rising power, alumina and logistic costs. Alumina prices in China entered an upward trajectory in the beginning of this year, increasing by above 50% in October since January 2016. Steam coal prices have increased up to as much as 56% (January-October), pushing up power costs. The new rules (since mid-September, China has enforced a lower maximum load weight on trucks, from 55 mt to 49 mt) have led to a surge in freight rates in some provinces, while implementation of the new policy has reportedly been sparse elsewhere. As of today, tightness in logistics appeared more severe in the coal and aluminium markets and less so in other commodities. The fact that rail authorities are prioritizing shipments for coal implies that other commodities could face even more pressure on logistics as the backlog is processed.

According to Chinese CNIA data, on a yearly basis China`s daily average aluminum production increased by only 1.3% in September after falling for the previous five consecutive months. During the January-September 2016 period China`s primary aluminum production fell 2.7% YoY to 23.223 million t. Despite the new Chinese capacity launches that have been taking place since the middle of 2015, the net rise in capacity since August 2015 to August 2016 was only 0.9 million tons as the majority of closed capacity is still frozen and additional restarts may well be limited amid increasing pressure from the cost of aluminium production and difficulties related to access to financing.

Chinese exports remain stagnant as a result of weak arbitrage and a tight domestic metal market. For January-September 2016 China`s exports of aluminum semis fell 2.0% YoY (days adj.) to 3.09 million tons as compared to 3.14 million tons for the same period during 2015.

Aluminium prices, premiums and stocks

The LME aluminium price rose to USD1659/ton at the end of 3Q16, the highest level since mid-August 2016 and remains stable at the USD1600-1700/t level. This was attributable to the growing metal deficit, particularly in the US, EU and continued slow production growth in China, coupled with strong growth in global manufacturing activity. Global reported aluminum inventories fell to 4.975 million tons in September, the lowest since January 2009, and to 29.9 days of consumption - significantly below than pre-crisis level in August 2009 at 76.0 days of consumption, making aluminium the best positioned amongst base metals.

Aluminum premiums in the key consuming regions started to improve by the end of Q316, they were supported by strong demand during the summer period and improved metal financing conditions.

Average monthly cash — the 3M spread returned to stable contango in September-October. However, growth of the 3M Libor interbank rate and a number of sections with backwardation along the LME forward curve significantly deteriorated the profitability of cash-carry trades.

The LME introduced a queue-based rent capping (QBRC) warehousing rule on 1st May to remove the revenue incentive for warehouses to generate delivery queues. This meant that by the end of July only the LME warehouses in Vlissingen had a queue length of over 50 days. At the same time the Vlissingen warehouse stocks reduced to 548,550 tonnes at the end of September, enabling a reduction in load-out rate from 2,447 t/day at the beginning of 2016 to 1,573 t/day.

Business review

Aluminium production

• Aluminium production in 3Q16 totaled 920 thousand tons (flat QoQ), with Siberian smelters representing 94% of total aluminium output. Smelters utilization remained on average at a high of 94%.

• 3Q16 aluminium sales increased by 2.4% QoQ to 981 thousand tons. The value added products (VAP) sales increased marginally (+0.5% QoQ), totaling 446 thousand tons.

• In 3Q16 the average aluminium realized price increased by 2.5% QoQ to USD1,754/ton largely driven by the LME QP component growth from USD1,550/ton in 2Q16 to USD1,604/ton in 3Q16. The realized premium decreased from USD162/ton to USD150/ton amid lower average commodity premium and higher volumes of commodity grades sales (including purchased volumes).

• 9M16 aluminium production totaled 2,755 thousand tons (+1.1% YoY).

• 9M16 aluminium sales volumes increased to 2,896 thousand tons (+4.9% YoY) largely due to the additional volumes of the Boguchansky smelter, where the plant is currently operating in test mode. The average realized price in 9M16 was USD1,711/t (-18.0% YoY). The average price reduction is explained by the structurally different market environment in the 9M 2015 versus 9M 2016 and therefore lower aluminium LME prices and premiums YoY.

Alumina production

• In 3Q16, total alumina production remained flat QoQ, totaling 1,865 thousand tons. Russian operations represented 36% of the total output, totaling 665 thousand tons.

• 9M16 alumina output totaled 5,589 thousand tons (+1.7% YoY). The production increase largely came from the Russian operations performance where output increased 3.9% YoY, amid higher utilization rates.

Bauxite production

• In 3Q16, bauxite output totaled 3,211 thousand tons (+2.7% QoQ). The increase came largely from Russian bauxite mining assets performance at North Urals and Timan where subtotal output increased by 8.9% QoQ. Bauxite Company of Guyana production also increased in 3Q16 by 15.1% QoQ, amid completion of scheduled repairs that largely impacted previous quarter volumes. The rest of the bauxite operations showed a negative performance that was largely explained by the current production plan and scheduled repairs. The Alpart asset is currently under review ahead of completion of the disposal transaction and as such the operations are currently postponed.

Nepheline ore production decreased by 6.1% QoQ to 1,135 thousand tons amid planned repairs at the facility.

• In 9M16, bauxite output totaled 9,346 thousand tons (+0.9% YoY). Nepheline ore output increased 9.3% YoY to 3,454 thousand tons.

Financial Overview

Revenue

	Three months ended 30 September		Change quarter on quarter, % (3Q to 3Q)	Three months ended 30 June	Change quarter on quarter, % (3Q to 2Q)	Nine months ended 30 September		Change nine months on nine months, %
	2016	2015		2016		2016	2015
	(unaudited)	(unaudited)		(unaudited)		(unaudited)	(unaudited)
Sales of primary aluminium and alloys
USD million	1,721	1,731	(0.6%)	1,640	4.9%	4,955	5,763	(14.0%)
Kt	981	939	4.5%	958	2.4%	2,896	2,762	4.9%
Average sales price (USD/t)	1,754	1,843	(4.8%)	1,712	2.5%	1,711	2,087	(18.0%)
Sales of alumina
USD million	157	147	6.8%	151	4.0%	458	451	1.6%
Kt	566	418	35.4%	525	7.8%	1,697	1,237	37.2%
Average sales price (USD/t)	277	352	(21.3%)	288	(3.8%)	270	365	(26.0%)
Sales of foil (USD million)	62	65	(4.6%)	62	0.0%	175	207	(15.5%)
Other revenue (USD million)	120	130	(7.7%)	129	(7.0%)	368	402	(8.5%)
	－－－－－－－	－－－－－－－		－－－－－－－		－－－－－－－	－－－－－－－
Total revenue (USD million)	2,060	2,073	(0.6%)	1,982	3.9%	5,956	6,823	(12.7%)
	=============	=============		=============		=============	=============

Total revenue decreased by USD867 million, or 12.7% to USD5,956 million in the nine months ended 30 September of 2016, from USD6,823 million in the corresponding period of 2015. The decrease in total revenue was primarily due to the lower sales of primary aluminium and alloys, which accounted for 83.2% and 84.5% of UC RUSAL’s revenue for the nine months ended 30 September of 2016 and 2015, respectively.

Revenue from sales of primary aluminium and alloys decreased by USD808 million, or 14.0% to USD4,955 million in the nine months ended 30 September of 2016, from USD5,763 million for the corresponding period in 2015, primarily due to a 18.0% decrease in the weighted-average realized aluminium price per tonne driven by a decrease in the LME aluminium price (to an average of USD1,569 per tonne in the first nine months of 2016 from USD1,719 per tonne in the same period of 2015), as well as a decrease in premiums above the LME prices in the different geographical segments (to an average of USD161 per tonne from USD313 per tonne in the first nine months of 2016 and 2015, respectively) partially offset by 4.9% increase in the sales volume.

The Company’s revenue from sales of primary aluminium and alloys increased by 4.9% to USD1,721 million in the third quarter of 2016 from USD1,640 million in the second quarter of 2016. This growth resulted primarily from a 2.5% increase in the weighted average realised aluminium price per tonne, which was driven by an increase in the LME aluminium price (to an average of USD1,621 per tonne in the third quarter of 2016 from USD1,571 per tonne in the second quarter of 2016) and 2.4% increase in the sales volume.

Revenue from sales of alumina was almost flat during the nine months of 2016 and the same period of 2015 as 37.2% increase in sales volume was compensated by 26.0% decrease in the average sales price.

Revenue from sales of foil decreased by USD32 million, or by 15.5%, to USD175 million in the nine months ended 30 September of 2016, as compared to USD207 million for the corresponding period of 2015 as a result of a 7.9% decrease in the weighted average sales price and 8.2% decrease in sales volumes.

Revenue from other sales, including sales of bauxite and energy services decreased by 8.5% to USD368 million for the nine months ended 30 September of 2016 from USD402 million in the same period of 2015, due to a 20.7% decrease in sales of other materials.

Cost of sales

The following table demonstrates the breakdown of UC RUSAL’s cost of sales for the nine months ended 30 September 2016 and 2015:

	Nine months ended 30 September		Change, %	Share of costs, %
	2016	2015
	(unaudited)	(unaudited)
(USD million)
Cost of alumina	579	557	3.9%	12.6%
Cost of bauxite	331	418	(20.8%)	7.2%
Cost of other raw materials and other costs	1,556	1,735	(10.3%)	33.9%
Purchases of primary aluminium from JV	170	5	3,300.0%	3.7%
Energy costs	1,194	1,306	(8.6%)	26.0%
Depreciation and amortisation	326	323	0.9%	7.1%
Personnel expenses	392	386	1.6%	8.5%
Repairs and maintenance	45	43	4.7%	1.0%
Net change in provisions for inventories	—	15	(100.0%)	0.0%
	－－－－－－－	－－－－－－－		－－－－－－－
Total cost of sales	4,593	4,788	(4.1%)	100.0%
	=============	=============		=============

Total cost of sales decreased by USD195 million, or 4.1%, to USD4,593 million for the nine months of 2016, as compared to USD4,788 million for the corresponding period in 2015. The decrease was primarily driven the continuing depreciation of the Russian Ruble and the Ukrainian Hryvnia against the US dollar by 15.3% and 19.1%, respectively, between the reporting periods, which was partially offset by the increase in volumes of primary aluminium and alloys sold.

Cost of alumina increased by USD22 million, or 3.9% to USD579 million for the reporting period, as compared to USD557 million for the same period of 2015. The increase was primarily driven by the growth in the aggregate volumes of aluminium sold for 4.9% (or 134 thousand tonnes).

Cost of bauxite decreased by 20.8% in the nine months of 2016 as compared to the same period of prior year, primarily as a result of a decrease in purchase price.

Cost of raw materials (other than alumina and bauxite) and other costs decreased by 10.3% in the nine months of 2016 compared to the same period of the previous year due to a lower raw materials purchase price (such as raw petroleum coke by 24.1%, calcined petroleum coke by 20.0% and raw pitch coke by 12.3%).

Energy cost decreased by 8.6% in the nine months of 2016 compared to the same period of 2015, primarily due to the continuing depreciation of the Russian Ruble against the US dollar and 9.0% decrease in the average electricity tariff.

Gross profit

As a result of the foregoing factors, UC RUSAL reports a gross profit of USD1,363 million for the nine months ended 30 September 2016 as compared with USD2,035 million for the same period of 2015, representing gross margins over the periods of 22.9% and 29.8%, respectively.

Adjusted EBITDA and Results from operating activities

	Nine months ended 30 September		Change nine months on nine months, %
	2016	2015
(USD million)	(unaudited)	(unaudited)
Reconciliation of Adjusted EBITDA
Results from operating activities	624	1,285	(51.4%)
Add:
Amortisation and depreciation	349	340	2.6%
Impairment of non-current assets	101	77	31.2%
Loss on disposal of property, plant and equipment	3	7	(57.1%)
	－－－－－－－	－－－－－－－
Adjusted EBITDA	1,077	1,709	(37.0%)
	=============	=============

Adjusted EBITDA, defined as results from operating activities adjusted for amortisation and depreciation, impairment charges and loss on disposal of property, plant and equipment, decreased to USD1,077 million during the nine months ended 30 September of 2016, as compared to USD1,709 million for the corresponding period of 2015. The factors that contributed to the decrease in Adjusted EBITDA margin were the same that influenced the operating results of the Company.

Adjusted EBITDA increased by 22.4% to USD421 million in the third quarter of 2016 from USD344 million in the second quarter of 2016 and remained practically flat as compared to USD420 million in the third quarter of 2015.

Adjusted EBITDA margin improved to 20.4% in the third quarter of 2016 from 17.4% in the second quarter of 2016 and from 20.3% in the third quarter of 2015.

Results from operating activities decreased in the nine months ended 30 September of 2016 by 51.4% to USD624 million, as compared to USD1,285 million for the corresponding period of 2015, representing operating margins of 10.5% and 18.8%, respectively.

Finance income and expenses

	Nine months ended 30 September		Change, year-on-year
	2016	2015
(USD million)	(unaudited)	(unaudited)
Finance income
Interest income on third party loans and deposits	16	24	(33.3%)
Interest income on loans to related party — companies under common control	1	2	(50.0%)
	－－－－－－－	－－－－－－－
	17	26	(34.6%)
	=============	=============
Finance expenses
Interest expense on bank loans and company loans, bonds and other bank charges, including	(446)	(485)	(8.0%)
Interest expense	(398)	(441)	(9.8%)
Bank charges	(48)	(44)	9.1%
Interest expense on provisions	(6)	(10)	(40.0%)
Net foreign exchange loss	(130)	(172)	(24.4%)
Change in fair value of derivative financial instruments, including	(133)	(301)	(55.8%)
Change in fair value of embedded derivatives	(79)	18	NA
Change in other derivatives instruments	(54)	(319)	(83.1%)
	－－－－－－－	－－－－－－－
	(715)	(968)	(26.1%)
	=============	=============

Finance income decreased by USD9 million, or 34.6% to USD17 million in the nine months of 2016 compared to USD26 million for the same period of 2015 due to the lower interest income on time deposit at several subsidiaries of the Group.

Finance expenses decrease by USD253 million or 26.1% to USD715 million for the nine months of 2016 from USD968 million for the same period of 2015 primarily due to a decrease in interest expenses, the foreign exchange loss and the net loss from the change in fair value of derivative financial instruments, slightly offset by an increase in bank charges.

Interest expenses on bank and company loans for the nine months of 2016 dropped by USD39 million to USD446 million from USD485 million for the nine months of 2015 due to the reduction of the principal amount payable to international and Russian lenders and an overall interest margin between the periods.

The decrease of the net foreign exchange loss to USD130 million for the nine months of 2016 from USD172 million for the same period of 2015 was driven by the revaluation of working capital items of several Group companies denominated in foreign currencies.

The net loss from the change in fair value of derivative financial instruments decreased to USD133 million for the nine months of 2016 from USD301 million for the same period of 2015 as a result of the Russian Ruble’s significant depreciation against the US dollar which led to the revaluation of certain cross-currency instruments.

Share of profits of associates and joint ventures

	Nine months ended 30 September		Change, year-on-year
	2016	2015
(USD million)	(unaudited)	(unaudited)
Share of profits of Norilsk Nickel, with Effective shareholding of	516 28.05%	561 28.02%	(8.0%)
Share of profits/(losses) of other associates	1	(8)	NA
	－－－－－－－	－－－－－－－
Share of profits of associates	517	553	(6.5%)
	=============	=============
Share of profits of joint ventures	138	7	1,871.4%
	=============	=============

Share of profits of associates was USD517 million in the nine months ended 30 September 2016 and USD553 million for the corresponding period in 2015. This was resulted primarily from the Company’s investment in Norilsk Nickel, which amounted to profit of USD516 million and USD561 million for the nine months ended 30 September 2016 and 2015, respectively.

As stated in Note 10 to the consolidated interim condensed financial information for the three- and nine-month periods ended 30 September 2016, at the date of this consolidated interim condensed financial information, the Group was unable to obtain consolidated interim financial information of Norilsk Nickel as at and for the three- and nine-month periods ended 30 September 2016. Consequently, the Group estimated its share in the profits, other comprehensive income and foreign currency translation reserve of Norilsk Nickel for the three- and nine-month periods ended 30 September 2016 based on publicly available information reported by Norilsk Nickel. The information used as a basis for these estimates is incomplete in many aspects. Once the consolidated interim financial information for Norilsk Nickel becomes available, they will be compared to the management´s estimates. If there are significant differences, adjustments may be required to restate the Group´s share in profit, other comprehensive income, foreign currency translation reserve and the carrying value of the investment in Norilsk Nickel reported in the consolidated interim condensed financial information.

The market value of the investment in Norilsk Nickel at 30 September 2016 was USD6,840 million as compared to USD5,542 million as at 31 December 2015.

Share of profits of joint ventures was USD138 million in the nine months of 2016 compared to a profit of USD7 million for the same period in 2015. This represents the Company’s share of profits in joint ventures, namely BEMO, LLP Bogatyr Komir and Mega Business and Alliance (transportation business in Kazakhstan).

Net Profit for the period

The Company recorded a net profit of USD273 million in the third quarter of 2016 as compared to a loss of USD54 million in the third quarter of 2015 and up 102.2% from USD135 million in the second quarter of 2016. Net Profit for the nine months ended 30 September 2016 amounted to USD534 million, as compared to USD825 million for the same period of 2015.

Adjusted and Recurring Net Profit

	Three months ended 30 September		Change quarter-on - quarter, % (3Q to 3Q)	Three months ended 30 June	Change quarter on quarter, % (3Q to 2Q)	Nine months ended 30 September		Change, year-on- year
	2016	2015		2016		2016	2015
(USD million)	unaudited	unaudited		unaudited		unaudited	unaudited
Reconciliation of Adjusted Net Profit/(Loss)
Net profit/(loss) for the period	273	(54)	NA	135	102.2%	534	825	(35.3%)
Adjusted for:
Share of profits and other gains and losses attributable to Norilsk Nickel, net of tax effect, with	(146)	(106)	37.3%	(236)	(38.1%)	(504)	(521)	(3.3%)
Share of profits, net of tax	(146)	(106)	37.3%	(236)	(38.1%)	(504)	(521)	(3.3%)
Change in the fair value of derivative financial liabilities, net of tax (20%)	8	236	(96.6%)	105	(92.4%)	117	310	(62.3%)
Foreign currency gain recycling from other comprehensive income on deconsolidated subsidiary	—	60	(100.0%)	—	0.0%	—	(95)	(100.0%)
Impairment of non-current assets, net of tax	46	45	2.2%	36	27.8%	101	77	31.2%
Net impairment of underlying net assets of joint ventures	—	—	N/A	—	N/A	—	20	(100.0%)
	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－
Adjusted Net Profit	181	181	0.0%	40	352.5%	248	616	(59.7%)
	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－
Add back:
Share of profits of Norilsk Nickel, net of tax	146	106	37.7%	236	(38.1%)	504	521	(3.3%)
	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－
Recurring Net Profit	327	287	13.9%	276	18.5%	752	1,137	(33.9%)
	=============	=============	=============	=============	=============	=============	=============	=============

Adjusted Net Profit for any period is defined as the net profit adjusted for the net effect of the Company’s investment in Norilsk Nickel, the net effect of derivative financial instruments and the net effect of non-current assets impairment. Recurring Net Profit for any period is defined as Adjusted Net Profit plus the Company’s net effective share in Norilsk Nickel results.

Segment reporting

The Group has four reportable segments, which are the Group’s strategic business units: Aluminium, Alumina, Energy, Mining and Metals. These business units are managed separately and results of their operations are reviewed by the CEO on a regular basis.

The core segments are Aluminium and Alumina.

	Nine months ended 30 September
	2016		2015
	Aluminium	Alumina	Aluminium	Alumina
(USD million)	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Segment revenue
kt	2,948	6,128	2,847	5,040
USD million	5,021	1,531	5,882	1,596
Segment result	815	3	1,424	179
Segment EBITDA^8	1,099	65	1,699	238
Segment EBITDA margin	21.9%	4.2%	28.9%	14.9%
	－－－－－－－	－－－－－－－	－－－－－－－	－－－－－－－
Total capital expenditure	228	98	206	107
	=============	=============	=============	=============

The segment result margin (calculated as a percentage of segment profit to total segment revenue per respective segment) from continuing operations decreased to 16.2% in the nine months ended 30 September 2016 from 24.2% in the same period in 2015 for the aluminium segment, and was 0.2% compared to 11.2%, respectively, for the alumina segment. Key drivers for the increase in margins in the aluminium segment are disclosed in “Revenue”, “Cost of sales” and “Adjusted EBITDA and Results from operating activities” sections above. Detailed segment reporting can be found in the consolidated interim condensed financial information as at and for the three- and nine-month periods ended 30 September 2016.

⁸ Segment EBITDA for any period is defined as segment result adjusted for amortisation and depreciation for the segment.

Capital expenditure

UC RUSAL recorded total capital expenditures of USD407 million for the nine months ended 30 September 2016. UC RUSAL’s capital expenditure for the nine months of 2016 was primarily due to maintaining existing production facilities.

	Nine months ended 30 September
	2016	2015
(USD million)	(unaudited)	(unaudited)
Development capex	113	97
Maintenance
Pot rebuilds costs	65	82
Re-equipment	229	183
	－－－－－－－	－－－－－－－
Total capital expenditure	407	362
	=============	=============

The BEMO project companies utilise the project financing proceeds to make necessary contributions to the ongoing construction projects and do not require contributions from the joint ventures partners at this time.

Auditors’ conclusion on the review of consolidated interim condensed financial information

The Company notes that its auditor, JSC KPMG, has provided a qualified conclusion in its review of the unaudited consolidated interim condensed financial information of the Company for the three and nine months ended 30 September 2016 as it was unable to obtain and review the consolidated interim financial information of Norilsk Nickel. An extract from the review report provided by JSC KPMG on the consolidated interim condensed financial information of the Company dated 10 November 2016 is as follows:

”Basis for Qualified Conclusion

We were unable to obtain and review consolidated interim financial information of the Group’s equity investee, PJSC MMC Norilsk Nickel (“Norilsk Nickel”), supporting the Group’s estimate of the share of profit of USD146 million and USD516 million for the three- and nine-month periods ended 30 September 2016 and USD117 million and USD561 million for the three- and nine-month periods ended 30 September 2015, respectively, other comprehensive income of USD nil million for both the three- and nine-month periods ended 30 September 2016 and USD20 million and USD21 million for the three- and nine-month periods ended 30 September 2015, respectively, the foreign currency translation gain in relation to that investee of USD16 million and USD444 million for the three- and nine-month periods ended 30 September 2016 and loss of USD1,412 million and USD1,192 million for the three- and nine-month periods ended 30 September 2015, respectively, and the carrying value of the Group’s investment in the investee stated at USD3,580 million as at 30 September 2016 and USD2,729 million as at 30 September 2015. Had we been able to complete our review procedures in respect of interests in associates, matters might have come to our attention indicating that adjustments might be necessary to this consolidated interim condensed financial information.

Qualified Conclusion

Based on our review, except for the possible effects of the matter described in the Basis for Qualified Conclusion paragraph, nothing has come to our attention that causes us to believe that the consolidated interim condensed financial information as at 30 September 2016 and for the three- and nine-month periods then ended is not prepared, in all material respects, in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting.”

Consolidated interim condensed financial information

The unaudited consolidated interim condensed financial information of UC RUSAL for the three and nine months ended 30 September 2016 was approved by the Directors of UC RUSAL on 10 November 2016, and reviewed by the Audit Committee (the “Audit Committee”). It has also been filed with the French Autorité des marchés financiers on the date hereof and is accessible on UC RUSAL’s website at http://www.rusal.ru/en/investors/financial_stat.aspx.

Audit Committee

The Board established the Audit Committee to assist it in providing an independent view of the effectiveness of the Company’s financial reporting process, internal control and risk management systems and to oversee the audit process. The Audit Committee consists of a majority of independent non-executive Directors. The members are as follows: Mr. Bernard Zonneveld (chairman of the committee, independent non-executive Director); Mr. Philip Lader (independent non-executive Director); Dr. Elsie Leung Oi-sie (independent non-executive Director); Mr. Dmitry Vasiliev (independent non-executive Director); Mr. Daniel Lesin Wolfe (non-executive Director); Ms. Olga Mashkovskaya (non-executive Director).

On 10 November 2016, the Audit Committee has reviewed the financial results of the Company for the nine months ended 30 September 2016.

Material events over the third quarter of 2016 and since the end of that period

The following is a summary of the key events that have taken place over the third quarter of 2016 and since the end of that period. All information regarding key events that has been made public by the Company for the three months ended 30 September 2016 and since the end of that period pursuant to legislative or regulatory requirements, including announcements and press releases, is available on the Company’s website (www.rusal.com).

30 September 2016	RUSAL declared interim dividend
07 October 2016	RUSAL was assigned a corporate family rating (“CFR”) of Ba3 and probability of default rating (“PDR”) of Ba3-PD by Moody’s. The outlook on the ratings is stable and is the first RUSAL has been assigned
26 October 2016	RUSAL published inside information update on interim dividend
27 October 2016	RUSAL announced the launch of the first RA-550 pot of new generation running at over 550 kA at the Sayanogorsk aluminium smelter as part of a USD 28 mln project

Compliance

Pursuant to Article L.451-1-2 IV of the French Code monétaire et financier, the Company is required to publish quarterly financial information for the first and third quarters of the financial year.

The Directors confirm that the information contained in this announcement does not contain any false statements, misleading representations or material omissions, and all of them jointly and severally accept responsibility as to the truthfulness, accuracy and completeness of the content of this announcement.

Forward-looking statements

This announcement contains statements about future events, projections, forecasts and expectations that are forward-looking statements. Any statement in this announcement that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risk and uncertainties include those discussed or identified in the prospectus for UC RUSAL. In addition, past performance of UC RUSAL cannot be relied on as a guide to future performance. UC RUSAL makes no representation on the accuracy and completeness of any of the forward-looking statements, and, except as may be required by applicable law, assumes no obligations to supplement, amend, update or revise any such statements or any opinion expressed to reflect actual results, changes in assumptions or in UC RUSAL’s expectations, or changes in factors affecting these statements. Accordingly, any reliance you place on such forward-looking statements will be at your sole risk.

By Order of the board of directors of United Company RUSAL Plc Vladislav Soloviev Director

11 November 2016

As at the date of this announcement, the executive Directors are Mr. Oleg Deripaska, Mr. Vladislav Soloviev and Mr. Siegfried Wolf, the non-executive Directors are Mr. Maxim Sokov, Mr. Dmitry Afanasiev, Mr. Ivan Glasenberg, Mr. Maksim Goldman, Ms. Gulzhan Moldazhanova, Mr. Daniel Lesin Wolfe, Ms. Olga Mashkovskaya and Ms. Ekaterina Nikitina, and the independent non-executive Directors are Mr. Matthias Warnig (Chairman), Mr.Philip Lader, Dr. Elsie Leung Oi-sie, Mr. Mark Garber, Mr. Bernard Zonneveld and Mr. Dmitry Vasiliev.

All announcements and press releases published by the Company are available on its website under the links http://www.rusal.ru/en/investors/info.aspx, http://rusal.ru/investors/info/moex/ and http://www.rusal.ru/en/press-center/press-releases.aspx, respectively.