United Company RUSAL Plc: First Quarter 2017 Trading Update

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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)

FIRST QUARTER 2017 TRADING UPDATE

This announcement is made by United Company RUSAL Plc (“UC RUSAL” or the “Company”) pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and applicable French laws and regulations.

Shareholders and potential investors are advised to exercise caution when dealing in the securities of UC RUSAL.

UC RUSAL announces its operating results for the first quarter (“1Q17”) 20171.

Aluminium

  • Aluminium production2 in 1Q17 totaled 910 thousand tonnes (-2.1% QoQ), with Siberian smelters representing 94% of total aluminium output. The total production dynamics is largely explained by the number of calendar days in the periods (92 days in 4Q16 and 90 days in 1Q17). Smelters utilization remained on average at a high of 95%.
  • In 1Q17 aluminium sales totaled 985 thousand tonnes (+6.8% QoQ), including value added product (VAP3) sales of 436 thousand tonnes (+7.8% QoQ). The increased level of inventories in 4Q16 which were subsequently sold out in 1Q17 was largely behind the QoQ total sales dynamics.
  • In 1Q17 the average aluminium realized price4 increased by 8.3% QoQ to USD1,949/t. The increase was driven by positive dynamics in London Metal Exchange (“LME”) QP5 component (+9.0% QoQ to USD1,796/t) and average realized premium component growth (+1.4% QoQ to USD153/t).

Alumina

  • In 1Q17, total alumina production declined by 2.6% QoQ, totaling 1,889 thousand tonnes. Russian operations accounted for 37% of total output. Production volumes at refineries were largely in line with production plans. Seasonal repair works performed at Windalco, Auginish and Bogoslovsk were offset by production performance at Achinsk and Urals.
  • Capacity upgrades which were completed at Nikolaev and Urals refineries were largely behind the YoY production increase at refineries in 1Q17.

Bauxite and nepheline ore

  • In 1Q17, bauxite output totaled 2,869 thousand tonnes (+1.0% QoQ). Nepheline output increased by 7.9% QoQ to 1,056 thousand tonnes. Production volumes at Timan and Kia Shaltyr (nepheline ore6) increased by 8.0% and 7.9% QoQ to meet the production plan needs of the Urals and Achinsk alumina refineries, respectively. North Urals production volumes were also driven by the performance of Bogoslovsk refinery. Kindia production in 1Q17 remained below the historic average but according to mining works schedule we anticipate the volumes to improve in 2H17. Bauxite Company of Guyana production increased by 13.2% QoQ, which is largely explained by a low base effect.

Market overview7

  • The world economy witnessed a broader based growth in 1Q17, with an increase in business activity, particularly in the advanced economies. Consumer spending particularly for cars, durable goods sales and fixed asset investments continue to be the main driver for metal demand.
  • In the Eurozone, household spendings increased, unemployment fell, consumer confidence grew and interest rates remained low. Fixed asset investments in the US are expected to grow by 3.5% in 2017 YoY, boosted by the possibility of approval of USD1 trillion investment plan. Japanese industrial production continues to rise and exports are expected to grow by 4.5% in 2017 YoY boosted by the strong demand in the neighbouring Chinese economy.
  • The Chinese economy showed strong growth at the beginning of the year. The official PMI reached 51.8 in March 2017, while industrial production grew 7.6% in March YoY and GDP in 1Q17 went up 6.9% YoY vs 6.8% estimated growth.
  • The LME aluminium price reached its highest level of USD1,955/t in March 2017 and has, on average remained stable above USD1,900/t in 1Q17. This was attributable to a growing global metal deficit driven by the US, EU and the expectation of supply disruptions in China coupled with significant production cost inflation.
  • Aluminum premiums in key consuming regions continued to improve in 1Q17 with, on average, a 27.8% rise compared to 4Q16. This was due to strong demand and a reduced supply in key regions after various smelting capacity reduction/closures (North America, Australia).
  • The ROW (rest of the world) reported that inventories have approached to pre-crisis levels of 3.6 mn tonnes in March 2017 and the days of consumption decreased to 46 days from 110 days in 2014-15 and continue to decline at rapid pace.
  • Based on CRU estimates, aluminium demand excluding China rose by a strong 3.4% in 1Q17 YoY to 7.1 mn tonnes while production (including eight non-reporting countries) increased by 1.2% YoY to 6.7 mn tonnes, leaving the ROW aluminium market with approximately 0.4 mn tonnes deficit in 1Q17.
  • According to the CNIA’s production figures, in 1Q17 China`s primary aluminum production rose 14.2% Y-Y to 8.191 Mt. However, the annualized production fell in February by 4.9% MoM and in March by 3.5% MoM, which may witness the beginning of supply matching process in line with China’s policy to strictly control overproduction
  • In terms of additional regulatory measures on April 12, 2017, a joint regulation was issued by the NDRC, MIIT, Ministry of lands and resources, MEP “On the word to streamline the situation with illegal projects in the primary aluminium industry”. The preamble of the regulation states the necessity to take measures to standardize investment in the construction of aluminium projects and to strictly control overproduction. The government of Changji country (Xinjang) subsequently issued a notice that the construction of three aluminium smelters with total capacity of 2 mn tonnes per annum is illegal and should be suspended immediately. Other projects and capacities are potentially under risk of termination.
  • In addition, a significant aluminium cost push in China by more than 40% in 1Q17 and continued cost pressure mainly in carbon raw materials prices brought in a significant impact on high cost non-integrated Chinese smelters operating on thin margins or losses.

KEY OPERATING DATA

GROUP PRODUCTION DATA8

                   
(‘000 tonnes) 1Q17 4Q16 Change, % (QoQ) 1Q16 Change, % (YoY)
 

Aluminium
utilisation rate

910

95%

930

95%

-2.1% 916

95%

-0.6%

Aluminium foil
and packaging
products

23.1 22.5 2.8% 18.8 22.9%
 
Alumina 1,889 1,939 -2.6% 1,873 0.4%
 
Bauxite 2,869 2,841 1.0% 3,009 -4.6%
Nepheline 1,056 978 7.9% 1,111 -5.0%
 

GROUP SALES DATA

                   
(‘000 tonnes) 1Q17 4Q16 Change, % (QoQ) 1Q16 Change, % (YoY)
 

Aluminium sales
including

985 922 6.8% 957 2.9%

BOAZ aluminium
product sales

33 31 6.0% 38 -14.2%

other third party
aluminium
products sales

46 39 18.5% 5
 
VAP sales

(included in the
total aluminium
sales)

436 405 7.7% 390 11.7%

Realized price,
USD/ton

1,949 1,799 8.3% 1,666 17.0%
 

ALUMINIUM PRODUCTION

                       
(‘000 tonnes) Interest 1Q17 4Q16

Change, %
(QoQ)

1Q16

Change, %
(YoY)

 
Russia (Siberia)

Bratsk
aluminium
smelter

100% 248 254 -2.2% 251 -1.1%

Krasnoyarsk
aluminium
smelter

100% 253 257 -1.4% 256 -1.0%

Sayanogorsk
aluminium
smelter

100% 131 135 -3.3% 130 0.3%

Novokuznetsk
aluminium
smelter

100% 53 54 -1.1% 53 0.0%

Irkutsk
aluminium
smelter

100% 103 105 -1.7% 103 0.3%

Khakas
aluminium
smelter

100% 72 74 -2.4% 73 -1.7%
 

Russia —
Other

Nadvoitsy
aluminium
smelter

100% 3 3 -2.1% 3 -8.6%

Kandalaksha
aluminium
smelter

100% 18 18 -0.2% 17 5.2%
 
Sweden

Kubikenborg
Aluminium
(KUBAL)9

100% 30 31 -4.0% 30 -2.1%
 

Total
production

910 930 -2.1% 916 -0.6%

Remelting of
third-party
primary
aluminium at
Volgograd
smelter

6 9 -33.6% 12 -50.8%

Total
aluminium
products
output
including
remelting10

916 939 -2.4% 928 -1.3%
 

Foil and packaging production results

                       
(‘000 tonnes) Interest 1Q17 4Q16

Change, %
(QoQ)

1Q16

Change, %
(YoY)

 
Russia
Sayanal 100% 9.0 9.2 -2.1% 6.9 31.0%
Ural Foil 100% 5.9 5.3 11.8% 3.9 53.0%
Sayana Foil 100% 0.8 1.1 -26.8% 0.8 -3.7%
 
Armenia
Armenal 100% 7.4 6.9 7.2% 7.2 2.1%
 
Total production 23.1 22.5 2.8% 18.8 22.9%
 

Other aluminium products output and silicon output

                   
(‘000 tonnes) 1Q17 4Q16 Change, % (QoQ) 1Q16 Change, % (YoY)
 
Secondary alloys 7.2 6.3 13.9% 5.6 29.2%
Silicon 14.3 15.5 -7.6% 15.2 -6.2%
Powder 4.6 4.3 9.2% 4.0 15.9%
 

ALUMINA PRODUCTION

                       
(‘000 tonnes) Interest 1Q17 4Q16

Change, %
(QoQ)

1Q16

Change, %
(YoY)

 
Ireland

Aughinish
Alumina

100% 471 509 -7.5% 488 -3.4%
 
Jamaica
Alpart11 100%
Windalco 100% 146 155 -6.0% 154 -5.0%
 
Ukraine

Nikolaev
Alumina
Refinery

100% 397 407 -2.4% 370 7.4%
 
Italy
Eurallumina 100%
 
Russia

Bogoslovsk
Alumina
Refinery

100% 234 250 -6.0% 235 -0.3%

Achinsk
Alumina
Refinery

100% 243 214 13.5% 244 -0.4%

Urals Alumina
Refinery

100% 209 205 2.1% 197 6.2%

Boxitogorsk
Alumina
Refinery

100%
 
Guinea

Friguia
Alumina
Refinery

100%
 
Australia (JV)

Queensland
Alumina Ltd
(20%)

20% 187 198 -5.2% 184 -1.6%
 

Total alumina
production

1,889 1,939 -2.6% 1,873 0.9%
 

BAUXITE MINING

                       
(‘000 tonnes wet) Interest 1Q17 4Q16

Change, %
(QoQ)

1Q16

Change, %
(YoY)

 
Jamaica
Alpart 100% 44
Windalco 100% 503 510 -1.3% 488 3.1%
 
Russia
North Urals 100% 589 607 -3.0% 551 7.0%
Timan 100% 723 669 8.0% 683 5.7%
 
Guinea
Friguia 100%
Kindia 100% 771 805 -4.1% 925 -16.6%
 
Guyana

Bauxite
Company of
Guyana Inc

90% 283 250 13.2% 319 -11.1%
 

Total bauxite
production

2,869 2,841 1.0% 3,009 -4.6%
 

Nepheline ore production12

                       

(‘000 tonnes
wet)

Interest 1Q17 4Q16

Change, %
(QoQ)

1Q16

Change, %
(YoY)

 

Kiya Shaltyr
Nepheline
Syenite

100% 1,056 978 7.9% 1,111 -5.0%
 

JOINT VENTURE OPERATING RESULTS

                       
1Q17 4Q16

Change, %
(QoQ)

1Q16

Change, %
(YoY)

 

Boguchanskaya
HPP13

Electricity
generation,
mwh

50% 3,176 3,452 -8.0% 3,127 1.6%
 

Boguchansky
aluminium
smelter14

Aluminium
production
(´000 tonnes)

50% 37 37 -1.5% 38 -2.5%
 

Bogatyr
Komir and
Bogatyr Trans

Coal
production
(50%) (Kt)

50% 5,071 6,023 -15.8% 4,465 13.6%

Transportation
volumes (50%)
(Kt of
transportation)

50% 1,571 1,663 -5.5% 1,516 3.6%
 
  By order of the Board of Directors of
United Company RUSAL Plc
Aby Wong Po Ying
Company Secretary

24 April 2017

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, Ms. Ekaterina Nikitina and Mr. Marco Musetti, and the independent non-executive Directors are Mr. Matthias Warnig (Chairman), Mr. Philip Lader, Dr. Elsie Leung Oi-sie, Mr. Mark Garber, Mr. Dmitry Vasiliev and Mr. Bernard Zonneveld.

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.

1 Operating data is based on preliminary data and may be updated in the 1Q17 financial results.
2 Aluminium production represented by salable products output (the number includes all facilities excluding Volgograd remelting).
3 VAP includes alloyed ingots, slabs, billets. wire rod and high, super, medium purity aluminium. The VAP sales for 1Q16 were updated as a result of addition of high, super, medium purity aluminium volumes.
4 The realised price includes three components: LME component, commodity premium and VAP upcharge.
5 QP (quotation period) prices differs from the real time LME quotes due to a time lag between LME quotes and sales recognition and due to contract formula speciality.
6 Kiya Shaltyr Nepheline ore is used as a feedstock for alumina production at Achinsk alumina refinery.
7 Unless otherwise stated data for the “Market overview” section is sourced from Bloomberg, CRU, CNIA, IAI and Antaike.
8 Unless stated otherwise the production data throughout the report is presented on equity-adjusted basis (for exceptions please refer to the data of the Boguchansky smelter and Boguchanskaya HPP). Production volumes are calculated based on the pro rata share of the Company´s (and its subsidiaries´) ownership.
9 Does not include remelting of the metal from other UC RUSAL smelters
10 Here and further “total production” may not be equal to the arithmetic addition of the numbers above presented in the table. The differences arise due to the rounding of exact numbers (including decimals).
11 The Alpart was sold to an external party (see UC RUSAL’s announcement dated 19 July 2016). The results of Alpart are excluded from UC RUSAL Consolidated Financial
12 Nepheline ore used as a feedstock for alumina production at the Achinsk alumina refinery.
13 Boguchanskaya HPP data is represented by 100% of energy generated (not on an ownership pro rata basis).
14 Boguchansky aluminium smelter data is represented by 100% of volumes produced (not on an ownership pro rata basis).

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United Company RUSAL Plc

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United Company RUSAL Plc