United Company RUSAL Plc: Fourth Quarter and Full Year 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)

FOURTH QUARTER AND FULL YEAR 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 fourth quarter of 2017 (“4Q17”)1 and for the 12 months ended 31 December 2017 (“12M17”).

Aluminium

Aluminium production2 in 4Q17 totaled 944 thousand tonnes (+1.4% quarter-on-quarter (“QoQ”)), with Siberian smelters representing 94% of total aluminium output. Total production dynamics remained largely stable with capacity utilization reaching 97%. The production of value added products (VAP3 ) in 4Q17 amounted to 469 thousand tonnes (+9.1% YoY), the company maintains VAP production levels as per its guidance at c.50% of total product mix;

• In 4Q17 aluminium sales increased (+3.3% QoQ) totaling 1 million tonnes. In 4Q17, sales of VAPs decreased to 462 thousand tonnes. (-3.4% QoQ). The QoQ decline in VAP sales dynamics is largely explained by a skew towards primary aluminium under existing contracts which led to a decline of VAP’s share in total sales to 46%. The Company expects that the sales mix will trend towards the production mix and targets 50-52% share of VAPs through 2018 on the back of a solid backlog of end-customer product orders for 2018 and the launch of new VAPs capacities;

• In 4Q17 the average aluminium realized price4 increased by 6.5% QoQ to USD2,263/t. The increase was due to positive dynamics in London Metal Exchange (“LME”) QP5 component (+7.1% QoQ to USD2,102/t). The average realized premium component remained almost flat (-0.6% QoQ to USD161/t);

• In 12M17 aluminium production totaled 3,707 thousand tonnes (+0.6% year-on-year (“YoY”));

• In 12M17 aluminium sales increased (+3.6% YoY) totaling 3,955 thousand tonnes. This increase was achieved largely due to an increase in third party aluminium products sales (+91.3% YoY to 169 thousand tonnes);

• During 12M17, the company as per its strategy continued to grow VAP’s sales, which totaled 1,869 thousand tonnes (+11.4% YoY). The share of VAP’s sales in total sales now stands at 47% in comparison with 44% in 12M16; and

• In 12M17, the average aluminium realized price increased by 21.5% YoY to USD2,105/t due to positive dynamics in LME QP component (+23.5% YoY to USD1,942/t). The average realized premium component increased by 2.3% YoY to USD163/t).

Alumina

• In 4Q17, total alumina production increased by 1.3% QoQ, totaling 1,990 thousand tonnes. Russian operations accounted for 36% of the total output. The performance of the Company’s alumina assets was largely in line with the production plan.

• The continuation of ramping up capacity at Russian (Urals Alumina Refinery) and Ukrainian (Nikolaev) based refineries post the completion of upgrades earlier in 2017 was largely behind the 12M17 YoY production increase of +3.3%, to 7,773 thousand tonnes.

Bauxite and nepheline ore

• In 4Q17, bauxite production increased by 7.4% QoQ to 2,945 thousand tonnes. This is due to a low comparison base in 3Q17 for mines of Bauxite Company of Guyana, Kindia and North Urals. In 4Q17, Nepheline output decreased by 7.4% to 1,041 thousand tonnes, due to seasonal decline in production.

• In 12M17 bauxite output totaled 11,645 thousand tonnes (-4.4% YoY). The decrease of bauxite production is largely attributed to a decline in output in 3Q17, due to abnormal weather conditions that affected the operational performance of Bauxite Company of Guyana and Windalco as well as scheduled operational equipment care and maintenance works at mines in Kindia and Timan. Nepheline ore output decreased by 2.3% YoY to 4,332 thousand tons.

Market overview6

• The LME aluminium price increased 30.8% YoY in 2017, reaching USD2,256/t on January 2, 2018, nearly a six-year high, consolidating at c. USD2,200/t as a result of widespread capacity cuts in China and a steady reduction of LME stocks - further evidence of a global market deficit. Rising cost inflation in China made a significant proportion of operating Chinese aluminium capacity barely breakeven by the end of 2017.

• According to the World Bank estimates, the global economy demonstrated robust growth in 2017, with GDP strengthening from 2.4% in 2016 to 3.0% in 2017. China’s GDP in 2017 accelerated from 6.7% in 2016 to 6.9% according to National Bureau of Statistics. Global manufacturing PMI (Purchaser Managers Index) continued to stay significantly above the 50 level during 2017, rising to 54.5 in December 2017. Manufacturing activities increased in nearly all major economies and consumer confidence stayed at a high level during 2017.

• The reported aluminium inventories in the world ex-China fell further to |P5 2.9 million tonnes at the end of 2017, down |P5 1.0 million tonnes from the level at the end of 2016. The ratio of inventories to aluminium consumption continued to decline at a steady rate during 2017 and fell to |P5 36 days at the end of 2017 as compared to |P5 51 days at the end of 2016.

• UC RUSAL’s preliminary estimates show that global aluminium demand grew by 6% YoY in 2017 to 64 million tonnes as a result of strong demand across all geographical regions. Robust demand growth left the global aluminum market balance in a deficit of around 1 million tonnes in 2017.

• UC RUSAL estimated demand for aluminum in China in 2017 grew by 7.8% to 34.9 million tonnes compared to 32.4 million tonnes a year ago. Ex-China demand grew by 3.7% to 29.2 million tonnes for the same period.

• There is strong evidence of the implementation of supply side reform in the Chinese aluminum industry in 2017 with more than 10 million tonnes of illegal operating capacity and project cuts. As a result, according to data from Aladdiny, industry information provider, annualized Chinese aluminum production in November 2017 has dropped to 35.4 million tonnes from its maximum of 38.6 million tonnes in July of 2017.

• The announcement by the Chinese regulator regarding winter capacity cuts, which has now been implemented, will result in annualized production losses of approximately 1 million tonnes of metal, and 4.4 million tonnes of alumina, according to UC RUSAL estimates. Larger losses may take place in the carbon material supply chain, including anodes and coking coal, which would exert upward pressure on the costs base of aluminium producers due to increasing raw material prices.

• China continues to focus on implementing strong anti-pollution controls and environmental measures on energy intensive industries and intends to further cap and reduce CO2 emissions. Starting this year, Chinese aluminum smelters will start paying environmental tax, potentially increasing production costs by 70-100 RMB/tonne for big producers.

• In addition to Chinese domestic regulatory measures, Chinese semis exports stay under significant pressure from international anti-dumping initiatives and there have been recent announcements calling for further investigations under Section 232 of the Trade Expansion Act of 1962 of the US, alongside the possible introduction of new duties on Chinese semis exported to the US. This could result in a continued drop of exports of Chinese flat rolled products and other aluminium semis products to United States, the second largest Chinese semis consuming market.

KEY OPERATING DATA

                                   

GROUP PRODUCTION DATA7

(‘000 tonnes) 4Q17 3Q17

Change, %
(QoQ)

12M17 12M16

Change, %
(YoY)

 
Aluminium 944 931 1.4% 3,707 3,685 0.6%
utilisation rate 97% 95% 96% 95%
Aluminium foil and packaging products 26.1 25.5 2.1% 100.7 84.7 18.9%
Alumina 1,990 1,965 1.3% 7,773 7,527 3.3%
Bauxite 2,945 2,742 7.4% 11,645 12,187 -4.4%
Nepheline 1,041 1,125 -7.4% 4,332 4,432 -2.3%
 

GROUP SALES DATA

(‘000 tonnes)       4Q17       3Q17      

Change, %
(QoQ)

      12M17       12M16      

Change, %
(YoY)

 
Aluminium sales 1,000 968 3.3% 3,955 3,818 3.6%
incl
BOAZ aluminium product sales 39 37 6.7% 147 140 5.1%
Other third parties aluminium products sales 41.6 41.5 0.1% 169 88 91.3%
 
Realized price, US$/tonne 2,263 2,124 6.5% 2,105 1,732 21.5%
LME QP component 2,102 1,962 7.1% 1,942 1,573 23.5%
Realised premium 161 162 -0.6% 163 159 2.3%
 
VAP sales in tonnes 462 479 -3.4% 1,869 1,677 11.4%
Share of VAP 46% 50% 47% 44%
 

ALUMINIUM PRODUCTION

                                         
(‘000 tonnes) Interest 4Q17 3Q17

Change,%
(QoQ)

12M17 12M16

Change,%
(YoY)

 
Russia (Siberia)
Bratsk aluminium smelter 100% 255 254 0.5% 1,008 1,005 0.2%
Krasnoyarsk aluminium smelter 100% 258 255 1.3% 1,019 1,024 -0.5%
Sayanogorsk aluminium smelter 100% 135 134 0.8% 533 530 0.6%
Novokuznetsk aluminium smelter 100% 54.4 54.1 0.6% 215 213 1.0%
Irkutsk aluminium smelter 100% 106 105 0.9% 419 415 0.9%
Khakas aluminium smelter 100% 74 73 1.6% 292 293 -0.2%
 
Russia — Other
Volgograd aluminium smelter 100% 8 4 85.3% 13
Nadvoitsy aluminium smelter 100% 2.9 3.1 -7.8% 12 13 -4.1%
Kandalaksha aluminium smelter 100% 18.4 18.1 1.4% 72 68 5.3%
 
Sweden
Kubikenborg Aluminium (KUBAL) 100% 32 31 3.5% 123 124 -0.6%
 
Total production 944 931 1.4% 3,707 3,685 0.6%
Remelting of third-party primary aluminium at Volgograd smelter 4 6 -35.2% 22 39 -44.0%
Total aluminium products output including remelting 948 937 1.2% 3,728 3,724 0.1%
 

Foil and packaging production results

                                         
(‘000 tonness) Interest 4Q17 3Q17

Change,%
(QoQ)

12M17 12M16

Change,%
(YoY)

 
Russia
Sayanal 100% 9.3 9.7

-3.7%

38.2 34.4 11.1%
Ural Foil 100% 6.9 6.3 10.8% 25.3 17.8 42.3%
Sayana Foil 100% 1.2 1.0 24.9% 3.8 3.5 8.5%
 
Armenia
Armenal 100% 8.9 8.6 3.4% 33.7 29.0 16.2%
 
Total production 26.4 25.5 3.3% 101.1 84.7 19.3%
 

Other aluminium products output and silicon output

                                   
(‘000 toness) 4Q17 3Q17

Change, %
(QoQ)

12M17 12M16

Change, %
(YoY)

 
Secondary alloys 7.4 7.2 2.4% 28.3 25.0 13.2%
Silicon 15.4 14.1 9.2% 56.0 59.3 -5.5%
Powder 3.9 5.0 -21.3% 18.5 18.7 -0.8%

Wheels (‘000 units)8

215 191 12.8%
 

ALUMINA PRODUCTION

                                         
(‘000 tonnes) Interest 4Q17 3Q17

Change,%
(QoQ)

12M17 12M16

Change,%
(YoY)

 
Ireland
Aughinish Alumina 100% 490 497 -1.5% 1,937 1,967 -1.5%
 
Jamaica
Alpart 100%
Windalco 100% 153 149 2.8% 582 609 -4.5%
 
Ukraine
Nikolaev Alumina Refinery 100% 431 416 3.7% 1,676 1,510 10.9%
 
Italy
Eurallumina 100%
 
Russia
Bogoslovsk Alumina Refinery 100% 258 252 2.5% 983 961 2.3%
Achinsk Alumina Refinery 100% 238 234 1.9% 945 916 3.2%
Urals Alumina Refinery 100% 228 230 -1.0% 894 803 11.3%
Boxitogorsk Alumina Refinery 100%
 
Guinea
Friguia Alumina Refinery 100%
 
Australia (JV)
Queensland Alumina Ltd 20% 192 187 2.7% 756 760 -0.6%
 
Total alumina production 1,990 1,965 1.3% 7,773 7,527 3.3%
 

BAUXITE MINING

                                         
(‘000 tonnes) Interest 4Q17 3Q17

Change,%
(QoQ)

12M17 12M16

Change,%
(YoY)

 
Jamaica
Alpart 100% 69
Windalco 100% 471 476 -1.1% 1,954 2,054 -4.9%
 
Russia
North Urals 100% 608 548 10.9% 2,360 2,367 -0.3%
Timan 100% 714 839 -14.9% 3,163 3,064 3.2%
 
Guinea
Friguia 100%
Kindia 100% 829 717 15.6% 3,124 3,538 −11.7%
 
Guyana
Bauxite Company of Guyana Inc. 90% 324 161 100.4% 1,045 1,094 -4.5%
 
Total bauxite production 2,945 2,742 7.4% 11,645 12,187 -4.4%
 

Nepheline ore production9

                                         
(‘000 tonnes wet) Interest 4Q17 3Q17

Change,%
(QoQ)

12M17 12M16

Change,%
(YoY)

 
Kiya Shaltyr Nepheline Syenite 100% 1,041 1,125 -7.4% 4,332 4,432 -2.3%
 

JOINT VENTURE OPERATING RESULTS

                                         
(‘000 tonnes wet) Interest 4Q17 3Q17

Change,%
(QoQ)

12M17 12M16

Change,%
(YoY)

 
Boguchanskaya HP
Electricity generation, mwh 50% 2,824 3,716 -24.0% 13,287 13,969 -4.9%
 
Boguchanskiy aluminium smelter
Aluminium production (´000 tons) 50% 37.4 37.3 0.1% 148 149 -0.6%
 
Bogatyr Komir and Bogatyr Trans
Coal production (50%) (Kt) 50% 5,807 5,212 11.4% 20,204 17,525 15.3%
Transportation volumes (50%) (Kt of transportation) 50% 1,698 1,499 13.3% 6,222 6,236 -0.2%
  By order of the Board of Directors of
United Company RUSAL Plc
Aby Wong Po Ying
Company Secretary

5 February 2018

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 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 maybe updated in the 4Q17 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, wheels, high and special purity aluminium.

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

Unless otherwise stated data for the “Market overview” section is sourced from Bloomberg, CRU, CNIA, IAI and Antaike.

7

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.

8

SKAD operations, engaged in wheels production, were consolidated in April 2017. Taking into account production volumes before the date of acquisition, output in 12M17 significantly grew by 28.4% YoY, up to 842 thousand wheels from 656 thousand wheels in 12M16.

9

Nepheline ore used as a feedstock for alumina production at the Achinsk alumina refinery.

Contacts

United Company RUSAL Plc

Contacts

United Company RUSAL Plc