OREANDA-NEWS. UC RUSAL (SEHK: 486, Euronext: RUSAL/RUAL, Moscow Exchange: RUALR/RUALRS), a leading, global aluminium producer, announces its results for the six months ended 30 June 2013.

Key highlights

The first half of 2013 saw aluminium prices on LME continue to decline, falling by 7.8% to an average of USD1,919 per tonne in reporting period, as compared to the first half of 2012. In an industry-leading move, the Company reduced its aluminium output by around 100,000 tonnes (4.5%) in the first half of the year, as compared to the same period in 2012. Total aluminium output amounted to 1,999 thousand tonnes in the first half of 2013 as compared to 2,093 thousand tonnes in the first half of 2012 following the ongoing production cuts program at the less efficient smelters.

The Board of the Company has approved an additional program of production reductions to improve costs and margins, beyond those previously announced. The updated program will see production halted at a number of the least efficient smelters in the Aluminium division West as well as reduced at certain smelters in Siberia. Production is forecast to be reduced by 357 thousand tonnes (or by 9%) in 2013 vs. 2012. Full effect of the program will be reflected in 2014.

Production of value-added products with higher margins continued to grow and reached a record 42.8% of total aluminium production in the second quarter of 2013.

Alumina output totalled 3,638 thousand tonnes in the first half of 2013, representing a decrease of 7.5%, as compared to 3,932 thousand tonnes for the same period of the previous year. Bauxite production totalled 5,750 thousand tonnes in the first half of 2013, representing a decrease of 14.3%, as compared to 6,713 thousand tonnes in the first half of 2012.

During the period, RUSAL continued to implement its cost control programme. Aluminium segment cost per tonne decreased by 3.0% to USD1,911 in the second quarter of 2013 in comparison with 1,971 USD per tonne in the first quarter of 2013. External factors such as the depreciation of the Russian Ruble to the US Dollar by 4.3% to RUB31.7 in the second quarter of 2013 from RUB30.4 in the first quarter of 2013 has also had a significant positive effect on the overall level of costs.

Despite these measures, the impact of the low LME aluminium prices has affected the Company's results. Revenue in the first half of 2013 decreased to USD5,203 million (by 8.8%) as compared to USD5,704 million in the first half of 2012 due to a 7.6% decrease in physical aluminium sales and continued pressure of the LME price, partially offset by historically high premiums of USD269 per tonne for the first half of 2013.

In addition, there was a negative impact on net profit of a one-off non-cash item related to the Norilsk Nickel share sale in the amount of USD 234 mln. As a result net loss accounted for USD 438 mln.

Adjusted EBITDA comprised USD420 million for the first half of 2013 with a margin of 8.1% demonstrating a decrease of 25.5% as compared to the same period of 2012. Aluminium segment EBITDA margin decreased to 12.7% in the first half of 2013 as compared to 13.5% for the same period of the preceding year.

In April 2013 the Company completed the sale of Norilsk Nickel shares according to the shareholder agreement signed in December 2012. The net proceeds in the total amount of USD620 million were applied towards the prepayment of debt owed to Sberbank. Total long-term debt repayments in the first half of 2013 comprised to USD1,135 million, Net Debt was reduced to USD9,882 million as at 30 June 2013 or by 8.7% since 31 December 2012.

Commenting on the half year results, Oleg Deripaska, CEO of RUSAL said:

“Our industry remains in a crisis of its own making with over supply leading to excess of stock overhanging the market. This status quo cannot be allowed to continue and the sector as a whole needs to take action to optimize capacity.

In an industry-leading move, in the first half of 2013 RUSAL reduced its aluminium output by around 100,000 tonnes, compared to the same period in 2012, in line with its approved production volume reduction programme at the Company's least-efficient smelting facilities. Furthermore the Board of the Company has approved an additional programme of reductions, beyond those previously announced. The updated programme will see production halted at a number of high cost smelters in the Aluminium division West as well as reduced at certain smelters in Siberia.

During the period, RUSAL continued to implement its cost control programme. Aluminium segment cost per tonne in 2Q2013 reduced to USD1,911/t (by 3% vs. 1Q2013) - the lowest level since the end of 2010. Aluminium segment EBITDA margin for the first half of 2013 was 12.7% in line with industry's best producers. The Company also continued to make significant progress in reducing its debt level with total debt repayments of USD1.1bn to international and Russian lenders made in 1H2013.

Whilst demand remains strong for aluminium, the sustainability of our industry relies on industry players to taking a uniformed and disciplined approach towards inefficient and unprofitable production, with a focus on the customer at the forefront. RUSAL is taking the lead in confronting the current negative market environment and will continue to do more to further improve business efficiency.”