OREANDA-NEWS. UC RUSAL (SEHK: 486, Euronext: RUSAL/RUAL, Moscow Exchange: RUALR/RUALRS), a leading global aluminium producer, announces its results for the three and nine months ended 30 September 2014.

Key highlights

The operating profitability and underlying results of UC RUSAL in the third quarter of 2014 were positively affected by growing LME aluminium price that reached the highest level since February 2013. Continuing procurement saving and cost reduction initiatives undertaken by management supported by product mix improvement, weakening local currency and growing premiums allowed the Company to recognise Adjusted Net Profit of USD25 million for the third quarter of 2014, demonstrating positive result first time since the fourth quarter of 2011.

Total aluminium output amounted to 2,686 thousand tonnes for the nine months of 2014, representing a decrease of 9.0% as compared to 2,953 thousand tonnes for the same period of the prior year reflecting the successful completion of 2012-2013 capacity curtailments program at the less efficient smelters.

Revenue in the third quarter of 2014 increased by 9.6% to USD2,477 million as compared to USD2,261 million in the second quarter of the year primarily due to the increase in the LME aluminium price up to an average of USD1,987 per tonne, a 10.5% increase compared to the previous quarter, and supported by continually increasing premiums over LME aluminium price of USD422 per tonne.

Aluminium segment cost per tonne decreased by 8.9% to USD1,748 in the first nine months of 2014 in comparison with USD1,919 per tonne in the same period of 2013 resulting from continuous cost control measures and external factors such as depreciation of the Russian Ruble to the US dollar by 11.9% to RUB35.39 in the nine months of 2014 from RUB31.62 in the respective period of 2013.

All these factors resulted in more than two-fold increase of Adjusted EBITDA to USD470 million for the third quarter of 2014 from USD220 million for the previous quarter of the year, with Adjusted EBITDA margin reaching 19.0% for the three months ended 30 September 2014 as compared to 9.7% in the previous quarter. Adjusted EBITDA for the nine months of 2014 amounted to USD863 million representing 56.9% increase as compared to USD550 million for the respective period of 2013. Aluminium segment EBITDA margin in the third quarter of 2014 reached 23.2%.

Recurring Net Profit for the three months ended 30 September 2014 increased by 93.8% to USD250 million as compared to USD129 million for the preceding quarter. Recurring Net Profit for nine months of the current year comprised USD210 million as compared to Recurring Net Loss of USD288 million for the same period of the prior year.

In August 2014, the Company successfully completed the refinancing of its debt portfolio and announced that the Amendment Agreement on the refinancing of USD4.75 billion and USD400 million PXF facilities has become effective. Pursuant to the Amendment Agreement, the two PXF facilities were combined into a single facility agreement with repayments starting from 12 January 2016 and final maturity at 31 December 2018 (for tranche A) and 31 December 2020 (for tranche B).

Aluminium production is expected to be around 900 thousand tonnes in the fourth quarter of 2014. UC RUSAL maintains strict cost discipline and low cash cost base. Management views further improvement of margins and profits in the fourth quarter of 2014 at current aluminium price levels and USD/RUB exchange rate. Capital expenditures for the year 2014 are expected to come under USD500 million. UC RUSAL's EBITDA in the fourth quarter of 2014 is expected to be in excess of USD400 million at current market conditions.

Commenting on the third quarter results, Oleg Deripaska, CEO of RUSAL said:

"In the third quarter of 2014 the situation in the aluminium market continued to improve resulting in price growth reaching USD2,114 per tonne in August, its highest level for a year and a half. Premiums have also continued to grow strongly reaching historical highs on the back of a sustained market deficit and strong demand. According to our estimates, healthy consumption growth coupled with production curtailments, have led to a deficit in the global market, ex-China, of 0.9 million tonnes of aluminium in the first nine months of the year. This, together with falling LME inventories, which have dropped below 4.5 million tonnes, means the deficit is continuing to widen.

These positive market developments and our continued focus on cost controls and increasing margins through value added production have enabled UC RUSAL to report significantly improved third quarter results. Revenue improved by 9.6% from the preceding quarter, while costs decreased by 0.3% quarter-on-quarter. Adjusted EBITDA reached USD470 million, up by 113.6% from the second quarter and was higher than in the first two quarters of the year combined. Adjusted EBITDA margin improved to 19%. Recurring Net Profit increased to USD250 million, or by 93.8%, in the third quarter of 2014 from USD129 million in the preceding quarter.

An important corporate development milestone during the quarter was the completion of the refinancing of UC RUSAL's loan portfolio, which was successfully completed in August. The new agreements with our lenders have significantly improved the Company's debt profile and enabled us to maintain a sustainable cash position. While the Company is permitted a grace period for the repayment of the principle amount until January 2016, further deleveraging remains a priority and the Company will be able to make debt repayments ahead of the schedule depending on market dynamics.

Looking beyond 2014, UC RUSAL estimates that global aluminium consumption will reach 66 million tonnes in 2018 vs. 52 million tonnes in 2013, and that the market will remain in deficit for the foreseeable future."