HONG KONG, Mar 31, 2011 - (ACN Newswire) - UC RUSAL (SEHK: 486, EuroNext: RUSAL/RUAL, MICEX: RUALR, RTS: RUAL), the world's largest aluminium producer, announces its full year results for 2010.
KEY HIGHLIGHTS
Financial
-- Net profit of US$2,867 million for 2010 compared to net profit
of US$821 million for 2009.
-- Revenue increased by 34.5% to US$10,979 million as a result of
higher aluminium market prices, improved product mix and premiums.
-- Total investments in development of existing facilities and
construction of new assets amounted to US$798 million.
-- Adjusted EBITDA increased by 335.7% to US$2,597 million due to
increased weighted-average realised prices and sales volumes.
-- Adjusted EBITDA margin returned to the pre-crisis level of 23.7%.
-- Net Debt reduced to US$11,472 million.
Investment
-- The market value of UC RUSAL's investment in OJSC MMC Norilsk Nickel
("Norilsk Nickel") increased by 66.8% in 2010. Market capitalisation
of the investment exceeded US$11 billion as of 31 December 2010.
Positive outlook for the business
-- Restart of Ewarton Plant Work in 2010 and Kirkvine in Jamaica
scheduled for 2011.
-- Restart of BEMO smelter construction in January 2011 backed by the
project financing from VEB.
-- Restart of Taishet smelter construction is scheduled for 2011.
Commenting on the full year results, Oleg Deripaska, CEO of RUSAL said:
"2010 saw UC RUSAL deliver excellent financial performance with both revenue and profits showing substantial gains on our 2009 results. Our EBITDA margin has risen to 23.7% and earnings per share have increased three times. This strong growth was driven by a significant increase in demand and prices for our metal which we were able to meet through productivity enhancement programs, enabling the Company to remain as the world's leading aluminium producer at the end of 2010."
"UC RUSAL exceeded its 2010 debt repayment obligations and an extremely strong operating performance across the Company ensured a significant decrease to our Net Debt to EBITDA ratio and increased our strategic flexibility and development capabilities. This enabled us to respond to improving market conditions by launching new and restarting previously idled operations as well as moving ahead with our large-scale investment projects."
"With an additional 1.3 million tonnes of technologically-advanced and environmentally friendly smelting capacity in the pipeline and further growth projects planned, UC RUSAL is ideally positioned to take advantage of the encouraging outlook for aluminium prices and increasing consumer demand. I am confident that the year ahead will see the Company strengthen its world leadership position."
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Key selected date Year ended 31 December Change
2010 2009 year-on-
year(%)
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Aluminium and alumina price information
(US$ per tonne)
Aluminium price per tonne quoted
on the LME(5) 2,173 1,668 30.3%
Alumina price per tonne(6) 333 244 36.5%
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Key operating data(7)
('000 tonnes)
Aluminium 4,083 3,946 3.5%
Alumina 7,840 7,279 7.7%
Bauxite (million tonnes wet) 11.8 11.3 4.4%
Aluminium foil and packaging products 1.4 69.8 16.6%
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Selected statement of comprehensive income data
(US$ million)
Revenue 10,979 8,165 34.5%
Cost of sales (7,495) (6,710) 11.7%
of which energy costs (1,972) (1,880) 4.9%
Gross profit 3,484 1,455 139.5
Distribution expenses (553) (566) (2.3%)
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Administrative expenses (762) (713) 6.9%
Impairment of non-current assets (49) (68) (27.9%)
Results from operating activities 2,031 (63) NA
margin (% of revenue) 18.5% (0.8%) -
Adjusted EBITDA 2,597 596 335.7%
margin (% of revenue) 23.7% 7.3% -
Finance income 99 1,321 (92.5%)
Finance expenses (1,529) (1,987) (23.0%)
Share of profits/(losses) and
impairment of associates 2,435 1,417 71.8%
Income tax (expense)/benefit (144) (18) 700.0%
Net income/(loss) for the year 2,867 821 249.2%
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Selected statement of financial position data
(US$ million)
Total assets 26,525 23,886 11.0%
Total working capital(8) 2,122 1,477 43.7%
Net financial debt(9) 11,472 13,633 (15.9)%
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Selected cash flow statement data
(US$ million)
Net cash flows generated from
operating activities 1,738 1,286 35.1%
Net cash flows used in
investing activities (442) (301) 46.8%
of which capex(10) (361) (239) 51.0%
including contribution to BEMO(11) (431) (176) 144.9%
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Selected ratios
Net debt to Adjusted EBITDA 4.4:1 22.9:1 NA
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OVERVIEW OF TRENDS IN INDUSTRY AND BUSINESS
Aluminium industry in 2010 and UC RUSAL's industry view and outlook
The aluminium market demonstrated significant price volatility during 2010, with prices below US$2,000 per tonne at times and reaching maximum levels around US$2,500 per tonne.
Based on robust demand growth for aluminium from China and the recovery of physical demand in the USA, Europe and Japan demand for aluminium in 2010 surged by around 14% from 2009 levels to 40.6 million tonnes. Worldwide production of primary aluminium in 2010 was 40.4 million tonnes, 9% higher than the 37.0 million tonnes of production in 2009.
UC RUSAL expects strong global demand for aluminium to continue in 2011 with 8% growth to 43.8 million tonnes. The emerging markets of China, Brazil, India and Russia will be driving the growth of aluminium consumption in 2011. Total underlying demand in China will reach 18.5 million tonnes in 2011 and remain strong, with aluminium consumption growth expected to be 12%. The transportation industry remains the key driver of aluminium consumption growth in China.
UC RUSAL expects aluminium prices to maintain the level of US$2,500 to US$2,600 per tonne throughout 2011 and be supported by positive underlying demand, whilst the continuing weakness of the US dollar supports the investment into tangible assets from investors.
Premiums
Regional premiums reflect the improvement in current physical demand and limited access to available metal in the traded market. Premiums are forecasted to continue at current levels in 2011 with the Duty Unpaid European Premium at US$110 to US$135 per tonne and the US Premium trading at US$130 to US$150 per tonne, Midwest delivered. In Japan and Korea, premiums are expected to be at the level of US$105 to US$115 per tonne, reflecting readier access to nearby stocks of the metal.
Alumina market
The Company saw strong growth in alumina prices in 2010 up to US$367 per tonne as more third party alumina sales were tracking spot market prices as global producers tried to de-link the alumina price from aluminium. UC RUSAL expects strong growth in alumina prices to continue in 2011 and alumina spot market price to reach a level of US$450 per tonne in 2011 based on strong Chinese and other regions' demands.
Aluminium stocks
Most LME aluminium stocks (around 75%) are covered by financial transactions and not available to aluminium consumers.
UC RUSAL does not expect a significant influx of aluminium from LME warehouses in 2011 as aluminium prices remain strong, the aluminium market is improving and most financial transactions linked to stocks are being retained by financial investors as longer term investments.
FINANCIAL OVERVIEW
Revenue
Revenue increased by 34.5% to US$10,979 million in 2010 compared to US$8,165 million in 2009. This was primarily due to increased sales of primary aluminium and alloys, which accounted for 83.9% and 82.9% of UC RUSAL's revenue for the years ended 31 December 2010 and 31 December 2009, respectively.
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Year ended 31 December 2010
US$ kt Av. sales price
million (US$/tonne)
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Sales of primary aluminium and alloys 9,208 4,085 2,254
Sales of alumina 597 1,845 324
Sales of foil 293 79 3,709
Other revenue(14) 881 - -
including bauxite 14 - -
including other revenue 867 - -
Total revenue 10,979
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Year ended 31 December 2009
US$ kt Av. sales price
million (US$/tonne)
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Sales of primary aluminium and alloys 6,770 4,069 1,664
Sales of alumina 410 1,640 250
Sales of foil 243 70 3,471
Other revenue(14) 742 - -
including bauxite 28 - -
including other revenue 714 - -
Total revenue 8,165
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Sales of primary aluminium and alloys increased by 36.0% primarily due to an increase in average realised price per tonne (by 35.5% year-on-year). Sales volumes increased by 16 thousand metric tonnes or 0.4% from 4,069 thousand metric tonnes in 2009 to 4,085 thousand metric tonnes in 2010.
Revenue from sales of alumina increased by 45.6% to US$597 million in 2010 from US$410 million in 2009. The increase in revenue was primarily attributable to the significant increase in average realised price. In 2010, UC RUSAL continued to sell alumina to external parties only under specific long-term contracts. Average sales price increased by 29.6% in 2010 as compared to 2009. The sales volume increased by 12.5% to 1,845 thousand metric tonnes in 2010.
Revenue from sales of foil increased from US$243 million in 2009 to US$293 million in 2010, which accounted for 3.0% and 2.7% of UC RUSAL's revenue for 2009 and 2010, respectively. Production volumes remained relatively stable with a slight increase of approximately 17% in 2010 while sales volume grew from 70 thousand metric tonnes in 2009 to 79 thousand metric tonnes in 2010. The increase in revenue from the sales of foil was primarily due to an increase in the average realised price.
Revenue from other sales, excluding bauxite, increased to US$867 million or by 21.4% in 2010 from US$714 million in 2009. The main factors contributing to the increase in revenue from other sales were increases in prices and volumes of various by-products and secondary materials, including silicon, hydrate, soda, aluminium powders and electricity following the overall recovery in the global economy and the resulting increase in capacity of a number of the Company's production entities.
UC RUSAL maintained sales to markets with higher premiums above LME aluminium prices, increasing the share of total sales to Asia, America and utilising growing demand in domestic Russia and the CIS markets. Sales to Europe continued to occupy the largest share of revenue from aluminium sales as the region with the highest premiums. The average premium of US$108 per tonne in 2010 was higher than the US$55 per tonne premium in 2009.
Cost Of Sales
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Year ended 31 December 2010 2009 Change
(US$ million) year-on-year(%)
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Cost of alumina 1,120 982 (14.1%)
Cost of bauxite 414 374 (10.7%)
Cost of other raw materials 2,605 2,253 (15.6%)
Energy costs 1,972 1,880 4.9%
Depreciation and amortization 473 554 (14.6%)
Personnel expenses 735 774 (5.0%)
Repairs and maintenance 132 115 14.8%
Change in asset retirement
obligations 17 29 (41.4%)
change in provisions for
inventories 27 (251) NA
Total cost of sales 7,495 6,710 11.7
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Cost of sales increased by US$785 million, or 11.7%, to US$7,495 million in 2010, compared to US$6,710 million in 2009. The increase was in line with the overall growth in production and sales volumes of both aluminium and alumina and the increase of purchase prices and transportation tariffs for raw materials.
Cost of other raw materials and other costs increased by US$352 million or 15.6% from US$2,253 million in 2009 to US$2,605 million in 2010 primarily due to the overall growth in materials purchase price. Energy costs increased by US$92 million, or 4.9%, to US$1,972 million in 2010 compared to US$1,880 million in 2009. The increase in electricity costs over the period resulted primarily from the growth of the weighted-average electricity tariff and increased consumption. The increase in the weighted-average electricity tariff was mainly due to continued market liberalisation and increased share of electricity sold through the wholesale market. Electricity tariffs are generally quoted in RUR and increased in line with the Russian consumer price index. As a percentage of revenue, energy costs decreased from 23.0% in 2009 to 18.0% in 2010.
As a percentage of revenue, cost of sales decreased from 82.2% in 2009 to 68.3% in 2010.
Gross profit
UC RUSAL reported a gross profit of US$3,484 million and US$1,455 million in 2010 and 2009 respectively, representing gross margins of 31.7% and 17.8% respectively.
Adjusted EBITDA
Adjusted EBITDA, being results from operating activities adjusted for amortisation and depreciation, impairment charges and loss on disposal of property, plant and equipment, increased by 335.7% to US$2,597 million in 2010, as compared to US$596 million in 2009. The key influencing factors were operating results and a significant increase in market prices resulting from a recovery in economic conditions.
Year ended 31 December 2010 2009 Change
(US$ million) year-on-year(%)
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Reconciliation of Adjusted EBITDA
Results from operating activities 2,031 (63) NA
Add:
Amortisation and depreciation 498 586 (15.0%)
Impairment of non-current assets 49 68 (27.9%)
Loss on disposal of property,
plant and equipment 19 5 280%
Adjusted EBITDA 2,597 596 335.7%
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Finance income
Finance income decreased by US$1,222 million, or 92.5%, to US$99 million in 2010 as compared to US$1,321 million in 2009. Finance income in 2010 was primarily represented by a gain on fair value adjustment on financial instruments of US$57 million, foreign exchange gains of US$25 million and interest income on third party loans and deposits of US$14 million. As a percentage of revenue, finance income decreased from 16.2% in 2009 to 0.9% in 2010. Finance income in 2009 was primarily represented by a gain on debt restructuring of US$1,209 million, a gain on fair value adjustment on financial instruments of US$77 million and interest income on third party loans and deposits of US$32 million.
Finance expenses
Finance expenses decreased by 23.0% to US$1,529 million in 2010 as compared to US$1,987 million in 2009.
Interest expenses on bank loans, including other bank charges increased by US$124 million, or 12%, to US$1,157 million in 2010 compared to US$1,033 million in 2009, mainly due to the amortisation of the gain on restructuring recognised in 2009. Interest expenses on bank loans changed insignificantly, as the effect of reduction in principal amounts payable to International and Russian banks was almost fully offset by a slight increase in interest rates in 2010 subsequent to the debt restructuring.
In November and December 2009, UC RUSAL entered into long-term electricity contracts with related parties through to 2019-2021. The contract pricing contains a fixed or a cost-based component and an LME-linked price adjustment. Management has analysed the contracts and concluded that the price adjustments represent embedded derivatives which should be separated from the host contract. The estimates of the fair value of the embedded derivatives are particularly sensitive to changes in the LME prices. Loss from revaluation of embedded derivatives amounted to US$240 million and US$570 million in 2010 and 2009 respectively.
As a result of the continuing appreciation of the Ruble against the US dollar over the period, the Company reported a forex gain of US$25 million in 2010, compared to the forex loss of US$73 million recognised in 2009.
In 2010, UC RUSAL recorded US$73 million of interest expenses on payables to Onexim, as compared to US$163 million in 2009 as a result of the debt restructuring.
Interest expenses on provisions of US$20 million and US$62 million in 2010 and 2009 respectively related to interest expenses on defined benefit retirement plans and the asset retirement obligations of the Company.
Share of profits/(losses) and impairment of associates and jointly controlled entities
Share of profits and reversal of impairment of associates was US$2,435 million in 2010 and US$1,417 million in 2009. Share of profits of associates in both periods resulted primarily from UC RUSAL's investment in Norilsk Nickel.
Share of profits of jointly controlled entities was negative US$25 million in 2010 and positive US$151 million in 2009. This represents UC RUSAL's share of results and impairment in UC RUSAL's joint ventures - BEMO project and LLP Bogatyr Komir.
Profit before income tax
UC RUSAL made a profit before income tax of US$3,011 million for the year ended 31 December 2010, as compared to US$839 million for the year ended 31 December 2009.
Income tax
Income tax expense increased by US$126 million to US$144 million in 2010, as compared to an income tax expense of US$18 million in 2009.
Net profit for the year
As a result of the above, UC RUSAL recorded a net profit of US$2,867 million for the year ended 31 December 2010, as compared to US$821 million for the year ended 31 December 2009.
Cash operating costs per tonne
The entire aluminium sector experienced cost inflation in 2010 and the Company was generally better off than the rest of the industry in managing its costs and maintained its position on the cost curve. The cost increases were principally driven by the following factors: energy related items, including power (partly attributable to the continued liberalisation of the Russian energy market during 2010), growing market prices for raw materials (coke, pitch, anodes) and fuel linked to increasing oil prices; LME-linked costs components due to the growth in the underlying aluminium price; and higher input costs associated with the revival of economic activity (e.g. transportation costs).
Aluminium Cash Operating Costs therefore increased from an average of US$1,471 per tonne in 2009 to an average of US$1,724 per tonne for 2010, by 17% or US$253 per tonne (inclusive of exchange rate effects). Key drivers of the growth were increases of US$82 per tonne in the cost of alumina, US$47 per tonne in the cost of energy, US$66 per tonne in the cost of raw materials and US$58 per tonne in other expenses. Cost of alumina bought from third and related parties is linked to LME price, increase of which additionally contributed to growth of alumina cost between the periods. Cost of energy rose due to the liberalisation of the Russian wholesale electricity market.
The largest components of the UC RUSAL Aluminium Cash Operating Costs structure in 2010 were alumina and energy at 39% and 25% respectively, as compared to the industry average of 37% and 36% respectively. Other cost items (raw materials at 17%, payroll at 6%, transportation at 4% and other costs at 9%) were roughly in line with the industry averages.
The Company's Alumina Cash Operating Costs also increased from an average of US$257 per tonne in 2009 to an average of US$277 per tonne in 2010, by 8% or US$20 per tonne. The principal factor in the overall increase in the Company's Alumina Cash Operating Costs from 2009 to 2010 was the increase in the market price of utilities (including fuel-oil and gas) as a result of a corresponding increase in market oil prices. Key factors contributing to the increase in Alumina Cash Operating Costs in 2010 were increases of US$18 per tonne in the cost of energy and US$5 per tonne in exchange rate effects which were partially offset by decreases of US$3 per tonne in costs of raw materials and US$1 per tonne in personnel costs.
Segment reporting
UC RUSAL has four reportable segments, which are the Company's strategic business units: Aluminium, Alumina, Energy, Mining and Metals. These business units are managed separately and results of their operations are reviewed by the CEO on a regular basis.
US$ million 2010 2009
Aluminium Alumina Aluminium Alumina
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Segment revenue 9,408 2,484 6,893 1,884
Segment result 2,244 49 300 (223)
Segment EBITDA 2,638 135 750 (107)
Segment EBITDA margin 28.0% 5.4% 10.9% (5.7%)
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Aluminium
The Aluminium segment is involved in the production and sale of primary aluminium and related products. EBITDA margin of the segment increased to 28% in 2010 from 11% in 2009 due to a combination of rising LME prices and remaining strict cost control implemented by UC RUSAL in previous years.
Alumina
The Alumina segment is involved in the mining and refining of bauxite into alumina and the sale of alumina. EBITDA margin of the segment increased to 5% in 2010 from negative result in 2009 representing a 32% increase in segment revenue due to growing sales volume and prices.
The full version of the Company's announcement to which the audited consolidated financial statements of UC RUSAL for the year ended 31 December 2010 are attached is published on the website of the Company at the following address: http://rusal.ru/en/stock_fillings.aspx
The audited consolidated financial statements of UC RUSAL for the year ended 31 December 2010 which were approved by the Directors of UC RUSAL on 30 March 2011 have been disclosed with The Stock Exchange of Hong Kong Limited and filed with the French Autorite des marches financiers and are accessible on the website of the Company at the following address: http://rusal.ru/en/fin_statements.aspx
Forward-looking statements
This press-release 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 risks 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.
Contact:
Vera Kurochkina
+7-495-720-51-70
vera.kurochkina@rusal.com
Topic: Earnings
Source: RUSAL
Sectors: Metals & Mining
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