Rusal · RUS:RUAL
Rusal — United Company RUSAL — Q3 2014 Earnings Presentation
34 slides from Rusal's earnings presentation, November 2014
Slide 1: Reaping the benefits of cost cutting and metal price recovery
Reaping the benefits of cost cutting and metal price recovery 3Q14 consolidated financial results
Slide 2: Disclaimer
DISCLAIMER These materials and the subsequent discussion are not an offer for sale of any securities of United Company RUSAL Plc (the “Company”). The distribution of these materials in certain jurisdictions may be restricted by law and therefore persons into whose possession these materials come sho
Slide 3: Agenda
AGENDA 1 Results Overview and Analysis 2 Net Debt Analysis 3 Norilsk Nickel Investment 4 Aluminium Sector Outlook 5 Appendices 6 Contacts 3
Slide 4: 3Q14 Financial and Operational Highlights
3Q14 FINANCIAL AND OPERATIONAL HIGHLIGHTS • Strong financial performance in 3Q14 o 3Q14 EBITDA of $470mn (+114%QoQ) with an EBITDA margin of 19% vs. 10% in 2Q14. UC RUSAL generated strongest quarterly EBITDA since 4Q11. o FCF entered positive territory ($84mn in 3Q14) first time since 2Q12; 3Q14 net
Slide 5: Continued Improvement in Safety
CONTINUED IMPROVEMENT IN SAFETY RUSAL demonstrates focus on health NUMBER OF FATAL ACCIDENTS and safety at all levels and full 9M 2014 1 compliance with the best industry 4 2013 health and safety standards: 2012 6 2011 11 o UC RUSAL is governed by the Policy in the field of occupational, industrial
Slide 6: Production Results
PRODUCTION RESULTS ALUMINIUM PRODUCTION kt • Maintaining and contributing to supply discipline 47% o 3Q14 aluminium output: 903kt (-5,2% YoY) 45% • Enhancing high value-added product portfolio 44% 953 43% o RUSAL targets a 55% increase to the value-added 43% in the product mix by 2020 o RUSAL’s stra
Slide 7: Production Results (cont.)
PRODUCTION RESULTS (CONT.) BAUXITE PRODUCTION BY REGION ALUMINA PRODUCTION BY REGION kt kt 3 291 3 003 2 882 2 600 3 067 1 817 1 805 1 813 1 870 1 804 258 487 346 344 141 120 147 147 143 391 216 370 187 167 177 183 171 464 484 371 832 393 355 363 366 368 832 776 805 872 499 495 480 506 460 1 713 1 3
Slide 8: Delivering on Cost
DELIVERING ON COST • RUSAL delivers further cost improvement; 3Q14 aluminium cash cost is $1 739/t (-$25/t compared to 2Q14 level) o 97% of 3Q14 aluminium volumes were produced at the highest margin assets (Siberian smelters) with the majority of power coming from hydrogeneration o RUSAL is leverage
Slide 9: Delivering on Cost (cont.)
DELIVERING ON COST (CONT.) ALUMINA CONSUMPTION, KG/T TECHNOLOGICAL POWER CONSUMPTION, KWH/T(1) 1 937,6 15 607 15 550 15 509 1 935,4 1 934,7 15 326 1 933,1 15 169 1 931,2 2010 2011 2012 2013 9m2014(F) 2010 2011 2012 2013 9m2014(F) ANODE MASS CONSUMPTION, KG/T DIRECT CURRENT EFFICIENCY, % 533,3 90,25
Slide 10: Profitability Growth
PROFITABILITY GROWTH • EBITDA 3Q14: $470mn (+114% QoQ) EBITDA MARGIN • 3Q14 EBITDA margin is 19% 19,0% o 3Q14 Aluminium Segment EBITDA margin: 23.2% vs. 16.6% in 2Q14; RUSAL maintains high profitability level in aluminium segment 9,7% o RUSAL’s Alumina Segment reported $32mn 8,1% EBITDA in 3Q14 comp
Slide 11: RUSAL Generates Positive Free Cash Flow (FCF)
RUSAL GENERATES POSITIVE FREE CASH FLOW (FCF) • FCF entered positive territory ($84mn FCF DYNAMICS in 3Q14) first time since 2Q12 US$ mln 84 o 3Q14 capex: $112mn (-5% QoQ) o 9M14 capex: $349mn o RUSAL maintains stable working capital requirements (202) (239) (274) (273) 3Q 2014 2Q 2014 1Q 2014 4Q 20
Slide 12: RUSAL's Management Outlook
RUSAL’S MANAGEMENT OUTLOOK o Aluminium production is expected to be around 900kt in 4Q14. RUSAL Aluminium Segment maintains strict cost discipline and low cash cost base o Management expects sustainability of LME spot price above US$2 000/t and Pricing physical premiums to grow further o Management
Slide 13: Agenda
AGENDA 1 Results Overview and Analysis 2 Net Debt Analysis 3 Norilsk Nickel investment 4 Aluminium Sector Outlook 5 Appendices 6 Contacts 13
Slide 14: Debt Structure Analysis
DEBT STRUCTURE ANALYSIS BALANCED CREDIT PORTFOLIO • RUSAL brings net debt below $10bn Sberbank 8% 5% 3% USD confirming the focus on deleveraging 6% 7% PXF and showing the net debt reduction for RUB 47% RUB bonds 1/3 since IPO Gazprombank EURO 32% 92% o Value of stake in Norilsk Nickel (“NN”) is Othe
Slide 15: Agenda
AGENDA 1 Results Overview and Analysis 2 Net Debt Analysis 3 Norilsk Nickel Investment 4 Aluminium sector outlook 5 Appendices 6 Contacts 15
Slide 16: RUSAL's Investment in Norilsk Nickel
RUSAL’S INVESTMENT IN NORILSK NICKEL • Our Norilsk Nickel stake is a long term RUSAL’S STAKE IN NORILSK NICKEL value-accretive strategic investment US$ mln 16 000 with significant upside potential 14 000 12 000 o The recent weakness across PGM and base 10 000 metal prices was driven by mounting 8 00
Slide 17: Stable Dividend Flow
STABLE DIVIDEND FLOW • Norilsk Nickel (NN) Board of Directors has approved 9M14 interim dividends of RUB120,6bn ($2,78bn5) that have significantly exceeded market expectations. The dividends secure 12% dividend yield(4) • Norilsk Nickel plans adjusting the dividend policy according to the company's
Slide 18: Agenda
AGENDA 1 Results Overview and Analysis 2 Net Debt Analysis 3 Norilsk Nickel Investment 4 Aluminium Sector Outlook 5 Appendices 6 Contacts 18
Slide 19: Physical Market Deficit Supports Price
PHYSICAL MARKET DEFICIT SUPPORTS PRIСE • RUSAL expects LME spot prices stay above ALUMINIUM PRICE DYNAMICS $2 000/t by the year-end US$/t 2 900 “All-in” price remains within o Narrowing contango and increasing warrants 2 700 $2,400-2,600/t range cancellation highlight physical market tightness 2 500
Slide 20: LME Inventory Expected to Reduce to 4.2Mnt by Year-End 2014
LME INVENTORY EXPECTED TO REDUCE TO 4.2MNT BY YEAR-END 2014 LME AL INVENTORY STRUCTURE o LME stock has decreased to 4 435kt by the mt 6 70% end of Oct 2014 (3-year low) and is forecast 60% to decrease by 1.2mnt in 2014 5 Inventory level as of 31 October, 2014 50% o Current tendency suggests a signif
Slide 21: Healthy Aluminium Demand Fundamentals
HEALTHY ALUMINIUM DEMAND FUNDAMENTALS • The sector demonstrates healthy demand PRIMARY ALUMINIUM DEMAND IN 2014 (%,YOY) fundamentals across core segments and World 6,5% geographies Ex.China 4% o In 9M14, global primary aluminium China 13% consumption reached 41mlnt (+7% YoY) N.America 5% o European
Slide 22: World Supply Will Remain Tight Despite Possible Capacity Restarts
WORLD SUPPLY WILL REMAIN TIGHT DESPITE POSSIBLE CAPACITY RESTARTS CHINA ALUMINUM MARKET BALANCE EX-CHINA ALUMINUM MARKET BALANCE mt mt 40 0 0 0 34 0 38,0 38,0 38 31,5 35,5 35,6 32 30,7 -200 36 -50 30,3 34 33,2 33,4 30 29,1 29,2 -400 30,9 31,0 28,0 27,9 32 -100 -100 28 27,0 26,8 -600 30 28,4 28,4 25,
Slide 23: Chinese Semis Export Influence Is Limited
CHINESE SEMIS EXPORT INFLUENCE IS LIMITED ANTI-DUMPING MEASURES AGAINST CHINA IS A MAJOR NET EXPORTER OF SEMIS CHINESE SEMIS kt US$/t 650 Products: Al wheels, Al foil, 550 Al radiators 450 Duty: 20.6%, 30%,61.4% 350 250 150 EU 50 -50 USA China -150 -250 -350 Product: Al extrusions Sep-08 Sep-10 Sep-
Slide 24: Impact of the Chinese Semis Exports on Global Supply-Demand
IMPACT OF THE CHINESE SEMIS EXPORTS ON GLOBAL SUPPLY-DEMAND ROW SEMIS DEMAND FORECAST VS ROW SEMIS DEMAND FORECAST CHINESE NET EXPORT kt mt 2014F 46 48 45 43 44 43 41 2 120 39 41 40 37 38 3 743 12 254 1 956 5 033 40.7 Mt 3 3 3 3 4 4 2 519 6 964 4 897 2013 2014F 2015F 2016F 2017F 2018F RoW semis dema
Slide 25: World Bauxite Balance and Imported Bauxite Stocks in China
WORLD BAUXITE BALANCE AND IMPORTED BAUXITE STOCKS IN CHINA CHINA’S IMPORTED BAUXITE STOCKS WORLD BAUXITE BALANCE kt kt kt 40 000 450 000 50 000 400 000 40 000 30 000 350 000 30 000 300 000 250 000 20 000 20 000 200 000 10 000 150 000 0 10 000 100 000 -10 000 50 000 Normal level – 5Mt 0 0 -20 000 Nov
Slide 26: Impact of Bauxite Export Ban on the Chinese Aluminium Industry
IMPACT OF BAUXITE EXPORT BAN ON THE CHINESE ALUMINIUM INDUSTRY o Chinese companies have partially substituted Indonesian bauxite mostly from Australia, India and Malaysia. The recent rise in imports is temporary mainly because of expected resistance to bauxite exports from the Indian Bauxite deficit
Slide 27: Agenda
AGENDA 1 Results Overview and Analysis 2 Net Debt Analysis 3 Norilsk Nickel Investment 4 Aluminium Sector Outlook 5 Appendices 6 Contacts 27
Slide 28: Summary Results: Income Statement
SUMMARY RESULTS INCOME STATEMENT US$m 3Q 2014 3Q 2013 % Change Revenue 2 477 2 432 2% Cost of sales (1 858) (2 127) (13%) EBITDA 470 130 262% EBITDA Margin 19% 5% NA Share of results of associates and JVs 235 91 158% Income tax (78) (19) 311% Net Profit / (Loss) 220 (172) NA Adjusted Net Profit/(Los
Slide 29: Summary Results: Balance Sheet and Cash Flow
SUMMARY RESULTS BALANCE SHEET AND CASH FLOW As of 30 As of 30 US$m % Change September 2014 June 2014 Cash and Cash Equivalents 373 377 (1%) Equity Attributable to Shareholders of the 4 957 6 141 (19%) Company Total Liabilities 13 237 13 854 (4%) Total working capital 1 606 1 707 (6%) Net Debt 9 917
Slide 30: Summary Results: Segment Results
SUMMARY RESULTS SEGMENT RESULTS 3Q 2014 2Q 2014 US$m Aluminium Alumina Aluminium Alumina Segment Revenue 2 118 462 1 929 430 Segment Results (EBIT) 402 10 227 (53) EBITDA 492 32 320 (32) EBITDA margin 23,2% 6,9% 16,6% (7,4%) Segment CapEx 63 39 65 49 Segment cash cost per tonne 1 739 284 1 764 337
Slide 31: UC RUSAL Relative Performance vs. Peers and All-in LME Price
31 20% 60% 80% 100% 120% 0% 40% Aug-11 Sep-11 Rebased to 100 Oct-11 Nov-11 Dec-11 Jan-12 Source: Bloomberg as of 06.11.2014 Feb-12 Mar-12 Apr-12 May-12 Jun-12 UC RUSAL (486 HK) Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Norsk Hydro (NHY NO) Mar-13 Apr-13 May-13 PEERS AND “ALL-IN” LME PR
Slide 32: Norilsk Nickel Shareholder Agreement: Latest Amendments
NORILSK NICKEL SHAREHOLDER AGREEMENT: LATEST AMENDMENTS PERIOD MOST RECENT TERMS AMENDED TERMS 2013 (to be paid in 2014) 50% of EBITDA but not less than USD2’bn unchanged 2014 (to be paid in 2015) 50% of EBITDA but not less than USD2’bn unchanged 2015 (to be paid in 2016) 50% of EBITDA, but not less
Slide 33: Agenda
AGENDA 1 Results Overview and Analysis 2 Net Debt Analysis 3 Norilsk Nickel Investment 4 Aluminium Sector Outlook 5 Appendices 6 Contacts 33
Slide 34: UC RUSAL IR Contacts
UC RUSAL IR CONTACTS Boris Krasnojenov UC RUSAL | Head of Investor Relations Phone: +7 (495) 720-51-70 ext. 1528 Email: [email protected] www.rusal.com Veronika Kryachko UC RUSAL | Senior Manager, Investor Relations Phone: +7 (495) 720-51-70 ext. 1520 Email: [email protected] ww