Rusal · RUS:RUAL
Rusal — United Company RUSAL — FY2010 Earnings Presentation
41 slides from Rusal's earnings presentation, Mar 31, 2011
Slide 1: 2010 Results Presentation
2010 Results Presentation 31 March 2011
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
A transformational year Financial and operational results Industry fundamentals favour UC RUSAL Norilsk Nickel investment Capex and maintenance Share price performance Q&A 3
Slide 4: A transformational year…
A transformational year… Returned to growth Focus on cost control and product mix improvement Investments in near-term growth projects Focus on deleveraging of the balance sheet Listing in Hong Kong and Euronext Improved capital structure 4
Slide 5: …with significant achievements
…with significant achievements Strong return to profitability… Adjusted EBITDA increased to US$2,597m Adjusted EBITDA margin has returned to the pre-crisis level of 24% Net profit of US$2,867m Cash generated from operations of US$1,909m before income taxes …resulting in significant debt redu
Slide 6: …that strengthened UC RUSAL industry leadership
…that strengthened UC RUSAL industry leadership World leader in aluminium production in 2010 With the most profitable operations Mt 4.1 3.8 3.8 24% 3.6 16% 13% 10% 1.4 8% 1.2 UC RUSAL RT Alcan Alcoa Norsk Hydro Chalco UC RUSAL Chalco RT Alcan Alcoa Norsk BHP Billiton Hydro Note: EBITDA margin for 20
Slide 7: Agenda
A transformational year Financial and operational results Industry fundamentals favour UC RUSAL Norilsk Nickel investment Capex and maintenance Share price performance Q&A 7
Slide 8: Improved financial performance
Improved financial performance Revenue Gross profit US$m US$m 10,979 3,484 +34% 8,165 2.4x 1,455 2009 2010 2009 2010 Results from operating activities Adjusted EBITDA US$m US$m 2,597 2,031 4.4x 596 (63) 2009 2010 2009 2010 8
Slide 9: Continued focus on cost control
Continued focus on cost control Cash generated from operations (1) Operating expenses US$m US$m 1,450 (3%) 1,404 +43% 1,909 171 89 1,333 713 762 566 553 2009 2010 2009 2010 distribution administrative other operating expenses Cost of sales Aluminium cash operating cost US$m US$/t 1,724 +12% 7,495 6,
Slide 10: Income statement
Income statement US$m 2009 2010 % Change LME aluminium price (US$/t) (1) 1,668 2,173 30% Revenue 8,165 10,979 34% Cost of sales (6,710) (7,495) 12% Adjusted EBITDA (2) 596 2,597 336% Adjusted EBITDA Margin 7% 24% - Share of profits/(losses) and 1,417 2,435 72% impairment of associates Income tax (18
Slide 11: Balance sheet and cash flow
Balance sheet and cash flow US$m As at 31 As at 31 % Change December 2009 December 2010 Cash and Cash Equivalents (1) 236 491 108% Equity Attributable to Shareholders of the Company 6,332 11,456 81% Total Liabilities 17,554 15,069 (14%) Net Debt 13,633 11,472 (16%) US$m 2009 2010 % Change Net cash g
Slide 12: Positive price environment
Positive price environment LME Aluminium price(1) Premiums above LME Aluminium price (2) 2600 US$/t US$/t +65% 108 2400 2x 2200 2000 1800 55 1600 1400 1200 1000 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 2009 2010 Source: Bloomberg Aluminium prices continued their recovery during the year (a
Slide 13: Focus on value added products and key markets
Focus on value added products and key markets 2010 sales to end-users breakdown(1) Sales breakdown by products Other Other Asia products 1% 14% Foundry alloy 1% 6% Sheet ingots America 10% 9% Europe 39% Wire rod 7% Aluminium billet Primary Russia & CIS 9% aluminium 37% 67% Production of alloys Foc
Slide 14: Aluminium
Aluminium Revenue (1) Production volume (1) US$m Kt 9,208 +3% 4,083 +36% 3,946 6,770 989 1,050 976 1,038 963 1,023 1,017 973 2009 2010 2009 2010 1Q 2Q 3Q 4Q Increase in aluminum and alloys revenue for 2010 from higher weighted-average realised prices per tonne (+35% vs 2009), including higher mark
Slide 15: Cost control remains key focus area
Cost control remains key focus area Aluminium cash cost bridge Average LME Aluminium price +17% 58 +30% 2,173 66 82 1,668 47 1,724 1,471 2009 Energy Alumina Raw materials Other 2010 2009 2010 partially linked to Source: UC RUSAL management accounts Source: Bloomberg LME Increased energy expenses d
Slide 16: UC RUSAL relies on green and renewable source of power
UC RUSAL relies on green and renewable source of power Production and principal electrical power sources UC RUSAL within Russia by region (2) Other Transport 4% 9% European Russia Power Payroll 25% Principal source of power: 6% Hydro / Nuclear Raw materials c. 85% 17% 3.453mt c. 8% Alumina 0.309mt 3
Slide 17: Alumina
Alumina Revenue – third party shipments (1) Production volume US$m Kt +8% 7,840 597 7,279 +46% 2,082 1,884 410 1,657 2,046 1,619 1,889 2,119 1,822 2009 2010 2009 2010 Note: (1) Represents revenue from alumina sales to third parties under specific long-term 1Q 2Q 3Q 4Q contracts Increase in revenue
Slide 18: Cost control remains key focus area
Cost control remains key focus area Alumina cash cost bridge Average oil price US$/t 80 +8% +28% 18 (1) 62 (3) 5 277 257 2009 Exchange rate Raw materials Energy Others 2010 2009 2010 Linked to oil prices Source: UC RUSAL management accounts Source: Bloomberg, WTI Cushing Crude Oil spot Alumina cas
Slide 19: Other businesses
Other businesses Revenue - Foil Revenue – Others (1) US$m US$m 21% 293 19% 881 243 742 559 477 101 100 165 221 2009 2010 2009 2010 (2) Transportation Energy Other products and income Foil revenue increased significantly driven by sales volumes (+13%) and sales prices growth (+7%) for 2010 compared
Slide 20: Coal and transportation business
Coal and transportation business Coal production (50% basis) Transportation Kt 19,445 Kt +12% 18,617 +14% 17,344 16,397 2009 2010 2009 2010 Coal is shipped by in-house transportation infrastructure (100% owned by UC RUSAL) Coal is consumed by the power plant which is the main source of power for
Slide 21: Segment results
Segment results US$m 2010 2009 Aluminium Alumina Aluminium Alumina Segment Revenue 9,408 2,484 6,893 1,884 EBIT 2,244 49 300 (223) EBITDA 2,638 135 750 (107) EBITDA margin 28% 5% 11% (6%) Aluminium segment is involved in the production and sale of primary aluminium and related products EBITDA ma
Slide 22: 2011 production guidance
2011 production guidance Aluminium production Alumina production Mt Mt 4.7 11.5 +2% 4.2 4.1 3.9 +8% 8.5 7.8 7.3 2009 2010 2011E Full capacity 2009 2010 2011E Full capacity Plan to increase production of aluminium by 2% in 2011 by increasing production at Siberian smelters Expect to increase alum
Slide 23: Deleveraging, Debt Repayment and Restructuring
Deleveraging, Debt Repayment and Restructuring Net Debt (1) Debt repayment and restructuring 13,633 Successfully completed restructuring of its (16%) overall credit portfolio through refinancing 11,472 of US$4.58bn VEB loan(2) out of proceeds of a loan provided by Sberbank in September 2010 Tota
Slide 24: Deleveraging, Refinancing and other activities
Deleveraging, Refinancing and other activities Net Debt(1) vs Norilsk Nickel stake New financing The project companies of the BEMO project 12,676 entered into loan agreements with VEB to 11,472 finance the completion of construction of BEMO project with the first draw down in December 2010 (no gua
Slide 25: Agenda
A transformational year Financial and operational results Industry fundamentals favour UC RUSAL Norilsk Nickel investment Capex and maintenance Share price performance Q&A 25
Slide 26: Aluminium consumption expected to continue growing
Aluminium consumption expected to continue growing Global aluminium consumption Aluminium consumption by regions RoW 43.8 Russia 10% 40.6 2% 38.0 37.8 Japan 35.6 5% 34.4 31.9 30.0 China 27.8 41% North America 12% Western Europe 15% Asia ex-China 2003 2004 2005 2006 2007 2008 2009 2010 2011E 15% Sour
Slide 27: Growing demand from Asia remains a key driver for the industry
Growing demand from Asia remains a key driver for the industry UC RUSAL(1) Global aluminium demand UC RUSAL locations: Mt Demand 2011 vs 2010 4.1 1.3 2011 Bauxite, alumina Potential Aluminium Production China 18.5 +12% additions 2010 W.Europe 6.2 +2% USA 5.4 +5% Siberia Japan 2.0 +4% Russia&CIS 0.9
Slide 28: China is expected to become a net importer ...
China is expected to become a net importer ... Chinese smelters profitability China aluminium balance 2010-2015 US$/t US$/t kt 30000 2700 300 25000 2500 200 20000 2300 100 15000 2100 0 10000 1900 -100 5000 1700 1500 -200 0 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 2009 2010 2011 2012 2013 2014 2015
Slide 29: Chinese supply is constrained by carbon emission and energy intensity issues
… while Chinese supply is constrained by carbon emission and energy intensity issues China’s energy efficiency gains and Aluminium producers power costs carbon abatement 100% 2005=100 US$/t 1200 China 90% 1000 E. Europe China achieves its 80% carbon intensity 800 15% efficiency gain versus reduction
Slide 30: Short-term price momentum is supported by a tight physical market
Short-term price momentum is supported by a tight physical market LME inventories Regional physical premiums US$/t days 200 US$193/t US$/t Europe US Japan 3200 100 3000 90 2800 160 80 US$141/t 2600 70 2400 120 60 2200 US$113/t 50 2000 40 80 1800 30 1600 1400 20 40 1200 10 1000 0 0 1999 2001 2003 200
Slide 31: Changes in alumina pricing should benefit UC RUSAL's long position
Changes in alumina pricing should benefit UC RUSAL’s long position UC RUSAL Alumina Index Alumina spot price vs oil price US$/t US$/t US$/t 500 160 400 390 450 140 380 400 120 370 350 100 360 350 300 80 340 250 60 330 200 40 320 310 150 20 300 100 0 30.08-05.09 04.10-10.10 08.11-14.11 13.12-19.12 17
Slide 32: Agenda
A transformational year Financial and operational results Industry fundamentals favour UC RUSAL Norilsk Nickel investment Capex and maintenance Share price performance Q&A 32
Slide 33: Performance of UC RUSAL's investment in Norilsk Nickel
Performance of UC RUSAL’s investment in Norilsk Nickel Norilsk Nickel share price performance (Jan 2010 – Mar 2011) Norilsk Nickel key financials 200% Financials, mln $ 2010E Revenue 14,698 180% 180% EBITDA 7,415 EBITDA margin 50% Net Income 5,017 160% 166% Net Income margin 34% 1 Jan 2010 = 100% No
Slide 34: UC RUSAL views Norilsk Nickel as undervalued
UC RUSAL views Norilsk Nickel as undervalued … which is underpinned by current commodity cycle GS Global Commodity Index Observations 12,000 Commodity prices expected to 10,000 move broadly higher in 2011 on the back of robust growth in 8,000 emerging markets and inflationary pressures 6,000 Str
Slide 35: Agenda
A transformational year Financial and operational results Industry fundamentals favour UC RUSAL Norilsk Nickel investment Capex and maintenance Share price performance Q&A 35
Slide 36: BEMO project – continuing progress Hydro Power Plant
BEMO project – continuing progress Hydro Power Plant BEMO HPP status Assembly works 7 turbines out of 9 delivered on site 93% of the concrete placing and assembly of pre-cast reinforced concrete has occurred 89% of the hydromechanical equipment and metal structures and 62% of the cranes have b
Slide 37: BEMO project – continuing progress Smelter
BEMO project – continuing progress Smelter BEMO smelter status Production area Earth works comprising 9,014 thousand cubic meters of ground excavation has occurred Earth works comprising back-filling of 6,031 thousand cubic meters has occurred 29.7 thousand cubic meters of cast-in-place reinfo
Slide 38: Attractive growth options – Taishet
Attractive growth options – Taishet UC RUSAL capital expenditures Taishet smelter status Production area Negotiating project financing with from various international lenders and Russian banks for the first phase of Taishet smelter Taishet smelter full capacity of 750Ktpa (considering first phas
Slide 39: Agenda
A transformational year Financial and operational results Industry fundamentals favour UC RUSAL Norilsk Nickel investment Capex and maintenance Share price performance Q&A 39
Slide 40: 2010 – first year as a publicly listed company
2010 – first year as a publicly listed company Share price performance ADTV(1) since RDR listing HK$ Mln shares 15,00 90 US$m 19.1 14,00 80 15.0 13,00 +20% 70 14.0 12.2 12,00 60 11,00 50 10,00 40 9,00 30 8,00 20 7,00 10 6,00 0 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 Dec-10 Jan-11 Feb
Slide 41: Agenda
A transformational year Financial and operational results Industry fundamentals favour UC RUSAL Norilsk Nickel investment Capex and maintenance Share price performance Q&A 41