Rusal · RUS:RUAL
Rusal — UC Rusal — Q2 2014 Earnings Presentation
31 slides from Rusal's earnings presentation, August 2014
Slide 1: Entering an era of metal deficit
Entering an era of metal deficit 2Q14 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 and debt refinancing progress 3 Norilsk Nickel investment 4 Aluminium sector outlook 5 Appendices 6 Contacts 3
Slide 4: 2Q14 Financial and Operating Highlights
2Q14 FINANCIAL AND OPERATING HIGHLIGHTS • Improved profitability and strengthening cash flows o Net profit entered positive territory ($129mn in 2Q14) first time since 1Q13 o 2Q14 EBITDA of aluminium segment: $320mn (+36%QoQ) with EBITDA margin of 16,6% vs. 13,2% in 1Q14 • Record high premiums and r
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 1H 2014 1 compliance with the best industry 4 2013 health and safety standards 2012 6 o H&S programs and initiatives at all sites: • UC RUSAL is governed by the Policy 2011
Slide 6: Production Results
PRODUCTION RESULTS ALUMINIUM PRODUCTION • Maintaining and contributing to supply kt discipline o 2Q14 aluminium output: 900kt (+1,8% QoQ and - 992 9,3% YoY) 47% o 2Q14 alumina output: 1 804 kt (-0,5% QoQ) 953 44% o 2Q14 bauxite output: 3 003 kt (+4,2% QoQ) 43% 43% 43% • Enhancing high value-added pr
Slide 7: Delivering on Cost
DELIVERING ON COST • Focus on stringent cost management • 2Q14 cash cost remains largely flat: $1 764/t vs. $1 741/t in 1Q14 • RUSAL at forefront of cost leadership o Energy contributes 27% in RUSAL’s aluminium cash cost vs. 33% industry average; o Siberian plants contributed 96% to aluminium produc
Slide 8: Profitability Growth
PROFITABILITY GROWTH • EBITDA 2Q14: $220mn (+27% QoQ) EBITDA MARGIN • 2Q14 EBITDA margin is 9,7% 9,7% o 2Q14 Aluminium segment EBITDA margin: 8,1% 16,6% vs. 13,2% in 1Q14; RUSAL maintains 6,9% high profitability level in aluminium segment 5,3% 4,8% o Higher aluminium prices and stable costs provided
Slide 9: RUSAL's Management Outlook
RUSAL’S MANAGEMENT OUTLOOK o Aluminium production is expected to be around 1,8mnlt in 2H14. RUSAL Aluminium Segment maintains strict cost discipline and low cash cost base o Management expects positive aluminium price dynamics in 2H14 with Pricing physical premiums continuing to rise through to the
Slide 10: Agenda
AGENDA 1 Results overview and analysis 2 Net debt analysis and debt refinancing progress 3 Norilsk Nickel investment 4 Aluminium sector outlook 5 Appendices 6 Contacts 10
Slide 11: Debt Structure Analysis
DEBT STRUCTURE ANALYSIS BALANCED CREDIT PORTFOLIO • RUSAL has a diversified debt 10% Sberbank 7% 4% USD structure by currency and 6% 7% PXF RUB domestic/international lenders split 45% 32% RUB bonds EURO • Value of stake in Norilsk Nickel (“NN”) Gazprombank 89% is approximately $8,7bn(1) which Other
Slide 12: Refinancing Process Completed
REFINANCING PROCESS COMPLETED • RUSAL’s average debt maturity increases from 2 years to 4,4 years o PXF: • Tranche A (International lenders) of USD2,56 bn maturity extended to 2018 • Tranche C(1) (Russian lenders) of USD1 bn extended to 2020, repayment commencing in 2017 • The grace period until 201
Slide 13: Agenda
AGENDA 1 Results overview and analysis 2 Net debt analysis and debt refinancing progress 3 Norilsk Nickel investment 4 Aluminium sector outlook 5 Appendices 6 Contacts 13
Slide 14: RUSAL's Investment in Norilsk Nickel
RUSAL’S INVESTMENT IN NORILSK NICKEL • Norilsk Nickel stake is a long term RUSAL’S STAKE IN NORILSK NICKEL US$ mln value-accretive strategic investment 16 000 Norilsk Nickel stake value is with massive upside potential 14 000 $8,7bn. (+20% YTD) 12 000 o Market expects further strengthening of Norils
Slide 15: Exposure to Diversified Metal Basket
EXPOSURE TO DIVERSIFIED METAL BASKET • RUSAL’s stake in Norilsk Nickel (NN) NN PERFORMANCE VS. BASE METALS Rebased to 100 secures a unique exposure to a 230 210 broader positive trend in base metal 190 and the PGM sector 170 o Market faces a shortage of nickel and palladium 150 130 as Norilsk Nickel
Slide 16: Solid Dividend Flows
SOLID DIVIDEND FLOWS • Norilsk Nickel’s cash flow strength is driven by a favorable pricing environment, a professional team and high corporate governance standards which secure solid dividend flows for RUSAL • In 2014-2016, RUSAL’s attributable gross dividends from Norilsk Nickel may reach up to $3
Slide 17: Agenda
AGENDA 1 Results overview and analysis 2 Net debt analysis and debt refinancing progress 3 Norilsk Nickel investment 4 Aluminium sector outlook 5 Appendices 6 Contacts 17
Slide 18: All-in Aluminium Price Is Well Supported
ALL-IN ALUMINIUM PRICE IS WELL SUPPORTED • RUSAL expects LME spot prices in 2H2014 ALUMINIUM PRICE DYNAMICS to consolidate above $2 100/t US$/t “All-in” price is at 3 000 3Q11 level o Narrowing contango and increasing warrants 2 500 cancellation highlight physical market tightness 2 000 o LME invent
Slide 19: 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% China 13% o In 1H14, global primary aluminium N.America 5% consumption reached 27mlnt (+6% YoY) Asia Ex.Chi
Slide 20: Automotive Aluminium – The Start of a New Era
AUTOMOTIVE ALUMINIUM – THE START OF A NEW ERA • The shift from steel to aluminium in the automotive sector will be a game changer for the industry o Tesla, Mercedes, BMW and Ford will all exceed the average aluminum content and the average aluminum share of curb weight for example, the Ford F-150 wi
Slide 21: Capacity Closures Constrain the Supply Side
CAPACITY CLOSURES CONSTRAIN THE SUPPLY SIDE • Primary aluminium supply has been impacted MAIN PRODUCTION CUTS EX-CHINA SINCE 2012 by ~3mlnt of annualised production cuts ex- kt 21% 15% 100% 9% 13% 15% China in FY11-13 o From 2012, RUSAL has shut down 647kt of loss- making capacities 449 o We estimat
Slide 22: China Conundrum
CHINA CONUNDRUM CHINA’S ALUMINIUM CAPACITY • China faces risk of Al deficit as domestic mlnt 88% 32,6 demand grows 13% in FY14 87% 28,8 27,7 25,7 25,1 85% o Supply chain has 32mlnt of aluminium capacity 22,7 whereas FY14 demand may exceed 28mlnt o The investments in primary aluminum projects 2012 20
Slide 23: Mounting Bauxite Deficit
MOUNTING BAUXITE DEFICIT • The market faces a mounting bauxite deficit due to (1) the Indonesian mineral export ban, (2) rising demand in China and the Middle East and (3) limited availability of economically viable bauxite deposits o China may run out of bauxite inventories in 6-12 months. The aver
Slide 24: Agenda
AGENDA 1 Results overview and analysis 2 Net debt analysis and debt refinancing progress 3 Norilsk Nickel investment 4 Aluminium sector outlook 5 Appendices 6 Contacts 24
Slide 25: Summary Results: Income Statement
SUMMARY RESULTS INCOME STATEMENT US$m 2Q 2014 2Q 2013 % Change Revenue 2 261 2 521 -10,3% Cost of sales -1 864 -2 196 -15,0% EBITDA 220 174 26,4% EBITDA Margin 9,7% 6,9% 2,8 % Share of results of associates and JVs 294 9 NA Income tax -39 -51 -23,5% Net profit / (Loss) 116 -458 N/A Adjusted Net Loss
Slide 26: Summary Results: Balance Sheet and Cash Flow
SUMMARY RESULTS BALANCE SHEET AND CASH FLOW As of 30 As of 31 US$m % Change June 2014 March 2014 Cash and Cash Equivalents 377 552 (31,7%) Equity Attributable to Shareholders of the 6 141 5 328 15,3% Company Total Liabilities 13 854 13 940 (0,6%) Total working capital 1 707 1 609 6,1% Net Debt 10 59
Slide 27: Summary Results: Segment Results
SUMMARY RESULTS SEGMENT RESULTS 2Q 2014 1Q 2014 US$m Aluminium Alumina Aluminium Alumina Segment Revenue 1 929 430 1 784 545 Segment Results (EBIT) 227 (53) 144 (50) EBITDA 320 (32) 236 (29) EBITDA margin 16,6% (7,4%) 13,2% (5,3%) Segment CapEx 65 49 61 54 Segment cash cost per tonne 1 764 337 1 741
Slide 28: UC RUSAL Relative Performance vs. Peers and All-in LME Price
UC RUSAL RELATIVE PERFORMANCE VS. PEERS AND “ALL-IN” LME PRICE Rebased to 100 US$/t 120% 3 000 100% 2 500 80% 2 000 60% 1 500 40% 1 000 20% 500 0% 0 Nov-11 Dec-11 Nov-12 Dec-12 Nov-13 Dec-13 Jan-12 Jun-12 Jul-12 Jan-13 Jun-13 Jul-13 Jan-14 Jun-14 Jul-14 Mar-12 Mar-13 Mar-14 Feb-12 Feb-13 Feb-14 Aug-
Slide 29: RUSAL's Corporate Governance
RUSAL’S CORPORATE GOVERNANCE RUSAL meets highest corporate INDEPENDENT DIRECTORS ON THE BOARD governance standards o Reputable diversified and experienced Board Independent directors 5 5 of Directors Non-executive o Main Board committees: Executive o Audit Committee 8 o Corporate Governance and Nomi
Slide 30: Agenda
AGENDA 1 Results overview and analysis 2 Net debt analysis and debt refinancing progress 3 Norilsk Nickel investment 4 Aluminium sector outlook 5 Appendices 6 Contacts 30
Slide 31: 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