Rusal · RUS:RUAL

Rusal — United Company RUSAL — 9M 2010 Earnings Presentation

36 slides from Rusal's earnings presentation, Nov 12, 2010

  1. Slide 1: 9M 2010 Results Presentation

    9M 2010 Results Presentation 12 November 2010

  2. 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

  3. Slide 3: Agenda

     Highlights and key achievements of 9M 2010  Market update  Norilsk Nickel investment  Capex and maintenance  Increasing liquidity  Q&A  Appendix 3

  4. Slide 4: Highlights

    Highlights Positive dynamics accelerated…  Adjusted EBITDA increased to US$1,889m  Adjusted EBITDA margin has returned to the pre-crisis level of 24%  Net profit of US$1,420m  Cash generated from operations of US$1,144m before income taxes and interest paid …resulting in increasing financial sta

  5. Slide 5: Positive dynamics accelerated…

    Positive dynamics accelerated… Revenue Adjusted EBITDA US$m 8,029 US$m 1,889 +37% 5,876 x6 328 9M 2009 9M 2010 9M 2009 9M 2010 Results from Operations Net Profit US$m US$m 1,420 1,467 9M 2009 9M 2010 (826) 9M 2009 (161) 9M 2010 UC RUSAL continues to deliver strong profitability 5

  6. Slide 6: …while focus on cost control remains

    …while focus on cost control remains Gross Profit Cash generated from operations (1) US$m 2,573 US$m 1,144 +62% +171% 706 951 (144) 9M 2009 9M 2010 9M 2009 9M 2010 Operating expenses Aluminium cash operating cost US$m +0.5% US$/t 1,056 1,061 +2.6% 1,727 54 1,684 204 566 449 403 441 9M 2009 9M 2010 1

  7. Slide 7: Income statement

    Income statement US$m 9M 2009 9M 2010 % Change LME aluminium price (US$/t) (1) 1,552 2,116 36% Revenue 5,876 8,029 37% Cost of sales 4,925 5,456 11% Adjusted EBITDA (2) 328 1,889 476% Adjusted EBITDA Margin 6% 24% nm (3) Share of profits/(losses) and 342 849 148% impairment of associates Income tax

  8. Slide 8: Rising prices and premiums

    Rising prices and premiums LME Aluminium price(1) Premiums above LME Aluminium price(2) US$/t 9M 2010 Av. LME Al 120 US$/t 114 9M 2009 Av. LME Al US$1,552/t US$2,116/t 95 2400 100 83 2200 78 80 66 2000 1800 60 48 39 1600 40 1400 20 1200 1000 0 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10

  9. Slide 9: Maintained presence in key markets

    Maintained presence in key markets Sales breakdown for 9M 2010(1) Sales of alloys Kt % 1 800 40 Africa 1% America 1 600 35 10% 1 400 30 Russia & CIS 1 200 32% Asia 25 18% 1 000 Global Regional 20 Traders clients 800 43% 57% 15 600 400 10 200 5 Europe 39% 0 0 2009 2010P 2011P Alloys (incl. HPA) Alloy

  10. Slide 10: Aluminium

    Aluminium Revenue Production volume US$m Kt 6,823 +3% 3,034 2,956 +39% 4,918 976 1,038 963 1,023 1,017 973 9M 2009 9M 2010 9M 2009 9M 2010 1Q 2Q 3Q  Increase in aluminum revenue for 9M 2010 was due to higher weighted-average realised prices per tonne (+40% vs 9M 2009), as well as higher market prem

  11. Slide 11: Aluminium price is the key driver of revenue growth

    Aluminium price is the key driver of revenue growth Revenue bridge (9M 2009 – 9M 2010) US$m 11 138 62 123 76 221 734 1,600 (812) 8,029 5,876 9M 2009 Average LME Average Average LME Average Price (other Other income Volume Volume (alloys) Volume (other) 9M 2010 (primary Premium (alloys) Premium produ

  12. Slide 12: Cost control remains key focus area

    Cost control remains key focus area Aluminium cash cost bridge US$/t +2.6% 10 34 (6) (18) 22 1,727 1,684 +20% 1H 2010 Exhange rate Power Alumina Raw materials Other expenses 3Q 2010  Liberalization of the Russian electricity market results in higher cost of power LME Aluminium  From 1 July 2010 80

  13. Slide 13: Alumina

    Alumina Revenue – third party shipments (1) Production volume US$m 409 Kt +7% 5,758 5,395 +53% 2,046 1,657 268 1,619 1,889 2,119 1,822 9M 2009 9M 2010 9M 2009 9M 2010 Note: (1) Represents revenue from alumina sales to third parties under specific long-term contracts 1Q 2Q 3Q  Increase in revenue fo

  14. Slide 14: Alumina cash operating cost

    Alumina cash operating cost Alumina cash cost bridge US$/t (0.1%) 0.5 2.3 0.5 (2.2) (2.1) 0.7 271.5 271.8 7% 1H 2010 Exchange rate Power and raw Payroll Shop expenses Plant expenses Others 3Q 2010 materials Oil WTI USD/bbl  Alumina cash operation costs remained flat at approx. US$272/t despite over

  15. Slide 15: Other businesses

    Other businesses Revenue - Foil Revenue - Others US$m US$m 209 +24% +13% 588 521 63 169 73 165 64 384 360 9M 2009 9M 2010 9M 2009 9M 2010 Other products and income Transportation Energy  Foil revenue increased significantly driven by production volumes (+22%) and sales prices growth (+10%) for 9M 2

  16. Slide 16: Balance sheet and cash flow

    Balance sheet and cash flow US$m As at 31 As at 30 % Change December 2009 September 2010 Cash and Cash Equivalents (1) 236 520 120% Equity Attributable to Shareholders of the Company 6,332 9,975 58% Total Liabilities 17,554 15,044 (14%) Net Debt 13,633 11,750 (14%) US$m 9M 2009 9M 2010 % Change Net

  17. Slide 17: Increasing financial stability

    Increasing financial stability Net Debt Reduction under the IOA Refinancing of VEB loan US$m 0.2 (2.4bn)  Refinancing of VEB loan with new US$4.58bn PIK (1.9) loan facility from Sberbank in October 2010 9.9 (0.5)  Maturity extended to December 2013 with an 7.7 option to extend for a further 1.5 ye

  18. Slide 18: Agenda

     Highlights and key achievements of 9M 2010  Market update  Norilsk Nickel investment  Capex and maintenance  Increasing liquidity  Q&A  Appendix 18

  19. Slide 19: Recovery in price momentum supported by a tight physical market

    Recovery in price momentum in the short-term is supported by a tight physical market LME inventories Regional physical premiums kt 200 US$/t Europe US Japan 4 650 (6%) 4 600 160 4 550 4 500 120 4 450 4 400 80 4 350 4 300 40 4 250 4 200 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

  20. Slide 20: Russian and CIS consumption driven by growth of infrastructure projects

    Russian and CIS consumption driven by a growth of infrastructure projects Russian and CIS aluminium consumption Aluminium consumption by product mt US$b 1000 1,6 60 900 Kt 1,4 50 800 1,2 700 40 1 600 500 0,8 30 400 0,6 20 300 0,4 200 10 0,2 100 0 0 0 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 200

  21. Slide 21: China is expected to become a sustainable net importer

    China is expected to become a sustainable net importer Cash Costs C1 2010 China aluminium balance 2010-2015 US$/t kt 30000 2700 25000 2500 20000 Current SHFE price 2300 15000 2100 10000 1900 5000 1700 0 2009 2010 2011 2012 2013 2014 2015 1500 -5000 0 5000 10000 15000 20000 Production Consumption Bal

  22. Slide 22: Alumina price de-linkage

    Alumina price de-linkage Historic alumina price and costs Alumina versus Iron ore market pricing US$/t 20% 700 600 16% 500 US$400/t potential de-linked price (1) 12% 400 2009 cost 300 US$226/t 8% 200 4% 100 1990 cost US$161/t 0 0% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

  23. Slide 23: Aluminium ETF will support market prices

    Aluminium ETF will support market prices Aluminium LME price vs Indexes 5 year forward curve price change 50% 25% 40% 20% 15% 30% 10% 8% 20% 5% 10% 0% 0% -5% -1.7% -3% S&P 500 USD/EUR Al cash LME -10% -10% -15% -13% -20% Since 2000 -20% -17% -30% Aluminium Zinc Lead Copper Nickel Y-o-Y -40% Source:

  24. Slide 24: Agenda

     Highlights and key achievements of 9M 2010  Market update  Norilsk Nickel investment  Capex and maintenance  Increasing liquidity  Q&A  Appendix 24

  25. Slide 25: EGM Results. Public Shareholders Impeachment of Interros and Norilsk Nickel's management

    EGM Results. Public Shareholders Impeachment of Interros and Norilsk Nickel’s management Termination and Dissolution of the Board Voting Results Observations % of total shares outstanding 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%  4% of Metalloinvest voting Rusal 25% for termination of the Board co

  26. Slide 26: Glass Lewis and ISS Recommendation

    Glass Lewis and ISS Recommendation “We are troubled by the current composition of the board and the disproportionate control wielded by one of the major shareholders… We believe that minority shareholders will benefit from a board that is more representative of the current shareholder structure. In

  27. Slide 27: Interros Proposal to Sell UC Rusal's 25% Stake

    Interros Proposal to Sell UC Rusal’s 25% Stake Interros Letter (22 October 2010) UC Rusal Response (1 November 2010) To: Mr. V.F.Vekselberg To: Mr. V.O. Potanin Chairman of Board of Directors of UC Rusal CEO of Interros ... Recent events, above all Rusal’s actions, had negative impact Your letter is

  28. Slide 28: Unlocking c. $20bn of Hidden Value

    Unlocking c. $20bn of Hidden Value $bn EV / EBITDA(1) Comments Current Current market capitalisation(2) $9.3 $37.3 5.0x Market Cap Price Average realised price increase of 5% – c.$400m p.a. Increase Cost SG&A cost reduction to 8%(3) of total cost – Value of a 25% stake c.$300m p.a. Reduction 61% Dem

  29. Slide 29: Agenda

     Highlights and key achievements of 9M 2010  Market update  Norilsk Nickel investment  Capex and maintenance  Increasing liquidity  Q&A  Appendix 29

  30. Slide 30: Capex and maintenance

    Capex and maintenance BEMO HPP project status(3)  6 out of 9 turbines already delivered on site  Packing of concrete and precast concrete installation – 92%  Installation of the hydromechanical equipment, metalware – 86%  Installation of crane equipment – 49%  Installation of the hydropower equ

  31. Slide 31: Agenda

     Highlights and key achievements of 9M 2010  Market update  Norilsk Nickel investment  Capex and maintenance  Increasing liquidity  Q&A  Appendix 31

  32. Slide 32: Reduction of the board lot size on HKSE

    Reduction of the board lot size on HKSE RUSAL share price performance August 31 October4 (million shares) (HK$) Public announcement of board Board lot reduction lot reduction $11,00 25 $10,50 +29% $10,00 20 $9,50 $9,00 15 $8,50 $8,00 10 $7,50 $7,00 5 $6,50 $6,00 0 Aug-10 Sep-10 Sep-10 Oct-10 Oct-10

  33. Slide 33: Agenda

     Highlights and key achievements of 9M 2010  Market update  Norilsk Nickel investments  Capex and maintenance  Increasing liquidity  Q&A  Appendix 33

  34. Slide 34: Agenda

     Highlights and key achievements of 9M 2010  Growth projects  Norilsk Nickel investment  Market update  Increasing liquidity  Q&A  Appendix 34

  35. Slide 35: Derivative financial instruments

    Derivative financial instruments  In November 2009 the Group entered into long-term electricity contracts for 9 to 11 years for electricity and power supply with related parties controlled by the immediate parent company of the Group.  The electricity and power tariffs stipulated by the contracts

  36. Slide 36: Investment in Norilsk Nickel: change in accounting policy

    Investment in Norilsk Nickel: change in accounting policy  Norilsk Nickel prepares and publishes its financial information significantly later than the Group  Consequently, the Group has adopted an approach for the purposes of equity accounting whereby the Group utilizes the financial results of N

United Company RUSAL — 9M 2010 Earnings Presentation on 6ix