United Company RUSAL — Q1 2010 Earnings Presentation
20 slides from United Company RUSAL's earnings presentation, May 14, 2010
Slide 1: 1Q 2010 Results
ni RUSAL - UC RUS AL 1Q 2010 Results 14 May 2010
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: Highlights
Highlights Strong return to profitability in 1Q 2010 Adjusted EBITDA of US$485m Adjusted EBITDA margin of 21% Net Profit of US$247m Financial stability Total debt reduced to US$12.0bn (1) Significantly ahead of debt reduction targets As a result starting from June 2010 will pay a lower
Slide 4: Dramatic improvement in performance
Dramatic improvement in performance Revenue Adjusted EBITDA US$m US$m 31% 2,331 1,777 485 1Q 2009 1Q 2009 1Q 2010 1Q 2010 (78) Cost of Sales Net Profit US$m US$m 1,609 (3%) 1,566 247 1Q 2009 1Q 2010 1Q 2009 1Q 2010 (638) Decreased costs and increased profitability 4
Slide 5: Income statement
Income statement US$m 1Q 2009 1Q 2010 % Change LME Aluminium (US$/t) 1,360 2,163 59% Revenue 1,777 2,331 31% Cost of Sales (1,609) (1,566) (3%) Adjusted EBITDA (1) (78) 485 - Adjusted EBITDA Margin (4%) 21% - Share of profits/(losses) and 20 263 1,215% impairment of associates Income Tax (71) (22) (
Slide 6: Balance sheet and cash flow
Balance sheet and cash flow US$m As at 31 As at 31 % Change December 2009 March 2010 Cash and Cash Equivalents 236 261 11% Equity Attributable to Shareholders of the 6,332 9,311 47% Company Total Liabilities 17,554 15,938 (9%) Net Financial Debt (1) 13,633 12,084 (11%) US$m 1Q 2009 1Q 2010 % Change
Slide 7: Refocus on world class low cost facilities
Refocus on world class low cost facilities Aluminium Production Alumina Production Kt Kt (4%) 2,119 (14%) 1,017 973 1,822 1Q 2009 1Q 2010 1Q 2009 1Q 2010 Aluminium Production vs. Full Capacity Alumina Production vs. Full Capacity Mt Mt 4.6 4.4 +3% 11.3 11.5 4.1 3.9 +11% 8.1 7.3 2008 2009 2010 projec
Slide 8: Moderate cost increase includes LME-linked and one-off items
Moderate cost increase includes LME-linked and one-off items Besides LME-linked and exchange-related items, increase in recurring costs is principally attributable to the continued liberalization of the Russian energy market and growing market prices for certain raw materials (coke, pitch, anodes)
Slide 9: Cost inflation lags behind top-line growth and industry averages
Cost inflation lags behind top-line growth and industry averages UC RUSAL cash costs vs. aluminium price Brook Hunt Aluminium C1 cash costs 2010 US$/t US$/t 2,400 2,000 +30% 1,600 1,200 Chalco Norsk Hydro +16% UC RUSAL Alcoa Rio Tinto BHP Billiton 800 400 2009 1Q 2010 0,0 5,0 10,0 15,0 20,0 25,0 30,
Slide 10: Aluminium cash operating cost structure
Aluminium cash operating cost structure UC RUSAL Aluminium cash cost structure Industry average cash cost structure (1) Power Power 37% 27% Other 8% Other 14% Payroll 6% Payroll Alumina Alumina 7% 37% Raw Materials 34% 15% Raw Materials 15% Source: UC RUSAL management accounts for 1Q 2010 Note: (1)
Slide 11: Norilsk Nickel investment delivering value for UC RUSAL
Norilsk Nickel investment delivering value for UC RUSAL Market value of UC RUSAL stake Norilsk Nickel Share price performance US$m Total debt (1) = 12.0 US$ 26% 8,862 32% 164% 6,707 74% As at 31 December, 2009 As at 31 March, 2010 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Note: (1) Total debt is cal
Slide 12: Capex profile and organic growth options
Capex profile and organic growth options UC RUSAL capital expenditures US$m 1Q 2010 2010 (2) Negotiating project finance terms with VEB for initial phases of BEMO and Taishet smelters in BEMO 19 (1) 256 mid-2010 Maintenance 59 225 Total 78 481 BEMO smelter first phase capacity of 147kt and
Slide 13: Recovery in price momentum supported by tight physical market
Recovery in price momentum in the short-term is supported by tight physical market High Levels of Physical Premia Japanese Port Stocks at 20-year lows US$/t kt Source: Bloomberg, as of March 2010 Source: Metal Bulletin, Platts as of 5 May 2010 Tight physical markets support aluminium price levels in
Slide 14: Global aluminium demand returned to growth in 2010
Global aluminium demand returned to growth in 2010 China aluminium demand continues to grow …As demand growth recovers in the rest of rapidly… the world Mt Mt +16.8% 30.0 +9.7% 20.0 16.4 24.8 22.3 14.0 20.3 12.6 20.0 10.0 10.0 0.0 0.0 2008 2009 2010E 2008 2009 2010E Demand for aluminium semis: trans
Slide 15: The key demand driver is still urbanisation and industrialisation in China
The key demand driver is still urbanisation and industrialisation in China Primary aluminium consumption vs. GDP Number of cars sold: China vs USA 40 Austria 35 30 25 Germany k g p e r c a p ita Greece Canada 20 South Korea Japan USA 15 Italy Australia Taiwan China France 10 Russia Turkey 5 Thailand
Slide 16: Key demand driver – higher aluminium usage in goods
Key demand driver – shifting of production paradigm – higher aluminium usage in goods Passenger cars ownership % of aluminium used in cars (per thousand people) Source: JD Power,CEIC, ACEA, Wards Auto, data as for 2009 Source: OICA, Drucker Worldwide The joint impact of modern technology, legislativ
Slide 17: Rising power costs in China pushing up marginal cost of production
Rising power costs in China pushing up the marginal cost of production of aluminium 2009 Aluminium Smelter Energy Costs by Source: LME as of 06/01/10 Increasing Thermal Coal Prices Geography US$/t US$/t Increase if RMB appreciates by 5% Total Energy Cost Cumulative Production (kt) Source: Brook Hunt
Slide 18: Short-term volatility
Short-term volatility Aluminium vs. other base metals 1,1 Aluminium is expected to outperform other base metals due to fundamental price support 1,1 from marginal production costs 1,0 Moves by China to tighten monetary policy have unnerved markets, but should help 1,0 establish sustainable long-
Slide 19: Aluminium likely to outperform other metals
Aluminium likely to outperform other metals Aluminium forward price curve 5 year forward curve price change US$/t (indexed to 100 - May 2010 to May 2015) 3,250 25% 20% 17.1% 3,000 15% 2,750 10% 2,500 5% 2.3% 0.1% 0% 2,250 -5% -6.3% 2,000 -10% -15% 1,750 -15.5% -20% 1,500 2010 2011 2012 2013 2014 201
Slide 20: 2010 outlook - focus on strengthening competitive position
2010 outlook- focus on strengthening competitive position Key priorities for 2010 Continued focus on operational efficiencies improvement, cost management and HSE performance Restart of 100,000 tonnes of aluminium production and 800,000 tonnes of alumina production Steady deleveraging through