Rusal · RUS:RUAL
Rusal — United Company Rusal — FY2018 Earnings Presentation
41 slides from Rusal's earnings presentation, Mar 7, 2019
Slide 1: 4Q 2018 and 12M 2018 Financial Results Presentation
4Q 2018 AND 12M 2018 FINANCIAL RESULTS PRESENTATION 7 March, 2019
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 Overview Update on sanctions Operating and financial results review Capital management: debt, investment in Norilsk Market overview Appendix 3
Slide 4: Overview: Rusal's Progress Over the Year
OVERVIEW: RUSAL’s PROGRESS OVER THE YEAR 2018 2017 Change Average Aluminium Price $2,111/t $1,969/t 7.2% Macro Average Nickel Price $13,122 /t $10,411/t 26.0% parameters Average USD / RUB Exchange Rate 62.71 RUB / USD 58.35 RUB / USD 7.5% Total sales, kt 3,671 kt 3,955 kt (7.2%) Sales VAP sales, kt
Slide 5: Environmental Achievements: Reduction of Greenhouse Gas Emissions
ENVIRONMENTAL ACHIEVEMENTS: REDUCTION OF GREENHOUSE GAS EMISSIONS SPECIFIC GREENHOUSE GAS EMISSIONS FROM RUSAL’S ALUMINIUM PLANTS Greenhouse Gas emissions reduction of 7.5% 2.4 2.33 2.28 2.30 2.11 MT СО2eq./MT Al 2.3 2.20 2.2 2.13 2.12 2.13 2.07 2.1 2 1.9 2014 2015 2016 2017 1st quarter 2nd quarter
Slide 6: Health and Safety
HEALTH AND SAFETY LTAFR DYNAMICS Lost Time Accident Frequency Rate (employee) per 1 000 000 mwh 1.90 2.0 1.70 1.60 1.6 1.30 1.30 1.20 1.2 0.8 1.10 0.95 0.90 0.85 0.80 0.75 0.4 0.0 2013 2014 2015 2016 2017 2018 UC Rusal Aluminium Industry* * Source International Aluminium Institute and Company intern
Slide 7: Agenda
AGENDA Overview Update on sanctions Operating and financial results review Capital management: debt, investment in Norilsk Market overview Appendix 7
Slide 8: Sanctions Removal
SANCTIONS REMOVAL BARKER PLAN EN+ NEW VOTING AND SHAREHOLDERS STRUCTURE • On 27 January 2019 the Office of Foreign Assets Control (OFAC) lifted sanctions Independent trustee from EN+, UC Rusal and EuroSibEnergo 14.33% upon successful implementation of core elements of the plan, developed by Lord Bar
Slide 9: Rusal Corporate Governance
RUSAL CORPORATE GOVERNANCE As per the requirements of the Barker Plan, shareholder structure and corporate governance of UC Rusal have changed. The Company will continue to maintain world class corporate governance standards: OWNERSHIP STRUCTURE1 ONGOING COMPLIANCE 50.10% In accordance with the obli
Slide 10: Independent Non-Executive Directors
INDEPENDENT NON-EXECUTIVE DIRECTORS Bernard Zonneveld Christopher Burnham(1) Nick Jordan(1) Elsie Leung Oi-sie Mr. Zonneveld was born in Mr. Burnham is the Mr. Jordan has more than Mrs. Leung was born in 1956. He holds a Master Chairman and CEO of 30 years experience in 1939 in Hong Kong. degree in
Slide 11: Agenda
AGENDA Overview Update on sanctions Operating and financial results review Capital management: debt, investment in Norilsk Market overview Appendix 11
Slide 12: Aluminium Price and Sales Structure
ALUMINIUM PRICE AND SALES STRUCTURE Total aluminium sales for 12M18 amounted to 3,671 kt, LME ALUMINIUM PRICE including VAP sales of 1,664 kt. $/t 12M18 average realized price increased to $2,259/t (7.3% YoY). The LME component reached $2,107/t, 2700 which traditionally lags behind LME prices. C
Slide 13: Financials Overview: Revenue Structure
FINANCIALS OVERVIEW: REVENUE STRUCTURE 12M18 REVENUE STRUCTURE REVENUE DYNAMICS $ mn +3.1% 6% YoY 3% $10,280 9% Aluminium Aluminium average realized price $9,969 10,000 ($/t) 666 553 Alumina 2,371 346 2,326 2,274 323 $10,280 mn 2,115 769 975 Foil and other aluminium products 8,000 Other 81% Aluminiu
Slide 14: Financials Overview: Key Segments Cash Cost
FINANCIALS OVERVIEW: KEY SEGMENTS CASH COST In 12M18 Rusal’s cash cost per 1 tonne of aluminium produced amounted to $1,646/t (+9.2% YoY on comparable basis). The cash cost of aluminium was primarily affected by an increase in other raw material and alumina costs. ALUMINIUM SEGMENT CASH COST DYNAM
Slide 15: Energy Cost Dynamics
ENERGY COST DYNAMICS The growth of the average energy tariff in 2Q17-1Q18 was ENERGY COST DYNAMICS 1Q17-4Q18 mitigated by the subsequent decrease in 2Q18 – 3Q18, Cost of energy purchased in the period driven mainly by exchange rates. In 4Q18 the energy tariff (purchased energy tariff impact to alu
Slide 16: Financial Overview: EBITDA
FINANCIAL OVERVIEW: EBITDA 12M18 EBITDA totaled $2,163 mn (+2.0% YoY); Aluminium segment remained the largest contributor to the Group EBITDA; EBITDA CHANGE BY FACTORS % margin 21% 21% 582 $ mn 69 427 43 2,120 2,163 12M17 EBITDA Premiums / Effect of LME and Aluminium Change in cash cost and 12M1
Slide 17: Capital Expenditures
CAPITAL EXPENDITURES CAPEX DYNAMICS $ mn 2016 2017 2018 12M18 842 400 834 295 300 254 213 226 220 192 197 200 168 163 129 54% 110 46% 84 100 0 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Maintenance Development In 12M18 capex totaled $834 mn (-1% YoY) Throughout the year, mainten
Slide 18: BEMO Project
BEMO PROJECT BEMO PROJECT: UNIQUE INDUSTRIAL COMPLEX IN SIBERIA COMBINING BOGUCHANSK HPP AND BOGUCHANSK SMELTER* Boguchansk smelter Project partner 50/50 JV with RusHydro Technology RA-300 (optionality available for the 2nd stage) Since the end of 3Q15 the first half (~149 ktpa) of the 1st sta
Slide 19: Taishet Aluminium Smelter
TAISHET ALUMINIUM SMELTER TAISHET CONSTRUCTION SITE Location Irkutsk region 1st line – 428.5 ktpa, 352 potcells RA-400, amperage 440 kA Capacity* 2nd line – 536 ktpa, 352 potcells RА-550, amperage 550 kA (equipment purchased for power supply, infrastructure, maintenance) Power 14.2 billion k
Slide 20: Agenda
AGENDA Overview Update on sanctions Operating and financial results review Capital management: debt, investment in Norilsk Market overview Appendix 20
Slide 21: Debt Profile
DEBT PROFILE KEY DEBT METRICS NET DEBT CHANGE IN 2018 $ mn 31 Dec 2018 31 Dec 2017 $ mn Total debt, IFRS 8 286 8 479 Cash and cash equivalents 844 831 7,648 371 7,442 Net debt, IFRS 7 442 7 648 106 3 Adjusted Total Net Debt1 3 156 3 568 680 Adjusted Total Net Debt / 1.4x 1.6x EBITDA (covenant)1 Leve
Slide 22: Investment in Norilsk Nickel
INVESTMENT IN NORILSK NICKEL NORILSK NICKEL OVERVIEW NN STAKE VALUE VS RUSAL NET DEBT Norilsk Nickel (NN) is the world’s largest high-grade nickel and A 27.8% stake in Nornickel equity remains a strategic investment palladium producer for UC Rusal. It diversifies the Company’s exposure to base m
Slide 23: Agenda
AGENDA Overview Update on sanctions Operating and financial results review Capital management: debt, investment in Norilsk Market overview Appendix 23
Slide 24: Global Aluminium Market to Stay in Deficit
GLOBAL ALUMINIUM MARKET TO STAY IN DEFICIT The company estimates that the global aluminium ROW REPORTED STOCKS market turned into heavy deficit of 1.6 mn tonnes in 2018 and would remain in deficit of about 1 mn tonnes kt days per annum in 2019-23 8000 120 Global aluminium demand CAGR is forecast
Slide 25: Global Market Deficit Is Set to Remain Due to Limited Production Growth
GLOBAL MARKET DEFICIT IS SET TO REMAIN DUE TO LIMITED PRODUCTION GROWTH GLOBAL ALUMINIUM BALANCE RUSSIA • Middle East continues to EUROPE 3.8 4.3 be a major aluminium CANADA 10.4 1.3 9.5 0.9 supply growth region. 2.9 3.3 4.5 4.8 2018 2023 North America will rank 0.4 0.4 the 2nd in growth 2018 2023 C
Slide 26: Key Foreign Markets: Europe, Asia ex-China and North America
KEY FOREIGN MARKETS: EUROPE, ASIA EX-CHINA AND NORTH AMERICA PRIMARY ALUMINIUM DEMAND GROWTH REMAINS FIRM BACKED BY INTENSIVE USE OF ALUMINIUM IN THE AUTOMOTIVE INDUSTRY MANUFACTURING PMI AUTOMOTIVE PRODUCTION HIGHLIGHTS 60.0 +1.2% -0.5% • Manufacturing activity ended the year in the positive territ
Slide 27: Russia & CIS
RUSSIA & CIS ALUMINUM DEMAND IS RISING DUE TO MANUFACTURING GROWTH MANUFACTURING PMI CONSTRUCTION WORKS HIGHLIGHTS 56 8% • Russian economic growth slowed towards 6% the end of the year, GDP rose by an 54 4% estimated 1.8% in 2018. Industrial 2% 52 production index growth amounted to 0% 2.9%. Investm
Slide 28: Favourable Automotive Industry Prospects for Aluminium and Nickel
FAVOURABLE AUTOMOTIVE INDUSTRY PROSPECTS FOR ALUMINIUM AND NICKEL Trend for lighter and more energy efficient car bodies is EV SALES PENETRATION FORECAST* 1 expected to accelerate, thus increasing Al content in vehicles • For example in 2014 Ford switched to an all aluminium design for the F-150, th
Slide 29: Aluminium Oversupply Hit Markets in China in 2017-18
ALUMINIUM OVERSUPPLY HIT MARKETS IN CHINA IN 2017-18 Sharp increase in aluminum production and CHINESE BALANCE slower demand caused an oversupply in China in 2017 47 44.0 44.4 Mln mt 43.0 43.0 1800 41.5 41.4 The Chinese market was oversupplied in 2017 as 42 1489 38.0 39.8 39.8 1300 38.2 smelting c
Slide 30: Effect of Supply Side Reform
EFFECT OF SUPPLY SIDE REFORM China continue to implement Supply-side reform in aluminum, first effect seen in 2018. That has put an end to unreasonable supply expansion, as well rebalancing domestic market and thus support for higher aluminum prices The government has identified ~4.5 mt of illegal
Slide 31: Appendix
APPENDIX nM RUSAL 31
Slide 32: Key Operating and Financial Data
KEY OPERATING AND FINANCIAL DATA GROUP OPERATING HIGHLIGHTS GROUP FINANCIAL HIGHLIGHTS 4Q 3Q 2Q 1Q YoY 4Q 3Q 2Q 1Q YoY FY18 FY17 FY18 FY17 18 18 18 18 chg 18 18 18 18 chg Aluminium Revenue, $mn 2,365 2,918 2,253 2,744 10,280 9,969 3.1% 943 940 939 931 3,753 3,707 1.2% production (kt) EBITDA, $mn* 36
Slide 33: Aluminium Segment Operating Data
ALUMINIUM SEGMENT OPERATING DATA ALUMINIUM PRODUCTION kt 920 930 910 921 931 944 932 939 940 943 1,000 33 33 30 29 31 31 31 31 32 30 21 20 35 21 29 21 800 20 20 21 25 600 869 878 860 869 875 883 878 878 890 878 400 200 0 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 Russia Siberia Russ
Slide 34: Alumina Segment Operating Data
ALUMINA SEGMENT OPERATING DATA PRODUCTION kt Bauxite 4,000 3,848 3,719 3,320 Alumina 2,945 2,961 1,388 3,000 2,741 1,630 1,075 1,965 1,990 829 918 Nepheline ore 1,999 1,958 717 1,924 394 149 153 1,892 79 312 2,000 22 80 161 324 345 131 118 122 130 344 457 187 192 180 188 185 186 410 476 471 445 480
Slide 35: Income Statement and EBITDA Reconciliation
INCOME STATEMENT AND EBITDA RECONCILIATION INCOME STATEMENT $ mn 4Q18 3Q18 2Q18 1Q18 FY18 FY17 YoY chg Revenue 2,365 2,918 2,253 2,744 10,280 9,969 3.1% Cost of sales (1,774) (2,068) (1,582) (2,022) (7,446) (7,183) 3.7% Other operating expenses (357) (357) (310) (329) (1,353) (1,263) 7.1% Operating
Slide 36: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW BALANCE SHEET $ mn 4Q18 3Q18 2Q18 1Q18 FY18 FY17 YoY chg Cash and Cash Equivalents 844 943 645 938 844 831 1.6% Inventory 3,006 2,739 2,880 2,558 3,006 2,414 24.5% Trade and other accounts 1,102 1,008 1,054 1,074 1,102 984 12.0% receivables Equity Attributable to Sharehol
Slide 37: Aluminium Segment EBITDA Reconciliation
ALUMINIUM SEGMENT EBITDA RECONCILIATION Other non- production costs and margin on other Total Aluminium Aluminium Alumina intra-group Aluminium FY18 produced purchased segment margin services segment $ mn (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenue kt 3,596 204 - - 3,800 USD
Slide 38: Net Income Reconciliation
NET INCOME RECONCILIATION RECONCILIATION OF ADJUSTED NET PROFIT/(LOSS) $ mn 4Q18 3Q18 2Q18 1Q18 FY18 FY17 YoY chg Net profit for the period 149 597 408 544 1,698 1,222 39.0% Adjusted for: Share of profits and other gains and (118) (285) (222) (214) (839) (496) 69.2% losses attributable to Norilsk Ni
Slide 39: Results of Supply Side Structural Reform in Chinese Steel Industry
RESULTS OF SUPPLY SIDE STRUCTURAL REFORM IMPLEMENTATION IN CHINESE STEEL INDSUTRY CHINA CRUDE STEEL CAPACITY & OUTPUT CHINA STEEL PRICES & COSTS Mt RMB/t 5600 5100 4600 4100 3600 3100 Margin 2600 2100 Aver cost (Dec19) 1600 HRC Rebar CRC CHINA STEEL INVENTORIES & EXPORTS • More than 400 mln tonnes o
Slide 40: Barriers for New Capacity in China
BARRIERS FOR NEW CAPACITY IN CHINA Two areas of pressure Regulations Economics Supply-Side Reform: Environmental Logistics limitations: Energy rising prices: Bauxite rising price: - Strict shut down of Initiatives: - Relocation of capacity - Coal price surge - Shut down of illegal illegal capacity -
Slide 41: Contact details
www.rusal.com UC RUSAL UC RUSAL Hong Kong Office www.rusal.ru/en/investors/ 1 Vasilisy Kozhinoi St., Karen Li, CFA 121096, Moscow, Russia Head of the Hong Kong Office InvestorRelations@rusal.com Karen.li@rusal.com Phone: +7 (495) 728-49-18 Phone: +852 3915 8798