Rusal · RUS:RUAL
Rusal — United Company RUSAL — Investor Presentation (July 2015)
36 slides from Rusal's investor presentation, July 2015
Slide 1: RUSAL corporate presentation
RUSAL corporate presentation July 2015
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 RUSAL production and sales 3 2 RUSAL cost position 8 3 RUSAL capex plans 12 4 RUSAL debt position 14 5 Sensitivity analysis 17 6 Market outlook 19 7 Appendix 33 8 Contacts 37 3
Slide 4: Al price volatility is ahead but current price levels are unsustainable
AL PRICE VOLATILITY IS AHEAD BUT CURRENT PRICE LEVELS ARE UNSUSTAINABLE RUSAL’S REALIZED PRICE DEVELOPMENT* AL PRICE DYNAMICS AND OUTLOOK $/t • RUSAL views current Al price levels 2,419 2,298 2,299 unsustainable and expects “all-in” price 2,072 2,114 2,124 429 recovery to $2,000-2,100/t 397 424 339
Slide 5: RUSAL enhances value-added product (VAP) portfolio
RUSAL ENHANCES VALUE-ADDED PRODUCT (VAP) PORTFOLIO KEY STRATEGIC CONSIDERATIONS RUSAL VAP SALES GROWTH FORECAST • RUSAL maintains supply discipline +833 kmt o The company runs at approximately 900kt quarterly 2,504 Al production. Management reiterates production +320 kmt guidance of 3.6mnt for FY15e
Slide 6: High level of geographical sales diversification
HIGH LEVEL OF GEOGRAPHICAL SALES DIVERSIFICATION REVENUE BREAKDOWN BY REGIONS (FY14) REVENUE BREAKDOWN BY REGIONS (1Q15) ALUMINIUM SALES ALUMINIUM SALES America Russia & CIS America Russia & CIS 11% 19% 15% 11% Asia Asia 21% 21% Europe Europe 49% 53% Source: Company data 6
Slide 7: Targeting 100% efficient upstream vertical integration
TARGETING 100% EFFICIENT UPSTREAM VERTICAL INTEGRATION ALUMINA PRODUCTION STABLE SUPPLY IN UPSTREAM SEGMENT kt • RUSAL targets 100% efficient upstream 1,818 1,808 vertical integration 152 149 186 185 o RUSAL plans to increase alumina 371 352 production to 7.4-7.5mm tonnes in FY15 477 488 vs. 7.3mm t
Slide 8: Agenda
AGENDA 1 RUSAL production and sales 3 2 RUSAL cost position 8 3 RUSAL capex plans 12 4 RUSAL debt position 14 5 Sensitivity analysis 17 6 Market outlook 19 7 Appendix 33 8 Contacts 37 8
Slide 9: Delivering on cost (1): RUSAL maintains stringent cost control
DELIVERING ON COST (1) RUSAL MAINTAINS STRINGENT COST CONTROL • The aluminium cash cost may be estimated at around $1,550 at ALUMINIUM COST BREAKDOWN (1Q15) the current USD/RUB exchange rate (55-60% cash cost base is RUB denominated). Energy o RUSAL benefits from access to hydropower sources as 97%
Slide 10: Delivering on cost (2): addressing market concerns on costs
DELIVERING ON COST (2) ADDRESSING MARKET CONCERNS ON COSTS • RUSAL benefits from lower energy costs utilizing RUSAL ENERGY TARIFF DYNAMICS hydropower sources US$ cents o RUSAL paid 2.63 USc/KWh in 1Q15 vs. 2.92 USc/KWh in 2.92 (0.66) 4Q14. The effect of 30%+ RUB weakening in 1Q15 was 0.1 2.63 0.27 l
Slide 11: Delivering on cost (3): a balanced view of global cost curve
DELIVERING ON COST (3) A BALANCED VIEW OF GLOBAL COST CURVE • RUSAL is positioned in the first quartile on the global cost GLOBAL ALUMINIUM CASH COST CURVE(2) curve being one of the most efficient primary aluminium $/t exporters 2,500 o RUSAL idled loss-making production sites (647kt in 2013) and Ch
Slide 12: Agenda
AGENDA 1 RUSAL production and sales 3 2 RUSAL cost position 8 3 RUSAL capex plans 12 4 RUSAL debt position 14 5 Sensitivity analysis 17 6 Market outlook 19 7 Appendix 33 8 Contacts 37 12
Slide 13: Capex discipline
CAPEX DISCIPLINE CAPEX SPENDING EVOLUTION INVESTMENT PROJECTS $mm • RUSAL expects approximately $500mn capex in FY15e ($87mm capex in 1Q15) 622 553 o The maintenance capex, including pot rebuilds, is 501 ~500 479 planned at $400-420mn in FY15e 367 o Ca. 50% of RUSAL’s capex is denominated purely in
Slide 14: Agenda
AGENDA 1 RUSAL production and sales 3 2 RUSAL cost position 8 3 RUSAL capex plans 12 4 RUSAL debt position 14 5 Sensitivity analysis 17 6 Market outlook 19 7 Appendix 33 8 Contacts 37 14
Slide 15: Debt profile
DEBT PROFILE Structure Dynamics Repayments DEBT REPAYMENTS PROFILE(1) $$mm 2,6 Refinancing of the RUSAL’s credit facilities in August 2014 allowed the company to extend the average 1,7 1,3 1,1 1,2 maturity of its debt profile from 2 to 4.4 years (as of the 1,0 refinancing date) 0,2 RUSAL current
Slide 16: Norilsk Nickel - stable dividend flow
NORILSK NICKEL - STABLE DIVIDEND FLOW NET DIVIDENDS ATTRIBUTABLE TO NN STAKE HELD BY RUSAL (27.8%)1 (3) $mm 1,268 840 807 789 764 582 2014A 2015A 2016E 2017E 2018E 2019E NORILSK NICKEL DIVIDENDS • UC RUSAL expects to receive c.$4.5 bln in 2015A-2019E which is competitive to any other company dividen
Slide 17: Agenda
AGENDA 1 RUSAL production and sales 3 2 RUSAL cost position 8 3 RUSAL capex plans 12 4 RUSAL debt position 14 5 Sensitivity analysis 17 6 Market outlook 19 7 Appendix 33 8 Contacts 37 17
Slide 18: Sensitivity analysis
SENSITIVITY ANALYSIS ANNUALIZED EBITDA(1) SENSITIVITY (US$MN) TO ALL-IN AL PRICE(2) AND USD-RUB (3) All-in USD/RUB price US$1900 US$2000 US$2100 US$2200 45 (911) (566) (220) 122 50 (600) (255) 91 433 55 (345) 0 345 688 60 (133) 212 557 900 USD/RUB SENSITIVITY • USD/RUB rate change of RUB5 has c. $20
Slide 19: Agenda
AGENDA 1 RUSAL production and sales 3 2 RUSAL cost position 8 3 RUSAL capex plans 12 4 RUSAL debt position 14 5 Sensitivity analysis 17 6 Market outlook 19 7 Appendix 33 8 Contacts 37 19
Slide 20: Aluminium demand fundamentals remain healthy
ALUMINIUM DEMAND FUNDAMENTALS REMAIN HEALTHY PRIMARY ALUMINIUM DEMAND IN FY15E (% YOY) ….YTD DYNAMICS (5M15, % YOY) Global 6.0% Global 5.8% World Ex.China 2.5% World Ex.China 2.3% China 9.5% China 9.4% N.America 4.7% N.America 4.6% Europe 2.5% Europe 2.3% Asia Ex.China 2.0% Asia Ex.China 2.2% Others
Slide 21: Increasing GDP per capita drives consumer metal demand
INCREASING GDP PER CAPITA DRIVES “CONSUMER” METAL DEMAND INCREMENTAL PRIMARY ALUMINIUM DEMAND ALUMINUM CONSUMPTION PER CAPITA END-USE STRUCTURE IN 2014-2019, EX-CHINA Consumer Foil stock Other durables 3% 3% 5% Packaging 5% Transport 41% Machinery & Equipment 6% 5,250 kt Construction 16% Electrical
Slide 22: Aluminium vs. copper in the electrical engineering sector
ALUMINIUM VS. COPPER IN THE ELECTRICAL ENGINEERING SECTOR ALUMINIUM AND COPPER PRICE DYNAMICS o The price of copper is 3.4 times that of US$/t aluminium as the two metal were at 12,000 parity in 2003. Around 70% of the cable 10,000 cost is in the metals 8,000 6,000 o China is long aluminium and shor
Slide 23: Current all-in price level is unsustainable
CURRENT “ALL-IN” PRICE LEVEL IS UNSUSTAINABLE SMELTERS COST CURVE EX-CHINA CAPACITY IDLING AND RESTARTS EX-CHINA $/t Around 4.8 Mt (or 18% world ex-China production) $/t 2700 were unprofitable in June 2015 Total idled capacity ex-China, 6,000kt 1500 941 2200 All in price aver. June $1828/t 3566 1700
Slide 24: Premiums collapse after unprofitable finance deals and China exports surge
Unprofitable finance deals and a surge in China exports has lead to a collapse in premium REGIONAL PREMIUM DYNAMICS o Premiums have collapsed across all regions 550 in the beginning of 2015 as contango Monthly averaged disappeared and metal from warehouses 450 flood the market 350 o Process of premi
Slide 25: Global market faces a minor surplus in 2015. What lies ahead?
GLOBAL MARKET FACES A MINOR SURPLUS IN 2015. WHAT LIES AHEAD? EX-CHINA ALUMINIUM MARKET BALANCE TOTAL ALUMINIUM MARKET BALANCE mm tonnes mm tonnes 31.6 80 400 30.6 30.4 3.0 300 29.6 29.5 2.9 277 70 28.5 200 27,6 27.5 2.4 28.5 2.8 137 26.8 100 26.3 2.8 60 25.8 2.1 0 50 -109 -89 -97 -100 -200 -1000 40
Slide 26: Contrarian view on China (1): transportation shoulder does matter
CONTRARIAN VIEW ON CHINA (1) TRANSPORTATION SHOULDER DOES MATTER CHINESE SMELTING COST CURVE o China is on track to add 4-4.5mnt of new capacity in FY15e. More than 90% of new smelters come on RMB/t Loss-making capacities over June 1-26, 2015 - 15.1 Mt (51%) stream in North Western provinces (Xinjia
Slide 27: Contrarian view on China (2): state priorities
CONTRARIAN VIEW ON CHINA (2) STATE PRIORITIES CHINESE ALUMINIUM CAPACITY AND CHINESE ALUMINIUM PRODUCTS PRODUCTION GROWTH 2011-2016F EXPORT TRADE BALANCE kt 78.6% kt 45,000 78.5% 42,500 4000 3248 39,500 40,000 79.4% 3000 Net Imports 79.2% 35,249 35,000 33,400 31,730 2000 83.8% 31,000 30,000 80.7% 28
Slide 28: Chinese semis exports to stabilize due to lower LME/SHFE arbitrage
CHINESE SEMIS EXPORTS TO STABILIZE DUE TO LOWER LME/SHFE ARBITRAGE LOWER METAL PRICE IN CHINA IN 2014 STIMULATED o China’s exports of aluminum semis GROWTH OF EXPORT OF CHINESE SEMIS LME/ probably rose 12% M-M (adj. for days in a Arbitrage = LME Al price (Cash) + MJP premium (Main Japanese port) – S
Slide 29: >78% of deficit in RoW covered by Chinese primary export in Jan-Jun 2015
>78% OF DEFICIT IN ROW HAS BEEN COVERED BY CHINESE PRIMARY EXPORT IN JAN-JUN 2015 World Ex. China(1) Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jan-Jun 2015 -144 kmt Production 2,191 2,139 2,216 2,222 2,020 2,237 2,166 2,228 2,162 13,034 in Jan-Jun 2015 Consumption 2,347 2,163 2,
Slide 30: Contrarian view on China (4): green manufacturing focus
CONTRARIAN VIEW ON CHINA (4) GREEN MANUFACTURING FOCUS GLOBAL ALUMINUM PRODUCERS’ RANKING BASED ON CO2 TOTAL EMISSION PER TONNE 20 18 16 14 12 10 8 6 4 2 0 Vedanta Xinfa Hongqiao East Hope BHP Chalco CPI Century Alba EGA Alcoa RTA UC Norsk Billiton Aluminium RUSAL Hydro Direct emissions Indirect emi
Slide 31: Agenda
AGENDA 1 RUSAL production and sales 3 2 RUSAL cost position 8 3 RUSAL capex plans 12 4 RUSAL debt position 14 5 Sensitivity analysis 17 6 Market outlook 19 7 Appendix 33 8 Contacts 37 31
Slide 32: Summary results: income statement
SUMMARY RESULTS INCOME STATEMENT $mm 1Q2015 4Q2014 % Change Revenue 2,477 2,496 (1%) Cost of sales (1,658) (1,709) (3%) EBITDA 721 651 11% margin (%) 29.1% 26.1% NA Share of results of associates and JVs 228 (75) NA Income tax (74) (101) (27%) Net Profit / (Loss) 572 (102) NA Adjusted Net Profit 228
Slide 33: Summary results: balance sheet and cash flow
SUMMARY RESULTS BALANCE SHEET AND CASH FLOW As of 31 As of 31 $mm March 2015 December 2014 % Change Cash and Cash Equivalents 620 570 9% Equity Attributable to Shareholders of the 2,510 2,237 12% Company Total Liabilities 12,120 12,620 (4%) Total working capital 1,376 1,363 1% Net Debt 8,624 8,837 (
Slide 34: Summary results: segment results
SUMMARY RESULTS SEGMENT RESULTS 1Q 2015 4Q 2014 $mm Aluminium Alumina Aluminium Alumina Segment Revenue 2,195 462 2,153 442 Segment Results (EBIT) 686 67 557 33 EBITDA 785 86 647 54 % margin 35.8% 18.6% 30.1% 12.3% Segment CapEx 55 24 68 53 Segment cash cost per tonne 1,437 245 1,671 266 • Aluminium
Slide 35: Agenda
AGENDA 1 RUSAL production and sales 3 2 RUSAL cost position 8 3 RUSAL capex plans 12 4 RUSAL debt position 14 5 Sensitivity analysis 17 6 Market outlook 19 7 Appendix 33 8 Contacts 37 35
Slide 36: RUSAL IR contacts
RUSAL IR CONTACTS Boris Krasnojenov RUSAL | Head of Investor Relations Phone: +7 (495) 720-51-70 ext. 1528 Email: boris.krasnozhenov@rusal.com www.rusal.com Veronika Kryachko RUSAL | Senior Manager, Investor Relations Phone: +7 (495) 720-51-70 ext. 1520 Email: veronika.kryachko@rusal.com www.rusal.c
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