Rusal · RUS:RUAL
Rusal — United Company Rusal — Q1 2019 Earnings Presentation
39 slides from Rusal's earnings presentation, May 14, 2019
Slide 1: 1Q 2019 Financial Results Presentation
1Q 2019 FINANCIAL RESULTS PRESENTATION 14 May, 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 Operating and financial results review Capital management: capex, key development projects and debt Market overview Appendix 3
Slide 4: Overview: Rusal's Progress Over the Period
OVERVIEW: RUSAL’s PROGRESS OVER THE PERIOD 1Q19 1Q18 Change Average Aluminium Price $1,859/t $2,159/t (13.9%) Macro Average Nickel Price $12,393/t $13,273/t (6.6%) parameters Average USD / RUB Exchange Rate 66.13 RUB / USD 56.88 RUB / USD 16.3% Total sales, kt 896 kt 965 kt (7.2%) Sales VAP sales, k
Slide 5: Environmental Achievements
ENVIRONMENTAL ACHIEVEMENTS RUSAL REMAINS COMMITTED TO CONTINUOUS IMPROVEMENT OF ENVIRONMENTAL FOOTPRINT Greenhouse Gas emissions reduction of 9% One of Rusal’s strategic goals is to reduce direct specific MT СО2eq./MT Al greenhouse gas emissions at its existing aluminium smelters 2.33 2.30 2.4 2.2
Slide 6: Agenda
AGENDA Overview Operating and financial results review Capital management: capex, key development projects and debt Market overview Appendix 6
Slide 7: Aluminium Price and Sales Structure
ALUMINIUM PRICE AND SALES STRUCTURE Total aluminium sales for 1Q19 amounted to 896 kt VAP SHARE IN SALES (-7.2% YoY), including VAP sales of 259 kt (-44% YoY). % of sales 1Q19 average realized price decreased to $1,949/t 43% 44% 47% 45% (-16.2% YoY). The LME component reached $1,849/t, 29% which
Slide 8: Financials Overview: Revenue Structure
FINANCIALS OVERVIEW: REVENUE STRUCTURE 1Q19 REVENUE STRUCTURE REVENUE DYNAMICS $ mn Aluminium average realized price 7% 8,000 ($/t) 4% 2,326 2,317 2,274 8% Aluminium 2,115 7,000 1,949 Alumina $2,170 mn Foil and other 6,000 aluminium products Aluminium sales volume Other (kt) 81% 5,000 1,046 965 877
Slide 9: Financials Overview: Key Segments Cash Cost
FINANCIALS OVERVIEW: KEY SEGMENTS CASH COST In 1Q19 Rusal’s cash cost per 1 tonne of aluminium produced amounted to $1,633/t (+1.7% QoQ on comparable basis). The cash cost of aluminium was primarily affected by an increase in energy cost. ALUMINIUM SEGMENT CASH COST DYNAMICS* CASH COST BY ITEMS +1
Slide 10: Energy Cost Dynamics
ENERGY COST DYNAMICS QUARTERLY ELECTRICITY PURCHASE PRICE ANALYSIS Cent/ kWh 0.14 0.09 0.19 0.02 0.28 0.03 0.01 0.04 0.18 3.57 0.18 0.02 0.02 0.04 0.19 3.07 3.33 3.08 2.89 1Q18 Exchange Capacity "Day- 2Q18 Exchange Capacity "Day- 3Q18 Exchange Capacity "Day- 4Q18 Exchange Capacity "Day- 1Q19 rate co
Slide 11: Financial Overview: EBITDA
FINANCIAL OVERVIEW: EBITDA 1Q19 EBITDA totaled $ 226mn (-60.5% YoY); Aluminium segment remained the largest contributor to the Group EBITDA; EBITDA CHANGE BY FACTORS % margin 21% 10% $ mn 70 572 254 19 3 226 1Q18 EBITDA Premiums / Effect of LME and Aluminium Change in cash cost and 1Q19 EBITDA A
Slide 12: Agenda
AGENDA Overview Operating and financial results review Capital management: capex, key development projects and debt Market overview Appendix 12
Slide 13: Capital Expenditures
CAPITAL EXPENDITURES CAPEX DYNAMICS $ mn 2017 2018 2019 1Q19 842 400 834 295 300 254 226 220 192 197 50% 50% 200 163 129 136 100 0 Maintenance Development 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 In 1Q19 capex totaled $136 mn (-46% QoQ) Friguia alumina refinery complex Throughout the quarter
Slide 14: BEMO Project
BEMO PROJECT BEMO PROJECT: UNIQUE INDUSTRIAL COMPLEX IN SIBERIA COMBINING BOGUCHANSK HPP AND BOGUCHANSK SMELTER* Project Boguchansk smelter 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 15: Taishet Aluminium Smelter
TAISHET ALUMINIUM SMELTER Location Irkutsk region TAISHET CONSTRUCTION SITE 1st stage – 428.5 ktpa, 352 potcells RA-400, amperage 440 kA Capacity/ technology* 2nd stage – 536 ktpa, 352 potcells RА-550, amperage 550 kA (equipment purchased for power supply, infrastructure, maintenance) Power
Slide 16: Debt Profile
DEBT PROFILE In March-April the Group repaid $267mn of public debt, DEBT STRUCTURE AS OF 1Q2019 including: 1st tranche of Panda bonds RMB 680mn RUB-denominated bonds RUB 10.8bn By currency By interest rate Following the removal of sanctions 3 rating agencies 1% 1% assigned ratings to Rusal a
Slide 17: Agenda
AGENDA Overview Operating and financial results review Capital management: capex, key development projects and debt Market overview Appendix 17
Slide 18: Various Risks Impacting Global Demand Forecast
VARIOUS RISKS IMPACTING GLOBAL DEMAND FORECAST GLOBAL SEMIS DEMAND FORECAST INFLUENTIAL FACTORS IN 2022, Mt TOTAL TRANSPORT • TRADE WARS 104.5 28.2 0.5 27.7 1.6 102.9 • BREXIT • CHINA’S ECONOMIC SLOWDOWN Jan-18 Date of Jan-19 Jan-18 Date of Jan-19 forecast forecast • A BAN ON IMPORT OF LOW GRADE ALU
Slide 19: Chinese Ban on Import of Low Quality Waste Led to Excess Scrap Supply
CHINESE BAN ON IMPORT OF LOW QUALITY WASTE LED TO AN EXCESS OF ALUMINUIM SCRAP SUPPLY EX-CHINA CHINESE UNDERIMPORTED SCRAP WAS SOLD TO INDIA & EAST ASIA 2018 vs 2017 INVESTMENT INTO RECYCLING TO ADD OVER 1,3Mt OF CAPACITIES 25% OTHERS DEVELOPMENT OF 50% SCRAP SORTING > >20% TECHNOLOGIES INDIA EAST A
Slide 20: Key Foreign Markets: Europe, Asia ex-China and North America
KEY FOREIGN MARKETS: EUROPE, ASIA EX-CHINA AND NORTH AMERICA PRIMARY ALUMINIUM DEMAND GROWTH REMAINED MODERATE BACKED BY INTENSIVE USE OF ALUMINIUM IN THE AUTOMOTIVE INDUSTRY AND PACKAGING MANUFACTURING PMI AUTOMOTIVE PRODUCTION HIGHLIGHTS 60.0 -2.5% • Manufacturing activity in 1Q19 varied -3.6% fro
Slide 21: Russia & CIS
RUSSIA & CIS ALUMINUM DEMAND IS DECREASING DUE TO ECONOMIC GROWTH SLOW DOWN MANUFACTURING PMI CONSTRUCTION WORKS HIGHLIGHTS 56 8% • In January-February 2019, Russian GDP 6% growth was modest (0.7% and 1.5%, 54 4% respectably). The government plans to 52 2% stimulate the economy in the second half 0%
Slide 22: World Market Balance
WORLD MARKET BALANCE MARKET BALANCE BY REGION IN 2019 AND 2020 ALUMINIUM CAPACITY RESTARTS/EXPANSION Mt RUSSIA EUROPE WORLD EX-CHINA 2,9 2,9 IN 2019-2020 2019 2020 2019 2020 NORTH AMERICA 5,2 5,2 CIS 10% 2019 2020 0,2 0,2 CHINA 26% 2,6 2,4 2019 2020 0,4 0,4 26% MIDDLE EAST 2019 2020 OTHER ASIA 38% I
Slide 23: Lack of Semis Capacities in ROW May Raise Risk of Chinese Export
THE LACK OF SEMIS CAPACITIES IN ROW MAY RAISE THE RISK OF CHINESE EXPORT STRENGTHENING TO MEET DEMAND EX-CHINA SHARE OF CHINESE SEMIS EXPORTS IN EX-CHINA CONSUMPTION IN 2013-2018, KT 7,0 00 FLAT ROLLED PRODUCTS 30 % 7,0 00 FOIL 10 0% FRP INCREMENTAL +1,8 PRODUCTION CAGR 16% CAGR 11% GROWTH DUE 90 %
Slide 24: Muted Chinese Aluminum Capacity But With Potential to Grow
MUTED CHINESE ALUMINUM CAPACITY BUT WITH POTENTIAL TO GROW CHINA CAPACITY EVOLUTION CHINA ANNUALIZED PRODUCTION Mt Mt 37 +19.8% -0.3% +1.1% -0.3% 88% 36 38 86% 35 0.6 0.06 36 84% -0.8 34 82% 33 34 80% 32 36.0 36.4 36.3 32 36.1 78% 31 30 30 76% annualized aluminum production, lhs capacity utilization
Slide 25: Appendix
APPENDIX nM RUSAL 25
Slide 26: Key Operating and Financial Data
KEY OPERATING AND FINANCIAL DATA GROUP OPERATING HIGHLIGHTS GROUP FINANCIAL HIGHLIGHTS QoQ YoY QoQ 1Q19 4Q18 1Q18 1Q19 4Q18 1Q18 YoY chg chg chg chg Aluminium production Revenue, $mn 2,170 2,365 (8.2%) 2,744 (20.9%) 928 943 (1.6%) 931 (0.3%) (kt) EBITDA, $mn* 226 363 (37.7%) 572 (60.5%) Aluminium sa
Slide 27: Aluminium Segment Operating Data
ALUMINIUM SEGMENT OPERATING DATA ALUMINIUM PRODUCTION kt 910 921 931 944 931 939 940 942 928 1,000 32 30 29 30 31 31 33 33 32 35 35 29 21 20 800 20 21 25 21 600 860 869 875 883 878 885 890 878 861 400 200 0 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 Russia Siberia Russia European Part Swe
Slide 28: Alumina Segment Operating Data
ALUMINA SEGMENT OPERATING DATA PRODUCTION kt Bauxite 3,848 3,831 4,000 3,719 Alumina 3,320 2,961 1,388 3,000 1,630 1,075 1,895 918 Nepheline ore 1,965 1,924 1,999 1,958 1,932 394 2,000 131 80 76 312 118 22 79 345 122 130 109 344 457 253 180 188 185 186 177 410 445 480 491 1,180 1,207 470 453 484 468
Slide 29: Income Statement and EBITDA Reconciliation
INCOME STATEMENT AND EBITDA RECONCILIATION INCOME STATEMENT QoQ 1Q19 4Q18 1Q18 YoY chg $ mn chg Revenue 2,170 2,365 (8.2%) 2,744 (20.9%) Cost of sales (1,805) (1,774) 1.7% (2,022) (10.7%) Other operating expenses (292) (357) (18.2%) (329) (11.2%) Operating income (Results from operating 73 234 (68.8
Slide 30: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW BALANCE SHEET QoQ 1Q19 4Q18 1Q18 YoY chg $ mn chg Cash and Cash Equivalents 826 844 (2.1%) 938 (11.9%) Inventory 3,037 3,006 1.0% 2,558 18.7% Trade and other accounts receivables 1,270 1,102 15.2% 1,074 18.3% Equity Attributable to Shareholders of the 5,819 5,209 11.7% 5,
Slide 31: Aluminium Segment EBITDA Reconciliation
ALUMINIUM SEGMENT EBITDA RECONCILIATION Other non- production costs and margin on other Total Aluminium Aluminium Alumina intra-group Aluminium 1Q19 produced purchased segment margin services segment $ mn (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenue kt 891 41 - - 932 USD milli
Slide 32: Net Income Reconciliation
NET INCOME RECONCILIATION RECONCILIATION OF ADJUSTED NET PROFIT/(LOSS) QoQ 1Q19 4Q18 1Q18 YoY chg $ mn chg Net profit for the period 273 149 83.2% 544 (49.8%) Adjusted for: Share of profits and other gains and losses attributable to Norilsk (403) (118) 241.5% (214) 88.3% Nickel, net of tax effect, w
Slide 33: 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 Rusal. It diversifies the Company’s exposure to base meta
Slide 34: Global Economic Recovery Remains Challenging
GLOBAL ECONOMIC RECOVERY REMAINS CHALLENGING WORLD ECONOMY PERFORMANCE HIGHLIGHTS %, Q-Q 58 6 Global production activity after 57 three quarters of decline has 5 56 started to pick up in Feb-Mar 2019 55 4 including China, the US and EM 54 53 3 economies. 52 51 2 Looking at 2019, we also expect 5
Slide 35: Potential Capacity Restarts in China
POTENTIAL CAPACITY RESTARTS IN CHINA POSSIBLE RESTARTS ARE CAPPED AT 700 KT POTENTIAL RESTARTS kt RMB/t 270 Spread 387 600 Possible against 192 Province Name adjusted 240 restarts mid-Feb 200 SHFE 210 -200 Gansu Dongxing 100 387 180 180 -557 -600 Shanxi Zhaofeng Al 120 192 -780 -843 -865 150 Yunnan
Slide 36: Possible Expansion of Capacity in China in 2019
POSSIBLE EXPANSION OF CAPACITY IN CHINA IN 2019 HIGHLIGHTS CHINA FULL COST EX. DEPRECIATION CURVE CNY/t During 2018-19, total new capacity coming New on stream in the two regions of Yunnan & 15,500 Yunnan smelters in green projects Guangxi is projected to stand at 2.1 Mt. 15,000 Guangxi smelters i
Slide 37: Health and Safety
HEALTH AND SAFETY LTAFR DYNAMICS FY18 HIGHLIGHTS • In total, 39 internal audits of health and safety 1.90 management systems were carried out at the 1.70 Company’s sites. • During FY18 total investment in employee safety 1.30 1.30 1.20 amounted to USD 49mn. • 4 external re-certification audits confi
Slide 38: New Aluminium Rolling Mill in the USA, JV with Braidy Industries
NEW ALUMINIUM ROLLING MILL IN THE USA JV WITH BRAIDY INDUSTRIES FAVOURABLE MARKET CONDITIONS PROJECT ADVANTAGES • The North American FRP market has demonstrated a • The project is developed to be both low-carbon robust growth for the past 5 years and will continue intensive and low cost manufacturin
Slide 39: UC RUSAL Contacts
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