Rusal · RUS:RUAL
Rusal — United Company RUSAL — Q2 2019 Earnings Presentation
39 slides from Rusal's earnings presentation, Aug 9, 2019
Slide 1: 2Q and 1H2019 Financial Results Presentation
2Q AND 1H2019 FINANCIAL RESULTS PRESENTATION 9 August, 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 2Q19 1Q19 Change 1H19 1H18 Change Average Aluminium Price $1,794/t $1,859/t (3.5%) $1,826/t $2,209/t (17.3%) Macro Average Nickel Price $12,243/t $12,393/t (1.2%) $12,318/t $13,871/t (11.2%) parameters 64.56 RUB / 66.13 RUB / 65.34 RUB / 59.33 RUB / Average
Slide 5: Environmental Achievements
ENVIRONMENTAL ACHIEVEMENTS RUSAL REMAINS COMMITTED TO CONTINUOUS IMPROVEMENT OF ENVIRONMENTAL FOOTPRINT Greenhouse Gas emissions reduction of 9,6% One of Rusal’s strategic goals is to reduce direct specific MT СО2eq./MT Al greenhouse gas emissions at its existing aluminium smelters 2.33 2.30 2.4 2
Slide 6: Agenda
AGENDA Overview Operating and financial results review Capital management: capex, key development projects and debt Market overview Appendix 6
Slide 7: Aluminium Price and Sales Structure
ALUMINIUM PRICE AND SALES STRUCTURE Total aluminium sales for 2Q19 amounted to 1,082 kt VAP SHARE IN SALES (+20.8% QoQ). This increase is due to the partial sell-off of surplus inventories of primary aluminum that were % of sales accumulated by the end of 2018 as a result of OFAC 43% 44% 47% 45% 3
Slide 8: Financials Overview: Revenue Structure
FINANCIALS OVERVIEW: REVENUE STRUCTURE REVENUE STRUCTURE REVENUE DYNAMICS 6% 7% 4% 4% Aluminium average realized price ($/t) 7% 7% 8,000 2,317 2,274 2,115 2Q19 Revenue 1H19 Revenue 1,970 $2,566 mn $4,736 mn 7,000 1,949 82% 6,000 Aluminium sales volume (kt) 83% 1,046 1,082 5,000 877 896 Aluminium Alu
Slide 9: Financials Overview: Key Segments Cash Cost
FINANCIALS OVERVIEW: KEY SEGMENTS CASH COST In 2Q19 Rusal’s cash cost per 1 tonne of aluminium produced amounted to $1,674/t (+2.5% QoQ). The cash cost of aluminium was primarily affected by the decrease in alumina cost which was offset by shift in change of finished goods and increase of distribu
Slide 10: Energy Cost Dynamics
ENERGY COST DYNAMICS QUARTERLY ELECTRICITY PURCHASE PRICE ANALYSIS Cent/ kWh 0.08 0.14 0.09 0.02 0.09 0.02 0.01 0.04 0.14 3.33 3.30 0.18 0.02 0.19 0.04 3.07 3.08 2.89 2Q18 Exchange Capacity "Day- 3Q18 Exchange Capacity "Day- 4Q18 Exchange Capacity "Day- 1Q19 Exchange Capacity "Day- 2Q19 rate costs a
Slide 11: Financial Overview: EBITDA
FINANCIAL OVERVIEW: EBITDA 2Q19 EBITDA totaled $302 mn (+33.6% QoQ); 1H19 EBITDA amounted to $528mn (-53.0% YoY) Aluminium segment remained the largest contributor to the Group EBITDA; EBITDA CHANGE BY FACTORS % margin % margin 10% 12% 22% 11% 50 50 1 $ mn $ mn 80 25 149 302 1,124 226 588 77 (4)
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 Approximate 1Q 2Q 3Q 4Q 842 834 2023 400 launch schedule 20 20 20 20 353 295 300 Taishet anode plant 254 X (1st stage) 226 220 217 192 197 200 163 136 Taishet anode plant 129 X (2nd stage) 100 Taishet aluminium X smelter 0 1Q17 2Q17 3Q17 4Q17 1
Slide 14: Taishet Anode Plant
TAISHET ANODE PLANT Location Irkutsk region ANODE PLANT CONSTRUCTION SITE 1st stage – the construction of anode baking furnace with a capacity of up to 217.5 ktpa of baked anodes(2); Capacity/ 2nd stage – the arrangement of calcined technology(1) coke(3) and green anodes production with the ca
Slide 15: Debt Profile
DEBT PROFILE In 2019 in view of favorable conditions on the Russian debt capital market, Rusal has successfully placed two tranches of CREDIT RATINGS DEBT STRUCTURE local RUB bonds (for the first time since 2016) amounting to By currency RUB 30 bn (eq. US$470 mm): EUR RMB o RUB 15bn, 9.00% p.a. co
Slide 16: Agenda
AGENDA Overview Operating and financial results review Capital management: capex, key development projects and debt Market overview Appendix 16
Slide 17: Primary Aluminum Demand Hit by Global Manufacturing Downturn in 1H 2019
PRIMARY ALUMINUM DEMAND HIT BY GLOBAL MANUFACTURING DOWNTURN IN 1H 2019 GLOBAL MANUFACTURING PMI GLOBAL* AUTOMOTIVE PRODUCTION GROWTH *covers nearly 90% of global automotive production, preliminary estimations 55 1.7% 54 0.7% YOY 1H18 53 1H19 52 -3.8% 51 threshold 50 -7.0% 49 Jul-16 Jan-17 Jul-17 Ja
Slide 18: Key Markets: Europe, N. America, Asia ex-China, Russia
KEY MARKETS: EUROPE, N. AMERICA, ASIA EX-CHINA, RUSSIA PRIMARY AL DEMAND GROWTH IN WORLD EX-CHINA IS FLAT IN 1H19 DUE TO TRADE TENSIONS AND GLOBAL SLOWDOWN MANUFACTURING PMI CONSTRUCTION PRIMARY AL DEMAND decreased to 47,6 in EU construction expanded slightly increased by June due to a by 2-3% in Ap
Slide 19: In 2020, Global Primary Aluminium Demand Expected to Accelerate
IN 2020, GLOBAL PRIMARY ALUMINIUM DEMAND EXPECTED TO ACCELERATE FOLLOWING AUTO SECTOR RECOVERY GLOBAL PRIMARY ALUMINUM DEMAND IN 2018-2020 CHINA Mt GLOBAL DEMAND 3.0% 38.8 Mt 3.0% 37.7 1 1 36.6 2.6% 69.2 2018 2019 2020 1.9% 67.5 66.2 WORLD EX-CHINA Mt 2.1% 30.4 2018 2019 2020 0.6% 29.8 29.6 2018 201
Slide 20: Need to Reach the Emissions Target Set to Incentivize Aluminium Use
NEED TO REACH THE EMISSIONS TARGET SET TO INCENTIVIZE MORE INTENSIVE USE OF ALUMINIUM CO2 EMISSION REDUCTION OVER TIME AGAINST 2017 ACTUAL DATA AND 2021 TARGETS EUROPE The TARGET is extremely challenging to reach, especially taking into account: DIESEL demand SUV demand 2021 CO2 targets would genera
Slide 21: ROW Production Continues to Expand, Inventories Are Running Out
ROW PRODUCTION CONTINUES TO EXPAND, INVENTORIES ARE RUNNING OUT ROW PRODUCTION ROW STOCKS DYNAMICS Reported Stocks Unreported Stocks Days of Consumption 24.2 6.2 14 .0 15 0 Mt Mt Mt 24.1 130 24.1 12 .0 24.0 105 10 0 6.1 6.1 86 23.9 10 .0 9.9 79 69 23.8 8.3 50 23.8 4.0 8.0 6.9 23.7 6.0 2.8 6.4 5.9 6.
Slide 22: China-US Tensions Supported Chinese Export of Aluminium Products in 1H 2019
CHINA-US TENSIONS SUPPORTED CHINESE EXPORT OF ALUMINIUM PRODUCTS IN 1H 2019 CHINA ANNUALIZED PRODUCTION & CHINESE ALUMINUM PRODUCTS* EXPORT CAPACITY UTILIZATION RATE kt Mt Utilization rate 40 100% 1700 END OF QUARTER 38 95% 1300 36 90% 34 85% 900 32 80% 500 30 75% 28 70% 100 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Slide 23: ROW Market Deficit Down to 800kt in 2020
ROW MARKET DEFICIT DOWN TO 800KT IN 2020 GLOBAL MARKET BALANCE PER REGION MIO TONNES RUSSIA 3.0 3.1 EUROPE 2019 2020 2019 2020 N.AMERICA CIS 0.2 5.0 5.1 0.2 CHINA 2019 2020 2019 2020 0.25 0 2.5 2.3 MIDDLE EAST 2019 2020 INDIA 4.5 4.6 1.5 1.4 2019 2020 2019 2020 2019 2020 5.3 5.4 S.AMERICA WORLD EX C
Slide 24: Appendix
APPENDIX nM RUSAL 24
Slide 25: Key Operating and Financial Data
KEY OPERATING AND FINANCIAL DATA GROUP OPERATING HIGHLIGHTS GROUP FINANCIAL HIGHLIGHTS QoQ YoY QoQ YoY 2Q19 1Q19 1H19 1H18 2Q19 1Q19 1H19 1H18 chg chg chg chg Aluminium production Revenue, $mn 2,566 2,170 18.2% 4,736 4,997 (5.2%) 939 928 1.1% 1,867 1,870 (0.2%) (kt) EBITDA, $mn* 302 226 33.6% 528 1,
Slide 26: Aluminium Segment Operating Data
ALUMINIUM SEGMENT OPERATING DATA ALUMINIUM PRODUCTION kt 921 931 944 932 939 940 943 938 928 1,000 33 29 31 31 31 32 33 30 32 35 35 20 35 800 21 25 29 21 21 600 869 875 883 878 885 890 878 878 872 400 200 0 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q19 Russia Siberia Russia European Part Swed
Slide 27: Alumina Segment Operating Data
ALUMINA SEGMENT OPERATING DATA PRODUCTION kt Bauxite 4,242 3,848 3,831 4,000 3,719 Alumina 3,320 1,847 1,388 3,000 1,630 1,895 1,075 Nepheline ore 1,924 1,999 1,958 1,932 1,918 394 398 2,000 118 122 76 78 312 22 79 80 345 130 109 109 410 457 253 470 188 185 186 177 166 480 491 1,180 1,207 1,144 453
Slide 28: Income Statement and EBITDA Reconciliation
INCOME STATEMENT AND EBITDA RECONCILIATION INCOME STATEMENT QoQ YoY 2Q19 1Q19 1H19 1H18 $ mn chg chg Revenue 2,566 2,170 18.2% 4,736 4,997 (5.2%) Cost of sales (2,126) (1,805) 17.8% (3,931) (3,604) 9.1% Other operating expenses (312) (292) 6.8% (604) (639) (5.5%) Operating income (Results from opera
Slide 29: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW BALANCE SHEET QoQ YoY 2Q19 1Q19 1H19 1H18 $ mn chg chg Cash and Cash Equivalents 969 826 17.3% 969 645 50.2% Inventory 2,846 3,037 (6.3%) 2,846 2,880 (1.2%) Trade and other accounts receivables 1,275 1,270 0.4% Equity Attributable to Shareholders of 6,236 5,819 7.2% 6,236
Slide 30: Aluminium Segment EBITDA Reconciliation
ALUMINIUM SEGMENT EBITDA RECONCILIATION Other non- production costs and margin on other Total Aluminium Aluminium Alumina intra-group Aluminium 2Q19 produced purchased segment margin services segment $ mn (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenue kt 1,050 69 - - 1,119 USD m
Slide 31: Net Income Reconciliation
NET INCOME RECONCILIATION RECONCILIATION OF ADJUSTED NET PROFIT/(LOSS) QoQ YoY 2Q19 1Q19 1H19 1H18 $ mn chg chg Net profit for the period 285 273 4.4% 558 952 (41.4%) Adjusted for: Share of profits and other gains and losses attributable to Norilsk (294) (403) (27.0%) (697) (436) 59 Nickel, net of t
Slide 32: 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 33: Health and Safety
HEALTH AND SAFETY LTAFR DYNAMICS FY18 HIGHLIGHTS 1.90 • In total, 39 internal audits of health and safety 1.70 management systems were carried out at the Company’s sites. 1.30 1.30 • During FY18 the total investment in employee safety 1.20 1.10 amounted to $49 mn. • Four external re-certification au
Slide 34: 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 35: 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 36: 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 • The project is developed to be both low-carbon robust growth for the past 5 years and will continue intensive and low cost manufacturing
Slide 37: 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 38: Independent Non-Executive Directors
INDEPENDENT NON-EXECUTIVE DIRECTORS Chairman of the Board Bernard Zonneveld Christopher Burnham(1) Nick Jordan(1) Elsie Leung Oi-sie Education: Master degree in Education: Master degree in Education: BA in political Education: Master degree, Business Law from Erasmus Public Administration, Harvard s
Slide 39: 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