Rusal · RUS:RUAL
Rusal — United Company Rusal — Q3 2019 Earnings Presentation
36 slides from Rusal's earnings presentation, Nov 8, 2019
Slide 1: 3Q and 9M2019 Financial Results Presentation
3Q AND 9M2019 FINANCIAL RESULTS PRESENTATION 8 November, 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, debt and investment in Norilsk Market overview Appendix 3
Slide 4: Overview: Rusal's Progress over the Period
OVERVIEW: RUSAL’s PROGRESS OVER THE PERIOD 3Q19 2Q19 Change 9M19 9M18 Change Average Aluminium Price $1,761/t $1,793/t (1.8%) $1,804/t $2,158/t (16.4%) Macro Average Nickel Price $15,586/t $12,241/t 27.3% $13,442/t $12,855/t 4.6% parameters 64.57 RUB / 64.56 RUB / 65.08 RUB / 61.44 RUB / Average USD
Slide 5: Environmental Achievements
ENVIRONMENTAL ACHIEVEMENTS RUSAL REMAINS COMMITTED TO CONTINUOUS IMPROVEMENT OF ENVIRONMENTAL FOOTPRINT Greenhouse Gas emissions reduction of 8,8% One of Rusal’s strategic goals is to reduce direct specific MT СО2eq./MT Al 2.33 2.30 greenhouse gas emissions at its existing aluminium smelters 2.4 2
Slide 6: Agenda
AGENDA Overview Operating and financial results review Capital management: capex, debt and investment in Norilsk Market overview Appendix 6
Slide 7: Aluminium Price and Sales Structure
ALUMINIUM PRICE AND SALES STRUCTURE Total aluminium sales for 3Q19 amounted to 1,091 kt VAP SHARE IN SALES (+0.8% QoQ). 9M19 sales volumes were 3,069 kt (+9.8% YoY). % of sales 3Q19 average price decreased to $1,896/t (-3.8% QoQ) as a 43% 44% 47% 45% 38% 40% result of decline in LME component by
Slide 8: Financials Overview: Revenue Structure
FINANCIALS OVERVIEW: REVENUE STRUCTURE REVENUE STRUCTURE REVENUE DYNAMICS 6% 6% 5% 4% Aluminium average realized price ($/t) 7% 7% 8,000 2,274 2,115 3Q19 Revenue 9M19 Revenue 1,970 $2,486 mn $7,222 mn 7,000 1,949 1,896 82% 6,000 Aluminium sales volume (kt) 83% 1,046 1,082 1,091 5,000 877 896 Alumini
Slide 9: Financials Overview: Key Segments Cash Cost
FINANCIALS OVERVIEW: KEY SEGMENTS CASH COST In 3Q19 Rusal’s cash cost per 1 tonne of aluminium produced amounted to $1,612/t (-3.7% QoQ). The cash cost of aluminium was primarily affected by the decrease in energy cost which was partially offset by shift in change of finished goods. In 9M19 Rusal’
Slide 10: Energy Cost Dynamics
ENERGY COST DYNAMICS QUARTERLY ELECTRICITY PURCHASE PRICE ANALYSIS Cent/ kWh 0.14 0.08 0.08 0.09 0.09 0.02 0.02 0.01 0.02 0.04 3.30 0.19 0.04 3.33 0.72 2.89 3.08 2.57 3Q18 Exchange Capacity "Day- 4Q18 Exchange Capacity "Day- 1Q19 Exchange Capacity "Day- 2Q19 Exchange Capacity "Day- 3Q19 rate costs a
Slide 11: Financial Overview: EBITDA
FINANCIAL OVERVIEW: EBITDA 3Q19 EBITDA totaled $237 mn (-21.5% QoQ); 9M19 EBITDA amounted to $765mn (-57.5% YoY). Aluminium segment remained the largest contributor to the Group EBITDA. EBITDA CHANGE BY FACTORS % margin % margin 12% 10% 23% 11% $ mn $ mn 1 7 104 71 155 302 1,800 237 932 153 (4)
Slide 12: Agenda
AGENDA Overview Operating and financial results review Capital management: capex, debt and investment in Norilsk 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 20 556 295 300 Taishet anode plant 254 X (1st stage) 226 220 217 192 197 203 200 163 136 Taishet anode plant 129 X (2nd stage) 100 Taishet aluminium X smelter 0 1Q17 2Q17 3Q17 4Q
Slide 14: Debt Profile
DEBT PROFILE The Company continued optimization of the cost and structure CREDIT RATINGS DEBT STRUCTURE of its debt portfolio: By currency o In view of favorable conditions on the Russian debt capital RMB market, Rusal has successfully placed two tranches of local BB- 1% bonds RUB 15 bn each: RUB
Slide 15: Investment in Norilsk Nickel
INVESTMENT IN NORILSK NICKEL NN METALS BASKET OUTPERFORMED LME IN 2019 NORILSK NICKEL STAKE VALUE VS RUSAL NET DEBT NN is the world’s largest high-grade nickel and palladium A 27.8% stake in Norilsk Nickel (NN) equity remains a strategic producer with exposure to copper and platinum. investment
Slide 16: Agenda
AGENDA Overview Operating and financial results review Capital management: capex, debt and investment in Norilsk Market overview Appendix 16
Slide 17: Primary Aluminium Demand Hit by Global Manufacturing Downturn in 9M19
PRIMARY ALUMINIUM DEMAND HIT BY GLOBAL MANUFACTURING DOWNTURN IN 9M19 GLOBAL MANUFACTURING PMI GLOBAL* AUTOMOTIVE PRODUCTION GROWTH *covers nearly 90% of global automotive production, preliminary estimations 55 YOY, % China 54 2018 2019e 1Q19 2Q19 3Q19 4Q19e 53 -2.6% -9.8% -6.2% -7.0% -9.1% 52 -17.6
Slide 18: Key Markets: Europe, N. America, Asia ex-China, Russia
KEY MARKETS: EUROPE, N. AMERICA, ASIA EX-CHINA, RUSSIA PRIMARY AL DEMAND IN WORLD EX-CHINA DECLINED IN 9M2019 DUE TO TRADE TENSIONS AND GLOBAL SLOWDOWN AUTOMOTIVE CONSTRUCTION PRIMARY AL DEMAND slightly increased by EU expected construction moderately decreased 0.1% in 3Q19 for the output increased
Slide 19: Recent Trend: Aluminium Customers Setting Aggressive Climate Targets
RECENT TREND: ALUMINIUM CUSTOMERS ARE SETTING AGGRESSIVE CLIMATE TARGETS, WHICH WILL REMODEL THE ALUMINIUM MARKET Zero CO2 Challenge by 2050 “Reduce the footprint of a drink in your hand by 30% by 2020” New structure to manage the CO2 from supply-chain, with aluminium in focus “Drop the C” Programme
Slide 20: ROW Aggressive Supply Cuts Required to Support the Price
ROW AGGRESSIVE SUPPLY CUTS REQUIRED TO SUPPORT THE PRICE ROW PRODUCTION REPORTED STOCKS Mt % Y-Y kt days 5000 70 29 6% 4500 60 28 4% 4000 50 3500 Flat 27 2% 40 3000 26 0% 2500 30 25 -2% 2000 20 ROW aluminium production (ann), Mt ROW public stocks ROW aluminium production growth, % Y-Y Days of Consum
Slide 21: ROW Market Deficit to Shrink in 2020
ROW MARKET DEFICIT TO SHRINK IN 2020 GLOBAL MARKET BALANCE PER REGION MIO TONNES RUSSIA 3.1 3.1 EUROPE 2019 2020 2019 2020 N.AMERICA CIS 0.2 4.9 4.8 0.1 CHINA 2019 2020 2019 2020 2.5 2.3 MIDDLE EAST 0.5 0 2019 2020 INDIA 4.4 4.5 1.6 1.5 2019 2020 2019 2020 2019 2020 5.2 5.1 S.AMERICA WORLD EX CHINA
Slide 22: Chinese Net Operating Capacity Reduction in 2H19
CHINESE NET OPERATING CAPACITY REDUCTION IN 2H19 CHINA COST OF PRODUCTION CHINA CAPACITY CHANGE IN 2019 kt 36,425 - 3,108 1,780 35,707 610 Capacity 2018 Idled Resumed New Capacity Sep capacity commissioning 2019 In Jan - Sep 2019 China faced operation Profitability significantly improved in 3Q19
Slide 23: Chinese Aluminium Semis Export Set to Decline Further in 2H19
CHINESE ALUMINIUM SEMIS EXPORT SET TO DECLINE FURTHER IN 2H19 CHINA ANNUALIZED PRODUCTION CHINESE UNWROUGHT ALUMINIUM EXPORT Mt kt 600 40 88% 500 38 86% 400 84% 36 82% 300 34 200 80% 32 78% 100 30 76% 0 annualized production capacity utilization rate, rhs China’s aluminium production fell in 3Q19
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 3Q19 2Q19 9M19 9M18 3Q19 2Q19 9M19 9M18 chg chg chg chg Aluminium production Revenue, $mn 2,486 2,566 (3.1%) 7,222 7,915 (8.8%) 942 939 0.3% 2,809 2,810 - (kt) EBITDA, $mn* 237 302 (21.5%) 765 1,80
Slide 26: Aluminium Segment Operating Data
ALUMINIUM SEGMENT OPERATING DATA ALUMINIUM PRODUCTION kt 931 944 932 939 940 943 938 942 928 1,000 33 32 31 29 31 32 33 30 29 35 35 29 21 20 35 35 800 25 21 600 875 883 878 885 890 878 861 878 878 400 200 0 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q19 3Q19 Russia Siberia Russia European Part Swede
Slide 27: Alumina Segment Operating Data
ALUMINA SEGMENT OPERATING DATA PRODUCTION kt Bauxite 4,242 3,848 3,948 4,000 3,831 3,719 Alumina 1,847 1,388 1,517 3,000 1,630 1,895 Nepheline ore 1,999 1,958 1,957 394 358 1,932 1,918 88 398 2,000 122 79 130 78 80 76 120 457 345 253 467 185 109 109 470 186 177 166 168 480 491 1,207 1,144 484 468 47
Slide 28: Income Statement and EBITDA Reconciliation
INCOME STATEMENT AND EBITDA RECONCILIATION INCOME STATEMENT QoQ YoY 3Q19 2Q19 9M19 9M18 $ mn chg chg Revenue 2,486 2,566 (3.1%) 7,222 7,915 (8.8%) Cost of sales (2,081) (2,126) (2.1%) (6,012) (5,672) 6.0% Other operating expenses (341) (312) 9.3% (945) (996) (5.1%) Operating income (Results from ope
Slide 29: Balance Sheet and Cash Flow
BALANCE SHEET AND CASH FLOW BALANCE SHEET QoQ YoY 3Q19 2Q19 9M19 9M18 $ mn chg chg Cash and Cash Equivalents 1,616 969 66.8% 1,616 943 71.4% Inventory 2,631 2,846 (7.6%) 2,631 2,739 (3.9%) Trade and other accounts receivables 1,304 1,275 2.3% 1,304 1,052 24.0% Equity Attributable to Shareholders of
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 3Q19 produced purchased segment margin services segment $ mn (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenue kt 1,046 80 - - 1,126 USD m
Slide 31: Net Income Reconciliation
NET INCOME RECONCILIATION RECONCILIATION OF ADJUSTED NET PROFIT/(LOSS) QoQ YoY 3Q19 2Q19 9M19 9M18 $ mn chg chg Net profit for the period 194 352 (44.9%) 819 1,549 (47.1%) Adjusted for: Share of profits and other gains and losses attributable to Norilsk (274) (361) (24.1%) (1,038) (721) 44.0% Nickel
Slide 32: 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 33: 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 34: 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 35: 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 36: UC RUSAL 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