United Co. Rusal, the world’s largest aluminum producer, is posting its best monthly rally on record as Goldman Sachs Group Inc. and VTB Capital predict a rebound in the metal will make the company profitable again.
Shares of Rusal gained 1 percent from an 11-month high at 3:45 p.m. in Moscow, extending its April surge to 26 percent. The stock has climbed 62 percent this year, the most on the Micex Index (INDEXCF), which has slumped 13 percent. Its Hong Kong-listed stock jumped 3.2 percent today to the strongest level since June 4. The Bloomberg index of Russian shares trading in the U.S. fell 0.9 percent yesterday, led by VimpelCom Ltd.
Rusal, which posted last year the largest loss since 2008, will report earnings of $392.8 million in 2014, according to the average of eight analysts’ estimates compiled by Bloomberg. That would be the first profit in three years. Aluminum has risen 4.1 percent in London this year amid speculation that global demand will exceed production. The company will also benefit from a weaker ruble, which has slumped 7.9 percent in 2014, Wiktor Bielski of VTB Capital said.
“The weak ruble helps because most of Rusal’s costs are denominated in rubles,” Bielski, a London-based analyst at VTB Capital, said by phone yesterday. The rally in aluminum “puts them in a much better position, hence the share-price performance.”
Global aluminum demand will rise 6 percent from 2014 to 2015, the company said last month, restating a February forecast. Rusal plans to cut output to the lowest in at least eight years as it shutters inefficient smelters. Production is forecast to be 3.5 million metric tons this year, the Moscow-based company said in a Feb. 18 statement to the Hong Kong (486) stock exchange. That’s down 10 percent from 2013.
The shares also rallied this month after Rusal entered into a forbearance agreement with lenders on a $4.75 billion loan, protecting the company from possible payment breaches as it seeks to refinance. The accord, which lasts to July 7 and took effect April 8, guarantees that lenders won’t demand the company repay the debt for breaching covenants, including failure to pay an installment.
“We believe a key catalyst for positive sentiment toward Rusal among equity investors would be the announcement of debt restructuring as it would allow matching cash generation with debt repayment schedules,” Goldman Sachs’ analysts including Yulia Chekunaeva wrote in an e-mailed note on April 21.
The Bloomberg Russia-US Equity Index dropped to 81.54 yesterday, extending this month’s slide to 4.4 percent. The Micex Index slid 1.5 percent 1,308.93 by 3:55 p.m. in Moscow. Rusal climbed to 154 rubles.
VimpelCom, co-owned by Russian billionaire Mikhail Fridman and Norway’s Telenor ASA, dropped 2.8 percent to $8.80 in New York. The stock rallied earlier this week on an agreement to sell a majority stake in its Algerian unit Djezzy.
The ruble was little changed versus the dollar yesterday. It’s the second-worst performer this year among 31 major currencies monitored by Bloomberg, after the Argentinian peso.
The RTS Volatility Index, which measures expected swings in futures, jumped 7 percent to 39.67 today, while RTS stock-index futures expiring in June fell 1.9 percent to 111.480.