Rusal Ready to Swap Aluminum Crown for World-Beating Profit

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United Co. Rusal wants to be the most profitable maker of aluminum, not just the biggest.

Rusal, the No. 1 producer since it was created in 2007 with the merger of the assets of billionaire Oleg Deripaska, Sual Holding and Glencore Ltd., more than doubled its earnings before interest, taxes, depreciation and amortization to $1.5 billion last year, partly by closing operations with the lowest returns.

“The company changed strategy,” Chief Executive Officer Vladislav Soloviev said in an interview in London Monday. “We want to be number one in terms of margin and Ebitda now.”

Rusal, based in Moscow, joins other metals companies accenting profit. BHP Billiton Ltd. said it was “squeezing the lemon” with plans in October to usurp Rio Tinto Group as the lowest-cost iron ore supplier. Russian steelmaker PAO Severstal sold U.S. assets last year to focus on earnings and dividends.

Rusal’s efforts in recent years have already made it one of the most profitable aluminum producers, with an Ebitda margin of 26 percent in the fourth quarter compared with the median for the industry of about 14 percent.

The company closed almost all of its Sual assets last year and the year before as they were reporting low or no profit. It’s also considering idling as much 200,000 metric tons of smelting output, the company said in a statement April 22.

That decision, after the 700,000 tons already shuttered, may be taken this year, Soloviev said in the interview.

Net Debt

The shift in strategy has helped the company cut its level of net debt to Ebitda. The ratio is expected fall to 3.5 by the end of this year, potentially allowing Rusal to pay dividends for the first time since it became public in 2010, the CEO said. A final decision on any 2015 payout will be taken by the board.

The company is also discussing its refinancing options with local and foreign banks. It may refinance Russian debt abroad when overseas lenders, which have lower interest rates, lift their current limits to the country, Deputy CEO Oleg Mukhamedshin said in the same interview.

Rusal is keeping its forecast of about a 1 million ton deficit of aluminum supply this year, excluding China, as new supply is slow to start up. In comparison, Alcoa Inc., the largest U.S. producer, changed its forecast this month to show a surplus.

Chinese demand may grow 9.5 percent this year, Mukhamedshin said. Shanghai prices mean about 42 percent of local producers are below break-even and loans are now costlier, Soloviev said.

Aluminum was down 1.4 percent this year at $1,826 a ton as of 1:42 p.m. in London. Prices should reach about $2,000 this year, Soloviev said.

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