Rusal Sales Volume Buoys Profit Even as Aluminum Prices Fall

United Co. Rusal, Russia’s biggest aluminum producer, said profit rose almost 11 percent in the first quarter as an increase in sales volume and the ruble’s depreciation countered weaker prices.

Adjusted earnings before interest, taxes, depreciation and amortization climbed to $721 million from $651 million the previous quarter, the Moscow-based company said Wednesday in a statement. Revenue fell 0.8 percent to $2.48 billion.

“The key factors driving our results were our supply discipline and cost control, strongly supported by local currency depreciation,” Chief Executive Officer Vladislav Soloviev said in the statement.

For the rest of 2015, industry challenges will be an oversupply of metal and falling premiums, Soloviev said.

Prices for the metal used in cars, airplanes and drink cans have dropped on concern there’ll be a glut in supply this year. Rusal has weathered the market weakness by boosting sales of value-added products such as aluminum alloys.

Net income totaled $572 million in the quarter, compared with a net loss of $102 million in the previous three months. Net cash flow from operating activities was $612 million, the company said. That compares with $1.4 billion net cash from operations for the whole of 2014.

Peak Earnings

“They are likely to be the peak quarterly earnings for the company in 2015,” VTB Capital analysts Wiktor Bielski and Boris Sinitsyn said in a report yesterday, before the results were announced.

Aluminum spot premiums in Europe and the U.S. are down 50 percent to 60 percent since the start of the year, while the ruble is trading at 18 percent above the first-quarter average, the analysts said.

From the second quarter of this year, “we expect earnings and free cash flow to be significantly negatively impacted,” Bielski and Sinitsyn said.

Analysts typically compare Rusal’s quarterly results with the preceding three months rather than year-earlier figures.

Average aluminum prices declined 8 percent in London in the period. European premiums -- a sum paid by buyers for faster delivery -- dropped almost 6 percent after jumping last year.

Rusal managed to reduce costs in part by drawing on its inventory. Aluminum sales volumes totaled 935,000 metric tons in the quarter, more than output of 900,000 tons in the period, the company said. Energy costs dropped almost 6 percent in the first three months of this year, compared with a year earlier. Net debt shrank 2.4 percent to $8.62 billion by March 31 from $8.84 billion at the end of 2014.

Rusal declined 0.4 percent to HK$4.67 at 9:55 a.m. in Hong Kong, extending its drop this year to 10.5 percent.

Before it's here, it's on the Bloomberg Terminal.