Rusal Cuts Aluminum Demand Growth Forecast as Profit Slumps

  • Producer forecasts global surplus of 373,000 tons in 2015
  • CEO sees aluminum sector under ``significant pressure''

United Co. Rusal, the world’s biggest aluminum producer last year, said third-quarter profit fell 26 percent as prices of the alloy declined. It also cut its demand forecast on a weaker outlook in emerging markets.

Adjusted earnings before interest, taxes, depreciation and amortization fell to $420 million from $568 million the previous quarter, the Moscow-based company said in a statement Friday. Revenue dropped 9 percent to $2.07 billion. Analysts typically compare Rusal’s quarterly results with the preceding three months rather than year-earlier figures.

The producer cut its global aluminum demand growth forecast for 2015 to 5.6 percent from 6 percent and raised its surplus forecast to 373,000 metric tons in 2015, according to the statement.

The aluminum sector “was under significant pressure from sliding prices and premiums due to a higher than expected market surplus,” Chief Executive Officer Vladislav Soloviev said in the statement. That’s “owing to weaker demand in some emerging markets and capacity growth in the Middle East, India and China,” he said.

Declining Price

Aluminum has declined 19 percent this year and closed Thursday at $1,492 a ton on the London Metal Exchange, the lowest since 2009. It rose 0.2 percent to $1,495 a ton by 10:07 a.m. London time on Friday. Exports from China, the largest producer, have swelled, creating a glut on global markets.

Around 9 million tons of production outside of China is unprofitable at current prices, while about 53 percent of operations in the Asian country are loss-making and at risk of closure, Rusal said.

Rusal’s revenue declined as the selling price, which includes the LME price and the premium for the metal’s delivery, fell 13 percent quarter-on-quarter, while the company had no “effective support” from the ruble’s depreciation in the quarter due to the 45-day lag in received metal sales, Wiktor Bielski, an analyst at VTB Capital, said before the results were published.

The company’s net debt stood at $7.9 billion at the end of the quarter, down from $8.8 billion as of Dec. 31, the producer said in its statement.

If the aluminum price declines, the company will consider keeping some production capacity offline after planned capital repairs, cutting output by 200,000 tons, Deputy CEO Oleg Mukhamedshin said in a September interview. Rusal restated on Friday that it may make the cuts this year.

Rusal shares closed down 0.7 percent in Hong Kong on Friday where they’ve plunged 45 percent this year. The stock was little changed in Moscow trading at 1:08 p.m. local time.

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