Rusal’s Profit Increases as Weakening Ruble Helps Cut Costs

  • Aluminum producer’s Ebitda climbed 2 percent in first quarter
  • Ruble’s slide, cheaper raw-material prices shrank outgoings

United Co. Rusal, the world’s second-biggest aluminum producer, said first-quarter profit climbed 2 percent as a weaker ruble and lower raw-material prices reduced costs.

Adjusted earnings before interest, taxes, depreciation and amortization rose to $312 million in the three months through March from $306 million the previous quarter, the Moscow-based company said in a statement Friday. That beat the $310.5 million average of four analysts’ estimates compiled by Bloomberg. Analysts typically compare results with the prior quarter rather than year ago.

The ruble’s plunge to a record in January, continuing cost-control measures and a drop in raw-material prices reduced outgoings at the firm controlled by billionaire Oleg Deripaska. While aluminum on the London Metal Exchange increased in the first quarter, the company’s average sales price declined.

The positive mood in the aluminum market is supported by “an accelerating ex-China deficit and solid demand fundamentals as the transportation sector continues to fuel global demand growth,” Chief Executive Officer Vladislav Soloviev said in the statement. World demand will expand 5.3 percent this year to 59.6 million tons, the company said.

Costs Decline

Revenue expanded 3.1 percent to $1.91 billion in the first quarter and recurring profit totaled $149 million, compared with a loss of $40 million in the previous three months. The cash cost to make a metric ton of the metal declined 6 percent to $1,326, the lowest since at least 2010, when the company began disclosing earnings after listing in Hong Kong.

After the end of the quarter, the company reached new agreements with its lenders and fully executed its obligations to repay scheduled installments under the combined pre-export finance facility in 2016, Soloviev said. The refinancing is a substantial move for the company’s debt profile and further deleveraging remains a priority, he said.

Deputy Chief Executive Officer Oleg Mukhamedshin said this week he expects exports from China, which makes about half the world’s aluminum, to shrink in 2016 as output grows at the slowest pace in five years, trailing demand. That’ll push the global market into a 1.2 million ton deficit this year from a 600,000 ton surplus in 2015, the company said.

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