Rusal Posts 10% Profit Gain on Aluminum Price, Diversified Sales

  • Global market may have 1 million ton deficit as demand expands
  • Company warns on potential for capacity restarts in China

United Co. Rusal, the largest aluminum producer outside China, said second-quarter profit rose 10 percent compared with the opening three months of the year as prices gained and the company diversified sales away from Europe.

Adjusted earnings before interest, taxes, depreciation and amortization rose to $344 million from $312 million in the first quarter, the company said in a statement on Thursday. While that’s down from $568 million a year earlier, it beat the $332 million average of five analyst estimates compiled by Bloomberg. Analysts typically compare results with the prior quarter.

Aluminum has climbed 9 percent in 2016, with the lightweight metal rising this month to the highest level in more than a year. Prices averaged more than 4 percent higher in the second quarter than the previous first three months. Higher demand and tighter supply outside China helped to lift prices in the period, Chief Executive Officer Vladislav Soloviev said in the statement.

Worldwide Deficit

“Rusal estimates that the global aluminum market will show a deficit of around 1 million tons in 2016 as a result of strong aluminum demand growth, incremental increase in the global aluminium supply and falling Chinese aluminum semis exports,” the Moscow-based company said. Semis is industry jargon for semi-finished products. Still, better prices may prompt the restart of idled capacity in China, it said.

Revenue gained 3.6 percent to $1.98 billion and recurring profit rose 85 percent to $276 million. Rusal shaved its debt to $8.33 billion from $8.37 billion after repaying part of its borrowings early.

Rusal also diversified sales, shifting some from Europe, typically its largest market, to the U.S. and former Soviet republics known as the Commonwealth of Independent States. The share of European sales fell to 46 percent of total revenue in the half from 53 percent a year ago, as U.S. sales rose to 14 percent from 10 percent and CIS sales were 24 percent from 21 percent.