Rusal Swings to Loss but Expects Stronger Aluminium Demand from China

on Nov 12, 2012

**Rusal’s Q3 Results**

Tepid demand for aluminium in an oversupplied market has recently pushed most of the major producers of the lightweight metal into the red. United Company Rusal (HKG:0486), the world’s top aluminium producer, was the latest name in the sector to swing to a third-quarter net loss as a result of the challenging market situation, Reuters reported on 11 November 2012.

Rusal posted a net loss of $118 million (£74 million) for the three months ended September, compared to a $432 million (£272 million) profit a year earlier, and an adjusted net loss of $248 million (£156 million) versus a profit of $351 million (£221 million) a year ago. The Russian company’s quarterly adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA), which indicates a company’s ability to pay back what it owes, dropped 82 per cent to $130 million (£81.9 million). In the third quarter, Rusal also recorded a 19 per cent revenue decline to $2.56 billion (£1.61 billion) from $3.16 billion (£1.99 billion) in the equivalent period last year.

Following Rusal’s quarterly report, shares in the company, which have dropped nearly 60 per cent since their IPO price of HK$10.80 in 2010, were flat in Hong Kong trade on Monday. Over the past year, the total market value of the company, controlled by chief executive Oleg Deripaska, has declined by about 27 per cent to $8.7 billion (£5.4 billion).

**China Aluminium Demand to Rebound**
According to Russal, its third-quarter performance has been “seriously hit” by tepid demand for aluminium and a decline in the metal’s prices, which have slumped 10 per cent over the last 12 months. Yet the Russian company expressed its optimism in regards to the aluminium outlook, saying that it expects demand for the lightweight metal to grow in the fourth quarter of the year.

!m[World’s Top Aluminium Producer Hit by Tepid Demand, Yet Remains Positive on Sector’s Outlook](/uploads/story/781/thumbs/pic1_inline.png)”This will be largely driven by a Chinese rebound in growth, a resilient USA automotive sector as well as new monetary stimulation steps taken by global central banks to support global economic growth and financial markets,” Rusal said in a statement.
Supporting Rusal’s expectations, China, the world’s biggest consumer of aluminium, said on Saturday it is effectively turning the corner on the economy and likely to meet its growth target for the year as a slowing trend had halted.
**Optimism Also Spurred by Growing North American Demand, But Japan Lags**
Rusal said its optimism in regards to the aluminium market in the fourth quarter of the year is also due to growing North American demand for the metal, used in aircraft, drink cans and iPads. Meanwhile, however, the Russian company does not see the same perspective in Japan. Rusal revised down its Japanese consumption growth forecast for 2012 to 3 per cent from 5 per cent due to a drop in exports to Europe and the recent row between Tokyo and Beijing over disputed islands which it said had weighed on Japanese carmaker.