Rusal Posts $3.2 Billion Loss on Aluminum Prices, Writedowns

Mar 28, 2014 7:11 am ET

(Updates with CEO Deripaska’s salary in 12th paragraph.)

March 28 (Bloomberg) -- United Co. Rusal posted the biggest annual loss since 2008 as the world’s largest aluminum producer wrote down the value of assets after prices for the metal fell.

The net loss widened to $3.2 billion in 2013 from a restated $528 million loss a year earlier, Rusal said today. Adjusted earnings before interest, taxes, depreciation and amortization fell 29 percent to $651 million, missing the $692.6 million average estimate of 10 analysts surveyed by Bloomberg.

Rusal has idled smelting capacity in the past year, taking its most inefficient plants out of production and reducing 2013 output to 3.9 million metric tons. The cuts accompanied an 8 percent drop in the average price of aluminum on the London Metal Exchange. The company wrote down about $2 billion of assets, including its Taishet project, according to a statement.

“We don’t see any deterioration of the situation throughout the first quarter,” Chief Financial Officer Alexandra Bouriko said today on a conference call. “While it’s too early to say what will happen in the future, we have no expectation of any further writedowns.”

Global aluminum demand will rise 6 percent from 2014 to 2015, the Moscow-based company said, restating a February forecast.

Rusal’s Hong Kong-traded shares climbed 2.9 percent to close at HK$2.80, compared with a 1.1 percent gain in the benchmark Hang Seng index.

Siberian Smelter

Construction of the Siberian Taishet smelter, with planned initial capacity of 375,000 tons a year, was frozen as the financial crisis unfolded in 2008. Rusal has been seeking funding for the project in Russia and China since 2011.

Full-year revenue fell 10 percent to $9.8 billion as production shrank. Net debt was $10.1 billion at the end of 2013 and Rusal is yet to secure waivers from international banks for a $4.75 billion loan obtained in 2011. Not all have agreed to extend repayments to 2016 from this month, the Financial Times reported, citing officials familiar with the situation.

The company has requested that the lenders agree to certain forbearances and not to exercise their rights until July 7, giving it more time to restructure its debts, Rusal said in the statement. It’s unlikely they’ll demand repayment while restructuring talks are continuing, the company said.

Refinancing Plan

Rusal is seeking amendments from lenders on the 2011 loan by the end of March, it said today in a presentation. Should an agreement be reached, Rusal will have to pay back $400 million this year rather than $1 billion, the presentation shows.

“Having gone through a difficult but important transformation, the company now has the lowest level of cash cost per ton” in recent years, Chief Executive Officer Oleg Deripaska said in the statement. The cash cost in the fourth quarter was $1,864 a ton, he said.

Deripaska’s 2013 salary was 60 percent lower than a year earlier at $2.23 million, while First Deputy CEO Vladislav Soloviev’s salary was cut by about half to $3.2 million.

Rusal, which holds a 28 percent stake in Russia’s OAO GMK Norilsk Nickel, may benefit from an improving outlook for nickel this year, Barclays Plc analysts said today in a note. Rusal doesn’t intend to sell its stake in the near term, Bouriko said.

Warehousing Rules

Aluminum from Rusal and other producers is stored by the LME, the world’s biggest industrial metals exchange, before it’s shipped to buyers. The Russian company has complained that proposed new rules on warehousing aren’t justified.

In a victory for Rusal, the LME postponed the implementation of the planned changes after a U.K. judge yesterday said the move would be “unfair and unlawful” following a lawsuit brought by the Russian company.

The exchange had proposed new rules to shorten times for withdrawing metals from warehouses after buyers said delays were driving up costs for consumers. The U.S. Commodity Futures Trading Commission is probing warehouse operators’ practices.

The LME didn’t properly examine alternatives to the changes, which would cause tens of millions of pounds in losses, Rusal said in its lawsuit. Deripaska said yesterday after the ruling that Rusal would work with the LME “to ensure that the revised consultation period and subsequent rule changes serve to increase the integrity of price discovery and transparency across the market.”