Difficult Financial Future possibility for UC Rusal

The decision to shut down the electrolytic production process at Bogoslov Aluminum Plant in the Sverdlovsk region could be seen as the beginning of the end for UC RUSAL. The company is mired in debt, its revenues and operating margin are declining, and the financial statements of its biggest companies have been labeled as classified. Challenging times await the co-owner of this aluminum empire, Oleg Deripaska.

The company's financial statements indicate that things are not going well. Analysts from Veles Capital emphasize that UC RUSAL's net profit for the first nine months of 2011 (according to IFRS) decreased by 14.7% - which amounts to as much as $1.2 billion. The company's operating profit decreased by 8% in the third quarter - which comes to as much as $555 million, and revenue fell by 5% - up to $3,126 million.

As these problems have developed, the company has been increasingly forced to borrow money. In early November, 2011, UC RUSAL received a syndicated loan of $4.75 billion, secured by its blocking stake in factories in Bratsk, Krasnoyarsk, Sayanogorsk, and Novokuznetsk, as well as the Siberian-Urals Aluminum Company, all of which belong to the holding company. Much of this money will go toward paying off current liabilities.

Russian analysts are unable to objectively assess how indebted the company is or whether it has a financial future. According to The Moscow Post, reporting statements from JSC Krasnoyarsk Aluminum Plant, JSC Achinsk Alumina Refinery, and several other manufacturing assets are not being made public.