Rusal reports drop in revenue and earning in H1 2019 despite higher volume on lower aluminium price

RUSAL has announced the interim results for the six months ended 30 June 2019 and second quarter and reported a 5.2% decline in total revenue to US$4,736 million from US$4,997 million for the same period of 2018. The decline is attributed to falling LME price which fell by 17.3% to US$1,826 per tonne compared with US$2,209 per tonne for the same period in 2018.

Aluminium sales volume increased by 13.2% to 1,978 thousand tonnes in H1 2019 compared to 1,748 thousand tonnes in H1 2018. However, the increase was offset by 15.6% drop in aluminium sales price to US$1,960 per tonne from US$2,322 per tonne in H1 2018. The increase in sales was driven by the partial sell out of surplus inventories of primary aluminium accumulated due to OFAC sanctions.

Revenue from alumina sales decreased by 23.9% to US$340 million in H1 2019 from US$447 million in the same period in 2018 primarily due to decline in sales volumes and 8.3% drop in average sales price.

Total cost of sales increased by US$327 million, or 9.1%, to US$3,931 million in H1 2019, compared to US$3,604 million in H1 2018. The increase was driven by 13.2% growth in primarily aluminium sales volume, partially offset by depreciating Russian rouble against US dollar.

Adjusted EBITDA dropped by 53.0% to US$528 million, compared to US$1,124 million in H1 2018, primarily driven by the effect of LME and quotation period. Net profit stood at US$558 million, down 41.4% from US$952 million in H1 2018.

Commenting on the second quarter and interim 2019 results, Evgenii Nikitin, CEO of RUSAL, said:

“During the first half of the year, the market environment was unfavourable for the aluminium industry. It has become time of the wider market volatility with aluminium prices declining by more than 17% year-on-year. This has inevitably impacted our overall performance and financial results and contributed to adjusted net loss in the first half of the year.”

“Looking ahead, we are working hard to improve our value-added product capacity…We look forward to the upcoming “mating” season in the second half of the year,” he added.

He expressed his concern over US-China trade tensions and tariffs and slowing down of manufacturing activities which might affect aluminium demand in H2 2019.

The global aluminium demand growth rate was weak in H1 2019. Rusal expects that global primary aluminium demand to rise by around 2% YoY in 2019 to 67.5 million tonnes, and the overall balance to be in deficit of around 0.7-0.8 million tonnes.