RusAl Profit Drops on Weak Prices, Higher Costs

© RIA Novosti . Vitaly BezrukihThe world's biggest aluminum producer RusAl posted a 74.4 percent drop in half-year net profit as a result of falling prices and rising costs
The world's biggest aluminum producer RusAl posted a 74.4 percent drop in half-year net profit as a result of falling prices and rising costs - Sputnik International
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The world's biggest aluminum producer RusAl posted a 74.4 percent drop in half-year net profit as a result of falling prices and rising costs, the company said in its earnings statement on Monday.

The world's biggest aluminum producer RusAl posted a 74.4 percent drop in half-year net profit as a result of falling prices and rising costs, the company said in its earnings statement on Monday.

The aluminum giant said its half-year results had been significantly impacted by a combination of factors including low aluminum prices, a challenging macroeconomic environment as well as an increase in the purchase price of certain raw materials and transportation tariffs.

Net profit for the six months ending June 30 plummeted to $37 million, from a high of $779 million a year earlier, the company said in the statement. Revenue fell 9.7 percent to $5.71 billion. The company also reported a 60.4 percent drop in adjusted earnings before interest, tax, depreciation and amortization, or EBITDA, dropped 60.4 percent compared to the same period in 2011.

Net debt mounted to $10.8 billion at the end of June 2012 after the Company repaid approximately $635 million under its existing credit facilities, RusAl said in its earnings statement. The company said it has no outstanding debt obligations this year.

However, the company said it benefited from low operating expenses and the continuing depreciation of the ruble against the U.S. dollar during the second quarter. “As a result, Adjusted EBITDA and Recurring Net Profit increased by 38 percent and 27.7 percent respectively for the second quarter 2012 compared to the previous quarter,” the statement said.

The Hong Kong-listed company said it will cut production at four of its less-efficient aluminum smelters in Russia. The cost-cutting program, already approved by the company's board, will affect 275,000 tons of aluminum production capacity and will be implemented in stages from 2012 to 2018.

The company expects curtailed capacities to be compensated for at the advanced high-efficiency smelters in Siberia, in particular, by the Company’s Boguchansky aluminum smelter, which is currently under construction.

"During the first half of 2012, continuing financial problems in the euro zone and a slower-than-expected growth in emerging economies resulted in a further weakening of global economic recovery," Chief Executive Oleg Deripaska said in a statement.

"These challenging market conditions put a significant pressure on the aluminum industry, especially in the second quarter of 2012, leading to a sharp downturn in the price of aluminum," he added.

Aluminum price slumped to close to its lowest level in three years on the London Metal Exchange, hitting a low of $1,810 a ton at the end of June.

Deripaska said that although global economic sentiment was expected to remain weak in the mid-term, there was "clear evidence of a stronger physical demand for aluminum, especially in North America and Asia".

RusAl’s rival, Alcoa Inc., the largest U.S. aluminum producer, reported quarterly revenue and profit that beat analysts expectations last month even though prices for its aluminum remained near two-year lows.

 

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