UC Rusal faces surplus of aluminum

The fall in aluminum prices in the third quarter hit the financial performances of UC Rusal, and in the fourth quarter the situation is only getting worse. The market is also under pressure of new facilities and volumes, accumulated in warehouses of the London Metal Exchange (LME). By results of the year, the surplus of aluminum on the market could reach 373 thousand tons.

By results of the third quarter, the UC Rusal’s net loss made up $54 million against $220 million of the profit in the previous year, the company reports. The adjusted profit for the period (excluding non-operating expenses and income) was $181 million ($25 million in the previous year), the normalized earnings (with the effective stake in Norilsk Nickel in the amount of 27.8%) was $287 million ($250 million in July-September 2014). The net loss is explained by "the results of change in the fair value of derivative financial instruments and reclassification of the cumulative loss from exchange rate differences in the elimination of one of the group’s subsidiaries". The company explained that it was about the elimination of "one of the intermediate holding companies"; according to the database of SPARC, in AugustUC Rusal Investment Management was eliminated, which owned the stake in Norilsk Nickel before May 2013 (was transferred to Aktivium Holding BV). Oleg Petropavlovsky of BCS notes that it is not just about paper revaluation - in the third quarter, the company, according to its report, paid $248 million on derivatives.