Rusal announces financial results for the year ended December 31, 2023

Rusal, the Russian aluminium giant and one of the leading aluminium producers in the world (ex-China), has unveiled its financial results for the year ended December 31, 2023.

The key highlights

• In 2023, global economic uncertainty continued, putting pressure on the demand for aluminium. Meanwhile, geopolitical tensions, including the unprecedented regime of external restrictions and supply chain disruptions, as well as a significant drop in aluminium prices, had a negative impact on the Company's results.
• In this environment, the Company continued to focus on securing its independence in raw materials supplies, restructuring its export sales channels, developing the domestic market, and implementing its investment programme based on the fundamental principles of sustainable development and social responsibility and aimed at ensuring the Company's continuous operation and further development.
• In 2023, sales of primary aluminium and alloys increased by 6.6 per cent to 4,153 thousand tonnes (3,896 thousand tonnes in 2022), driven by the release in 2023 of excess inventory accumulated as of the end of 2022.
• This was offset by a 16.8 per cent decrease in the price of aluminium on the London Metal Exchange (LME) over the corresponding period, reaching an average of USD2,252 per tonne in 2023 (compared to USD2,707 per tonne in 2022) and an 18.0 per cent decrease in the weighted-average realised aluminium price to USD 2,439 per tonne (compared to USD 2,976 per tonne in 2022).
• As a result, 2023 revenue decreased by 12.6 per cent compared to 2022 and amounted to USD12,213 million (USD13,974 million in 2022), and Adjusted EBITDA decreased by 61.2 per cent to USD786 million (compared to USD2,028 million in 2022), Adjusted EBITDA margin decreased to 6.4 per cent (compared to 14.5 per cent in 2022).

Market overview

• In 2023, global economic uncertainty, high inflation, and the constant threat of recession continued to pressure the demand for aluminium. Geopolitical tensions affected the global economy, disrupting supply chains and end markets.
• In 2023, the average LME aluminium price dropped by USD455 to USD2,252 per tonne; its lowest point was USD2,069 per tonne in August 2023, after reaching USD2,636 per tonne in mid-January 2023. 
• Aluminium consumption increased despite all the above headwinds in 2023 to 70.2 million tonnes, up 1.7 per cent from the previous year. In China, consumption increased to 42.8 million tonnes, which is 4.9 per cent higher than last year’s figure. China’s decarbonisation efforts have increased demand for aluminium, which is a key material for renewable energy-related manufacturing, ranging from electric vehicles to solar panels. Aluminium consumption in the rest of the world (the world excluding China, the “RoW”) in 2023 contracted 2.8 per cent year-on-year and amounted to 27.4 million tonnes, showing the figures previously seen in 2015 and 2016. The demand was supported mainly by sectors with a particular focus on green transformation, namely the automotive and electrical industries. Only these two areas contributed to consumption growth in 2023.
• The worldwide supply of primary aluminium was up by 3.5 per cent year-on-year in 2023, reaching 70.5 million tonnes. RoW production went up by 0.9% to 29.0 million tonnes due to production restart and capacity expansions in South America and India. Nonetheless, around 1.1 million tonnes of aluminium production in Europe were frozen due to high power costs in previous years.
• Aluminium production in China increased by 3.4 per cent year-on-year in 2023 to 41.5 million tonnes and is expected to grow further in 2024 due to the expected growth in new capacity. In China, the industry recorded around 1.5 million tonnes of net capacity increase by the end of 2023 as a result of the creation of 3.9 million tonnes of new capacity and additional restart of previously closed production, and 2.4 million tonnes of capacity being closed due to temporal supply cuts in certain provinces. By the end of 2023, China had 45.3 million tonnes of installed aluminium capacity.
• China shipped out a lower volume of unwrought aluminium and alloys to the RoW in 2023 than the previous year due to weak demand in the RoW. China’s exports of unwrought aluminium, alloys and semis dropped by 14.0 per cent year-on-year to 5.7 million tonnes in 2023. At the same time, China’s imports of unwrought aluminium and alloys rose significantly during 2023 - by 58.8 per cent year-on-year to 2.7 million tonnes. China will increase its import of primary metal in the upcoming years as its production is reaching its capacity limit and to satisfy the healthy demand for aluminium.
• During 2023, aluminium inventories in the LME, after rising in high volatility trading in the five months ended 31 May 2023, trended mostly downward until mid-December and surged by 120 thousand tonnes to 566 thousand tonnes by the end of the year, particularly the Russian metal supply accounted for 90 per cent of the total LME inventories as at the end of 2023. Metal held outside of LME warehouses (off-warrant reported stocks) wavered during the year and rose by 142 thousand tonnes to 439 thousand tonnes at the end of November 2023.
• Regional aluminium premiums mostly dropped during the 11 months ending 30 November 2023 due to the downward price pressure from increased supply and weakening global spot demand. In December 2023, premiums stabilised at approximately 18.80 cents per pound for U.S. Midwest aluminium premiums and began to rise in Europe amid wide contango, sanctions against Russian aluminium and risks of supply chain disruption in the Middle East. By the end of 2023, the European P1020 Duty Unpaid premium at warehouse Rotterdam stood at USD145 per tonne.
• Overall, the global aluminium market was roughly balanced in 2023.

Financial overview

• Total revenue decreased by USD1,761 million or by 12.6 per cent to USD12,213 million in 2023 compared to USD13,974 million in 2022.
• Revenue from sales of primary aluminium and alloys decreased by USD1,464 million, or by 12.6 per cent, to USD10,129 million in 2023, as compared to USD11,593 million in 2022, primarily due to an 18.0 per cent decrease in the weighted average realised aluminium price per tonne (to an average of USD2,439 per tonne in 2023 from USD2,976 per tonne in 2022) driven by a decrease in the LME aluminium price (to an average of USD2,252 per tonne in 2023 from USD2,707 per tonne in 2022), which was partially offset by a 6.6 per cent increase in the sales volumes between the compared periods.
• Revenue from sales of alumina decreased by 38.2 per cent to USD340 million for the year ended 31 December 2023 from USD550 million for the year ended 31 December 2022 due to a decrease in the alumina sales volume by 35.1 per cent as well as a decrease of 4.7 per cent in the average sales price.
• Revenue from sales of foil and other aluminium products decreased by USD31 million, or by 5.3 per cent, to USD550 million in 2023, as compared to USD581 million in 2022, due to a decrease in revenue from sales of foil by 11.9 per cent between the compared periods.
• Revenue from other sales, including sales of other products, bauxite and energy services, decreased by 4.5 per cent to USD1,194 million for the year ended 31 December 2023 as compared to USD1,250 million for the previous year due to a decrease in sales of other materials (such as anode blocks by 12.1 per cent, aluminium powder by 15.3 per cent, silicon by 28.0 per cent), which was partially offset by an increase in revenue from the sale of bauxite, and also due to a 27.0 per cent decrease in revenue from the sale of services (mainly a 36.8 per cent decrease in revenue from the sale of energy services, what was caused by the weakening of the Russian rouble against the US dollar).

Cost of sales

The following are the key highlights and breakdown of UC RUSAL’s cost of sales for the year ended December 31, 2023, and 2022, respectively:

• Total cost of sales decreased by USD325 million, or by 3.0 per cent, to USD10,445 million for the year ended 31 December 2023, compared to USD10,770 million for the year ended 31 December 2022.
• The cost of alumina increased by USD182 million, or by 9.9 per cent, to USD2,029 million in 2023 as compared to USD1,847 million in 2022, primarily due to the increase in alumina purchase volume by 11.9 per cent between the periods, which was partially offset by the decrease in alumina purchase price.
• The cost of raw materials (other than alumina and bauxite) and other costs decreased by 19.8 per cent in 2023 compared to 2022 due to a decrease in raw materials purchase price (prices for the raw pitch coke went down by 38.3 per cent, pitch by 16.3 per cent, anode blocks by 28.1 per cent, caustic soda by 28.9 per cent).
• Energy costs decreased by USD370 million, or by 13.9 per cent, to USD2,288 million for the year ended 31 December 2023, as compared to USD2,658 million for the year ended 31 December 2022 due to a decrease of 13.9 per cent in the average electricity tariff between the comparable periods (USD3.18 cent/kWh in 2023 as compared to USD3.69 cent/kWh in 2022) that was caused by the weakening of Russian rouble against US dollar during the reporting period.
• The finished goods mainly consist of primary aluminium and alloys (approximately 95 per cent of the total volume). The change dynamics between the reporting periods were driven by the fluctuations of primary aluminium and alloy physical inventory between the reporting periods: a 27.7 per cent decrease in 2023 and a 33.3 per cent increase in 2022.

Results from Operations and Adjusted EBITDA

Adjusted EBITDA, defined as results from operating activities adjusted for amortisation and depreciation, impairment charges and loss on disposal of property, plant, and equipment, decreased to USD786 million for the year ended December 31, 2023, as compared to USD2,028 million for the year ended December 31, 2022. The factors that contributed to the decrease in Adjusted EBITDA margin were the same that influenced the Company's operating results.

Profit for the period

As a result of the above, the Company recorded a profit of USD282 million in 2023, as compared to USD1,793 million in 2022.

Adjusted Net Profit/(Loss) for any period is defined as the net profit/(loss) adjusted for the net effect of the Company’s investment in Norilsk Nickel, the net effect of derivative financial instruments and the net effect of non-current assets impairment. Recurring Net Profit/(Loss) for any period is defined as Adjusted Net Profit/(Loss) plus the Company’s net effective share in Norilsk Nickel results.

Segment reporting

As described in the Annual Report, the Group has four reportable segments, which are the Group’s strategic business units: Aluminium, Alumina, Energy, Mining, and Metals. These business units are managed separately, and the General Director reviews their operations on a regular basis.

The Company presents two metrics for the Aluminium segment: (1) total segment information and (2) information on its own aluminium production. The difference between the two metrics relates to the intersegment margins, sales of third parties, metal and related costs and other non-production costs and expenses. Segment information for the year ended December 31, 2023, presented above relates to its own aluminium production that is different from the relevant segment information presented in the Company's consolidated financial statements for the year ended December 31, 2023.

The "Revenue," "Cost of sales," and "Adjusted EBITDA and results from operating activities" sections above disclose key drivers for the decrease in the margin in the aluminium segment. The consolidated financial statements for the year ended December 31, 2023, provide detailed segment reporting.

Capital expenditure

UC RUSAL recorded a total capital expenditure of USD1,056 million for the year ended December 31, 2023. UC RUSAL’s capital expenditure in 2023 aimed to maintain existing production facilities.

Forward-looking statements

This announcement contains statements about future events, projections, forecasts, and expectations that are forward-looking statements. Any statement in this announcement that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause UC RUSAL’s actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include those discussed or identified in the prospectus for UC RUSAL. In addition, the past performance of UC RUSAL cannot be relied on as a guide to future performance. UC RUSAL makes no representation of the accuracy and completeness of any of the forward-looking statements and, except as may be required by applicable law, assumes no obligations to supplement, amend, update, or revise any such statements or any opinion expressed to reflect actual results, changes in assumptions or UC RUSAL’s expectations or changes in factors affecting these statements.