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Print[Ferro-Alloys.com] RUSAL's Q2 adjusted EBITDA USD327 mln vs forecast $265 mln H1 net profit USD 37 mln, Q2 net loss of USD USD 37 mln Places 275,000 tonnes of aluminum capacity under review
Russia's United Company RUSAL Plc, the world's top aluminum producer, reported sharply lower profits for the second quarter on Monday, battered by high inventories and low prices, and trimmed its outlook for global aluminum consumption.
Despite a 72 percent drop in recurring net profit from a year ago, tight cost controls helped RUSAL beat earnings estimates, and analysts said the company's comparatively low production costs should help it outperform competitors.
Even so, RUSAL and rivals Alcoa Inc and Aluminum Corp of China Ltd (Chalco) are struggling with aluminum prices that are down about 5 percent so far this year to near 2-year lows.
RUSAL said it would review 275,000 tonnes of capacity and expected to cut up to 150,000 tonnes by year-end, with subsequent cuts in stages through 2018. That relatively high cost capacity would be replaced by new cost-effective smelters in Siberia that are under construction, it added.
"Second-quarter earnings were better than expected, largely due to better cost controls and higher LME premiums, but otherwise no surprise," said Robin Tsui of BOCI Research.
"RUSAL should outperform its rivals and be able to make a profit at the current aluminum price level due to its relatively low production costs."
Concerns about weakening demand for the metal, which is used in drink cans, car parts, planes and iPads, have prompted rivals Alcoa and Norsk Hydro to cut capacity.
Despite RUSAL's market-leading position, the weak operating environment has increased pressure on the company, which is embroiled in a shareholder battle over its stake in Norilsk Nickel and is grappling with an ownership dispute over a plant in Guinea.
Hong Kong listed shares of RUSAL, which have dropped nearly 12 percent so far this year, were up about 0.70 percent by late morning on Monday, lagging a flat overall market.
At HK USD 4.38, the stock is trading at less than half of its 2010 Hong Kong IPO value of HK USD 10.80 a share.
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