United Company RusAl swung to a first-quarter profit from a loss as prices for the metal used in planes and packaging climbed and the value of its 25 percent stake in Norilsk Nickel rose, the aluminum maker said Friday.
Net income was $247 million, or 2 cents per share, compared with a $638 million loss, or 5 cents, a year ago, RusAl said.
RusAl, controlled by billionaire Oleg Deripaska, is restarting plants after prices jumped 59 percent in the quarter and demand outside of China is forecast to grow 10 percent this year. The first Russian company to sell shares in Hong Kong is seeking to repay total debt of $12 billion and needs growing profit to revive a stock down 24 percent since its debut.
Sales rose 31 percent to $2.3 billion. The market value of RusAl’s stake in Norilsk Nickel, Russia’s largest mining company, rose by 32 percent through the first quarter, RusAl said.
"We still observed very strong demand for aluminum especially in Asia," Oleg Mukhamedshin, RusAl's deputy chief executive, said at a briefing on the quarterly earnings.
"We believe China's aluminum demand can grow nearly 20 percent this year," he said, adding that aluminum prices should stay above $2,000 a metric ton in 2010.
The price of aluminum, widely used in the building, auto, aviation and packaging industries, this week dropped to a three-month low of $2,056 a metric ton along with other base metals amid concerns over the fallout from a debt crisis in Greece.
The Chinese government’s decision to raise electricity surcharges will add $100 to the cost of making a ton of aluminum in China and drive global prices of the metal, Mukhamedshin said.
China, the world’s biggest aluminum producer, will raise the power tariff surcharges for some energy intensive companies by as much as 100 percent from June, the country’s top planner said Thursday. Demand for the metal may grow 20 percent in the nation, and 10 percent in the rest of the world, RusAl said.
“The driver of the market will be the cost of production in China,” Mukhamedshin said. "Demand outside of China will continue to improve too.”
RusAl shares rose almost 1 percent on Friday but were still 23 percent below their initial public offering price of 10.8 Hong Kong dollars on concerns over the firm's heavy debt position.
They were in line with a 21 percent fall on Alcoa shares but lagged the blue-chip Hang Seng Index, which is down about 7 percent this year.
To meet growing demand, the company was in talks to get project financing for its BEMO and/or Taishet smelters, and expects to receive long-term loan facilities by midyear, Mukhamedshin said.
RusAl plans to restart construction of the initial phases of the BEMO and Taishet smelters, with projected capacity of 147,000 metric tons and 187,000 metric tons of aluminum a year, respectively, with a target of starting production in the third quarter of 2011.
(Bloomberg, Reuters)