United Company RUSAL Plc: Results Announcement for the Three and Nine Months Ended 30 September 2015

HONG KONG--(BUSINESS WIRE)--Regulatory News:

United Company RUSAL Plc (Paris:RUSAL) (Paris:RUAL):

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UNITED COMPANY RUSAL PLC
(Incorporated under the laws of Jersey with limited liability)
(Stock Code: 486)

RESULTS ANNOUNCEMENT
FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2015

Key highlights   • In the third quarter of 2015 London Metals Exchange (“LME”) aluminium price continued its sharp decline and reached an average of USD1,589 per tonne, the record low since the second half of 2009, demonstrating a 20.0% decrease compared to USD1,987 per tonne in the third quarter of the prior year. This negative trend was compounded by significant decrease in the realized premiums over the LME aluminium price down to an average of USD206 per tonne in the three months ended 30 September 2015, 51.2% lower than USD422 per tonne in the third quarter of 2014.   • However, United Company RUSAL Plc (the “Company” or “UC RUSAL”, together with its subsidiaries, the “Group”) managed to withstand the negative industry environment and recorded an Adjusted EBITDA of USD420 million with Adjusted EBITDA margin of 20.3% for the third quarter of 2015 as compared to 19.0% for the same period of the prior year. Adjusted EBITDA for the first nine months of 2015 reached USD1,709 million with Adjusted EBITDA margin of 25.1% as compared to USD863 million and 12.6% for the same period of 2014.

• As a result of continuing focus on efficiency and cost reduction initiatives undertaken by the management supported by weakening local currency aluminium segment cost per tonne decreased by 17.2% to USD1,440 in the third quarter of 2015 in comparison with USD1,739 per tonne in the same period of 2014.   • Revenue in the third quarter of 2015 decreased by 16.3% to USD2,073 million as compared to USD2,477 million in the same quarter of 2014 with average realized price decreased by 19.8% to USD1,843 per tonne for the reporting quarter as compared to USD2,298 per tonne in the same period of 2014.   • The Company achieved Adjusted Net Profit and Recurring Net Profit of USD181 million and USD287 million, respectively, for the third quarter of 2015 as compared to USD25 million and USD250 million for the same period of the prior year.   • In August 2015 the Board of the Company has approved a new dividend policy for the subsequent periods to pay dividends at the level of 15% of the Company’s Covenant EBITDA. The payment of dividends will be subject to compliance with requirements of the Group’s credit facilities, including financial covenants, and relevant Jersey legislation. Further in October 2015, the Board of the Company has approved an interim dividend for the financial year ending 31 December 2015 in the aggregate amount of USD250 million (US Dollar 0.01645493026 per ordinary share) to be paid in cash. Dividends were paid on 6 November 2015.

Statement of the Chief Executive Officer

During the third quarter of 2015, the aluminium industry was under significant pressure from sliding prices and premiums due to a higher than expected market surplus owing to weaker demand in some emerging markets and capacity growth in the Middle East, India and China. In light of these factors, we have further reduced our initial global aluminium demand growth forecast for 2015 from 6% to 5.6% and increased the surplus forecast to 373kt in 2015.

Production discipline and cost control remain the key principles of UC RUSAL’s operational strategy. UC RUSAL has maintained a flat rate of cost of sales quarter-on-quarter with cash cost per tonne reaching a multi-year low of USD1,440 per tonne in the third quarter of 2015. While pricing pressure in the third quarter of 2015 has inevitably led to a decrease of revenue and adjusted EBITDA, the Company has managed to demonstrate a healthy adjusted EBITDA margin of 20% and posted a Recurring Net Profit of USD287 million in the third quarter of 2015.

While the market situation remains highly challenging, the importance of the aluminium industry’s sustainable development has acquired greater importance ahead of the upcoming 2015 Paris Climate Conference (COP21). Aluminium production requires large amounts of electricity that is often generated by burning fossil fuels such as coal. UC RUSAL is proud to be one of the most efficient global producers in terms of carbon emissions thanks to its use of hydro power. The Company will continue to further improve its carbon footprint and aims to achieve 100% of its energy from clean hydro power for its aluminium production.

Vladislav Soloviev
Chief Executive Officer

12 November 2015

Financial and Operating Highlights

	Three months ended 30 September		Change quarter on quarter, % (3Q to 3Q)	Three months ended 30 June	Change quarter on quarter, % (3Q to 2Q)	Nine months ended 30 September		Change nine months on nine months, %
	2015	2014		2015		2015	2014
	unaudited	unaudited		unaudited		unaudited	unaudited
Key operating data
(‘000 tonnes)
Aluminium	916	903	1.4%	908	0.9%	2,724	2,686	1.4%
Alumina	1,870	1,817	2.9%	1,818	2.9%	5,496	5,435	1.1%
Bauxite	3,290	3,291	0.03%	3,016	9.1%	9,262	9,176	0.9%
Key pricing and performance data
(‘000 tonnes)
Sales of primary aluminium and alloys	939	904	3.9%	888	5.7%	2,762	2,651	4.2%
(USD per tonne)
Aluminium segment cost per tonne^1	1,440	1,739	(17.2%)	1,469	(2.0%)	1,469	1,748	(16.0%)
Aluminium price per tonne quoted on the LME^2	1,589	1,987	(20.0%)	1,769	(10.2%)	1,719	1,833	(6.2%)
Average premiums over LME price^3	206	422	(51.2%)	306	(32.7%)	313	382	(18.1%)
Average sales price	1,843	2,298	(19.8%)	2,119	(13.0%)	2,087	2,154	(3.1%)
Alumina price per tonne^4	294	319	(7.8%)	339	(13.3%)	326	322	1.2%

¹ For any period, “Aluminium segment cost per tonne” is calculated as aluminium segment revenue less aluminium segment results less amortisation and depreciation divided on sales volume of the aluminium segment.

² Aluminium price per tonne quoted on the LME represents the average of the daily closing official LME prices for each period.

³ Average premiums over LME realized by the company based on management accounts.

⁴ The average alumina price per tonne provided in this table is based on the daily closing spot prices of alumina according to Non-ferrous Metal Alumina Index FOB Australia USD per tonne

	Three months ended 30 September		Change quarter on quarter, % (3Q to 3Q)	Three months ended 30 June	Change quarter on quarter, % (3Q to 2Q)	Nine months ended 30 September		Change nine months on nine months, %
	2015	2014		2015		2015	2014
	unaudited	unaudited		unaudited		unaudited	unaudited
Key selected data from the consolidated interim condensed statement of income
(USD million)
Revenue	2,073	2,477	(16.3%)	2,273	(8.8%)	6,823	6,861	(0.6%)
Adjusted EBITDA	420	470	(10.6%)	568	(26.1%)	1,709	863	98.0%
margin (% of revenue)	20.3%	19.0%		25.0%		25.0%	12.6%
Net (Loss)/Profit for the period	(54)	220	NA	307	NA	825	11	7400.0%
margin (% of revenue)	(2.6%)	8.9%		13.5%		12.1%	0.2%
Adjusted Net Profit/(Loss) for the period	181	25	624.0%	187	(3.2%)	596	(370)	NA
margin (% of revenue)	8.7%	1.0%		8.2%		8.7%	(5.4%)
Recurring Net Profit for the period	287	250	14.8%	363	(20.9%)	1,117	210	431.9%
margin (% of revenue)	13.8%	10.1%		16.0%		16.4%	3.1%

Key selected data from consolidated interim condensed statement of financial position

	As at		Change nine months on year end, %
	30 September 2015	31 December 2014
	(unaudited)
(USD million)
Total assets	13,070	14,857	(12.0%)
Total working capital^5	1,406	1,349	4.2%
Net Debt^6	7,907	8,837	(10.5%)

Key selected data from consolidated interim condensed statement of cash flows

	Nine months ended		Change nine months on nine months, %
	30 September 2015	30 September 2014
	(unaudited)	(unaudited)
(USD million)
Net cash flows generated from operating activities	1,400	598	134.1%
Net cash flows generated from/(used in) investing activities	221	(8)	NA
of which dividends from Norilsk Nickel	535	304	76.0%
of which CAPEX^7	(362)	(349)	3.7%
Interest paid	(403)	(524)	(23.1%)

⁵ Total working capital is defined as inventories plus trade and other receivables minus trade and other payables.

⁶ Net Debt is calculated as Total Debt less cash and cash equivalents as at the end of any period. Total Debt refers to UC RUSAL’s loans and borrowings and bonds outstanding at the end of any period.

⁷ CAPEX is defined as payment for the acquisition of property, plant and equipment and intangible assets.

Global aluminium market trends for the first 9 months of 2015

• Global aluminium demand grew by 5.6% in the first nine months (“9m”) 2015 year-on-year (“YoY”). Demand growth in North America, India, Middle East and the EU compensated for a contraction in demand from Japan, Russia and South America.

• With the commissioning of new capacity in the Middle East and India, production outside of China grew by 2.2% in YoY in 9m 2015.

• China continues to increase new operating capacity whilst subsidizing existing loss making smelters. While 2.5 million tonnes of capacity has been cut year-to-date (“YTD”), 3.0 million tonnes of new capacity has been commissioned and 616 ktpy of operating capacities were resumed.

• Chinese net exports of semis rose by 29.4% YoY in 9m 2015 but fell to a lower YTD monthly level due to low price arbitrage. It is expected that Chinese semis exports will return to the historical trend.

• The global aluminium market entered into a surplus of 373,000 tonnes in 2015 as a result of weak demand in various emerging markets and in some Asian countries compounded by the increase in the Chinese semis exports.

Aluminum demand

In 9m 2015, global aluminium demand rose by 5.6% to 43.4 million tonnes. Demand growth in North America, India, Middle East and the EU compensated a contraction in demand from Japan, Russia and South America.

The US recovery is still firmly on track, strongly supported by the fundamentals. North American demand for aluminium rose by 4.2% YoY in 9m 2015. Demand continues to be driven by the transportation sector. From January to September of 2015, North American automakers built 13.5 million vehicles, an increase of 3.2% compared to the same period in 2014. The transportation sector remained the main driver of aluminium consumption growth in the region.

US housebuilding rebounded in September 2015, driven by a boost in multifamily construction. New housing rose 6.5% from the prior month to a seasonally adjusted annual rate of 1.21 million in September 2015. Outlook for the US housing sector remains positive.

Aluminium demand in Europe improved in 9m 2015 growing by 2.1% YoY compared to 9m 2014. The biggest rise came from Turkey (5.9%), Italy (1.9%) and France (1.3%).

The EU’s Purchasing Managers’ Index (“PMI”) for the manufacturing sector in September 2015 remained stable at 52.3 points. Among the European countries, France returned to growth and Ireland expanded at a faster pace. Manufacturing activity in the Netherlands, Italy, Austria, Germany and Spain slowed and Greece remained in contraction.

In September 2015, the EU passenger car market experienced another strong month of growth (+9.8%), marking the 25th consecutive month of growth. Demand for new passenger cars was up in all major markets, driven by ongoing scrappage schemes and the economic recovery in Southern Europe. In 9m 2015, new passenger car registrations increased 8.8% YoY, surpassing approximately 10 million units. All major markets posted growth, contributing to the overall upturn of the EU market over the first three quarters of the year. Spain (+22.4%) and Italy (+15.3%) benefited from strong growth and posted double-digit percentage gains, followed by the UK (+7.1%), France (+6.3%) and Germany (+5.5%).

Aluminium demand growth in developing South East Asian countries is estimated to increase by 3.1% in 9m 2015 YoY. However, in consideration of the whole of South East Asia, including Japan and South Korea, the region experienced a lower increase in overall aluminium demand (0.2%), mainly due to a decrease in Japan (-5.6%), the region’s biggest individual market. The slowdown in the Chinese economy, ASEAN’s largest trading partner, has dampened economic growth in the region. In Japan, the production of capital goods and consumer durables both fell for the second successive month since July 2015 and production of motor vehicles in the first eight months of the year was down by 7.6% compared to the same period in 2014.

In August, domestic automotive sales in South Korea grew by 3.6% over a year to 121,127 units, led by the effects of new models and a robust demand for SUVs and minivans. Car production in August rose 4.3% over a year to 284,803 units, helped by an increase in domestic sales.

Primary aluminium consumption in India grew by 3.4% during the first quarter (“1Q”) to the third quarter (“3Q”) of 2015 compared to the same period in 2014. Aluminium conductor and cable business in India showed a strong recovery throughout 2015 and has been the key driver of aluminium product demand in India.

Primary aluminium demand is growing in the Middle East, led by Saudi Arabia and the United Arab Emirates, where new downstream facilities are ramping up. Regional demand grew by 6.4% during 1Q to 3Q 2015 compared to the same period in 2014.

China’s apparent primary aluminium consumption was 22.72 million tonnes in 9m 2015, up by 9.8% YoY. Q3 GDP growth on a yearly basis was better than expected, reaching 6.9%. In 2015, the industrial production growth slowed to 5.7% YoY in September from 6.1% in August, while the PMI for production activity in China in September was 49.8 points, up from 49.7 points in the previous month, which was below expectations, pointing to weaker 2H 2015 economic growth. Therefore, aluminium consumption growth has already slowed in Q3 to 8.7% YoY as compared to 10.5% YoY growth in the preceding quarter.

The surveys show that prices are now stabilizing (on a month-on-month basis) in the housing sector.

The overall floor space of housing projects under construction for all real estate enterprises was 6.17 billion square metres from January to September 2015, up 3.0% YoY. Nonetheless, the Chinese property market is showing signs of entering a period of downturn. Floor space created in the period was 114.814 million square metres, down 12.6% YoY, while floor space completed in the period was 509.67 million square metres, down 9.8% YoY.

From January to September 2015, land purchased by real estate enterprises stood at 159 million square metres, down 33.8% YoY, compared to a decline of 32.1% for the first eight months of 2015.

In 9m 2015, car production in China totalled 17,091,600 units, a slight 0.8% decrease compared with last year. Car sales totalled 17,056,500 units, a slight 0.3% increase compared with last year, China Association of Automobile Manufactures (“CAAM”) reported.

UC RUSAL has slightly reduced its initial global aluminium demand growth forecast from 6% to 5.6%, or 58 million tonnes, for the whole of 2015, due to weaker demand in various emerging markets and weak demand in some Asian countries.

Aluminium supply

International Aluminium Institute (“IAI”) and CRU data shows that aluminium production ex-China grew by 415,000 tonnes, or 2.2% YoY to 19.592 million tonnes in 9m 2015. Growth mainly came from Asia and the Middle East, whilst South and North America led the decline in production.

The aluminium all-in price has declined by 27% since the beginning of 2015, to USD1,666 per tonne at the end of September 2015, resulting in around 9 million tonnes of production outside of China is unprofitable.

At current all-in prices, we assume around 53% or 14 million tonnes of ex-China production is unprofitable and at risk of closure. More than 300,000 tonnes of production was cut since the beginning of this year and another 300,000 to 500,000 tonnes will be closed in the fourth quarter (“4Q”) of 2015. UC RUSAL has confirmed the potential closure of up to 200,000 tonnes of production this year.

Overcapacity in the Chinese aluminium market continued throughout 1Q 2015, with a record supply of 7.45 million tonnes, up 8.3% YoY. As a result, total aluminium stocks in China grew to 3 million tonnes in 1Q 2015, up 1.0% YoY. The aluminium balance in China improved during the second quarter (“2Q”) of 2015, and as a result, total stocks fell by 353,000 tonnes to 2.65 million tonnes by the end of 2Q 2015. The aluminium balance in China continued to improve in 3Q 2015, falling by 115,000 tonnes to 2.54 million tonnes.

From January to September 2015, Chinese installed aluminium capacity rose by 2.45 million tonnes to 37.7 million tonnes. Around 3.0 million tonnes per year (“TPY”) of operating capacity was commissioned and around 616,000 TPY was resumed during the same period. This created additional supply pressures in domestic markets, which resulted in a 10.2% decrease in the Shanghai Future Exchange (“SHFE”) price during 9m 2015. The decline in the SHFE price continued throughout October 2015, with the price slumping 19.0% on a YTD basis. As a result about 50% (more than 70% with the price at the end of October 2015) of Chinese aluminium production capacity, or 15.7 million tonnes, was loss-making at an average SHFE price in September 2015 of RMB11,824 per tonne.

Aluminum capacity closures in China continued at a slow pace despite extremely low domestic aluminum prices and heavy losses due to regional authority subsidisation. We expect rapid closures early in 2016 with the onset of a new five year development plan.

Chinese semis exports declined in 3Q 2015 due to a low aluminum price arbitrage between China and the markets in the rest of the world. Export of semis in September 2015 declined by 25% from a peak in June of 2015 to 300,000 tonnes, net export of semis rose by 29.4% YoY in 9m 2015. We expect Chinese semis exports to decline to a historically normal level and will not exceed the semis demand levels in the rest of the world in the future.

As a result of further growth in ex-China aluminium production and a slight reduction in demand, UC RUSAL estimates that the global aluminium market faces a surplus of 373,000 tonnes, slightly up from previous estimates of 277,000 tonnes in 2015.

Aluminium premiums

Aluminum premiums have bottomed in 3Q 2015 across all regions due to a continued supply growth and weak demand in some regions. The aluminum market at a healthy 3 month and 15 month contango of USD37 and USD76 per tonne, respectively, representing an increasingly attractive financial activity and supportive for premiums. As expected, premiums should rebound in line with continued tightness in key consumption markets.

Business review

Aluminium production

• Aluminium production in 3Q 2015 totaled 916 thousand tonnes (+0.9% quarter-on-quarter (“QoQ”)). The capacities utilization rate was approximately 96%. Russia Siberian operations accounted for 95% of the total aluminium products output.

• Aluminium sales in 3Q 2015 totaled 939 thousand tonnes (+5.7% QoQ). Sales growth was driven by the increased sales to both the domestic and export markets. Export deliveries in 3Q 2015 were partially supported by the reduction of inventories held during transportation. The share of VAP products in the overall aluminium sales portfolio in 3Q 2015 increased to 46%.

• 3Q 2015 realised price decreased by 13.0% QoQ to USD1,843 per tonne following the reduction of aluminium prices at LME and commodity premiums, impacted by deteriorating market conditions.

• In 9m 2015 aluminium production totaled 2,724 thousand tonnes (+1.4% YoY). The utilisation rate was approximately 95%.

• In 9m 2015 aluminium sales totaled 2,762 thousand tonnes (+4.2% YoY), with 43% share of VAP in the sales portfolio. Average realised price in 9m 2015 was at USD2,087 per tonne (-3.1% YoY).

Alumina production

• Alumina production in 3Q 2015 totaled 1,870 thousand tonnes (+2.9% QoQ). International operations (including Aughinish and Windalco) accounted for the major part of the output growth due to routine maintenance repairs performed at those plants in 2Q 2015. The overall alumina production growth is attributable to stronger internal (intercompany) demand and sustainable demand from third parties.

• Alumina production in 9m 2015 totaled 5,496 thousand tonnes (+1.1% YoY).

Bauxite production

• Bauxite (excluding low grade alumina bauxite) and nepheline ores production in 3Q 2015 totaled 3,290 thousand tonnes (+9.1% QoQ) and 1,053 thousand tonnes (+1.2% QoQ), respectively. Russian operations accounted for 50% of bauxite produced and for 100% of nepheline ore produced. The overall bauxite production growth is attributable to stronger internal (intercompany) and external demand.

• In 9m 2015 bauxite and nepheline ores production totaled 9,262 thousand tonnes (+0.9% YoY) and 3,159 thousand tonnes, respectively (-6.6% YoY).

Financial Overview

Revenue

	Three months ended 30 September		Change quarter on quarter, % (3Q to 3Q)	Three months ended 30 June	Change quarter on quarter, % (3Q to 2Q)	Nine months ended 30 September		Change nine months on nine months, %
	2015	2014		2015		2015	2014
	(unaudited)	(unaudited)		(unaudited)		(unaudited)	(unaudited)
Sales of primary aluminium and alloys
USD million	1,731	2,077	(16.7%)	1,882	(8.0%)	5,763	5,709	0.9%
Kt	939	904	3.9%	888	5.7%	2,762	2,651	4.2%
Average sales price (USD/t)	1,843	2,298	(19.8%)	2,119	(13.0%)	2,087	2,154	(3.1%)
Sales of alumina
USD million	147	157	(6.4%)	164	(10.4%)	451	420	7.4%
Kt	418	489	(14.5%)	428	(2.3%)	1,237	1,309	(5.5%)
Average sales price (USD/t)	352	321	9.7%	383	(8.1%)	365	321	13.7%
Sales of foil (USD million)	65	74	(12.2%)	74	(12.2%)	207	223	(7.2%)
Other revenue (USD million)	130	169	(23.1%)	153	(15.0%)	402	509	(21.0%)
Total revenue (USD million)	2,073	2,477	(16.3%)	2,273	(8.8%)	6,823	6,861	(0.6%)

Total revenue was almost flat in the nine months ended 30 September of 2015 as compared to the same period of 2014.

Revenue from sales of primary aluminium and alloys increased by USD54 million, or 0.9%, to USD5,763 million in the nine months ended 30 September of 2015, as compared to USD5,709 million for the corresponding period of 2014. This growth resulted primarily from a 4.2% increase of aluminium sales volumes in the nine months ended 30 September 2015 as compared to the corresponding period of 2014, which was almost offset by a 3.1% decrease in the weighted-average realized aluminium price per tonne, driven by a decrease in the LME aluminium price (to an average of USD1,719 per tonne in the nine months of 2015 from USD1,833 per tonne in the same period of 2014), as well as a decrease in premiums above the LME prices in the different geographical segments (to an average of USD313 per tonne from USD382 per tonne for the nine months ended 30 September 2015 and 2014, respectively).

Revenue from sales of alumina increased by USD31 million, or 7.4%, to USD451 million in the nine months of 2015 as compared to USD420 million for the corresponding period of 2014, due to 13.7% increase in average sales price partially offset by a 5.5% decrease in alumina sales volume.

Revenue from sales of aluminium foil decreased by USD16 million, or 7.2%, to USD207 million in the nine months of 2015, as compared to USD223 million for the corresponding period in 2014, due to a decrease in foil sales volumes and average sales price by 5.8% and 1.5%, respectively.

Revenue from other sales, including sales of other products, bauxite and energy services decreased by USD107 million, or by 21.0%, to USD402 million in the nine months of 2015 as compared to USD509 million for the corresponding period of 2014, due to 37.3% lower sales of bauxite and a 26.2% decrease in sales of other materials.

Cost of sales

The following table demonstrates the breakdown of UC RUSAL’s cost of sales for the nine months ended 30 September 2015 and 2014:

	Nine months ended 30 September		Change, %	Share of costs, %
	2015	2014
	(unaudited)	(unaudited)
(USD million)
Cost of alumina	557	610	(8.7%)	11.6%
Cost of bauxite	418	468	(10.7%)	8.7%
Cost of other raw materials and other costs	1,740	2,017	(13.7%)	36.3%
Energy costs	1,306	1,471	(11.2%)	27.3%
Depreciation and amortisation	323	328	(1.5%)	6.8%
Personnel expenses	386	562	(31.3%)	8.1%
Repairs and maintenance	43	57	(24.6%)	0.9%
Net change in provisions for inventories	15	1	1400.0%	0.3%
Total cost of sales	4,788	5,514	(13.2%)	100.0%

Total cost of sales decreased by USD726 million, or 13.2%, to USD4,788 million for the nine months of 2015, as compared to USD5,514 million for the corresponding period in 2014. The decrease was primarily driven the continuing depreciation of the Russian Ruble and the Ukrainian Hryvnia against the US dollar by 67.5% and 94.3%, respectively, between the reporting periods, which was partially offset by the increase in volumes of primary aluminium and alloys sold.

Cost of alumina decreased by USD53 million, or 8.7% to USD557 million for the reporting period, as compared to USD610 million for the same period of 2014, primarily as a result of decrease in alumina transportation costs following significant Russian Rouble depreciation and slight decrease in tariff.

Cost of bauxite decreased by 10.7% in the nine months of 2015 as compared to the same period of prior year, due to a decrease in purchase volume.

Cost of raw materials (other than alumina and bauxite) and other costs decreased by 13.7% in the nine months of 2015 compared to the same period of the previous year due to a lower raw materials purchase price (such as raw petroleum coke by 24.6%, calcined petroleum coke by 11.9%, raw pitch coke by 14.6% and pitch by 22.9%).

Energy cost decreased by 11.2% in the nine months of 2015 compared to the same period of 2014, primarily due to the continuing depreciation of the Russian Ruble against the US dollar that more than offset a 46.6% increase in the average electricity tariff.

Gross profit

As a result of the foregoing factors, UC RUSAL reports a gross profit of USD2,035 million for the nine months ended 30 September 2015 as compared with USD1,347 million for the same period of 2014, representing gross margins over the periods of 29.8% and 19.6%, respectively.

Adjusted EBITDA and Results from operating activities

	Nine months ended 30 September		Change nine months on nine months, %
	2015	2014
(USD million)	(unaudited)	(unaudited)
Reconciliation of Adjusted EBITDA
Results from operating activities	1,285	444	189.4%
Add:
Amortisation and depreciation	340	346	(1.7%)
Impairment of non-current assets	77	67	14.9%
Loss on disposal of property, plant and equipment	7	6	16.7%
Adjusted EBITDA	1,709	863	98.0%

Adjusted EBITDA, defined as results from operating activities adjusted for amortisation and depreciation, impairment charges and loss on disposal of property, plant and equipment, increased to USD1,709 million during the nine months ended 30 September of 2015, as compared to USD863 million for the corresponding period of 2014. The factors that contributed to the increase in Adjusted EBITDA margin were the same that influenced the operating results of the Company.

Results from operating activities increased in the nine months ended 30 September of 2015 by 189.4% to USD1,285 million, as compared to USD444 million for the corresponding period of 2014, representing operating margins of 18.8% and 6.5%, respectively.

Finance income and expenses

	Nine months ended 30 September		Change, %
	2015	2014
(USD million)	(unaudited)	(unaudited)
Finance income
Interest income on loans and deposits	26	22	18.2%
	26	22	18.2%
Finance expenses
Interest expense on bank loans and company loans, bonds and other bank charges, including	(485)	(625)	(22.4%)
Interest expense	(441)	(533)	(17.3%)
Bank charges	(44)	(92)	(52.2%)
Net foreign exchange loss	(172)	(145)	18.6%
Change in fair value of derivative financial instruments, including	(301)	(147)	104.8%
Change in fair value of embedded derivatives	18	(15)	NA
Change in other derivatives instruments	(319)	(132)	141.7%
Interest expense on provisions	(10)	(12)	(16.7%)
	(968)	(929)	4.2%

Finance income increased by USD4 million, or 18.2% to USD26 million in the nine months of 2015 compared to USD22 million for the same period of 2014 due to increase the interest income on time deposit at several subsidiaries of the Group.

Finance expenses increase by USD39 million or 4.2% to USD968 million for the nine months of 2015 from the same period of 2014 due to an increase in the foreign exchange loss and the net loss from the change in fair value of derivative financial instruments, partially offset by a decrease in interest expenses and bank charges.

The net loss from the change in fair value of derivative financial instruments increased to USD301 million for the nine months of 2015 from USD147 million for the same period of 2014 as a result of the Russian Ruble’s significant depreciation against the US dollar which led to the revaluation of certain cross-currency instruments.

Interest expenses on bank and company loans for the nine months of 2015 dropped by USD140 million to USD485 million from USD625 million for the nine months of 2014 due to a decrease in bank charges, as well as the reduction of the principal amount payable to international and Russian lenders and an overall interest margin between the periods.

The growth of the net foreign exchange loss to USD172 million for the nine months of 2015 from USD145 million for the same period of 2014 was driven by a continuing depreciation of the Russian Ruble and the Ukrainian Hryvnia against the US dollar and the resulting revaluation of working capital items of several Group companies denominated in foreign currencies.

Share of profits of associates and joint ventures

	Nine months ended 30 September		Change, %
	2015	2014
(USD million)	(unaudited)	(unaudited)
Share of profits of Norilsk Nickel,	561	596
with Effective shareholding of	28.02%	27.82%	(5.9%)
Share of losses of other associates	(8)	(18)	(55.6%)
Share of profits of associates	553	578	(4.3%)
Share of profits of joint ventures	7	33	(78.8%)

Share of profits of associates was USD553 million in the nine months ended 30 September 2015 and USD578 million for the corresponding period in 2014. This was resulted primarily from the Company’s investment in Norilsk Nickel, which amounted to profit of USD561 million and USD596 million for the nine months ended 30 September 2015 and 2014, respectively.

As stated in Note 10 to the consolidated interim condensed financial information for the three- and nine-month periods ended 30 September 2015, at the date of this consolidated interim condensed financial information, the Group was unable to obtain consolidated interim financial information of Norilsk Nickel as at and for the three- and nine-month periods ended 30 September 2015. Consequently, the Group estimated its share in the profits, other comprehensive income and foreign currency translation reserve of Norilsk Nickel for the three- and nine-month periods ended 30 September 2015 based on publicly available information reported by Norilsk Nickel. The information used as a basis for these estimates is incomplete in many aspects. Once the consolidated interim financial information for Norilsk Nickel becomes available, they will be compared to the management´s estimates. If there are significant differences, adjustments may be required to restate the Group´s share in profit, other comprehensive income, foreign currency translation reserve and the carrying value of the investment in Norilsk Nickel reported in the consolidated interim condensed financial information.

The market value of the investment in Norilsk Nickel at 30 September 2015 was USD6,247 million as compared to USD6,388 million as at 31 December 2014.

Share of profits of joint ventures was USD7 million in the nine months of 2015 compared to a profit of USD33 million for the same period in 2014. This represents the Company’s share of profits in joint ventures, namely BEMO, LLP Bogatyr Komir, Mega Business and Alliance (transportation business in Kazakhstan) and North United Aluminium Shenzhen Co., Ltd.

Profit recycled from other comprehensive income

On 11 March 2015, the Supreme Court of Ukraine denied the Group´s appeal to reconsider a previous court decision that 68% of shares of OJSC Zaporozhye Aluminium Combine (“ZALK”), an indirect subsidiary of UC RUSAL, should be deprivatized and returned to the State of Ukraine. On 9 June 2015, these shares were transferred to the State Property Fund of Ukraine.

The Company intends to pursue all available legal alternatives, including, but not limited to, the European Court of Human Rights, to overturn the above decision. However as a result of the Supreme Court ruling the Group no longer has the rights to varying returns from ZALK or the ability to control this entity to affect those returns.

The assets and liabilities of ZALK have been deconsolidated, which resulted in the recognition of a USD9 million gain in this consolidated interim condensed financial information. Additionally, USD155 million of foreign currency translation gain arising on the translation of ZALK accumulated from 2007 was recycled through profit and loss.

In August 2015, one of the Group’s intermediary holding subsidiaries was liquidated. Consequently, USD60 million of foreign currency translation loss arising on translation of investments in foreign assets accumulated by this subsidiary was recycled through profit and loss.

Net Profit for the period

As a result of the above, the Company recorded a net profit of USD825 million for the nine months ended 30 September 2015, as compared to USD11 million for the same period of 2014.

Adjusted and Recurring Net Profit/(Loss)

	Three months ended 30 September		Change quarter on quarter, % (3Q to 3Q)	Three months ended 30 June	Change quarter on quarter, % (3Q to 2Q)	Nine months ended 30 September		Change nine months on nine months, %
	2015	2014		2015		2015	2014
(USD million)	unaudited	unaudited		unaudited		unaudited	unaudited
Reconciliation of Adjusted Net Profit/(Loss)
Net (loss)/profit for the period	(54)	220	NA	307	NA	825	11	7,400.0%
Adjusted for:
Share of profits and other gains and losses attributable to Norilsk Nickel, net of tax effect, with	(106)	(225)	(52.9%)	(176)	(39.8%)	(521)	(580)	(10.2%)
Share of profits, net of tax	(106)	(225)	(52.9%)	(176)	(39.8%)	(521)	(580)	(10.2%)
Change in derivative financial instruments, net of tax (20.0%)	236	19	1,142.1%	42	461.9%	310	132	134.8%
Foreign currency translation gain recycled from other comprehensive (loss)/income on deconsolidation of subsidiaries	60	—	100.0%	—	—	(95)	—	100.0%
Impairment of non-current assets, net of tax	45	11	309.1%	14	221.4%	77	67	14.9%
Adjusted Net Profit/(Loss)	181	25	624.0%	187	(3.2%)	596	(370)	NA
Add back:
Share of profits of Norilsk Nickel, net of tax	106	225	(52.9%)	176	(39.8%)	521	580	(10.2%)
Recurring Net Profit	287	250	14.8%	363	(20.9%)	1,117	210	431.9%

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 for any period is defined as Adjusted Net Profit plus the Company’s net effective share in Norilsk Nickel results.

Segment reporting

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 results of their operations are reviewed by the CEO on a regular basis.

The core segments are Aluminium and Alumina.

	Nine months ended 30 September
	2015		2014
	Aluminium	Alumina	Aluminium	Alumina
(USD million)	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Segment revenue
kt	2,847	5,040	2,736	4,617
USD million	5,882	1,596	5,831	1,437
Segment result	1,424	179	773	(93)
Segment EBITDA^8	1,699	238	1,048	(29)
Segment EBITDA margin	28.9%	14.9%	18.0%	(2.0%)
Total capital expenditure	206	107	189	142

The segment result margin (calculated as a percentage of segment profit to total segment revenue per respective segment) from continuing operations rose to 24.2% in the nine months ended 30 September 2015 from 13.3% in the same period in 2014 for the aluminium segment, and was positive 11.2% compared to negative 6.5%, respectively, for the alumina segment. Key drivers for the increase in margins in the aluminium segment are disclosed in “Revenue”, “Cost of sales” and “Adjusted EBITDA and Results from operating activities” sections above. Detailed segment reporting can be found in the consolidated interim condensed financial information as at and for the three- and nine-month periods ended 30 September 2015.

⁸ Segment EBITDA for any period is defined as segment result adjusted for amortisation and depreciation for the segment.

Capital expenditure

UC RUSAL recorded total capital expenditures of USD362 million for the nine months ended 30 September 2015. UC RUSAL’s capital expenditure for the nine months of 2015 was primarily due to maintaining existing production facilities.

	Nine months ended 30 September
	2015	2014
(USD million)	(unaudited)	(unaudited)
Development capex	97	45
Maintenance
Pot rebuilds costs	82	112
Re-equipment	183	192
Total capital expenditure	362	349

The BEMO project companies utilise the project financing proceeds to make necessary contributions to the ongoing construction projects and do not require contributions from the joint ventures partners at this time.

Auditors’ conclusion on the review of consolidated interim condensed financial information

The Company notes that its auditor, JSC KPMG, has provided a qualified conclusion in its review of the unaudited consolidated interim condensed financial information of the Company for the three and nine months ended 30 September 2015 as it was unable to obtain and review the consolidated interim financial information of Norilsk Nickel. An extract from the review report provided by JSC KPMG on the consolidated interim condensed financial information of the Company dated 12 November 2015 is as follows:

”Basis for Qualified Conclusion

We were unable to obtain and review consolidated interim financial information of the Group’s equity investee, PJSC MMC Norilsk Nickel (“Norilsk Nickel”), supporting the Group’s estimate of the share of profit of USD117 million and USD561 million for the three- and nine-month periods ended 30 September 2015 and USD225 million and USD596 million for the three- and nine-month periods ended 30 September 2014, respectively, other comprehensive income of USD20 million and USD21 million for the three- and nine-month periods ended 30 September 2015 and USD nil million and USD1 million for the three- and nine-month periods ended 30 September 2014, respectively, the foreign currency translation loss in relation to that investee of USD1,412 million and USD1,192 million for the three- and nine-month periods ended 30 September 2015 and USD1,172 million and USD1,391 million for the three- and nine-month periods ended 30 September 2014, respectively, and the carrying value of the Group’s investment in the investee stated at USD2,729 million as at 30 September 2015 and USD6,694 million as at 30 September 2014. Had we been able to complete our review procedures in respect of interests in associates, matters might have come to our attention indicating that adjustments might be necessary to this consolidated interim condensed financial information.

Qualified Conclusion

Based on our review, except for the possible effects of the matter described in the Basis for Qualified Conclusion paragraph, nothing has come to our attention that causes us to believe that the consolidated interim condensed financial information as at 30 September 2015 and for the three- and nine-month periods then ended is not prepared, in all material respects, in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting.

Consolidated interim condensed financial information

The unaudited consolidated interim condensed financial information of UC RUSAL for the three and nine months ended 30 September 2015 was approved by the Directors of UC RUSAL on 12 November 2015, and reviewed by the Audit Committee (the “Audit Committee”). It has also been filed with the French Autorité des marchés financiers on the date hereof and is accessible on UC RUSAL’s website at http://www.rusal.ru/en/investors/financial_stat.aspx.

Audit Committee

The Board established the Audit Committee to assist it in providing an independent view of the effectiveness of the Company’s financial reporting process, internal control and risk management systems and to oversee the audit process. The Audit Committee consists of a majority of independent non-executive Directors. The members are as follows: Dr. Peter Nigel Kenny (chairman of the committee, independent non-executive Director, with relevant professional qualifications and knowledge related to accounting and financial management); Mr. Philip Lader (independent non-executive Director); Ms. Elsie Leung Oi-sie (independent non-executive Director); Mr. Daniel Lesin Wolfe (non-executive Director); Ms. Olga Mashkovskaya (non-executive Director).

On 12 November 2015, the Audit Committee has reviewed the financial results of the Company for the nine months ended 30 September 2015.

Dividend Policy

The Board of the Company on 26 August 2015 has approved and adopted a new dividend policy for the subsequent periods to pay dividends at the level of 15% of the Company’s Covenant EBITDA as defined in the Company’s relevant credit facility agreements. The payment of dividends will be subject to compliance with requirements of the Group’s credit facilities, including financial covenants, and relevant Jersey legislation.

Declaration of Dividend

On 12 October 2015, the Board of the Company approved the declaration and payment of an interim dividend for the financial year ending 31 December 2015 in the aggregate amount of USD250 million (USD 0.01645493026 per ordinary share) to be paid in cash. The interim dividend has been paid on 6 November 2015. For further details, please refer to the Company´s announcements dated 13, 16 and 30 October 2015.

Material events over the third quarter of 2015 and since the end of that period

The following is a summary of the key events that have taken place over the third quarter of 2015 and since the end of that period. All information regarding key events that has been made public by the Company for the three months ended 30 September 2015 and since the end of that period pursuant to legislative or regulatory requirements, including announcements and press releases, is available on the Company’s website (www.rusal.com).

2 July 2015	UC RUSAL announced its plans to fully switch production at its Achinsk alumina refinery to support the consumption requirements of the Krasnoyarsk aluminium smelter.
6 July 2015	UC RUSAL announced that its RUB160 million (USD3 million) investment programme begun in early 2015 to modernise powder production at the Volgograd Aluminium Smelter is progressing as planned.
27 August 2015	UC RUSAL announced the adaptation of new dividend policy for the subsequent periods to pay dividends at the level of 15% of the Company’s Covenant EBITDA.

28 August 2015	UC RUSAL announced the cancellation the Corporate Ruble Bonds of OJSC RUSAL Krasnoyarsk series 01, 02, 03, 04.
14 October 2015	UC RUSAL announced the development of acid technology for alumina production of non-bauxite raw materials.
29 October 2015	UC RUSAL announced its investment up to USD 10 million for melting furnace installation in the casthouse modernisation project at RUSAL Sayanogorsk.
	UC RUSAL announced that it has become the first Russian company to join the UN IMPACT 2030 network. IMPACT 2030 is aimed to help deliver the UN Sustainable Development Goals, a set of ambitious targets to end extreme poverty, fight inequality and injustice, and address climate change.

Compliance

Pursuant to Article L.451-1-2 IV of the French Code monétaire et financier, the Company is required to publish quarterly financial information for the first and third quarters of the financial year.

The Directors confirm that the information contained in this announcement does not contain any false statements, misleading representations or material omissions, and all of them jointly and severally accept responsibility as to the truthfulness, accuracy and completeness of the content of this announcement.

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 our 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 risk and uncertainties include those discussed or identified in the prospectus for UC RUSAL. In addition, past performance of UC RUSAL cannot be relied on as a guide to future performance. UC RUSAL makes no representation on 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 in UC RUSAL’s expectations, or changes in factors affecting these statements. Accordingly, any reliance you place on such forward-looking statements will be at your sole risk.

By Order of the board of directors of
United Company RUSAL Plc
Vladislav Soloviev
Director

13 November 2015

As at the date of this announcement, the executive Directors are Mr. Oleg Deripaska, Mr. Vladislav Soloviev and Mr. Stalbek Mishakov, the non-executive Directors are Mr. Maxim Sokov, Mr. Dmitry Afanasiev, Mr. Len Blavatnik, Mr. Ivan Glasenberg, Mr. Maksim Goldman, Ms. Gulzhan Moldazhanova, Mr. Daniel Lesin Wolfe, Ms. Olga Mashkovskaya and Ms. Ekaterina Nikitina, and the independent non-executive Directors are Mr. Matthias Warnig (Chairman), Dr. Peter Nigel Kenny, Mr.Philip Lader, Ms. Elsie Leung Oi-sie and Mr. Mark Garber and Mr. Dmitry Vasiliev.

All announcements and press releases published by the Company are available on its website under the links http://www.rusal.ru/en/investors/info.aspx, http://rusal.ru/investors/info/moex/ and http://www.rusal.ru/en/press-center/press-releases.aspx, respectively.