29 January
London,
Dow Jones

LONDON (Dow Jones)-Russia’s United Company Rusal, the world’s largest aluminum producer by volume, Tuesday said that rising production and investment boosted full-year revenue by more than 11% and the company is pushing ahead with plans to become a global diversified metals and mining giant.

The company, majority owned by Russian billionaire Oleg Deripaska, reported revenue of $14.3 billion for the year ending Dec. 31 2007, compared with $12.9 billion in 2006. The company is planning what is expected to be one of the world’s largest initial public offerings by March 2010.

The company said in a statement that its 2007 full-year aluminum production was up 6% at 4.2 million metric tons and its alumina production was up 5.1% at 11.3 million metric tons.

UC Rusal attributed the growth in aluminum production to the launch of the Siberian Khakas aluminum smelter’s full capacity and the modernization of other production facilities. The increased production of alumina, an essential ingredient in aluminum, was mainly due to Rusal completing upgrades of refineries in Achinsk, Siberia, and in Nikolaev, Ukraine and to production-process improvements its Eurallumina plant in southwestern Sardinia.

The company said it invested over $2.9 billion in production development and modernization in 2007, up 45% on the year.

Despite the possible slowdown in the U.S. and the reduced competitiveness of imported products because of the weak U.S. dollar, the company expects the demand for aluminum to grow at least 7% in 2008.

UC Rusal expects that the reduction of aluminum exports from China to offset the U.S. slowdown.

"We believe that Chinese factor and mainly China transformation into a net importer of aluminum will be a core driving force to stimulate the demand for aluminum in 2008," UC Rusal Chief Executive Alexander Bulygin said in a a statement.

Furthermore, the increasing costs of energy, raw materials and new aluminum-plant construction, coupled with tougher environmental legislation are expected to discourage new sources of aluminum, sustaining demand for Rusal’s products in 2008.

"In order to support the further growth of our business and value of our company, we intend to develop as a global diversified metals and mining corporation and secure a position among the top five largest metals and mining giants," Bulygin said.

In December 2007, UC Rusal agreed to buy 25% plus one share in OAO Norilsk Nickel (GMKN.RS), the world’s largest miner of the metal.

This deal, which Bulygin called "a first step towards a possible full consolidation of Norilsk, and the creation of a Russian metals and mining champion," is waiting the country’s competition authority’s approval.

UC Rusal, which according to its part-owner, billionaire Viktor Vekselberg, is worth around $45 billion, had a debt of $8.8 billion at the end of 2007, the company said. No comparative figures were provided.

"The price of the Norilsk stake is probably included in the debt figure," Dmitry Kolomytsyn, an analyst with Unicredit Aton in Moscow.

UC Rusal isn’t a publicly traded company and didn’t provide profit, dividend or earnings before interest, taxes, depreciation and amortization, or Ebitda, figures for the year.

However, Kolomytsyn said: "We can estimate the company’s Ebitda to grow at about 15% to $5.8 billion-$6 billion in 2007."

Historically, UC Rusal has paid about 90% of its net profit as dividends.

UC Rusal was formed in March 2007 through the three-way merger of Russian Aluminium, local rival Sual Group, which is partly owned by Vekselberg, and Swiss commodities trader Glencore International AG. The company’s major shareholder, Deripaska, owns 66% in Rusal through his Basic Element holding company.

Its closest competitors by volume include Rio Tinto PLC (RTP), which says it makes 4.3 million tons of aluminum and 8.7 million tons of alumina.

UC Rusal controls four bauxite mines, 10 alumina refineries, 14 aluminum smelters and three foil mills.

UC Rusal’s owners are planning an initial public offering in two years time after scrapping earlier plans to list in London November 2007, citing unfavorable market conditions. A person familiar with the matter said that a listing in Hong Kong one of its possible options.