United Rusal : UC RUSAL announces 2015 interim results

Press-release

Key highlights

 A record low London Metal Exchange ("LME") aluminium price driven by growing exports from China and oversupply in different regions exerted further pressure on the aluminium industry throughout the first half of 2015. The average LME aluminium price decreased by 10.1% from USD1,968 per tonne for the last quarter of 2014 to USD1,769 per tonne for the three months ended 30 June 2015.
 A significant drop in premiums over the LME aluminium price in different geographical regions resulted in a decrease in average realised price by 7.8% to USD2,119 per tonne for the second quarter of
2015 from USD2,299 per tonne for the preceding quarter of the year.
 Revenue in the first half of 2015 increased by 8.3% to USD4,750 million from USD4,384 million in the first half of 2014 due to a 4.4% increase in physical aluminium sales, a slight 1.8% improvement of the LME aluminium price between the periods (to an average of USD1,785 per tonne from USD1,753 per tonne) and 5.8% growth in average premiums over the LME aluminium price to USD367 per tonne for the first half of 2015 from USD347 per tonne for the same period of the previous year.
 Revenue in the second quarter of 2015 decreased by 8.2% to USD2,273 million from USD2,477 million in the first quarter of the year following a 5.0% decrease in sales volumes, 1.8% decrease in the average LME aluminium price and 27.8% drop in the average realised premiums over the LME price.
 Aluminium segment cost per tonne decreased by 15.3% to USD1,484 in the first half of 2015 from USD1,752 per tonne in the first half of 2014 due to management efforts to strictly control costs and stabilise expenses despite a 50.8% increase in the average electricity tariff. External factors, such as the depreciation of the Russian Ruble against the US dollar also had a significant positive effect on the overall level of costs.
 Adjusted EBITDA in the second quarter of 2015 decreased by 21.2% from USD721 million to USD568 million as a result of a decrease in LME aluminium price and premiums in comparable periods as well as due to the strengthening of the Russian Ruble against the US Dollar. Adjusted net profit of the Company in the second quarter of 2015 decreased to USD187 million from USD228 million in the first quarter of 2015.
 The Company reduced its Net Debt by USD832 million in the first six months of 2015, which together with the robust financial results led to a further drop in the leverage ratio to below 3.0:1 as at 30 June
2015. This will result in the further reduction of the interest rate margin under the PXF facility
Agreement to the minimum level set by PXF and cancellation of the cash sweep mechanism starting from September 2015.
Commenting on the 2015 interim results, Vladislav Soloviev, CEO of RUSAL said:
'The first half of RUSAL's financial year coincided with another challenging period for the aluminium market,
with the all-in aluminium price declining by 22%, Chinese semis exports increasing by 43% and the global

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aluminium market entering a surplus. As a result, the Company reduced its 2015 demand estimate by 6%, down from an anticipated 6.5%, due to weaker demand from Russia, Brazil and Asia.
In spite of this challenging market context, RUSAL still managed to report a strong set of financial results thanks to its relentless focus on efficiency, CAPEX control, commitment to improving the quality of its products and extending its overall product mix. We delivered USD1,484 per tonne cash cost in the aluminium segment in 1H 2015, 15.3% below USD1,752 per tonne in the 1H 2014. The Company has also maintained its industry-leading stance of strict production discipline and is considering reducing its capacity by up to 200 thousand tonnes.
I am pleased to report that all of these efforts are now starting to pay off as the Company has become more profitable. Adjusted EBITDA in 1H 2015 substantially improved to USD1,289 million, adjusted EBITDA margin reached 27.1%. However, the situation in the aluminium market remains highly volatile, with aluminium prices touching multi-year lows. Therefore, RUSAL will continue to make all possible efforts in order to remain efficient.
It is important to highlight UC RUSAL's efforts in terms of further deleveraging to bolster the Company's balance sheet. Net debt has been reduced to USD8.0 billion and, since 2008, net debt has been lowered by 41%. Repayments in the first half of 2015 totalled USD570 million, including USD267 million from a cash sweep. The Company continues to benefit from its Norilsk Nickel investment and RUSAL expects to receive USD4.5 billion between 2015A-2019E, which is in line with dividend payouts of companies in the Metals & Mining industry.'

Financial and operating performance

1 For any period, "Aluminium segment cost per tonne" is calculated as aluminium segment revenue less aluminium segment results less amortisation and depreciation divided by 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.

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(USD million)

Net Debt5 8,005 8,837
Net Debt to Adjusted EBITDA ratio6 3.1 5.8

Overview of trends in the aluminium industry

 Global aluminium demand grew by 6.3% in 1H 2015 year-on-year ("YoY"), as a result of strong
demand in North America and India
 RUSAL has reduced its overall 2015 demand growth forecast to 6% from a previously anticipated 6.5% due to weaker than expected demand in Russia, Brazil and Asia. Chinese apparent consumption growth is forecast to slow to 9.0% in 2015 from 9.5%
 With the commissioning of new capacity in the Middle East and India, production outside of China grew by 2% YoY in 1H 2015
 The all-in aluminium price declined by 22% in 1H 2015 compared to the fourth quarter ("4Q") of 2014,
which may lead to additional supply cuts outside of China
 In 1H 2015 YoY, Chinese semis exports increased by 43% to 2.2 million tonnes as a result of overproduction in the Chinese market
 The global aluminium market entered into a surplus of 277,000 tonnes in 2015 as a result of Chinese semis growth and a continued net increase in supply outside of China

5 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.

6 For the purposes of calculating Net Debt to Adjusted EBITDA ratio as at 30 June 2015, Adjusted EBITDA was annualised by multiplying Adjusted EBITDA for the period by two. This ratio may not be indicative of what this ratio will be for the full fiscal year

ending 31 December 2015. Net Debt to Adjusted EBITDA differs from Total Net Debt to Covenant EBITDA for the purposes of the

Company's credit facility agreements.

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In 1H 2015, global aluminium demand rose by 6.3% to 28.6 million tonnes as a result of stronger demand in North America and the EU. Within the BRIC economies, the growth of Indian demand has been a key contributor to growth.
Demand for aluminium in North America improved by 5.6% YoY. Statistics from the Aluminum Association indicate that the year-to-date new mill orders index increased by 5.8% in 1H 2015, whereas shipments of aluminium extruded products by U.S. and Canadian producers increased by 9.0%.
In 1H 2015, aluminium demand in Europe grew by 2.3% YoY. Turkey, Italy, France and Germany represent the key growth markets, respectively increasing consumption by 6.1%, 2.6%, 2.4% and 1.1%.
There has been particularly strong aluminium demand in the automotive sector. The European Automobile Manufacturers Association reported that car sales increased by 6.8% over the first five months of 2015. The annual forecast estimates 5% growth.
Excluding China, primary aluminium consumption in Asia increased by 1.3% in 1H 2015 compared to the same period in 2014.
On the negative side, Japan's industrial output decreased in May by 4% YoY as a slowdown in the production of transport equipment and cars weakened the recovery. The first five months of 2015 saw a 9% YoY drop in Japanese automotive production contributing to a 2.1% YoY slump in total Japanese aluminium semis production in January-May.
Industrial production in the Republic of Korea decreased by 2.8% YoY and 1.3% month-on-month (MoM) in May. Automotive production in South Korea fell by 3.3% YoY in January-May 2015. Consequently, South Korea's primary aluminium consumption growth slowed to 2.4% in 1H 2015.
China's primary aluminium apparent consumption was 14.6 million tonnes in 1H 2015, up by 10.4% YoY. Q2
GDP growth on a yearly basis was better than expected, reaching 7%. Industrial production growth accelerated to 6.8% YoY from 6.1%. At the same time, the PMI for production activity in China in July was 47.8 points,
down from 49.4 points in the previous month and far below expectations, pointing to weaker 2H 2015 economic
growth. This means aluminium consumption growth might slow in 2H 2015.
RUSAL has reduced its initial global aluminium demand growth forecast from 6.5% to 6%, or 58 million tonnes for the whole of 2015, due to weaker demand in various emerging markets and declines in both Japan and South Korea.

IAI and CRU data shows that aluminium production ex-China grew by 2.0% YoY in 1H 2015 to 12.992 million tonnes. This growth was mainly from Asia and the Middle East, with South and North America leading the decline in production. Since January 2015, net ex-China production has risen by 251,000 tonnes.
The aluminium all-in price has declined by 22% since the beginning of 2015, to USD1,772 per tonne, making around 16% or 5 million tonnes of production outside of China unprofitable and at risk of closure.
Overcapacity in the Chinese aluminium market continued throughout 1Q 2015, with record supply growth of
7.45 million tonnes, up by 8.3% YoY. As a result, total aluminium stocks in China grew to 3.0 million tonnes in
1Q 2015, up by 1.0% YoY. The aluminium balance in China improved during the second quarter of 2015, and as a result total stocks fell by 353,000 tonnes to 2.65 million tonnes by the end of 2Q 2015. It is expected, that
the aluminium balance in China will continue to improve in 3Q 2015.
From January to May 2015, Chinese installed aluminium capacity rose by 1.0 million tonnes per year to 36.545 million tonnes. Around 1.5 million tpy of operating capacity was commissioned and around 510,000 tpy was resumed for the same period. This created additional supply pressures in domestic markets, which resulted in a

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2.6% decrease in the SHFE price during 1H 2015. The decline in price continued through July 2015, and as a result about 39% of Chinese aluminium production capacity, or 12.3 million tonnes, were loss-making at an average SHFE price in July 1-20 of RMB12,380 per tonne.
The main change to the supply environment resulted from the export of aluminium semis from China. Net exports of semis rose by 47% YoY in 1H 2015. Due to a seasonal slowdown in the domestic market, aluminium product manufacturers had to export, even at a loss, in order to generate cash flow.
The products include heavy gauge extrusions, plate and cast coil, which are made with minimum semi- fabrication transformation. The products are either remelted or stockpiled and used as collateral in financial transactions.
RUSAL is skeptical that Chinese aluminium producers will be able to increase semis exports in 2H 2015, as these exports are already unprofitable. This may result in a potential slowdown in Chinese exports in the second half of the year.
As a result of both rising Chinese semi exports and growth of ex-China aluminium production, RUSAL
estimates that the global aluminium market faces a minor surplus of 277,000 tonnes in FY15.

Premiums have collapsed across all regions in 1H 2015 as contango disappeared and metal from warehouses flooded the market. Premiums began falling in Europe, where the highest concentration of off-warrants stock is present. This was followed by North America, where an oversupply was created by attracting metal with the highest rates of return. Asia also witnessed a collapse in premiums as a result of increasing exports of Chinese semis.
In relation to premiums, the current levels of contango have supported the attractiveness of metal financing. Currently 3m contango stands at USD42 per tonne. As a result, premiums stabilised at the end of 2Q 2015.
It is expected that metal holders will look to gain contango and lock the metal for 3-9 months into financial deals in order to support premiums. Nevertheless, entrance into long-term deals is unlikely as a result of the uncertainty regarding further warehousing reforms and regulations.
Since the beginning of 2015, LME stocks have dropped by 631,000 tonnes to 3.574 million tonnes, or by 1.272 million tonnes annualized.

Financial overview

Sales of primary aluminium
and alloys 4,032 1,823 2,212 3,632 1,747 2,079
Sales of alumina 304 819 371 263 820 321
Sales of foil 142 41 3,463 149 43 3,465

Other revenue7 272 340

7 Including energy and bauxite.

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Sales of primary aluminium
and alloys 1,882 888 2,119 2,150 935 2,299
Sales of alumina 164 428 383 140 391 358
Sales of foil 74 21 3,524 68 20 3,400

Other revenue 153 119

Revenue increased by USD366 million, or 8.3% to USD4,750 million in the first six months of 2015, from USD4,384 million in the corresponding period of 2014. The increase in revenue was primarily due to growth of sales of primary aluminium and alloys, which accounted for 84.9% and 82.8% of RUSAL's revenue for the first six months of 2015 and 2014, respectively.
Revenue from sales of primary aluminium and alloys increased by USD400 million, or 11.0% to USD4,032 million in the first six months of 2015, from USD3,632 million for the corresponding period in 2014. This growth resulted primarily from a 6.4% increase in the weighted average realised aluminium price per tonne, which was driven by an increase in the LME aluminium price (to an average of USD1,785 per tonne in the first half of 2015 from USD1,753 per tonne in the same period of 2014); an increase in premiums over the LME price in different geographical segments (to an average of USD367 per tonne from USD347 per tonne for the six months ended 30 June 2015 and 2014, respectively); as well as a slight increase in physical sales of 76,000 metric tonnes in the first half of 2015 compared to the first half of 2014.
The Company's revenue from sales of primary aluminium and alloys decreased by 12.5% to USD1,882 million in the second quarter of 2015 from USD2,150 million in the first quarter of 2015. The decrease in revenues resulted from a 5.0% drop in primary aluminium and alloys sales volumes, as well as a 27.8% decrease in the realised premiums above LME prices from USD424 in the first quarter of 2015 to USD306 in the second quarter of 2015.
Revenue from sales of alumina grew by 15.6% to USD304 million in the first six months of 2015 from USD263 million in the corresponding period of 2014 as the average sales price rose by 15.6%.
Revenue from sales of aluminium foil decreased by 4.7% to USD142 million in the first six months of 2015, from USD149 million for the corresponding period of 2014, primarily due to a decrease in the average realised sales prices.
Revenue from other sales, including sales of bauxite and energy services decreased by 20.0% to USD272 million for the first six months of 2015 from USD340 million in the same period of 2014, due to a 16.0% drop in sales of bauxite and a 14.3% decrease in sales of other materials.
The table below shows the breakdown of the Group's revenues by geographic segment for the six months ended
30 June 2015 and 30 June 2014, showing the percentage of revenue attributable to each region:

Note: Data based on location of customers, which may differ from the location of final consumers.

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The following table shows the breakdown of UC RUSAL's cost of sales for the six months ended 30 June 2015
and 30 June 2014 and for the three months ended 30 June 2015 and 31 March 2015:

Cost of
alumina 373 386 (3.4%) 11.6% 175 198 (11.6%) 11.2% Cost of bauxite 272 305 (10.8%) 8.4 % 137 135 1.5% 8.8%
Cost of other
raw materials
and other costs 1,160 1,348 (13.9%) 36.0% 549 611 (10.1%) 35.1% Energy costs 901 982 (8.2%) 28.0% 442 459 (3.7%) 28.3% Depreciation
and
amortisation 222 219 1.4% 6.9% 108 114 (5.3%) 6.9% Personnel
expenses 258 380 (32.1%) 8.0% 130 128 1.6% 8.3%
Repairs and
maintenance 20 34 (41.2%) 0.6% 8 12 (33.3%) 0.5% Net change in
provisions for

inventories 15 2 650.0% 0.5% 14 1 1,300.0% 0.9%

sales 3,221 3,656 (11.9%) 100.0% 1,563 1,658 (5.7%) 100.0%

Total cost of sales decreased by 11.9%, to USD3,221 million for the six months ended 30 June 2015, from USD3,656 million for the corresponding period of 2014. The decrease was primarily driven by the continuing depreciation of the Russian Ruble and the Ukrainian Hryvnia against the US dollar by 64.1% and 107.7%, respectively, between the reporting periods, which was partially offset by the increase in volumes of primary aluminium and alloys sold.
Cost of alumina was almost flat during the first six months of 2015 compared to the same period of 2014.
Cost of bauxite decreased by 10.8% in the first six months of 2015 compared to the same period of the previous year due to a 7.1% drop in purchased volume, which was partially offset by a slight increase in purchase prices.
Cost of raw materials (other than alumina and bauxite) and other costs decreased by 13.9% in the first six months of 2015 compared to the same period of the previous year due to lower raw materials purchase prices (including 19.2% lower for raw petroleum coke, 17.6% for raw pitch coke and 4.37% for calcined petroleum coke).
Energy cost decreased by 8.2% in the first half 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 50.8% increase in the average electricity tariff.
Cost of sales decreased by 5.7%, to USD1,563 million in the second quarter of 2015 from USD1,658 million in the previous quarter, primarily as a result of a 5.0% decrease in the volumes of primary aluminium and alloys sold.

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(USD million)

Results from operating activities 1,021 99 931.3%

Add:

Amortisation and depreciation 234 232 (0.9%)
Impairment of non-current assets 32 56 (42.9%)

Loss on disposal of property, plant and equipment
2 6 (66.7%)

As a result of the factors discussed above the Company demonstrated a significant increase in results from operating activities and Adjusted EBITDA for the six months ended 30 June 2015 to USD1,021 million and USD1,289 million respectively, from USD99 million and USD393 million respectively for the same period of
2014.

(USD million) 2015 2014

Profit/(Loss) for the period 879 (209) NA

Adjusted for:

Share of profits and other gains and losses attributable to Norilsk Nickel, net of tax effect,
with
(415) (355) 16.9%

Share of profits, net of tax (415) (355) 16.9%

Change in the fair value of derivative financial liabilities, net of tax (20%)
Foreign currency gain recycling from other comprehensive income on deconsolidated subsidiary
74 113 (34.5%) (155) - (100.0%)
Impairment of non-current assets, net of tax 32 56 (42.9%)

Share of profits of Norilsk Nickel, net of tax 415 355 16.9%

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 impairment of non-current assets. Recurring Net Profit/(Loss) for any period is defined as Adjusted Net Profit/(Loss) plus the Company's net effective share in Norilsk Nickel's results.

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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.

The segment result margin (calculated as a percentage of segment profit to total segment revenue per respective segment) from continuing operations rose to 27.7% in the six months ended 30 June 2015 from 10.0% in the same period a year earlier for the aluminium segment, and was positive 8.9% compared to negative 10.6%, respectively, for the alumina segment. Key drivers for the increase in margin in the aluminium segment are disclosed in "Cost of sales" and "Results from operations and Adjusted EBITDA" above.

Forward-looking statements

This press-release 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.

UC RUSAL (www.rusal.com) is a leading, global producer of aluminium, in 2014 accounting for approximately
7% of global production of aluminium and 7% of alumina. UC RUSAL employs over 61,000 people in 19 countries, across 5 continents. UC RUSAL markets and sells its products primarily in the European, Japanese, Korean, Chinese, South East Asian and North American markets. UC RUSAL's ordinary shares are listed on The Stock Exchange of Hong Kong Limited (Stock code: 486), global depositary shares representing UC RUSAL's ordinary shares are listed on the professional compartment of Euronext Paris (RUSAL for Reg S GDSs and RUAL for Rule 144A GDSs). UC RUSAL's ordinary shares and Russian depositary receipts that are issued on common shares of the Company are listed on Moscow Exchange (RUAL/RUALR).

Disclaimer

The information contained in this press release is for media advice only. The contents are true and accurate at the time of publishing, however, may change over time.

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

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Contacts:

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