3Q 2017 FINANCIAL RESULTS PRESENTATION

Transcription

1 3Q 217 FINANCIAL RESULTS PRESENTATION 13 November, 217

2 DISCLAIMER These materials and the subsequent discussion are not an offer for sale of any securities of United Company RUSAL Plc (the Company ). The distribution of these materials in certain jurisdictions may be restricted by law and therefore persons into whose possession these materials come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdiction. Certain financial information contained herein has not been audited, comforted, confirmed or otherwise covered by a report by independent accountants. In addition, past performance of the Company cannot be relied on as a guide to future performance. These materials and the subsequent discussion include measures of financial performance that are not a measure of financial performance under IFRS, such as EBITDA, Adjusted EBITDA and Adjusted EBITDA margin. These measures are presented because the Company believes they are useful measures to determine the Company s operating cash flow and historical ability to meet debt service and capital expenditure requirements. Adjusted EBITDA or EBITDA should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net profit or indicators of the Company s operating performance or any other measure of performance derived in accordance with IFRS. Because it is not an IFRS measure, EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures presented by other companies. These materials and the subsequent discussion contain statements about future events, projections, forecasts and expectations that are forward-looking statements. Any statement in these materials 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 risks and uncertainties include those discussed or identified in the prospectus of the Company dated 31 December 29, the Annual Report of the Company for the financial year ended 31 December 29, the Annual Report of the Company for the financial year ended 31 December 21, the Annual Report of the Company for the financial year ended 31 December 211, the Annual Report of the Company for the financial year ended 31 December 212, the Annual Report of the Company for the financial year ended 31 December 213, the Annual Report of the Company for the financial year ended 31 December 214, the Annual Report of the Company for the financial year ended 31 December 215 and the Annual Report of the Company for the financial year ended 31 December, 216. The Company makes no representation on the accuracy and completeness of any of such forward-looking statements, and, except as may be required by applicable laws, 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 the Company s expectations, or changes in factors affecting these statements. Accordingly, any reliance you place on such forwardlooking statements will be at your sole risk. 2

3 AGENDA : debt, dividends, investment in Norilsk Appendix 3

4 OVERVIEW 25% 2% INDUSTRY LEADING EBITDA MARGIN 17% 16% 17% 2% 2% 21% 21% 22% kt STRONG VAP SALES % 5% $ mn 1,829 FURTHER DELEVERAGING AND DEBT OPTIMISATION 1,19 8,837 Net debt reduction of 8,372 8,421 1% 7,592 15% 1% 55% 5% Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 3Q M217 EBITDA margin Commodity grade VAP sales Net debt Interest paid 3Q 217 RESULTS HIGHLIGHTS Stable operations with continuous growth in the value added products share within the sales portfolio: Total aluminium production stood at 931kt (+1.1% QoQ). Smelters average utilisation rate remained at full efficient capacity of 95%. Production of value added products (VAP) reached 5% of total production in 3Q17 Aluminium sales decreased to 968kt (-3.4% QoQ). The QoQ decline is largely explained by increase of goods in transit due to ports/vessels availability (volumes to be realized in the next period) In 3Q17 sales of value added products (VAP) stood at 479 thousand tonnes. The company as per its strategy continued to grow the VAP s share in total sales, which now stands at 5% in comparison with 45% in 3Q16 Realised aluminium price increased 2.1% QoQ to $2,124/t largely driven by LME component growth Solid financial performance with industry leading margins: Total revenue in 3Q17 was $2.5bn (+19.4% YoY and flat QoQ as price increase was balanced by realised sales volume); Sequential EBITDA growth of 7.6% QoQ to $549mn, with EBITDA margin rising above 22% - an industry leading indicator for vertically integrated aluminium smelting operations; Solid FCF generation: total FCF amounted to $566mn in 3Q17 with cash conversion ratio standing at 63%; Significant reduction in net debt with current levels below $7.6bn: o o Gross debt reduction by c. $239mn QoQ as per repayment schedule and growth of cash and cash equivalents to US$1.1bn Nornickel stake value of $8.7bn (as of 3 Nov 217) implying 1.14x net debt value (9M217) 4

5 HEALTH AND SAFETY Lost Time Accident Frequency Rate (employee) per 1 mwh LTAFR DYNAMICS M 217 UC Rusal Aluminium Industry* * Source International Aluminium Institute and Company internal data Note: LTAFR is calculated per 1 man-hours worked COMPANY S INITIATIVES IN HEALTH AND SAFETY To increase responsibility of workers, contractors and visitors for Occupational Safety, UC RUSAL has developed and will be implementing Cardinal Occupational Safety Rules UC RUSAL reports that very solid progress has been made in electric injury rate. In 216, the injury rate was 5% lower than the average level for the period of and continued to decline in 217 In 217 we continue implementing programs to reduce health and safety risks. The programs Safe mine, 1% unification of workplace, Safety culture in production will be further integrated at production sites To further reduce risks, new programs such as Program for prevention of professional neurosensory loss of hearing, Program for identification of risks connected with local vibration and reduce of local vibration will be implemented 5

6 MT СО2eq./MT Al ENVIRONMENTAL ACHIEVEMENTS: REDUCTION OF GHG EMISSIONS SPECIFIC GHG EMISSIONS OF ALUMINIUM PLANTS OF RUSAL January 217 February 217 March 217 April 217 May 217 June 217 July 217 August 217 September 217 RUSAL REMAINS COMMITTED TO CONTINUOUS IMPROVEMENT OF ENVIRONMENTAL FOOTPRINT In the run-up to the 21st Conference of the UNFCCC in Paris, UC RUSAL published an ambitious strategic climate change targets aimed at reduce of the carbon footprint of the aluminium produced by the company and reduce the purchase of electric power generated by fossil fuels One of the strategic goals is to reduce direct specific greenhouse gas emissions by 15% compared to 214 at reduction processes at existing aluminium smelters. The Company has already substantially reduced emissions and is on track to reach its target The Company also increased the share of hydropower used for primary aluminium production by 2% (from 96.6% to 98.5%) from the beginning of 217 6

7 RUSAL LOW CO2 ALUMINIUM POSITION IS NOW SUPPORTED BY A NEW BRAND NEW FORCES DRIVE DEMAND FOR LOW CO2 ALUMINIUM Consumer Company reputation Regulation, following the Paris agreement GLOBAL ALUMINIUM PRODUCERS RANKING BASED ON CO2 TOTAL EMISSIONS PER TONNE LEADING BRANDS ARE EXPECTING MATERIALS WITH LOWER CO2 FOOTPRINT We prioritized aluminum that was smelted using hydroelectricity rather than fossil fuels. Apple: Environmental Responsibility Report 216 We will reduce the carbon footprint of the drink in your hand by a third by delivering carbon reductions throughout our value chain by 22. Coca Cola Enterprises: Corporate Responsibility & Sustainability report % of all aluminium produced is consumed by brands with a strong sustainability profile RUSAL ACTIVELY PROMOTE ITS LOW CO2 ALUMINIUM CO2 emissions per tonne Company: UC 1 RUSAL Indirect emissions Direct emissions Exceeding 1t CO2/t Al From 6t to 1t CO2/t Al Not exceeding 6t CO2/t Al Source: CRU, UC RUSAL Research Low CO2 aluminium is a key element of the value proposition to customers to achieve our VAP growth strategy We engage with the entire value chain of all application sectors (automotive, consumer products, packaging, construction) to stimulate the demand for product with a lower environmental footprint We offer new sales contracts, with certificates detailing the carbon footprint for the smelter of origin of the metal delivered The brand launch of our Low CO2 aluminium, ALLOW, will accelerate the development and awareness among customers to support our development RUSAL aluminium has one of the lowest CO 2 footprint of the industry. >9% of RUSAL aluminium is produced with hydro electricity 7

8 AGENDA : debt, dividends, investment in Norilsk Appendix 8

9 ALUMINIUM PRICE AND SALES STRUCTURE Total aluminium sales in 3Q17 decreased 3.4% QoQ to 968 kt, including value added product sales of 479 kt (-3% QoQ). The QoQ decline is largely explained by increase of goods in transit due to ports/vessels availability (volumes to be realized in the next period) 3Q17 average realised price increased to $2,124/t (+2.1% QoQ). The LME component reached $1,962/t, which traditionally lags behind LME prices. Commodity grade premium was $72/t. Average upcharge per tonne of VAP sales was ~$181/t* in 3Q17 Regional sales mix remained largely unchanged to the average split of the previous year. European destinations maintained the largest share in the mix (45%). The rest of the sales volumes were sold to Russia & CIS, Asia and America $/t Source: Bloomberg LME ALUMINIUM PRICE AND REGIONAL PREMIUM 5 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 LME Al cash price (LHS) Range impacted 2Q17 results Range impacted 3Q17 results $/t Premium Rotterdam, duty unpaid (RHS) ALUMINIUM SALES SALES GEOGRAPHY REALISED PRICE STRUCTURE kt 1, Ingots Q17 External ingots -3.4% 1,2 QoQ 968 3Q17 Ingots BoAZ VAP 16% 3Q17 sales geography by tonnes 17% 22% 45% Europe Russia&CIS Asia America $/t 2,1 1,9 1,7 1,5 1,3 1,1 9 7 Price structure per 1% of Al sales 2, % QoQ 2, ,97 1,962 $/t Premium structure over LME component* 5% of total sales 5% of total sales Q17 3Q17 Commodity VAP Average price grade premium LME price ** Commodity component *** VAP upcharge**** 181 1% of sales 9 * Excluding sales of secondary alloy ** LME cash price adjusted by quotation period. *** Estimated average commodity premium over LME component **** VAP component is applicable only to VAP products and represents an upcharge over LME price and commodity premium. 9

10 CONTINUOUS IMPROVEMENT OF PRODUCT MIX WITH A TARGET OF 6% VAP SALES BY 221 Value added products continue to be attractive from different perspectives: o Additional premium per tonne o Market share in advanced niches that allows closeness with end users In order to achieve its long term target, RUSAL invests into new capacities, those launched through 217 include: o 12 ktpa new large diameter billets line at Krasnoyarsk (launched in a test run) o 12 ktpa new foundry alloys Properzi line at Khakas smelter (launched in Nov 217) o A complex of furnaces for the hardening of wire rods at the Kandalaksha aluminium smelter ROAD TO ACHIEVE VAP TARGET* VAP BRIDGE 9M16-9M17* % sales kt , % 44% 5% 6% 1, VAP sales 216 VAP sales * Excluding sales of secondary alloy 3Q 217 VAP sales Current and new investment projects completion and debottnecking VAP target for 221 VAP 9M 216 Wire rod Billets Foundry PFAalloys Slabs High Others purity VAP 9M 217 1

11 FINANCIALS OVERVIEW: REVENUE STRUCTURE 3Q17 REVENUE STRUCTURE REVENUE QUARTERLY DYNAMICS 4% 6% 7% $2,46 bn Aluminium Alumina Foil and other aluminium products $ mn 2,5 2,1 $2, % QoQ $2, % QoQ $2, % Other 1,7 Total revenue in 3Q17 was almost $2.5 bn Revenue from aluminium sales decreased 1.4% QoQ to $2.6 bn. Remaining revenues totaled $44 mn o Revenue from alumina sales to third parties was $172 mn driven by lower sales volumes. o Revenue from sales of foil and other aluminium products increased to $91 mn due to higher volumes and realized prices o Revenue from other sales increased by 12% to $141 mn due to the higher sales of other materials 1, , % QoQ -1.4% 2,85 QoQ 2,56 1Q17 2Q17 3Q17 Aluminium Alumina Foil Other and other aluminium products 11

12 FINANCIALS OVERVIEW: KEY SEGMENTS CASH COST In the beginning of 217 RUSAL changed the presentation of its aluminium segment s cash costs to differentiate the performance of RUSAL own operations from sales of 3 rd party products. Thus the impact of aluminium resales is excluded In 3Q17 RUSAL s cash cost per 1 tonne of aluminium produced amounted to $1,52/t (+1.5% QoQ on comparable basis). The cash cost of aluminium increased QoQ largely as a result of the increase in raw material costs and seasonal uptick in energy costs, while somewhat weakening ruble has been beneficial to the ruble denominated costs components $/t 1,5 1, Aluminium segment cash cost 1,414 * Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Energy tariff (cent / kwh) CASH COST DYNAMICS +1.5% 1,497 QoQ 1,52 ENERGY COST DYNAMICS 1Q15-3Q17 Alumina segment cash cost Q17 2Q17 3Q17 1Q 17 2Q 17 3Q 17 Cost of energy purchased in the period (purchased energy tariff impact to aluminium cash cost with ~3 month lag see next slide for details) Average RUB / USD FX rate $/t 1,5 1,3 1, ALUMINIUM SEGMENT CASH COST BY ITEMS $1,497/t Q17 $1,52/t Q17 Change in finished goods General and administrative costs Distribution expenses Other costs Repair and maintenance Personnel costs Energy Other raw materials Alumina purchased (external) Alumina internal *Starting 217 the Company presents two metrics for Aluminim segment: (1) total segment costs and (2) cost of own aluminum produced. The difference between two metrics relates to the intersegment margins (primarily - between the alumina and Aluminium), margin on sales of third parties metal and other non-production costs and expenses. See Segment reporting details on slide 36 in appendix 12

13 ENERGY COST DYNAMICS QUARTERLY ELECTRICITY PURCHASE PRICE ANALYSIS Cent/ kwh Purchase price range contributed to 2Q17 results.1 Purchase price range contributed to 3Q17 results Q17 USD/RUR 58.8 Exchange rate Capacity costs "Day-ahead" market tariff 2Q17 USD/RUR 57.2 Exchange rate Capacity costs "Day-ahead" market tariff 3Q17 USD/RUR 59. In 3Q17 the average energy purchase price for UC Rusal stood at 3.14USc/KWh, key elements contributing to energy costs dynamics were: o A marginal increase in Day-ahead market pricing was observed during Q3 due to typical seasonal factors o Capacity component increase was driven by the introduction of a governmental fee aimed at equalizing energy prices in the Far Eastern Federal District of Russia (starting from ) o As with other Ruble denominated costs the energy costs saw a positive impact from the weakening of Ruble vs. USD by c. 3% QoQ 13

14 FINANCIAL OVERVIEW: EBITDA 3Q17 EBITDA totaled $549 mn (+7.6% QoQ) continuing a sequential growth trend which started in 4Q16 driven by the favorable momentum in the aluminium market. The continuous rise in the LME component of the realized aluminium sales price QoQ offset the decrease in aluminium sales volumes; Aluminium segment remained the largest contributor to the Group EBITDA; Further expansion of an already industry leading EBITDA margin despite flattish revenues and marginal cost inflation. EBITDA CHANGE BY FACTORS % margin 21% 22% $ mn Q17 EBITDA Premiums / Aluminium sales structure Effect of LME and quotation period Aluminium sales volumes Change in cash cost and other components 3Q17 EBITDA $ mn Aluminium business results, excluding alumina segment margin, the results of aluminium resales and other non-production costs and expenses 55 3Q17 EBITDA BY SEGMENT 5 51 Alumina business results, excluding margin on sales to aluminium segment, the results of alumina and bauxite resales and other nonproduction costs and expenses Other non-core businesses results are represented by foil, powder, silicon sales and other operations and general and administrative expenses of the headquarter See page 38 in Appendix for details 549 Aluminium segment Alumina segment Unallocated Group EBITDA 3Q17 14

15 FREE CASH FLOW POSITIVE FREE CASH FLOW REMAINED A CORNERSTONE OF RUSAL S FINANCIAL POLICY 3Q 217 EBITDA Change in WC Tax Other Operating CF Capex Other investing CF Dividends from ** associated companies Interest paid and refinancing fees Settlement of derivatives 549 Including - inventories increase of -$91 mn - trade and other receivables increase -$63 mn - payables increase $236mn $ mn $14 mn of total investing CF $-15 mn financing cash flow In 3Q17 RUSAL continued to generate positive free cash flow (FCF) in the amount of $566 mn; The working capital related cash movements totalled $73 mn overall, including $91 mn outflows due to increase of inventories, increase in trade and other receivables of -$63 mn, while an increase in payables of $236 mn contributed positively; Total net investing cash flow was +$14 mn. The amount included dividends received from Norilsk Nickel of $31 mn; The financing cash outflow totalled $15 mn, where the largest portion was related to financing costs and $26 mn were related to derivative settlements. Free cash flow* 566 * Free cash flow doesn t include debt settlements and proceeds; ** Including dividends form Norilsk Nickel ($31mn) and other JV ($7mn) 15

16 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 CAPITAL EXPENDITURES In 3Q17 capex totaled $226 mn (+18% QoQ, +6% YoY), including maintenance capex of $114 mn The Company continued its investment into key projects as per its strategic priorities of preserving its competitive advantages of vertical integration into raw materials and product mix enhancements: o Bauxite self-sufficiency: Dian-Dian in Guinea; o Alumina capacities expansion: Friguia relaunch; o Carbon materials self-sufficiency: Volgograd calcined coke and anode plant and Taishet anode plant. $ mn CAPEX DYNAMICS o Growth of value added products: Modernization of Hertwich line at Khakas smelter Approximate projects launch schedule 1H17 2H17 1H18 2H18 1H19 2H19 Raw materials self-sufficiency projects Dian-Dian bauxite mine Middle of 218 Existing alumina capacities upgrade/expansion Friguia alumina complex Volgograd anode plant and calcined coke capacity Planned Planned New calcined coke capacity at Irkutsk smelter Taishet anode plant Planned VAP capacities projects New large diameter billet line at Krasnoyarsk smelter New foundry alloys Properzi line at Khakas smelter Modernization of Hertwich line at Khakas smelter Planned 16

17 AGENDA : debt, dividends, investment in Norilsk Appendix 17

18 SUBSTANTIAL REDUCTION OF NET DEBT IN 3Q17 As at the end of 3Q217 gross debt declined to $8.7bn, as company net settlements during the 9M217 totaled (~$25 mn): o RUSAL made settlements of the PXF (~$2.6bn), c. $3 mn under bilateral facilities with Russian banks, NN backed REPO - $141 mn, Ruble bonds $113 mn and others o RUSAL raised $1.1 bn through two tranches of Eurobonds, $22mn through panda bonds and $1.7bn via New PXF and others On the back of its solid financial performance cash and cash equivalents grew to $1.1bn as at end of 3Q217 up from $.5bn at the beginning of the year, hence Net Debt declined to below $7.6bn All in all the Company continues to deliver on its key priority in the capital allocation policy and notes a significant reduction of its gross debt levels that stood at c.$11.3 bn in FY212 to $8.7bn as of the end of 3Q17 o UC Rusal reiterates its commitment to reduce this gross debt level to c.$7 bn by 22. The achievements of the company has been recognized by credit rating agencies: in September Moody's Investors Service improved the company s outlook on the Ba3 rating and adjusted the outlook to Positive from Stable, this was followed by an October upgrade from Fitch Ratings, who upgraded UC RUSAL rating to BB- from B+, with Stable outlook $ mn 11,334 $ mn 931 1,43 8,421 FY16 1,825 1,676 9,149 8,96 1,181 GROSS DEBT EVOLUTION Gross debt reduction of 23% 9, Operating CF Investment CF incl divs received 8,88 8,965 1,355 1, ,525 7,532 8,73 FY12 FY13 FY14 FY15 FY16 9M17 FY22 LT debt NET DEBT CHANGE Financing CF excl debt settlements 8,715 ST debt Other factors 22 target gross debt level of $7bn 7,592 9M17 18

19 CONTINIOUS IMPROVEMENT OF DEBT PROFILE By 3 September 217 RUSAL achieved multiple improvements to its debt portfolio by actively pursuing capital markets opportunities and engaging with its strategic financial partners: o o In August 217 a new amendment to facility agreement with Sberbank of Russia was concluded extending the maturity profile to 224, reducing the interest rate and aligning the covenants package with principles implemented in other bilateral facilities; In September 217 the second tranche of panda bonds in the amount of RMB 5 million was placed for 3 years (subject to put the option after 2 years) and coupon rate 5.5% p.a. As of September 3, the Leverage ratio under Eurobonds stands at 2.7x (incurrence test only) and differs from Leverage ratio introduced by New PXF and other bilateral facilities, which stands at 1.4x* Optimized debt structure provides for lesser risks of refinancing and greater operational flexibility Part of the $1.1bn of cash balance has been used towards dividend distribution of c.$3mn in Q4 217 and will be further directed on debt repayment as per existing debt maturity profile and including up to c.$3 mn voluntary prepayments ahead of schedule using excess free cash flow. DEBT MATURITY AS OF THE END OF 3Q17 PORTFOLIO STRUCTURE $ bn Cash and equivalents % By type, end of 3Q17 82% By currency, end of 3Q17 2% 3% 2% (1.1) % 18% Q217 93% PXF Sberbank* GPB eurobond panda bond Others secured unsecured USD RUB EURO RMB * Sberbank debt is secured by pledge of NN shares and is excluded from the Leverage ratio calculation for most of the credit facilities in the portfolio when applied save for Eurobond transactions; 19

20 TRACK RECORD IN DELIVERING RETURNS TO EQUITY HOLDERS UPDATE ON DIVIDEND POLICY As per earlier announcements the company distributed in October 217 c. $3mn as dividends approved by its BoD UC Rusal maintains an industry leading cash conversion ratio and established track record of distributing up to 33%*** of generated FCF to its equity holders 8% 6% 4% 2% % CASH CONVERSION RATIO* NM Rusal PEER 1 PEER 2 PEER 3 NM Subject to its financial performance UC Rusal is committed to deliver cash returns to shareholders, whilst also ensuring the deleveraging targets are fully achieved Approved dividend policy states that the total amount of dividends paid by UC Rusal is up to 15% of Covenant EBITDA**** per annum DIVIDEND AND FREE CASH FLOW** EVOLUTION $ mn Dividend FCF 762 The distribution of dividends going forward would depend on the financial position of UC Rusal and subject to compliance with restrictions in its debt agreements and applicable legal requirements and may be distributed on a quarterly basis FCF * (Operating cash flow capex) / operating cash flow. ** Free cash flow excluding debt settlements and proceeds and excluding dividends paid by UC Rusal. *** Based on FY215 and FY216 data. **** EBITDA on LTM basis as defined in the relevant credit agreements, adding dividends declared by Norilsk Nickel and attributable to the shares owned by the Group. $ mn M 215 9M 216 9M 217 2

21 INVESTMENT INTO NORNICKEL NN STAKE VALUE VS RUSAL NET DEBT A 27.8% stake in Nornickel equity remains a strategic investment for RUSAL. It diversifies the Company s exposure to base metals and at the same time yields lucrative and sustainable cash returns Dividends from Nornickel cover all of UC RUSAL s interest payments and contribute to the Company s accelerated deleveraging $ bn 7.6 RUSAL Net debt 8.7 NN stake equals ~1.14 Net Debt 1 Norilsk stake value Updated as of 3 November 217 RUSAL DIVIDEND RECEIVED US$/t 12,5 11, 9,5 8, 6,5 FAVOURABLE INDUSTRY PROSPECTS RESULT IN RENEWED DEMAND FOR NICKEL 7,595 a decade-low price Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Nickel spot price LME NCA batteries (Nickel Cobalt Aluminium) are becoming a product of choice for the rapidly growing EV industry, such as in Tesla s Model S vehicle o EV sales in 216 accounted for 2.4m expected to reach 14.2m in 225 o Global EV stock is expected to reach up to 2m in 23 o UK is to ban combustion engines from 24 Demand from NCA batteries may evolve into a market comparable in size to stainless steel demand NON-STAINLESS NICKEL DEMAND Nickel price increase of 7% 12,92 highest since Jun-15 $ mn 1, Source: CRU, Bloomberg, Wood Mackenzie E Dividends for preceeding year Dividends for current year kt Alloy Steels Non-Ferrous Alloys Plating Other Batteries 21

22 AGENDA : debt, dividends, investment in Norilsk Appendix 22

23 Millions Vehicles KMT 1/14 4/14 7/14 1/14 1/15 4/15 7/15 1/15 1/16 4/16 7/16 1/16 1/17 4/17 7/17 Index, 21=1 EUROPE EU MANUFACTURING AND CONSTRUCTION REMAIN STRONG. AUTO WEAKENING OFFSET BY INCREASED AL CONTENT PER VEHICLE MANUFACTURING PMI PRODUCTION IN CONSTRUCTION HIGHLIGHTS EU DE FR SP IT UK TR 11 EU Manufacturing PMIs in the euro area strengthened to the greatest extent over six-and-a-half years during 217 YTD. At 57.4 in September the Eurozone Manufacturing PMI signaled stronger output growth and new orders expansion Motor vehicle production in topproducing counties has weakened between Jan-Aug 217 (+1.5% YoY), mainly due to declines in Germany and the UK. Nevertheless, Turkey was up by 18.2% YoY, to 1,123,419 units 1 Jul-17 Aug-17 Sep-17 AUTOMOTIVE PRODUCTION +1.5% ALUMINIUM DEMAND +3.6% European construction sector grew strongly over Jan-July 217 period on a YoY basis. Production gained 3.6% in July 217 YoY, primarily driven by private sector investment in infrastructure, residential and energy and utilities construction projects POLAND CZECH TURKEY UK SPAIN 6,726 6,956 7,26 Primary aluminium demand in Europe has mirrored the underlying economic improvement as consumption accelerated through the year. Demand rose by 3.6% in the first nine months of 217, with residential construction supporting strong growth in building sheet and extrusions GERMANY 8M-215 8M-216 8M-217 9M-215 9M-216 9M

24 Thousands Vehicles KMT Thousands, SAAR NORTH AMERICA MANUFACTURING AT STRONGEST LEVEL SINCE 24. ALUMINIUM INTENSITY GAINS OFFSET SLOWDOWN IN CAR OUTPUT US MANUFACTURING PMI US HOUSING STARTS HIGHLIGHTS AUTOMOTIVE PRODUCTION -3.7% 13.5% -3.7% -8.2% Jan-Sep 15 Jan-Sep 16 Jan-Sep 17 MEXICO CANADA USA ALUMINUM DEMAND 4,816 4,91 5,67 Jan-Sep 15 Jan-Sep 16 Jan-Sep 17 US ISM PMI accelerated through Q3, hitting its highest level since 24 in September, suggesting a solid near term outlook for aluminium demand Motor vehicle production fared less well and is down an estimated 3.7% ytd, despite strong growth in Mexico. More positively, there is a nascent recovery in the heavy truck segment. This will feed into improved truck trailer output and boost extrusions and castings demand US housing starts slowed going into Q3, impacted by higher mortgage interest rates. Aluminium demand expected to remain firm for now given the lagged impact. Higher commodity prices are boosting capital investment, offsetting any moderation in housing and also lifting demand from heavy equipment uses Primary aluminium demand in N.America rose by 3.4% in Jan-Sep, according to CRU, as extrusions demand accelerated from a slow start to the year. Can sheet demand has been sluggish but intensity of use gains in automotive outweighed weakness in car output. PMI gains point to further demand growth ahead 24

25 Millions Vehicles KMT Thousand Houses ASIA EX-CHINA STRONG EXPORTS AND HEALTHY JAPANESE DOMESTIC MARKET LEADING GROWTH FOR PRIMARY DEMAND IN THE REGION MANUFACTURING PMI HOUSING STARTS IN JAPAN HIGHLIGHTS JP KR ID TW MY VN TH Jul-17 Aug-17 Sep-17 AUTOMOTIVE PRODUCTION +3.7% TW ASEAN-4 KR JP % 8M-215 8M-216 8M-217 AL DEMAND IN ASIA EX-CHINA 5, 4, 3, 2, 1, +3.5% TW ASEAN-4 KR JP All the countries of the region except Malaysia rounded off the third quarter on a firm note. Manufacturing PMI indexes improved most in September underpinned by stronger international demand which increased solidly In Japan, housing starts grew 1% year-on-year in the Jan-Aug period. Projects related to the development and improvement of facilities in preparation for the Tokyo Olympics and Paralympics led to growing demand from the construction sector Automotive production in Japan continued to be strong and showed 6.7% growth in the first eight months of the year. As a consequence, shipments of FRP and extrusions also showed a noticeable increase of 3%. Total vehicle output grew 3.7% with Indonesia being an outperformer among other ASEAN countries Strong indicators of manufacturing growth along with more intense use of aluminium in vehicles provide ground for primary aluminium demand growth of 3.5% in the first nine months of the year 8M-215 8M-216 8M-217 9M-215 9M-216 9M

26 Thousands Vehicles KMT Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Index, YoY RUSSIA & CIS RECOVERY OF INDUSTRIES, CONSTRUCTION AND AUTOMOTIVE MARKETS AFTER THE RECESSION MANUFACTURING PMI CONSTRUCTION WORKS HIGHLIGHTS CARS SALES IN RUSSIA 1,25-14% +11% 1,2 1,15 1,1 1,5 1, 95 1% -1% -3% -5% -7% -9% -11% -13% AL DEMAND IN RUSSIA & CIS +17% % Industrial PMI index continues to remain above 5 points and has grown to 51.9 points in September The light vehicle market has grown by 18% in September and by 1.6% in total for the 9 months of 217 Beginning from July 217, the volume of construction works has stopped decreasing and a small increase is being observed. Experts forecast the construction of new housing to reach the same level as last year Aluminum cable production is growing by 17% compared to the previous year due to projects for the building of new industrial objects and the investment program of «Rosseti» - one of the largest operators of energy networks in the world At the same time the stabilization of the ruble exchange rate continues to encourage the growth of import of finished products and semis, which compete with domestic products Primary aluminium demand in Russia and CIS was up 17% in 9m 217 YoY 9 9M-215 9M-216 9M M-215 9M-216 9M

27 Mln mt Mln mt GLOBAL ALUMINIUM MARKET TO STAY IN DEFICIT The company estimates that the global aluminum market deficit will reach around 2 mn tonnes per annum over the course of Global aluminium demand CAGR is forecasted at 4-5% pa over On the supply side: There are no new significant supply projects outside of China beyond 217 (excluding UC RUSAL); Chinese primary aluminum metal supply to be challenged by environmental regulation, supply side reform and significant cost inflation Through 217 ROW reported stocks have declined to pre-28 crisis level as production grew at moderate pace GLOBAL SUPPLY AND DEMAND BALANCE IS TO FURTHER TIGHTEN , , ROW REPORTED STOCKS kt days 8, 13 7, 11 6, 9 5, 4, 7 3, 5 2, , , -1,5 Reported Stocks, lhs Reported Stocks Consumption Ratio, rhs ROW PRIMARY ALUMINIUM PRODUCTION 28 CAGR.4% ,139-1,887-1,875-2, Production Consumption Balance (in kmt) -2, F Source: CRU, LME, companies data, RUSAL analysis 27

28 CHINA IS ACTIVELY CUTTING ALUMINIUM & ALUMINA PRODUCTION China s vows on curtailing illegal capacity and winter season cuts are currently strictly implemented. That has put an end to unreasonable supply expansion, as well widening primary metal deficit and potentially opening a window for aluminium imports into China The government has identified ~4.5 Mt of illegal capacity Of which ~4.3 Mt has already been curtailed as of 3 September, 217 IN 217, COMPLETE REVERSAL OF ALUMINIUM OPERATING CAPACITY GROWTH TREND OCCURRED IN CHINA (MT) In addition to the winter cuts policy, starting from October, 217, MEP has applied special air emission standard to 2+26 area. Shanxi province, including large alumina producer Lvliang, has announced joining the winter cuts policy. Stricter permissible air pollutants concentration put additional environmental pressure on refineries, smelters and their captive power plants CHINESE SEMIS EXPORTS BY PRODUCTS (HS ) EFFECT OF CUTS DURING WINTER SEASON ON ALUMINIUM AND ALUMINA PRODUCTION (MT)* ,2 kt ,3% Q-Q H216 2H216 1H217 2H217 E 217 E Aluminium 1.9 Alumina Negative growth of operating capacity in 2H 217 nullified capacity expansion in 2H 216 and 1H 217 Companies strictly follow governmental orders and maintain production discipline There are clear signs of supply currently matching demand Source: Aladdiny, MEP, UC RUSAL Research * Impacted by 2+26 regulation capacities for aluminium stand at c. 3 mn t and for alumina at c. 13 mn t Winter cuts implementation reveals higher-than-expected effect on capacity closures The effect of winter cuts on alumina by far exceeds the effect on aluminium production Some regions launch the curtailment period ahead of the general timeline Government officials and industry analytics forecast the recurrence of the winter cut policy for winter season 28

29 RUSAL RISING COSTS CURRENTLY NULLIFY PRODUCTION MARGINS IN CHINA Increased costs will lead to additional pressure on aluminium production and export volumes from China Starting from July 217, the profitability of aluminium producers in China has been nullified by raw material cost inflation In the short-term, there is no room for aluminium price decrease as the smelters currently operate at zero margins One of the main factors creating costs production growth in 217 was carbon materials cost inflation, with the strongest growth observed for pitch In addition, all smelters with captive power plants now cannot avoid payments to curtain governmental funds that total $1.9 cents per kwh. This will considerably increase aluminium smelting costs 24% 21% 18% 15% 12% RAW MATERIALS COST EXPERIENCED ONGOING GROWTH SINCE JANUARY, Prices ($/t) * ** GPC CPC Pitch Anodes Growth rate (%) $/t Source: SMM CHINA ALUMINUM SMELTERS' PROFIT MARGIN SHRINKS CRU LIQUID COST, 217 LME 3Q17 Average 1 st Quartile 2 nd Quartile 3 rd Quartile 4 th Quartile (RHS) 9% 1 Mt 16Mt 33Mt 49Mt 65Mt *GPC (green petroleum coke) ** CPC (calcined petroleum coke) Source: CRU, LME, companies data, EIU, SMM. UC RUSAL Research 29

30 UPSIDE POTENTIAL FOR LT ALUMINIUM DEMAND GROWTH BASED ON TECH ADVANCES IN END-USE 1 Aluminium in vehicle bodies 2 Electricity distribution infrastructure Secular trend for lighter and energy efficient car bodies will accelerate, raising aluminium content in vehicles In 214 Ford switched to an all aluminium design for the F-15, the US s most popular pickup truck in the last 38 years, joining many luxury brands offering all aluminium models including Jaguar, Audi and Range Rover 1 Tech advances, new consumer patterns, and advanced materials developments create platform for wider use of Al. For example, the entire power generation and distribution infrastructure will need to adapt for EVs Global installation base of EV charging stations is forecast to grow to more than 12.7 million by 22 from ~2 million in 216 Power supply to houses and charging stations will need to be re-wired to accommodate higher voltages and currents required by faster chargers GLOBAL DEMAND FOR ALUMINIUM SHEET IN THE AUTOMOTIVE INDUSTRY (millions of tonnes) ALUMINUM CABLE IS LIGHTER AND LESS EXPENSIVE COMPARED WITH COPPER 7% 1% 1% 6% Mass Aluminium Cost Copper Source: CRU, International Energy Agency, Aluminiumleader.com, HIS, UC RUSAL analysis 3

31 MANAGEMENT OUTLOOK FOR 12M217* Volumes UCR s production VAP production EBITDA margin CAPEX Leverage Stable production from own operational assets of 3.7mn t Maintaining share of VAPs at the level of c. 5% of product mix Stable margins despite inflationary pressures at current Al price levels and USD/RUB FX Strict investment discipline with CAPEX on core operations** at c. USD7mn for full 217 Gross debt reduction by at least USD25-35mn in 4Q17 FOCUSED ON PRESERVING STRENGTHS & SUSTAINABLE DEVELOPMENT Source: UC Rusal *Data as per latest management accounts and business plan assumptions, subject to regular update and change, ** doesn t include CAPEX for growth projects. 31

32 APPENDIX 32

33 KEY OPERATING AND FINANCIAL DATA GROUP OPERATING HIGHLIGHTS GROUP FINANCIAL HIGHLIGHTS 3Q 17 2Q 17 QoQ chg 3Q 16 YoY chg 3Q 17 2Q 17 QoQ chg 3Q 16 YoY chg Aluminium production (kt) % % Revenue, $mn 2,46 2,467 (.3%) 2,6 19.4% EBITDA, $mn* % % Aluminium sales (kt) 968 1,2 (3.4%) 981 (1.3%) margin (%) 22.3% 2.7% - 2.4% - Aluminium av realized sales price ($/t) 2,124 2,81 2.1% 1, % Net debt, $mn 7,592 8,335 (8.9%) 8,33 (8.6%) $ mn 2,5 2,1 REVENUE $2,467 $2, COST OF GOODS SOLD* $ mn 1,8 $1,66 $1, , $ mn 3 SELLING GENERAL & ADMINISTRATIVE ,7 1, , ,85 2,56 2Q17 3Q17 Aluminium Alumina Foil Other and other aluminium products Q Q17 Alumina Bauxite Purchases of primary aluminium Other raw Payroll Repairs ** materials Energy Other Change in FG *EBITDA breakdown is presented later in the Appendix. * Cost of goods sold excluding depreciation ** Other raw materials includes the following major components: fuel, anode blocks, coke, coal tar pitch, ligating materials etc. 1 2Q17 3Q17 33

34 ALUMINIUM SEGMENT OPERATING DATA ALUMINIUM PRODUCTION kt 1, Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 Russia Siberia Russia European Part Sweden ALUMINIUM SALES ALUMINA EXTERNAL PURCHASES kt 1,2 1, , kt Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Aluminium RUSAL Aluminium BoAZ Third parties Purchased from 3rd parties SWAP agreements purchases 34

35 ALUMINA SEGMENT OPERATING DATA kt 4, 3, 2, 1, Alumina 1,851 1,865 1,939 1,889 1,928 1, , ,399 1,523 PRODUCTION 3,211 Bauxite 2,841 2, ,276 1,312 3, , ,53 1,387 1,28 1,135 Nepheline ore 978 1,56 1,111 1,125 1,28 1, ,56 1,111 1,125 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Russia Ukraine Ireland Australia* Jamaica Guyana Guinea SALES TO THIRD PARTIES PURCHASES kt Bauxite kt Alumina kt Bauxite** Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Sales to third parties Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Sales to third parties by SWAP Sales to third parties 2,1 1,9 1,7 1,5 1,3 1, ,519 1,556 1,685 1,535 1,694 1,837 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 *Australia output (QAL) is presented on the ownership pro rata basis. In the income statement alumina sourced from QAL operations are reflected as bauxite purchases from third parties and tolling fee RUSAL pays to QAL for processing bauxite into alumina ** Bauxite purchases includes purchases of bauxite for QAL operations. 35

36 KEY OPERATING AND FINANCIAL DATA GROUP OPERATING HIGHLIGHTS GROUP FINANCIAL HIGHLIGHTS 3Q 17 2Q 17 QoQ chg 3Q 16 YoY chg 3Q 17 2Q 17 QoQ chg 3Q 16 YoY chg Aluminium production (kt) % % Revenue, $mn 2,46 2,467 (.3%) 2,6 19.4% EBITDA, $mn* % % Aluminium sales (kt) 968 1,2 (3.4%) 981 (1.3%) margin (%) 22.3% 2.7% - 2.4% - Aluminium av realized sales price ($/t) 2,124 2,81 2.1% 1, % Net debt, $mn 7,592 8,335 (8.9%) 8,33 (8.6%) ALUMINIUM SEGMENT ALUMINA SEGMENT ($ mn) 3Q 17 2Q 17 QoQ chg 3Q 16 YoY chg ($mn) 3Q 17 2Q 17 QoQ chg 3Q 16 YoY chg Aluminium sales (kt) 994 1,25 (3.%) 1, (.6%) Alumina sales (kt) 2,26 2,263 (.1%) 2,14 5.6% Avg. realised price ($/t) 2,135 2,98 1.8% 1, % Avg. realised price ($/t) (2.2%) % Revenue 2,122 2,15 (1.3%) 1, % Revenue (2.3%) % EBITDA % % EBITDA (8.6%) % margin (%) 22.6% 2.6% % - margin (%) 15.4% 16.5% - 9.2% - Capex 8 82 (2.4%) 12 (21.6%) Capex % % *EBITDA breakdown is presented later in the Appendix part. 36

37 - - ALUMINIUM SEGMENT EBITDA RECONCILIATION 3Q17 Aluminium produced Aluminium purchased Alumina segment margin Other nonproduction costs and margin on other intra-group services Total Aluminium segment $ mn (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenue kt USD million 1, ,122 Cost of sales, including: 1, ,626 Alumina incl. purchased Primary aluminum and alloys purchased for resale Other raw materials Energy Depreciation and amortization Personnel costs Repair and maintenance Other costs Change in finished goods (53) - - (4) (57) - Distribution expenses General and administrative costs Other operating expenses Total segment costs 1, ,732 Segment EBITDA 55 4 (64) (11)

38 INCOME STATEMENT AND EBITDA RECONCILIATION INCOME STATEMENT $ mn 3Q17 2Q17 QoQ chg 1Q17 4Q16 3Q16 Revenue 2,46 2,467 (.3%) 2,297 2,27 2,6 Cost of sales (1,77) (1,79) (1.1%) (1,688) (1,477) (1,52) Other operating expenses (327) (36) (9.2%) (266) (16) (32) Operating income (Results from operating activities) % Net finance expense (223) (7) 218.6% (389) (162) (186) Other income/(loss) * % Income tax (26) (43) (39.5%) 15 (128) (13) Net profit % Adjusted net profit ** % Recurring net profit ** % EBITDA RECONCILIATION $ mn 3Q17 2Q17 QoQ chg 1Q17 4Q16 3Q16 Operating income (Results from operating activities) % Depreciation and amortisation *** (6.2%) Impairment of non-current assets (9.4%) 17 (145) 46 Loss on disposal of property plant and equipment 7-1.% Adjusted EBITDA % EBITDA margin 22.3% 2.7% - 2.7% 2.3% 2.4% *Other income includes Share of profits of associates and JVs, FX translation gain ** Adjusted and recurring net profit reconciliation is presented on the next slide. *** Depreciation and amortisation includes depreciation and amortisation of other operating expenses (incl SG&A). 38

39 NET INCOME RECONCILIATION RECONCILIATION OF ADJUSTED NET PROFIT/(LOSS) $ mn 3Q17 2Q17 QoQ chg 1Q17 4Q16 3Q16 Net profit for the period % Adjusted for: Share of profits and other gains and losses attributable to Norilsk Nickel, net of tax effect, with (174) (5) 248.% (171) (163) (146) Change in the fair value of derivative financial liabilities, net of tax (2%) 66 (95) NA Recycling from other comprehensive income and other one-off - - (298) - Impairment of non-current assets, net of tax (9.4%) 17 (145) 46 Adjusted Net Profit % Add back: Share of profits of Norilsk Nickel, net of tax % Recurring Net Profit %

40 BALANCE SHEET AND CASH FLOW BALANCE SHEET $ mn 3Q17 2Q17 QoQ chg 1Q17 4Q16 3Q16 Cash and Cash Equivalents 1, % Inventory 2,224 2, % 2,69 1,926 1,751 Trade and other accounts receivables % Equity Attributable to Shareholders of the Company 3,961 3, % 3,839 3,299 2,662 Trade and other accounts payable 1, % 1,21 1, Total Liabilities 11,641 11,94 4.9% 11,12 11,153 1,937 Net Debt 7,592 8,335 (8.9%) 8,221 8,421 8,33 CASH FLOW $ mn 3Q17 2Q17 QoQ chg 1Q17 4Q16 3Q16 Net cash generated from operating activities Net cash generated from /(used in) investing activities % (184) (5) o/w CapEx (226) (192) 17.7% (129) (168) (213) Net cash used in financing activities (212) 49 - (555) (413) (495) o/w interest paid (124) (129) (3.9%) (132) (127) (114) Net change in cash and cash equivalents % (148) 18 (176) 4

41 RUSAL GROWTH PROJECTS: ON TRACK TO BENEFIT FROM THE CYCLE BEMO PROJECT: UNIQUE INDUSTRIAL COMPLEX IN SIBERIA COMBINING BOGUCHANSK HPP AND BOGUCHANSK SMELTER* TAISHET ALUMINIUM SMELTER* Project partner 5/5 JV with RusHydro Location Irkutsk region Technology Capacity/ status RA-3 (optionality available for the 2 nd stage) Since the end of 3Q15 the first half (~149 ktpa) of the 1 st stage (~298 ktpa) is in operation in test mode The total projected capacity of the smelter is ~6 ktpa Capacity 1st line ktpa, 352 potcells RA-4, amperage 44 ka 2nd line 536 ktpa, 352 potcells RА-55, amperage 55 ka (equipment purchased for power supply, infrastructure, maintenance, anode production, casting production) Further development The other half (~149 ktpa) of the 1 st stage is under construction and is scheduled for completion at the end of 218 2nd stage (~3ktpa) to be considered with our strategic partner RusHydro Power consumption Project timescale 14.2 billion kwh a year (including 6.4 billion kwh for 1 st line) 26, suspended in 29 Product portfolio Up to ~36 ktpa of VAP, including 12 ktpa for the 1st stage Investments For 2 lines as of October 1, 217 already invested $84.9 million net of VAT Financing for further development The financing for the 1 st stage (~3 ktpa) is provided by VEB on project financing basis Financing for further development The financing for the 1 st stage is likely to be provided under a project financing scheme Boguchansk HPP Construction site location Boguchansk smelter Boguchansk smelter Taishet construction site Russia Taishet aluminium smelter *Data from preliminary management estimates as part of overall project feasibility study update subject to further evaluation and review. 41

42 CAPITAL ALLOCATION AND DIVIDENDS UC Rusal has in place a disciplined capital allocation framework governing its deployment of capital Three core priorities are: 1. Continue to reduce absolute debt levels: o Targeting absolute debt reduction below $7.bn in Ongoing funding of capital expenditure and strategic 2 projects 2. Commitment to a dividend of up to 15% of covenant 3 EBITDA * Any excess cash will then be allocated appropriately to maximise shareholder value Update to Dividend policy introduced in August 215: The dividend policy allowing payment of up to 15% of covenant EBITDA* per annum, has been updated to include the opportunity for dividends on a quarterly basis subject to: DISCIPLINED APPROACH TO CAPITAL ALLOCATION Operations Balance sheet deleveraging Cash flow from operations CAPEX: funding strategic projects Dividend of up to 15% Covenant EBITDA* o Financial performance of the Company; Excess cash o o No breach of covenants in any given quarter respectively; Approval by the Board of Directors and applicable legislation Optimise balance sheet Organic growth M&A *EBITDA on LTM basis as defined in the relevant credit agreements, adding dividends declared by Norilsk Nickel and attributable to the shares owned by the Group. 42

43 UC RUSAL 1 Vasilisy Kozhinoi St., 12196, Moscow, Russia InvestorRelations@rusal.com Phone: +7 (495) UC RUSAL Hong Kong Office Karen Li, CFA Head of the Hong Kong Office Karen.li@rusal.com Phone: