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

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1 Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. Key highlights UNITED COMPANY RUSAL PLC (Incorporated under the laws of Jersey with limited liability) (Stock Code: 486) ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2017 During 2017, the market environment was favourable for the aluminium industry. Recovery in the London Metals Exchange ( LME ) aluminium price in 2017 by 22.7% to an average of 1,968 per tonne as compared to 1,604 per tonne in 2016 together with an increase in volumes of primary aluminium and alloys sold by 3.6% between the same periods as well as a growth in share of value added products ( VAP ) in total aluminium sales to 47.3% in 2017 in comparison with 44.0% in 2016 resulted in the growth of revenue of United Company RUSAL Plc ( UC RUSAL orthe Company, together with its subsidiaries, the Group ) in 2017 by 24.9% to 9,969 million as compared to 7,983 million in On the back of strong LME prices and healthy demand the Group s Adjusted EBITDA increased to 2,120 million in 2017, an increase of 42.4% as compared to 2016 and the highest result since The Group increased its Adjusted EBITDA to 586 million in the fourth quarter of 2017 as compared with 549 million for the third quarter of 2017 despite significant pressure on cost of production. Focus on efficiency and cost reduction initiatives limited aluminium segment cost per tonne increase by 5.4% to 1,602 per ton in the fourth quarter of 2017 in comparison with 1,520 in the third quarter of 2017 as a result of the increase in energy and other raw material costs as well as appreciation of Russian Ruble. UC RUSAL achieved Adjusted Net Profit and Recurring Net Profit of 1,077 million and 1,573 million, respectively, in 2017, as compared to 292 million and 959 million in In February 2017, the Company completed its third offering of Eurobonds with the following key terms: principal amount of 500 million, tenor of 5 years, coupon rate of 4.85% per annum. The bonds proceeds were applied for partial prepayment of UC RUSAL s existing debt. 1

2 Statement of the Chief Executive Officer In 2017 strong global demand for aluminium ensured a positive market backdrop for the industry, with UC RUSAL s estimates showing that global demand for the metal grew by 6% throughout the year to 64 million tonnes. The global aluminium market balance was left in a deficit of around 1 million tonnes whilst the LME price grew by 22.7% year-on-year ( YoY ). Alongside this positive macro backdrop, UC RUSAL s fourth quarter and full year results demonstrated continued momentum. The Company delivered robust operating results and sales volumes growth, which, coupled with the LME price s solid improvement, led to the fourth quarter revenue increasing by 11.6% quarter-on-quarter ( QoQ ) to 2,745 million. Despite a rise in cost inflation, UC RUSAL s management succeeded in keeping costs under control to reach 586 million in EBITDA with a healthy margin of 21.3% in the last quarter of the year. The full year results seemingly demonstrated UC RUSAL s solid position in its core business. Revenue increased to nearly 10 billion while full year 2017 EBITDA was up by 42.4% to reach 2,120 million. Importantly, 2017 saw UC RUSAL achieve further progress in key strategic priorities. Production of value added products reached approximately 50% in total output. We launched our bespoke brand of low carbon aluminium, ALLOW, which we believe will be in demand from climate-conscious customers. We also expanded our product portfolio with new downstream acquisitions. Throughout the year, UC RUSAL continued to improve its debt profile by actively pursuing capital markets opportunities and engaging with its strategic financial partners. Post reporting period, the Group successfully tapped into the Eurobonds market and offered 500 million of bonds. Overall, the Groups s debt structure provides for minimal liquidity risk and greater operational flexibility, which leaves the Group in good shape for February 2018 Vladislav Soloviev Chief Executive Officer 2

3 Financial and Operating Highlights Quarter ended 31 December Change, quarter on quarter, (4Q to 4Q) Quarter ended 30 September Change, quarter on quarter, (4Q to 3Q) Year ended 31 December unaudited unaudited unaudited Change, year-onyear Key operating data ( 000 tonnes) Aluminium % % 3,707 3, % Alumina 1,991 1, % 1, % 7,773 7, % Bauxite 2,944 2, % 2, % 11,645 12,187 (4.4%) ( 000 tonnes) Sales of primary aluminium and alloys 1, % % 3,955 3, % ( per tonne) Production cost per tonne in Aluminium segment 1 1,602 1, % 1, % 1,508 1, % Aluminium price per tonne quoted on the LME 2 2,101 1, % 2, % 1,968 1, % Average premiums over LME price % 162 (0.6%) % Average sales price 2,263 1, % 2, % 2,105 1, % Alumina price per tonne % % % Key selected data from the consolidated statement of income ( million) Revenue 2,745 2, % 2, % 9,969 7, % Adjusted EBITDA % % 2,120 1, % margin (% of revenue) 21.3% 20.3% NA 22.3% NA 21.3% 18.7% NA Profit for the period (31.8%) % 1,222 1, % margin (% of revenue) 16.0% 31.8% NA 12.7% NA 12.3% 14.8% NA Adjusted Net Profit for the period % % 1, % margin (% of revenue) 12.8% 2.2% NA 10.7% NA 10.8% 3.7% NA Recurring Net Profit for the period % % 1, % margin (% of revenue) 16.4% 10.2% NA 17.7% NA 15.8% 12.0% NA 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. Aluminium price per tonne quoted on the LME representing the average of the daily closing official prices for each period. Average premiums over LME realized by the Company based on management accounts. 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 per tonne. 3

4 Key selected data from consolidated statement of financial position 31 December 2017 As at 31 December 2016 Change year-on-year ( million) Total assets 15,774 14, % Total working capital 5 1,761 1, % Net Debt 6 7,648 8,421 (9.2%) Key selected data from consolidated statement of cash flows 31 December 2017 Year ended 31 December 2016 Change year-on-year ( million) Net cash flows generated from operating activities 1,702 1, % Net cash flows generated from investing activities (98.1%) of which dividends from associates and joint ventures % of which CAPEX 7 (842) (575) 46.4% Interest paid (493) (452) 9.1% Total working capital is defined as inventories plus trade and other receivables minus trade and other payables. 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. CAPEX is defined as payment for the acquisition of property, plant and equipment and intangible assets. 4

5 Overview of Trends in the Aluminium Industry and Business Environment Highlights for the full year 2017 Global aluminium demand rose by 6% in 2017 to 64 million tonnes, amid coordinated economic growth in major regions of the world, including China, Europe and North America. In 2018, global demand is expected to build on the positive foundations of the past year to increase by 5% to 67.3 million tonnes. Robust demand growth left the global aluminum market balance in a deficit at around 1 million tonnes in 2017 and is expected to rise to above 2 million tonnes in Global aluminium supply is expected to grow by 2.8% in 2018 compared to 5.7% growth in In China there is strong evidence of the implementation of supply side reform in the Chinese aluminum industry in 2017 with more than 10 million illegal operating capacity and projects having been cut. As estimated significant part of aluminium smelters closed during current winter cuts season will not return to the market due to severe environmental regulation for smelters emissions in 26+2 cities, high restarting costs and current low profitability. Chinese semis exports stay under significant pressure from international anti-dumping initiatives and there have been recent announcements for further investigations under Section 232 alongside the possible introduction of new duties on Chinese semis exported to the US. As a result, aluminium Midwest premium in the US hit 12 c/t with potential move to 14 c/t. The reported aluminium inventories in the world ex-china fell further to ~ 2.9 million tonnes at the end of 2017, down ~ 1.0 million tonnes from the level at the end of 2016 to historical low level for stock to consumption ratio of 36 days compared to 115 days peak in mid of The LME aluminium price rose 22.7% YoY in 2017 and reached 2,256/t on January 2, 2018, nearly a six-year high, consolidating later at a new level of 2,200/t as a result of widespread capacity cuts in China and a steady reduction of LME stocks - further evidence of a global market deficit. The rising cost inflation in China made a significant share of operating Chinese aluminium capacity barely breakeven by the end of

6 Aluminium demand Global aluminium demand rose by 6% to 64.2 million tonnes in In the world excluding China, demand grew by 3.7% to 29.2 million tonnes, while Chinese demand increased by 7.8% to 34.9 million tonnes. Despite high aluminium prices there is a slow process of restarting capacity capability outside of China due to lack of competitive power tariff and high restarting costs. China continued to lead global growth in 2017, with its economy confounding expectations of a slowdown. Full year GDP increased by 6.9%, an upturn from the 6.7% pace of 2016 and well above the official target of 6.5%. The key driver of aluminium demand, industrial production, mirrored the improvement in the broader economy, accelerating to 6.6% growth in 2017, from 6% the prior year. There was broad based strength across the major aluminium consuming industrial sectors, with construction, manufacturing and transportation all remaining robust. Floor space under construction started in 2017, rose by 10.5%, while auto production rose by 2.1%, but growth in production of commercial vehicles was much sharper, up by 13.8%. Strong investment in the power sector, especially in green energy, also provided further impetus to aluminium demand. In North America, underlying demand began the year cautiously before strengthening through the year. There was a welcome return to positive growth in industrial production in 2017, rising by 1.8% in the United States, following a contraction in the prior year. Despite a 3.9% decline in North American motor vehicle production, aluminium demand from the sector grew strongly, amid rising intensity of use, especially in the rolled products sector. Construction activity remained solid, with housing starts rising by 2.4% to 1.1 million units, and pointing to a robust outlook for extrusions demand given the lag between starts and aluminium consumption in the build. In 2017 as a whole, primary aluminium demand rose by an estimated 2.6% to 6.8 million tonnes. The recovery in the Eurozone economy was particularly impressive, with industrial activity improving throughout Manufacturing PMIs were illustrative of this trend, hitting multi-year highs in regional heavyweights Germany, France and Italy and even the UK shrugged off Brexit fears to increase through the year. The Eurozone manufacturing PMI ended the year at 60.6, its loftiest level since the currency group was formed. In a similar vein, the construction market built on strong growth in 2016, with further gains last year, which resulted in the production in construction index for Euro 28 countries also hitting multi-period highs. The pace of the auto market slowed slightly but vehicle output still rose by an estimated 1.4% across the region, although 6

7 as in the US, intensity of use gains meant that sectoral aluminium demand ran well ahead of car production. This confluence of positive factors led to aluminium demand growth of 3.2% to 9.4 million tonnes in Europe (including Turkey but excluding Russia). Japan s economy carried on the strong momentum from the end of the previous year to accelerate in 2017, driven by a recovery in the industrial sector. This led to industrial production growth estimated at 4.4%, after a minor contraction in A key component of this growth was automotive, with vehicle production accelerating by an expected 5.6% for the full year, bouncing back from a decline in The construction market fared less well, with housing starts contracting by a modest 0.1%, although sectoral aluminium demand still increased, benefiting from follow through from buildings that began construction the prior year. In addition to the strength of underlying domestic demand, Japan was boosted by a strong global economy, which was supportive of its exports. This was evident in the aluminium sector as well as the broader manufacturing sector. Economic activity has remained strong in the ASEAN region, as GDP in major countries such as Thailand, Vietnam and Indonesia, grew at a rate of between 4 and 7%. The region as a whole continues to benefit from major macro drivers such as industrialisation and urbanisation, in addition to investment in downstream industry, including in aluminium. This will result in primary aluminium demand increasing to 6.5 million tonnes or 3.5% in the Asian region (ex China & India) in The other major growth driver in the rest of Asia is India, and although its economy slowed in 2017, amid economic reforms, the rate of increase in GDP would still be the envy of most developed countries. GDP is expected to have grown by 6.2% over the year as a whole, although picking up speed in the final two quarters. Industrial production followed a similarly positive trend, pointing to an acceleration in growth in Even with a slowdown in the economy, primary aluminium demand still rose by an impressive 5.6% to 2.1 million tonnes in In our home market of Russia, following two years of negative economic growth, GDP rose by an estimated 1.9% in A recovery in oil prices supported government revenues and this is fed through into increased government spending on infrastructure. This boosted demand across a range of end uses but especially in the electrical sector. A change in regulations to allow aluminium wiring in buildings during 2017 provides a bullish backdrop for further consumption growth. Primary aluminium demand in Russia grew by 10.9% to 0.8 million tonnes in 2017 and expected to rise to million tonnes in

8 Global supply Global aluminium supply rose by 5.7% to 63.5 million tonnes in In the world excluding China, supply grew by 1% to 27.2 million tonnes, while Chinese supply increased by 9.5% to 36.4 million tonnes. In China there is strong evidence of the implementation of Supply Side reform in the Chinese aluminum industry in 2017 with more than 10 million illegal operating capacity and project cuts. As a result, according to Aladdiny data annualized Chinese aluminum production in November has dropped to 35.4 million tonnes from its maximum of 38.6 million tonnes in July of The announcement by the Chinese regulator regarding winter capacity cuts which have now been implemented will result in an annualized production losses of approximately 1 million tonnes of metal, and 4.4 million tonnes of alumina, according to UC RUSAL estimates. As estimated significant part of aluminium closed smelters during current winter cuts season will not return to the market due to sevear environmental regulation for smelters emissons in 26+2 cities, high restarting costs and current low profitability. Larger losses may take place in carbon materials supply including anodes and coking coal, that would to exert an upward pressure on the costs bases for aluminium producers due to squeezes in raw materials supply chain. Strong antipollution controls and environmental measures continue to be focused towards the energy intensive industries in China in 2018 with intention to further cap and reduce CO2 emissions. Several heavily aluminium producing provinces plan to curb CO2 emissions by 20-23% on average by 2020 from the 2015 level. Starting this year Chinese aluminum smelters start paying environmental tax potentially increasing production costs by RMB/tonne for big producers. In addition to China domestic regulatory measures, Chinese semis exports stay under significant pressure from international anti-dumping initiatives and there has been recent announcements for further investigations under Section 232 alongside the possible introduction of new duties on Chinese semis exported to the US. This may result in a continued drop of exports of Chinese FRP and other aluminium semis products to United States, the second largest Chinese semis consuming market. 8

9 Business review Aluminium Aluminium production in 4Q17 totaled 945 thousand tonnes (+1.5% QoQ), with Siberian smelters representing 94% of total aluminium output. Total production dynamics remained largely stable with capacity utilization reaching 97%. The production of value added products (VAP ) in 4Q17 amounted to 469 thousand tonnes (+9.1% YoY), the company maintains VAP production levels as per its guidance at c.50% of total product mix; In 4Q17 aluminium sales increased (+3.3% QoQ) totaling 1 million tonnes. In 4Q17, sales of VAPs decreased to 462 thousand tonnes. (-3.5% QoQ). The QoQ decline in VAP sales dynamics is largely explained by a skew towards primary aluminium under existing contracts which led to a decline of VAP s share in total sales to 46%. The Company expects that the sales mix will trend towards the production mix and targets 50-52% share of VAPs through 2018 on the back of a solid backlog of end-customer product orders for 2018 and the launch of new VAPs capacities;. In 4Q17 the average aluminium realized price increased by 6.5% QoQ to 2,263/t. The increase was due to positive dynamics in LME QP component (+7.1% QoQ to 2,102/t). The average realized premium component remained almost flat (-0.6% QoQ to 161/t); In 12M17 aluminium production totaled 3,707 thousand tonnes (+0.6% YoY); In 12M17 aluminium sales increased (+3.6% YoY) totaling 3,955 thousand tonnes. This increase was achieved largely due to an increase in third party aluminium products sales (+91.3% YoY to 169 thousand tonnes); During 12M17, the company as per its strategy continued to grow VAP s sales, which totaled 1,869 thousand tonnes (+11.2% YoY). The share of VAP s sales in total sales now stands at 47.3% in comparison with 44% in 12M16; In 12M17, the average aluminium realized price increased by 21.5% YoY to 2,105/t due to positive dynamics in LME QP component (+23.5% YoY to 1,942/t). The average realized premium component increased by 2.5% YoY to 163/t). 9

10 Alumina In 4Q17, total alumina production increased by 1.3% QoQ, totaling 1,991 thousand tonnes. Russian operations accounted for 36% of the total output. The performance of the Company s alumina assets was largely in line with the production plan. The continuation of ramping up capacity at Russian (Urals Alumina Refinery) and Ukrainian (Nikolaev) based refineries post the completion of upgrades earlier in 2017 was largely behind the 12M17 YoY production increase of +3.3%, to 7,773 thousand tonnes. Bauxites In 4Q17, bauxite production increased by 7.4% QoQ to 2,944 thousand tonnes. This is due to a low comparison base in 3Q17 for mines of Bauxite Company of Guyana, Kindia and North Urals. In 4Q17, nepheline output decreased by 7.4% to 1,041 thousand tonnes, due to seasonal decline in production. In 12M17 bauxite output totaled 11,645 thousand tonnes (-4.4% YoY). The decrease of bauxite production is largely attributed to a decline in output in 3Q17, due to abnormal weather conditions that affected the operational performance of Bauxite Company of Guyana and Windalco as well as scheduled operational equipment care and maintenance works at mines in Kindia and Timan. Nepheline ore output decreased by 2.3% YoY to 4,332 thousand tonnes. 10

11 Financial Overview Revenue million Year ended 31 December 2017 kt Average sales price (/tonne) million Year ended 31 December 2016 kt Average sales price (/tonne) Sales of primary aluminium and alloys 8,324 3,955 2,105 6,614 3,818 1,732 Sales of alumina 769 2, , Sales of foil and other aluminium products Other revenue Total revenue 9,969 7,983 Total revenue increased by 1,986 million or by 24.9% to 9,969 million in 2017 compared to 7,983 million in The increase in total revenue was mainly due to the growth of sales of primary aluminium and alloys, which accounted for 83.5% and 82.9% of UC RUSAL s revenue for 2017 and 2016, respectively. Quarter ended 31 December Change, quarter on quarter, (4Q to 4Q) Quarter ended 30 September Change, quarter on quarter, (4Q to 3Q) Year ended 31 December unaudited unaudited unaudited Change, year-onyear ( million) Sales of primary aluminium and alloys million 2,263 1, % 2, % 8,324 6, % kt 1, % % 3,955 3, % Average sales price (/t) 2,263 1, % 2, % 2,105 1, % Sales of alumina million % % % kt (13.7%) 502 (2.0%) 2,018 2,267 (11.0%) Average sales price (/t) % % % Sales of foil and other aluminium products ( million) % % Other revenue ( million) % % % Total revenue ( million) 2,745 2, % 2, % 9,969 7, % 11

12 Revenue from sales of primary aluminium and alloys increased by 1,710 million, or 25.9% to 8,324 million in 2017, as compared to 6,614 in 2016, primarily due to a 21.5% increase in the weighted-average realized aluminium price per tonne driven by an increase in the LME aluminium price (to an average of 1,968 per tonne in 2017 from 1,604 per tonne in 2016), as well as an increase in the sales volumes by 3.6% and slight improvement in premiums above the LME prices in the different geographical segments (to an average of 163 per tonne from 159 per tonne in 2017 and 2016, respectively). Revenue from sales of alumina increased by 23.6% to 769 million for the year ended 31 December 2017 as compared to 622 million for the previous year primarily due to an increase in the average sales price by 39.1%, which was partially offset by a decrease in the sales volumes by 11.0%. Revenue from sales of foil and other aluminium products increased by 83 million, or by 34.6%, to 323 million in 2017, as compared to 240 million in 2016 primarily due to a 20.1% increase in sales volumes of foil. The Company notes the growth in sales of other aluminium products (such as wheels) from SKAD operations, consolidated starting from April Revenue from other sales, including sales of other products, bauxite and energy services increased by 9.1% to 553 million for the year ended 31 December 2017 as compared to 507 million for the previous year, due to a 6.5% increase in sales of other materials (such as anode blocks by 28.3%, aluminium powder by 12.4%, corundum by 20.0%). 12

13 Cost of sales The following table shows the breakdown of UC RUSAL s cost of sales for the years ended 31 December 2017 and 2016, respectively: Year ended 31 December Change, year-onyear Share of costs ( million) Cost of alumina (3.1%) 10.1% Cost of bauxite % 6.4% Cost of other raw materials and other costs 2,621 2, % 36.5% Purchases of primary aluminium from JV % 3.9% Energy costs 2,149 1, % 29.9% Depreciation and amortisation % 6.6% Personnel expenses % 8.1% Repairs and maintenance % 1.0% Net change in provisions for inventories 2 (11) NA 0.0% Change in finished goods (184) (69) 166.7% (2.6%) Total cost of sales 7,183 6, % 100.0% Total cost of sales increased by 1,153 million, or 19.1%, to 7,183 in 2017, as compared to 6,030 million in The increase was driven by an increase in volumes of primary aluminium and alloys sold as well as significant increase in electricity prices, railway transportation tariffs and other raw material costs in Russian Ruble in Cost of alumina was almost flat in 2017 compared to Cost of bauxite increased by 24.2% in 2017 compared to the previous year, primarily as a result of an increase in purchase volume and a slight increase in purchase prices. Cost of raw materials (other than alumina and bauxite) and other costs increased by 22.3% in 2017 compared to the previous year, due to a rising raw materials purchase price (prices for raw pitch coke increased by 74.5%, raw petroleum coke by 18.1%, pitch by 46.7%, caustic soda by 47.8%). 13

14 Energy costs increased by 31.8% in 2017 compared to 2016, primarily due to 13.0% appreciation of Russian Ruble against US dollar between the comparable periods. Distribution, administrative and other expenses Distribution expenses increased by 18.6% to 446 million in 2017, compared to 376 million in 2016, primarily due to the increase in transportation tariffs as well as the continuing appreciation of the Russian Ruble against the US Dollar between the periods. Administrative expenses, which include personnel costs, increased by 19.0% to 632 million in 2017, compared to 531 million in 2016 and primarily resulted from the appreciation of the Russian Ruble to the US Dollar within the comparable periods. Gross profit As a result of the foregoing factors, UC RUSAL reported a gross profit of 2,786 million for the year ended 31 December 2017 as compared to 1,953 million for the previous period, representing gross margins of the periods of 27.9% and 24.5%, respectively. 14

15 Adjusted EBITDA and results from operating activities Year ended 31 December Change year-onyear ( million) Reconciliation of Adjusted EBITDA Results from operating activities 1,523 1, % Add: Amortisation and depreciation % Impairment/(reversal) of non-current assets 84 (44) NA Loss on disposal of property, plant and equipment % Adjusted EBITDA 2,120 1, % 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 2,120 million for the year ended 31 December 2017, as compared to 1,489 million for the previous year. 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 by 42.6% to 1,523 million for the year ended 31 December 2017, as compared to 1,068 million for the previous year, representing operating margins of 15.3% and 13.4%, respectively. 15

16 Finance income and expenses Year ended 31 December Change year-onyear ( million) Finance income Interest income on third party loans and deposits (11.1%) Interest income on loans to related party companies under common control 1 1 Net foreign exchange gain % % Finance expenses Interest expense on bank loans, company loans, bonds and other bank charges, including (581) (603) (3.6%) Interest expense (477) (530) (10.0%) Bank charges (104) (73) 42.5% Interest expense on company loans from related parties companies exerting significant influence (2) (7) (71.4%) Interest expense on provisions (6) (7) (14.3%) Net foreign exchange loss (105) (100.0%) Change in fair value of derivative financial instruments, including (287) (157) 82.8% Change in fair value of embedded derivatives (104) (77) 35.1% Change in other derivatives instruments (183) (80) 128.8% (876) (879) (0.3%) Finance income increased by 2 million, or 10.5% to 21 million in 2017 compared to 19 million for the same period of 2016 due to an increase in foreign exchange gain which was partially offset a decrease in interest income on third party loans and deposits at several subsidiaries of the Group. Financial expenses was 16

17 almost flat in 2017 compared to 2016 primarily due to a decrease in the interest expense on bank loans and net foreign exchange result that was partially offset by an increase in the net loss from the change in fair value of derivative financial instruments and an increase in bank charges. Interest expenses in 2017 decreased by 53 million to 477 million from 530 million in 2016 following the successful restructuring of the Group s loan portfolio. The same factor caused an increase in bank charges as a result of amortization of previously capitalized arrangement fees. The net loss from the change in fair value of derivative financial instruments increased to 287 million in 2017 from 157 million for the same period of 2016 following significant LME and other commodities price improvement between the comparable periods that negatively affected the fair value of respective hedging instruments. Share of profits of associates and joint ventures Year ended 31 December Change year-onyear ( million) Share of profits of Norilsk Nickel, with (23.3%) Effective shareholding of 27.82% 27.82% Share of profits of other associates % Share of profits of associates (23.1%) Share of profits of joint ventures (43.1%) The Company s share in profits of associates for the years ended 31 December 2017 and 2016 amounted to 529 million and 688 million, respectively. Share in results of associates in both periods resulted primarily from the profit from the Company s investment in Norilsk Nickel, which amounted to 528 million and 688 million for 2017 and 2016, respectively. At the date of these consolidated financial statements, the Group was unable to obtain consolidated financial statements of Norilsk Nickel for the year ended 31 December Consequently, the Group estimated its share in the profits, other comprehensive income and foreign currency translation reserve of Norilsk Nickel for year ended 31 December 2017 based on publicly available information reported by Norilsk Nickel. 17

18 The information used as a basis for these estimates is incomplete in many aspects. Once the consolidated financial statements of Norilsk Nickel become 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. The market value of the investment in Norilsk Nickel at 31 December 2017 was 8,294 million as compared to 7,348 million as at 31 December Share of profits of joint ventures was 91 million for the year ended 31 December 2017 as compared to 160 million for the same period in This represents the Company s share of profits in joint ventures, namely BEMO, LLP Bogatyr Komir and Mega Business and Alliance (transportation business in Kazakhstan). Profit before income tax UC RUSAL earned a profit before income tax in an amount of 1,288 million for the year ended 31 December 2017, as compared to a profit before income tax in an amount of 1,354 million for the year ended 31 December 2016 due to reasons set out above. Income tax Income tax expense decreased by 109 million to 66 million in 2017, as compared to 175 million in Current tax expenses increased by 18 million, or 14.8%, to 140 million for the year ended 31 December 2017, as compared to 122 million for the previous year primarily due to increase in operating profit. The deferred tax benefit was 74 million in 2017 as compared with deferred tax expense of 53 million in 2016 primarily due to reversal of certain tax provisions, change in fair value of derivative financial instruments and effect of reversal of impairment of non-current assets at several subsidiaries in different periods. Profit for the period As a result of the above, the Company recorded a profit of 1,222 million in 2017, as compared to 1,179 million in

19 Adjusted and Recurring Net Profit Three months ended 31 December Change quarter-onquarter, % (4Q to 4Q) Three months ended 30 September Change quarter on quarter, % (4Q to 3Q) Year ended 31 December Change, year-on-year unaudited unaudited unaudited unaudited unaudited ( million) Reconciliation of Adjusted Net Profit Net profit for the period (31.8%) % 1,222 1, % Adjusted for: Share of profits and other gains and losses attributable to Norilsk Nickel, net of tax effect (101) (163) (38.0%) (174) (42.0%) (496) (667) (25.6%) Change in the fair value of derivative financial liabilities, net of tax (20%) ,220.0% % (Reversal)/impairment of non-current assets (55) (145) (62.1%) 58 NA 84 (44) NA Result from disposal and deconsolidation of subsidiaries including items recycled from other comprehensive income (298) (100.0%) (100.0%) (298) (100.0%) Adjusted Net Profit % % 1, % Add back: Share of profits of Norilsk Nickel, net of tax (38.0%) 174 (42.0%) (25.6%) Recurring Net Profit % % 1, % Adjusted Net Profit for any period is defined as the net profit 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. Assets and liabilities UC RUSAL s total assets increased by 1,322 million, or 9.1% to 15,774 million as at 31 December 2017 as compared to 14,452 million as at 31 December The increase in total assets is mainly resulted from the increase in the carrying value of the investment in Norilsk Nickel, inventories and property, plant and equipment. 19

20 Total liabilities increased by 177 million, or 1.6%, to 11,330 million as at 31 December 2017 as compared to 11,153 million as at 31 December The increase was mainly due to the increase in the Company s trade and other payables and bonds outstanding that was partially offset by loans and borrowings reduction following the successful restructuring of the Group s loan portfolio. Cash flows The Company generated net cash from operating activities of 1,702 million for the year ended 31 December 2017 as compared to 1,244 million for the previous year. Net increase in working capital and provisions comprised 326 million for 2017 as compared to 178 million for the previous year. The Company generated net cash from the investing activities of 2 million for the year ended 31 December 2017 as compared to 104 million for the previous year primarily due to an increase in an acquisition of property, plant and equipment in amount 822 million for 2017 as compared to 558 million for the prior year. The above mentioned factors allowed the Company to assign 411 million of its own cash flows for the debt repayment that together with the interest payments of 493 million, dividends paid in amount of 299 million and settlement of derivative financial instruments of 182 million represent the main components of the cash used in the financing activities with the total amount of 1,421 million for Segment reporting The Group has four reportable segments, as described in the annual report of the Company, 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. 20

21 The core segments are Aluminium and Alumina. Year ended 31 December 2017* 2016 Aluminium Alumina Aluminium Alumina ( million) Segment revenue kt 3,741 7,668 3,891 8,165 million 7,847 2,338 6,708 2,071 Segment result 1, ,157 2 Segment EBITDA 8 2, , Segment EBITDA margin 28.1% 9.9% 22.6% 4.3% Total capital expenditure * Starting 2017 the Company presents two metrics for Aluminium segment: (1) total segment information and (2) information on own aluminium production. The difference between two metrics relates to the intersegment margins, sales of third parties metal and related costs and other non-production costs and expenses. Segment information for the year ended 31 December 2017 presented above relates to own aluminium production, that is different from the relevant segment information presented in the Company s consolidated financial statements for the year ended 31 December The segment result margin (calculated as a percentage of segment profit to total segment revenue per respective segment) for aluminium segment increased to 23.6% for the year ended 31 December 2017 from 17.2% for the year ended 31 December 2016, and increased to 5.6% compared to 0.1%, respectively, for the alumina segment. Key drivers for the increase in margin 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 financial statements for the year ended 31 December Segment EBITDA for any period is defined as segment result adjusted for amortisation and depreciation for the segment. 21

22 Capital expenditure UC RUSAL recorded a total capital expenditure of 842 million for the year ended 31 December UC RUSAL s capital expenditure in 2017 was aimed at maintaining existing production facilities. Year ended 31 December ( million) Development CAPEX Maintenance Pot rebuilds costs Re-equipment Total capital expenditure 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. The Company noted that its auditor, JSC KPMG, has provided a qualified opinion on its audit of the consolidated financial statements of the Company for the year ended 31 December As it was unable to obtain and audit the consolidated financial statements of Norilsk Nickel for the year ended 31 December 2017, an extract from the audit report provided by JSC KPMG on the consolidated financial statements of the Company is as follows: Qualified Opinion We have audited the consolidated financial statements of United Company RUSAL Plc (the Company ) and its subsidiaries (the Group ), which comprise the consolidated statement of financial position as at 31 December 2017, the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. 22

23 In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards ( IFRS ), and have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991 and the disclosure requirements of the Hong Kong Companies Ordinance. Basis for Qualified Opinion As explained in Note 15 to the consolidated financial statements, the Group has estimated its share of profit and other comprehensive income of its associate, PJSC MMC Norilsk Nickel ( Norilsk Nickel ), for the year ended 31 December 2017 based on the latest publicly available information reported by Norilsk Nickel for six months ended 30 June 2017 adjusted by the Group to account for Norilsk Nickel s performance in the remaining part of the reporting period. As a result of the consolidated financial statements of Norilsk Nickel for the year ended 31 December 2017 not being available, we were unable to obtain sufficient and appropriate audit evidence in relation to the Group s estimate of the share of profit, other comprehensive income and foreign currency translation gain in relation to that investee of 528 million, 28 million of loss and 216 million, respectively, for the year ended 31 December 2017, and the carrying value of the Group s investment in Norilsk Nickel of 3,796 million as at 31 December 2017 and the summary financial information of associates disclosed in Note 15. As a result, we were unable to determine whether adjustments might have been found to be necessary in respect of interests in associates, and the elements making up the consolidated statements of income, comprehensive income, changes in equity and cash flows. Consolidated financial statements The following section contains the audited consolidated financial statements of UC RUSAL for the year ended 31 December 2017 which were approved by the directors of UC RUSAL (the Directors ) on 22 February 2018, and reviewed by the Audit Committee. The full set of audited consolidated financial statements of UC RUSAL, together with the report of the independent auditor is available on UC RUSAL s website at 23

24 Consolidated Statement of Income for the year ended 31 December Note million million Revenue 5 9,969 7,983 Cost of sales 6(a) (7,183) (6,030) Gross profit 2,786 1,953 Distribution expenses 6(b) (446) (376) Administrative expenses 6(b) (632) (531) (Impairment)/reversal of impairment of non-current assets 6(b) (84) 44 Net other operating expenses 6(b) (101) (22) Results from operating activities 1,523 1,068 Finance income Finance expenses 7 (876) (879) Share of profits of associates and joint ventures Result from disposal and deconsolidation of subsidiaries including items recycled from other comprehensive income 1(b) Profit before taxation 1,288 1,354 Income tax 8 (66) (175) Profit for the year 1,222 1,179 Attributable to Shareholders of the Company 1,222 1,179 Profit for the year 1,222 1,179 Earnings per share Basic and diluted earnings per share () Adjusted EBITDA 6(d) 2,120 1, The consolidated statement of income is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 31 to 106.

25 Consolidated Statement of Comprehensive Income for the year ended 31 December 2017 Year ended 31 December Note million million Profit for the year 1,222 1,179 Other comprehensive income Items that will never be reclassified subsequently to profit or loss: Actuarial (loss)/gain on post retirement benefit plans 20 (7) 1 Items that are or may be reclassified subsequently to profit or loss: (7) 1 Share of other comprehensive income of associates 15 (28) - Change in fair value of cash flow hedges Items recycled from other comprehensive income on deconsolidation of subsidiaries 1(b) - 22 Foreign currency translation differences for equity-accounted investees Foreign currency translation differences on foreign operations Other comprehensive income for the year, net of tax Total comprehensive income for the year 1,444 2,158 Attributable to: Shareholders of the Company 1,444 2,158 Total comprehensive income for the year 1,444 2,158 There was no significant tax effect relating to each component of other comprehensive income. 25 The consolidated statement of comprehensive income is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 31 to 106.

26 Consolidated Statement of Financial Position as at 31 December December 31 December Note million million ASSETS Non-current assets Property, plant and equipment 13 4,323 4,065 Intangible assets 14 2,552 2,470 Interests in associates and joint ventures 15 4,448 4,147 Deferred tax assets Derivative financial assets Other non-current assets Total non-current assets 11,492 10,836 Current assets Inventories 16 2,414 1,926 Trade and other receivables 17(a) 1, Dividends receivable Derivative financial assets Cash and cash equivalents 17(c) Total current assets 4,282 3,616 Total assets 15,774 14,452 The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 31 to

27 Consolidated Statement of Financial Position as at 31 December December 31 December Note million million EQUITY AND LIABILITIES Equity 18 Share capital Share premium 15,786 15,786 Other reserves 2,847 2,882 Currency translation reserve (8,801) (9,058) Accumulated losses (5,540) (6,463) Total equity 4,444 3,299 Non-current liabilities Loans and borrowings 19 7,744 7,532 Provisions Deferred tax liabilities Derivative financial liabilities Other non-current liabilities Total non-current liabilities 8,858 8,594 Current liabilities Loans and borrowings ,433 Trade and other payables 17(b) 1,658 1,054 Derivative financial liabilities Provisions Total current liabilities 2,472 2,559 Total liabilities 11,330 11,153 Total equity and liabilities 15,774 14,452 Net current assets 1,810 1,057 Total assets less current liabilities 13,302 11,893 Approved and authorised for issue by the board of directors on 22 February Vladislav A. Soloviev Chief Executive Officer Alexandra Y. Bouriko Chief Financial Officer The consolidated statement of financial position is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 31 to

28 Consolidated Statement of Changes in Equity for the year ended 31 December 2017 Share capital Share premium Other reserves Currency translation reserve Accumulated losses Total equity Note million million million million million million Balance at 1 January ,786 2,882 (9,058) (6,463) 3,299 Profit for the year ,222 1,222 Other comprehensive income for the year - - (35) Total comprehensive income for the year - - (35) 257 1,222 1,444 Dividends (299) (299) Balance at 31 December ,786 2,847 (8,801) (5,540) 4,444 Balance at 1 January ,786 2,823 (9,978) (7,392) 1,391 Profit for the year ,179 1,179 Other comprehensive income for the year Total comprehensive income for the year ,179 2,158 Dividends (250) (250) Balance at 31 December ,786 2,882 (9,058) (6,463) 3, The consolidated statement of changes in equity is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 31 to 106.

29 Consolidated Statement of Cash Flows for the year ended 31 December 2017 OPERATING ACTIVITIES Year ended 31 December Note million million Profit for the year 1,222 1,179 Adjustments for: Depreciation Amortisation Impairment/ (reversal of impairment) of non-current assets 6(b) 84 (44) Impairment/ (reversal of impairment) of trade and other receivables 6(b) 6 (3) Impairment/ (reversal of impairment) of inventories 16 2 (11) Reversal of provision for legal claims 6(b) - (1) Pension provision 2 3 Reversal of tax provision (2) - Change in fair value of derivative financial instruments Net foreign exchange (gain)/loss 7 (4) 105 Loss on disposal of property, plant and equipment 6(b) Interest expense Interest income 7 (17) (19) Income tax expense Result from disposal and deconsolidation of subsidiaries including items recycled from other comprehensive income 1(b) - (298) Share of profits of associates and joint ventures 15 (620) (848) Cash from operating activities before changes in working capital and provisions 2,128 1,477 Increase in inventories (462) (73) Increase in trade and other receivables (167) (62) (Increase)/decrease in prepaid expenses and other assets (1) 5 Increase/(decrease) in trade and other payables 330 (13) Decrease in provisions (26) (35) Cash generated from operations before income tax paid 1,802 1,299 Income taxes paid 8 (100) (55) Net cash generated from operating activities 1,702 1, The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 31 to 106.

30 Consolidated Statement of Cash Flows for the year ended 31 December 2017 INVESTING ACTIVITIES Year ended 31 December Note million million Proceeds from disposal of property, plant and equipment Interest received 8 17 Acquisition of property, plant and equipment (822) (558) Dividends from associates and joint ventures Loans given (11) (6) Acquisition of intangible assets 14 (20) (17) Proceeds from disposal of a subsidiary 1(b) Acquisition of a subsidiary (1) - Changes in restricted cash 17(c) (4) 1 Net cash generated from investing activities FINANCING ACTIVITIES Proceeds from borrowings 5,928 2,923 Repayment of borrowings (6,339) (3,066) Refinancing fees and other expenses (36) (14) Interest paid (493) (452) Settlement of derivative financial instruments (182) (446) Dividends 11 (299) (250) Net cash used in financing activities (1,421) (1,305) Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year 17(c) Effect of exchange rate fluctuations on cash and cash equivalents - (6) Cash and cash equivalents at the end of the year 17(c) Restricted cash amounted to 17 million and 13 million at 31 December 2017 and 31 December 2016, respectively. 30 The consolidated statement of cash flows is to be read in conjunction with the notes to, and forming part of, the consolidated financial statements set out on pages 31 to 106.