RusAl:
A New Player in the Premier League
2001 Russian Equities Conference
Moscow, 12 September 2001
• RusAl Foundation: Following the Global Trend
• Company Overview
• Corporate Strategy
• Financial Strategy
2
Recent Aluminium Industry Mergers
• RusAl foundation falls in line with a recent global industry trend
March
1998
Alcoa (USA) and Alumax (USA)
August
1999
Alcoa (USA) and Reynolds (USA)
August
1999
Alcan (Canada) and Algroup (Switzerland)
March
2000
March
2001
RusAl foundation through merger of largest CIS aluminium producers
BHP (Australia) and Billiton (S. Africa)
3
Industry Leader...
•
•
Second largest in the world’s aluminium industry
Fourth largest in the global metals industry (by Metal Bulletin)
Primary Aluminium Capacity (mln MT)
4.2
2.2
1.9
1.1
Alcoa
RusAl
Source: Company reports
Alcan
Pechiney
4
1.0
Billiton
0.8
Norsk Hydro
… Not Only in Size
• High margin combined with low leverage
EBITDA/Sales
Financial Debt/Equity
(2000)
(31 December 2000)
26%
27%
0.65
22%
18%
19%
0.67
0.72
0.52
0.43
0.32
9%
Pechiney
Alcan
Alcoa
BHP Bil iton
Norsk Hydro
RusAl
RusAl
Source: Company reports
5
Pechiney
Alcan
BHP Bil iton
Alcoa
Norsk Hydro
Reasons to Merge
• Increased shareholder value as a result of:
Synergy
&
Scale
Leading position in the national
economy and world aluminium industry
Develop vertical integration
Combine management experience
Multiply investment resources and
political power
Improve efficiency due to centralisation
of product and cash flows
Facilitate access to capital markets
Reduce administrative expenses
Potentially increase market
Re-establish historical cooperation
between production units
capitalisation
6
• RusAl Foundation: Following the Global Trend
• Company Overview
• Corporate Strategy
• Financial Strategy
7
Production Assets
Rostar (100%)
Bratsk Aluminium
Smelter (98%)
Krasnoyarsk Metals
Plant (29%)
Nikolaev Alumina
Refinery* (80%)
Dmitrov Rolling Mill (79%)
Krasnoyarsk Aluminium
Smelter (66%)
Consolidated Production
Capacity
Oradia Alumina
Refinery* (100%)
• 2.5 mln MT of bauxite
• 2.3 mln MT of alumina
• 2.2 mln MT of primary
aluminium and alloys
• 0.7 mln MT of aluminium
semi-products
• 0.1 mln MT of aluminium
foil and flexible aluminium
packaging materials
Achinsk Alumina
Refinery (70%)
ArmenAl* (44%)
• 1.3 billion of aluminium
beverage cans
Sayansk Aluminium
Smelter (88%)
Samara Metals
Plant (88%)
Sayansk Foil
Mill (88%)
Belaya Kalitva
Metals Plant (55%)
SBK (Guinea)
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Note: Equity ownership shown in brackets
* Owned by RusAl’s shareholders
Product Flow
Mln MT
Alumina
Own
0.9
Achinsk
nepheline
0.9
Primary
Aluminium
Fabricated
Products
Bratsk
2.0
C
Export
Bauxite
SBK
1.5
1.1
Nikolaev
Krasnoyarsk
0.8
o
0.2
Domestic
market
n
0.2
Others
2.0
Cemtrade
0.4
Sayansk
0.3
Belaya Kalitva
Aluminium
roll
KraMZ
2.5
s
0.2
Samara
Others
u
m
0.4
Others
ArmenAl
e
Foil
Sayansk Foil
r
s
Dmitrov
Rostar
9
Cans,
etc.
Targets and Achievements in the First Year of Operations
•
Consolidate assets
• Established full control over subsidiaries through equity buy-out
• Set up the holding company via contribution of aluminium assets
• Acquired new capacities in bauxite, alumina and aluminium products
•
Introduce effective
management structure
• Appointed professional management team and established Moscow Headquarters with
over 500 staff members
• Centralised product and cash flows
•
Reduce costs
• Decreased average power tariff paid by the Group’s smelters by 30% through new
contracts with electricity providers
• Introduced centralised purchases and competitive bidding system
•
Develop strategy
• Developed and approved corporate strategy and investment priorities
•
Increase transparency
• US GAAP financial statements audited by PricewaterhouseCoopers
• Technical appraisal reports on RusAl’s smelters produced by Kaiser Engineering
• Independent asset appraisal performed by American Appraisal
•
Introduce risk
management
• Developed and implemented comprehensive insurance strategy (including property
damage, business interruption and cargo insurance) with participation of top-tier
insurance companies
•
Access bank financing
• Over $300 mln in trade finance by Western banks
• Over $400 mln in credit facilities by Russian banks
10
• RusAl Foundation: Following the Global Trend
• Company Overview
• Corporate Strategy
• Financial Strategy
11
Key Strategic Objectives
• Balance production capacity
• Expand margins
• Reduce costs
• Establish world-class management processes
• Meet international standards of environmental management and quality control
• Enter capital markets
12
Balance Production Capacity
By 2005, RusAl intends to produce at own facilities 100% of the required
alumina and up to 50% of the required bauxite via
– expansion of existing alumina capacity by up to 30%
– acquisition and building of new capacity in CIS, Guinea, etc.
– potential strategic partnerships to develop large scale greenfield projects
Alumina Production
'000 MT
•
1.8
1999*
+13%
2.0
+15%
2000*
2.3
2001F
* pro-forma combination of RusAl's production assets
13
4.8
2005F
Expand Margins
•
•
Increase production of alloys and fabricated products at 26% and 12% annual
rate respectively
Increase sales to end users and regional international traders from 30% in
2001 to 70% in 2003
Sales Structure
2,359
222
2,415
37
275
98
2,446
2,500
320
500
Fabricated products
'000 MT
313
800
2,100
2,042
1,813
1,200
1999*
Aluminium alloys
2000*
2001F
* pro-forma combination of RusAl's production assets
14
2005F
Primary aluminium
Reduce Costs
•
Secure against raw materials price volatility by raising own bauxite and alumina
production
•
Enter long-term contracts with energy suppliers
•
Reduce transportation costs via launch of own expeditor
•
Further optimise logistics
•
Upgrade existing facilities (US$100-150 mln in annual capex) to achieve by
2005:
– reduction of electric power consumption by 9% per MT of primary aluminium
– reduction of anode consumption by 6% per MT of primary aluminium
– increase in average pot life by 12%
15
• RusAl Foundation: Following the Global Trend
• Company Overview
• Corporate Strategy
• Financial Strategy
16
Financial Strategy
•
Maintain working capital financing at up to $700-800 mln
•
Restructure existing debt by replacing short-term and high-interest loans for
long-term low-interest financing
•
Use hard currency debt to match export revenues
•
Consider financing selected investment projects by international project
finance institutions
•
Utilise internally generated cash flows for investment projects and acquisitions
•
Lower weighted average cost of capital through long-term unsecured finance
including
– corporate term loans
– capital markets instruments
17
Experience In Raising Finance
• Over $300 mln in trade finance
including:
• Over $400 mln in corporate loans
including :
$100 mln credit facility by
WestLB
$200 mln credit line by
Sberbank
$125 mln club deal by European
banks
$100 mln loans by DIB
$75 mln loans by Rosbank
$47 mln domestic syndication by
Raiffeisenbank
At least two club deals worth up
to US$150 mln to be completed
by the year end
18
Issues to Address
Completed
•
Transparency
•
•
•
Investor
Awareness
Issued US GAAP financial
statements audited by
PricewaterhouseCoopers
Independent asset appraisal and
engineering reports produced by
Western consultants
•
Received approval by Russian
Ministry for Antimonopoly Policy
•
Key assets contributed to the holding
company
•
Established Investor Relations
function
•
Appointed public relations
consultants
19
To Be Done
•
Complete consolidation of all
Group’s assets
•
Credit rating by international
rating agencies
•
Establish transparent dividend
policy
•
Ensure enhanced information
flow between the Company and
investors
–
regular investor meetings
–
Web-site
Proposed Capital Markets Timeline
•
Potential issuance of structured notes backed by export
receivables
•
Potential international bond offering (e.g. Eurobond)
•
Potential international equity offering
Early
2002
End
2002
2004
20
Statements made in the course of this presentation which describe the Company’s intentions, expectations or predictions may be
«forward-looking statements». The Company cautions that, by their nature, forward-looking statements involve risk and uncertainty and
that the Company’s actual actions or results could differ materially from those expressed or implied in such forward-looking statements.
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