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Edited Transcript of 486.HK earnings conference call or presentation 14-May-19 7:00am GMT

Q1 2019 United Company RUSAL Plc Earnings Call

NICOSIA May 30, 2019 (Thomson StreetEvents) -- Edited Transcript of United Company RUSAL Plc earnings conference call or presentation Tuesday, May 14, 2019 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alexandra Y. Bouriko

United Company RUSAL Plc - CFO

* Denis Nushtaev

United Company RUSAL Plc - Head of Research Department

* Elena Ivanova

* Gleb Diachkov-Gertcev

* Inga Simonenko

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Conference Call Participants

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* Alexey Ilin

Templeton Asset Management Ltd. - VP & Investment Analyst

* Daniel Edward Major

UBS Investment Bank, Research Division - Director and Analyst

* Rahul Ullal Bhat

JP Morgan Chase & Co, Research Division - Analyst

* Sergey Donskoy

Societe Generale Cross Asset Research - Equity Analyst

* Timothy William Riminton

Barclays Bank PLC, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the first quarter 2019 results announcement conference call. Today's conference is being recorded. At this time, I would like the turn the conference over to Gleb Diachkov-Gertcev. Please go ahead, sir.

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Gleb Diachkov-Gertcev, [2]

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Good evening, ladies and gentlemen. I'm Gleb Diachkov-Gertcev, Head of Investor Relations for RUSAL, and I would like to welcome you to our first quarter 2019 results.

Let me introduce the RUSAL team presenting today. It's Alexandra Bouriko, CFO; Roman Andryushin, Director of Sales and Marketing; Denis Nushtaev, Head of Research Department; and Elena Ivanova, Director, Corporate Finance.

With this, I would like to pass the word over to Elena, who will to start this presentation with the highlights.

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Elena Ivanova, [3]

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Thank you, Gleb, and good afternoon, good morning, everyone. We apologize for slight delay and thank you very much for joining the call.

Before we proceed, I would like to point out that the first quarter of 2019 was significantly challenged by the previous year's results. That includes the OFAC sanctions, which were lifted, as you know, in January 2019. Both operating and financial results were affected by these circumstances and as well as by deteriorating market environment.

I would like to give you a few numbers highlighting the company performance during the first quarter. Total aluminium sales in first quarter decreased by 7.2% year-on-year, down to 8,096 kilotonnes. The short OFAC General License extension impacted the sales structure. In first quarter '19, VAP sales decreased by 44% year-on-year down to 2,059 tonnes -- kilotonnes. Following the reduction of the LME aluminium price by almost 14% year-on-year, down to $1,860 per tonne, RUSAL's trading decreased by almost 20% year-on-year down to $2.2 billion.

EBITDA decreased by 60% year-on-year to $226 million and EBITDA margin amounted to about 10% -- 10.5%. And as of the end of first quarter '19, net debt amounted to $7.6 billion.

Now moving to the next slide, environmental achievements. On this slide, we would like to draw your attention to the continuous improvement of our environmental footprint. RUSAL's major strategic goals remain the same, to reduce direct greenhouse gas emissions by 15% by 2025 compared to 11% in 2014 and to ensure that we purchase -- we purchase at least 95% of electricity from hydroelectric power plants and other carbon-free power sources.

As you can see from the chart on the slide, we are constantly working to reduce emissions, and as of today, we're proud to say that we have decreased emissions by 9% since 2014.

We also purchased 98% of our energy from non-carbon sources.

In first quarter '19, RUSAL signed an agreement with the government of Krasnoyarsk region. And as part of this pilot project in Krasnoyarsk region, the company will plant 500,000 trees and develop a set of measures to protect 500,000 hectares of forest from fire. We believe this will further compensate for the company's carbon footprint for aluminium production.

Now we are moving to the review of our operational and financial results, and I would like to hand over to Alexandra Bouriko, who's going to open this section with sales dynamics and our operational overview.

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [4]

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Thank you very much, Elena, and good morning, everyone. We are now on Slide #7. As Elena already mentioned, the first quarter 2019 still felt the impact of OFAC sanctions. The most significant influence was on the share of our VAP products [in] the total sales mix, which dropped to approximately 29% in the first quarter of 2019.

Due to longer lead times, VAP sales recognized in the first quarter 2019 represent contracts that were serviced towards the end of Q4 2018 and at the beginning of the first quarter. And this period was significantly challenged by short OFAC General License extensions as the sanctions were only lifted on 27th of January 2019.

Total aluminium sales for the first quarter amounted to 896,000 tonnes, which is a 7.2% decrease year-on-year, including VAP sales of 259,000 tonnes, 44% decrease year-on-year due to sanction pressure.

Following decline in the aluminium price, the first quarter 2019 average realized price decreased to $1,949 per tonne, which represents 16.2% decrease year-on-year.

The LME component was $1,849 per tonne and commodity-grade premium was approximately $51 per tonne.

Average upcharge per tonne of value-added product sales was $171 per tonne for the first quarter of 2019.

Our regional sales mix in the first quarter has been adjusted due to OFAC sanctions with more weight on European destinations, which maintained the largest share in the mix, increased from 41% to 53% year-on-year. And on the Asia region, which increased from 18% to 22% year-on-year.

Let's move to Slide #8 and look at the financial overview and the revenue structure. Total revenue in the first quarter of 2019 was $2.2 billion, which represents almost 21% decrease year-on-year.

Our revenue from aluminium sales in the first quarter decreased by 22.2% to $1.7 billion. This was driven by 16.2% decrease in the average realized price as well as decline in premiums to an average of $100 per tonne in the first quarter of 2019 from $173 per tonne in the first quarter of the previous year as well as 7.2% decrease in sales volumes that I have already touched upon. Remaining revenues totaled $424 million.

Revenue from alumina sales to third parties was $172 million, 27.4% decrease year-on-year, driven by significant decrease in sales volumes.

Revenue from sales of foil and other aluminium products was $91 million, which represents 1.1% increase year-on-year. And revenue from other sales decreased by 6.4% to $161 million.

Let's move to Slide #9, which represents our key segment cash cost. In the first quarter of 2019, the production cash cost of aluminium increased by 1.7% quarter-on-quarter to $1,633 per tonne. The cash cost in the first quarter of 2019 as compared to the fourth quarter of the previous year was primarily affected by increase in energy cost, which is seasonal as well as ruble appreciation.

In the first quarter of 2019, the average energy purchase price for RUSAL stood at [$0.033] per kilowatt hour, which represents 8% increase quarter-on-quarter or 7% decrease year-on-year. And appreciation in day-ahead market pricing, the exchange rate factor and capacity component increase were observed during the first quarter 2019 and all contributed to the energy purchase price growth.

Let's move now to Slide #11, which gives you an overview of the company's EBITDA. On this slide, we traditionally summarize the factors that contributed to our EBITDA dynamics. As you may see from the top chart, the LME component decrease in the aluminium price coupled with the decline in premiums were the key factors that led to 60.5% year-on-year drop in EBITDA to $226 million.

As a result, our EBITDA margin decreased to 10%.

In terms of the segment impact, the aluminium segment remained the largest contributor to our group's EBITDA.

Let's move now to Slide #13, which gives you an overview of our capital expenditure. On this slide, you can see that in the first quarter 2019, our total CapEx was $136 million, of which approximately 50% went to maintenance CapEx.

In the first quarter 2019, the company continued to invest in our key development projects to support the company's competitive advantage of vertical integration and to continue the expansion of RUSAL's aluminium capacity. These projects include the Friguia alumina refinery complex, which at full capacity will run -- will produce 600,000 tonnes of alumina; the first stage of development of the Taishet anode plant, 217,000 tonnes of baked anodes at the first stage; and the first stage of Taishet aluminium smelter, which at full capacity would run at 430,000 tonnes.

On the following slides, we'll give you a brief update on the 2 key projects aimed at increasing RUSAL's aluminium capacity, BEMO and Taishet aluminium smelters.

Slide #14 now, which talks about BEMO project. As you already know, BEMO projects is an industrial complex in Siberia combining the Boguchansk hydropower station and Boguchansk smelter and it is carried out in joint venture partnership with RusHydro. The first half, 149,000 tonnes per annum of the first stage of the smelter was launched in third quarter of 2015.

On March 29 of this year, during the ceremony attended by Dmitry Kozak, Deputy Chairman of the Russian government, RUSAL and RusHydro [additionally] launched the first stage of the Boguchansk smelter. Burn capacity of the smelter stands at approximately 300,000 tonnes per annum.

The second stage is yet to be considered with our strategic partner, RusHydro. But once fully completed, the total project capacity of Boguchansk smelter will be around 600,000 tonnes per annum with a product portfolio including up to 360,000 tonnes of value-added products.

Let's look at Slide #15 now that gives you an overview of Taishet aluminium smelter. I would like to update you with some new details regarding this project. As you know, the expected capacity of the first stage is around 430,000 tonnes per annum. We anticipate that value-added products will constitute around 80% of total output of the first stage of the Taishet aluminium smelter. The project was initiated in 2006 and then suspended in 2009 due to unfavorable market conditions. We restarted construction in the first quarter 2017 and expect first metal at the end of 2020.

During the course of the first quarter 2019, the company continued financing the construction of the smelter using its own funds.

With this, I would like to hand over back to Elena to give you an overview of debt profile.

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Elena Ivanova, [5]

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Thank you, Alexandra. We are now on Slide 16. On this slide, we can see our key debt metrics and updated maturity profile of the company's debt portfolio as of the end of the first quarter 2019, and I would like to give you a brief update on the key events that occurred during the first quarter and the subsequent events with regards to our debt management.

In March/April, RUSAL repaid in total about $300 million of public debt including partial repayment of first tranche of [panda] bonds and some partial repayment of ruble-denominated bonds. All these repayments occurred through put option that was presented by the bondholders.

Once OFAC sanctions were removed, all 3 rating agencies assigned ratings to RUSAL, namely Fitch at BB- with stable outlook; Moody's, Ba3 with stable outlook; and Russian National Agency Expert RA with rating at the level of ruAA and stable outlook.

In the end of April, on the 29th of April specifically, the company successfully reentered the debt capital markets with placement of ruble bonds with total amount of RUB 15 billion, total maturity of 10 years with put option date in 3 years' time. And the coupon rate was at the level of 9%, and as a result of this placement, the company decided to proceed with cross-currency swap that resulted in conversion of this placement into U.S. dollar at the rate of 4.69%.

If you compare this level with current average rate, so it's actually lower compared to current average rate of 5.6%.

If you look at the debt profile, we have remaining repayments at the level of $600 million as of the date of today's presentation throughout the entire year.

With this, I would like to finish this section of the presentation and pass it back to -- and pass it to Roman Andryushin to start the market discussion.

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [6]

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Roman?

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Inga Simonenko, [7]

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Hello. This is Inga Simonenko on behalf of Roman. Let's turn to the Slide 19. Aluminium industry and demand growth faced a wide range on challenges that occurred in 2018 and continued to [assess] the market in first quarter 2019.

The main challenges faced in the industry were trade wars and considerable slowdown of the Chinese economy, Brexit and the implementation of low-quality ore ban in China. Unpredictability of these factors has contributed to a generally negative reaction from the market, especially considering the current weak economics and industrial indicators.

The key end-use aluminium consumer segment such as the automotive and construction sectors are also under the pressure. As a result of those factors the IMF has [lowered] global GDP growth forecast for the fourth time in 9 months.

Market analysts have reduced their forecast for aluminium end-use demand for the short and midterm. For example, in the past 12 months, the global end-use demand for car for 2022 was downgraded by 1.6 million tonnes, including 0.5 million tonnes for the transportation sector alone.

Forecast for primary aluminium demand were lowered by almost 900,000 tonnes in China and 1.5 million tonnes in the rest of the world.

The next slide, please. Chinese ban on import of low-quality [waste] led to an excess of aluminium scrap supply ex China. In 2018, the restrictions on the import of low-quality aluminium scrap by China added more than 600,000 tonnes to aluminium flow in the rest of the world.

The U.S. and Europe, which are both traditional exporters of aluminium scrap to China, have been affected the most. Both the U.S. and Europe are now trying to export their post-consumer scrap to India and Southeast Asia.

Nevertheless, the availability of excessive scrap might intensify in the mid- to short term, stimulating the investment into scrap sorting and recycling facilities and [adding concern] regarding growth [sustainability] of primary aluminium demand.

Next slide, please. Key foreign markets, Europe, Asia ex China and North America. On this slide, we would like to discuss major trends in our key international markets, including Europe, Asia ex China and North America.

Automotive, the key aluminium-consuming segment, contracted in the first quarter 2019 year-to-year across all regions. According to the estimates, automotive production in Europe fell 9% and Asia by 2.5% and by 3.6% in North America.

Among key consuming regions, the manufacturing PMI will continue to expand only in U.S., predicting weak demand in most regions for at least the next 2, 3 months.

Despite the negative macro factor in first quarter 2019, primary aluminium demand grew in Europe by 1%, in North America by 1.5% and 1.3% in East Asia. The main reason is continuation of aluminizing process in the automotive industry.

The European aluminium industry started responding to enforcement of the EU ban on single-use plastic scheduled for 2021 with an increasing dependency on aluminium in the packaging industry.

Next slide, please. Now let's have a look to Russia and CIS markets. In the first quarter 2019, the primary aluminium demand in Russia and CIS markets has decreased by almost 17% year-to-year and actually reached to the level we reached in 2017. Such fluctuation is explained by high base in the first quarter last year and the stagnation of the key consumer segments such as construction due to changes in regulation and the introduction of escrow accounts for developers.

The pace of car sales slowed down after the rapid growth in 2018 and the market volume is expected to remain at the same level as last year.

Manufacturing PMI will continue to expand, showing an improvement in the business environment but the number of economic risks remain in place, making any forecast of aluminium demand dynamics in the region unreliable.

Next slide, please. Let's have a look at the market balance. The deficit in the primary aluminium market ex China is shrinking, [holding] expansions and restart of smelting capacities in North America, Europe, Russia, India and Asia. At the same time, about 1.6 million metric tonnes in additional smelting capacity, which are expected to be delivered to the market. Ex China will not sufficiently meet demand, and therefore, will keep the rest of the world market in deficit. Nevertheless, we expect a deficit of 1.4 million tonnes in 2019 and 1.2 million tonnes in 2020.

The market deficit in Europe is forecast to stay unchanged this year and the next year while the deficit in North America might reduce. The aluminium scrap sector may continue to gain share from primary aluminium and particularly in North America.

Now I'd like to give the floor to Denis Nushtaev to discuss the development in China and our views on supply and demand in that region.

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Denis Nushtaev, United Company RUSAL Plc - Head of Research Department [8]

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Thank you, Inga. Just briefly speaking on Chinese supply/demand. Overall, we believe that given the deficit ex China, we've seen that this deficit is filled in by different supply sources, including stocks, but we also see the Chinese semis expert [gradually possessing] ex Chinese demand as we see the lack of semis capacity ex China due to low margins and risks of further growth in ex China smelting and the semis capacity. By this, we're seeing that China is gradually possessing the share of ex Chinese demand and the supply in the semis products including flat rolled products, foil, extrusions and wheels. And as we expect and that China still has ability to grow some spare capacity and we're definitely seeing some projects in the pipeline during next 2, 3 years, thus we believe that China will continue exporting semis products, I'd say, also subsidized by the government. So definitely seeing more Chinese exports going forward.

And on the next slide, we show -- we see that despite some muted growth in Chinese capacity over the last 2 years, we see some capacity closures due to lower SHFE price. At the same time, we see the good spike and shift of price in the recent years as a result of some closures in the end of 2018, in the first half -- sorry, in the first quarter of 2019. Definitely, this spike is now making more capacity profitable in China. Today, just 16% is underwater. In this way, we're seeing there are some possible restarts maybe coming, which will definitely be pushing down the price or at least keeping the price at that same level. At the same time, we've definitely seen that production in China is also not growing. But again as I said that with the spikes in the price, definitely might see some restarts in China.

At the same time, demand in China continue to be weak. We've seen that in the first quarter demand was up only 1.5%. It's also well explained why we've see the spike and growth in Chinese semis export in the first quarter of this year.

And with this, I'm passing back to Gleb.

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Gleb Diachkov-Gertcev, [9]

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Thank you, Denis. Thank you all for your attention. We will now open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take our first question from Daniel Major from UBS.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [2]

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A few questions. Firstly, on CapEx, can you give us any updated guidance for the full year on a group basis? That's my first question.

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [3]

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Daniel, this is Alexandra. Our guidance for now doesn't change. As we stated previously, this year, we expect to spend $800 million to $900 million for CapEx. So you can see that the first quarter was lower due to sanction restrictions and so on. However, the situation remains stable. We do expect to continue on with the project and spend as planned.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [4]

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Okay. And then second question. Assuming that you normalize your VAP sales structure, what is the current -- and at sort of current alumina pricing at about $350 spot price, what is the current cash flow breakeven of the smelting business on an operating cost plus sustaining CapEx basis?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [5]

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It's a convoluted question. I will try to answer in simplistic way. You can see our aluminium segment cash cost, which stood at just over $1,600 during the first quarter. So you can use that as the guidance for a breakeven as it includes alumina at our production cost.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [6]

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Okay. And then just final question on the announcement of the joint venture in downstream in the U.S. Can you give us any guidance or just a reminder on the future capital spend there? And I'm assuming this will be an equity account joint venture. Is that correct?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [7]

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It's very early stages at this point in time. However, if the company does proceed with the project, it will be equity accounted and the total value of the project estimated at approximately $1.7 billion, which will be project financed. Expected investment from the company's balance sheet is around $200 million.

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Operator [8]

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We will now take our next question from Timothy Riminton from Barclays.

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Timothy William Riminton, Barclays Bank PLC, Research Division - Research Analyst [9]

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I just had a quick question regarding En+'s announcement earlier this year that they [weren't] going to suspend dividend payments for 2019, that is for 2018 payments in this year. Can you just talk at all about how that might be affecting your outlook on dividends? Will you also be suspending payments this year or do you still expect to pay your dividends to En+ and other shareholders?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [10]

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Thank you for your question. I suggest that En+'s decisions on dividends and so on are discussed with En+. As for RUSAL, we do expect a discussion at the Board level later on this year. And depending on the situation with the company's cash flow, the Board will make a decision. So far, no decisions have been made on suspension or otherwise.

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Operator [11]

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Our next question comes from Sergey Donskoy from Societe Generale.

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Sergey Donskoy, Societe Generale Cross Asset Research - Equity Analyst [12]

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I have just one question. Your VAP products, they were -- the sales were lower in the first quarter. They're going to hopefully normalize going forward. Could you remind me, what is the extra transformation cost per tonne that you incur to produce a tonne of VAPs? Or alternatively, what is the additional EBITDA per tonne that you generate on every tonne of sales?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [13]

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Sergey, thank you for your question. The extra margin that we generate on average per tonne of VAP product varies between $80 and $100 per tonne depending on the price in the period and the product premium.

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Operator [14]

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Our next question comes from Rahul Bhat from JPMorgan.

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Rahul Ullal Bhat, JP Morgan Chase & Co, Research Division - Analyst [15]

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Can I just ask a couple of questions on VAP sales. By [the end] , you expect sales to normalize in this segment to the 40%, 45% that was there that we used to see previously. And also for production in 2019, do you -- can you give any guidance on what should we expect for the full year?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [16]

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Rahul, thank you for your question. The production figures will remain stable overall. So if you're talking about the entire amount of metal we produce, it will be at 3.8 million tonnes approximately. And as for VAP, we finished 2017 and beginning of 2018 at approximately 50%. The figure slid after the sanctions. The average for 2018 was 45%. And right now, we are starting to grow the share of VAP back. We hope that by the end of the year, the average percent will be just under 40% or so. We have already seen the share of VAP climb in the second quarter. So it's in line with our expectation. And we expect to come back fully to the share of VAP that we had prior to sanctions in 2020.

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Rahul Ullal Bhat, JP Morgan Chase & Co, Research Division - Analyst [17]

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If I can also ask one follow-up on the Glencoe sales contract that was due to be renegotiated. Is there any update on that? And is that contract more on commodity aluminium sales or is that VAP sales?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [18]

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Thanks for your question. Glencore contract predominantly includes primary metal. It may include some optionality with the VAP products. But they present rather a smaller share. We target to sell our VAP products to the end customers in our markets. We are still discussing the conditions with Glencore and once it's finalized, we will make the appropriate announcement.

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Operator [19]

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Our next question comes from Alexey Ilin from Templeton Asset Management.

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Alexey Ilin, Templeton Asset Management Ltd. - VP & Investment Analyst [20]

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I have a couple of questions. Can you provide the CapEx breakdown for the full year? As you mentioned the full figure, maybe you can provide some details more, please?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [21]

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Yes. We're just looking for the right slide in the presentation. You can see kind of the key projects described on Slide #13. Out of the full year CapEx, approximately 45% to 50% will relate to maintenance and environmental projects and the rest will be development projects. The most significant development project for this year is Taishet aluminium smelter. The other significant projects include Taishet anode factory, Dian-Dian bauxite mine completion and Friguia refinery relaunch in Guinea. So those are the major kind of spends that we expect this year.

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Alexey Ilin, Templeton Asset Management Ltd. - VP & Investment Analyst [22]

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All right. And like, the second question is about the cash flow statement. You have some acquisitions of subsidiaries and they also have the same, like, similar number in last year. Can you explain what is this?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [23]

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This year, we completed an acquisition of K&K, it's a wheel producer, last year. I would have to check exactly what was there last year but perhaps some payments for -- in other wheel [manufacturer's] cut. As you know, we control a significant share of Russian market for [wheel] manufacturers and so it is now disclosed in our production figures and so on.

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Alexey Ilin, Templeton Asset Management Ltd. - VP & Investment Analyst [24]

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All right. Can you explain also what is other investments in this case? Because you spend it last year and you also have some short-term investments on the balance sheet at the moment. Is it the same amount of money or it's different?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [25]

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We do sometimes try and invest in short-term high liquidity promissory notes to generate additional interest on our cash balances. So that would go through other investment lines in the cash flow.

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Alexey Ilin, Templeton Asset Management Ltd. - VP & Investment Analyst [26]

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So is it like, basically, cash equivalent or something else?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [27]

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It's not quite a cash equivalent due to the conditions attached and the IFRS requirements but those promissory notes are high liquidity and can be easily converted into cash.

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Alexey Ilin, Templeton Asset Management Ltd. - VP & Investment Analyst [28]

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Okay. Can you explain also a bit on segment reporting? Because it seems that you changed it a bit because in the previous, you were like showing alumina segment EBITDA and now it's like totally different. Can you explain the reason for you changing the program?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [29]

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We haven't really changed anything in comparison with the previous year. There was a change but it happened actually before 2018.

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Alexey Ilin, Templeton Asset Management Ltd. - VP & Investment Analyst [30]

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Yes. Sorry, but I mean, if you look at full year presentation, you can see that in alumina segment, you were selling like also 2.3 million tonnes of alumina a year but now we can see only you're selling like around 400,000 tonnes. So it seems that you have totally -- it changes completely.

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [31]

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We can get back to you separately on that. I'm not sure what like -- what we have changed. We definitely didn't make any significant changes in the presentation. So the sales of alumina may go down for different business reasons. We had a contract with Kazakh alumina producer, Pavlodar. The amount that we're purchasing from them this year will go down in comparison to previous years. So the sales, therefore, to third parties will go down as well to maintain full integration but we don't have any significant changes otherwise.

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Alexey Ilin, Templeton Asset Management Ltd. - VP & Investment Analyst [32]

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All right. And maybe the last question from my side. Can you -- because as far as I remember you have like coal assets but you haven't really disclosed any numbers on them. But last year was -- should be really profitable for the company. But maybe you can share some numbers on EBITDA you're getting from the company and how much you actually received [due diligence] from coal assets?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [33]

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The coal assets in Kazakhstan are accounted by using the equity method in our financials. So the line that includes our equity share in Norilsk Nickel also includes our [indiscernible] share in coal assets and further disclosures provided in the financial statements. And the dividends are also included in the cash flow statement. The coal assets are [undertaken in] certain investment projects, and last year, due to sanction restrictions that applied also to them, the dividend flow from them was restricted.

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Alexey Ilin, Templeton Asset Management Ltd. - VP & Investment Analyst [34]

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Okay. But do you expect them to resume this year?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [35]

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They will be. We do expect that there will be [dividend payments] this year. As far as the amount is concerned, the decisions have not yet been made.

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Operator [36]

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Our next question comes from Timothy Riminton from Barclays.

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Timothy William Riminton, Barclays Bank PLC, Research Division - Research Analyst [37]

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Just a quick follow-up from me. I noticed that your income taxes paid in the cash flow statement have jumped quite considerably. That's versus last year and also recent periods across last year in 2017. Could you explain why they're so much higher in a quarter where you generated less revenue and profit?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [38]

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Yes, thank you for your question. Indeed, there was a payment made in the first quarter due to reassessment of [project] stocks for several prior periods based on recent quarter practice with respect to certain tax positions that the company have taken. This amount relates to 2015 and '16 and we do not anticipate any similar accruals and payments in the future years.

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Operator [39]

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We will now take our next question from Daniel Major from UBS.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [40]

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A follow-up on working capital. Looks like it was fairly stable in the quarter, small release from payables. Can you give us any update on guidance on your expectation about further releases, working capital over the next 12 months, obviously, after you built working capital over the last 12 months?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [41]

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Thank you for your question. As we previously stated, we expect to release $900 million to $1 billion this year from the working capital and that expectation did not change. Indeed, during the first quarter, the process was not as expedient as we wanted it to be due to the short term of license expiration and so on. But we do see good progress now in the beginning of the second quarter and we believe that we will move to our targeted release by the end of the year.

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Daniel Edward Major, UBS Investment Bank, Research Division - Director and Analyst [42]

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Great. And just on that, I mean, I assume you'll release any metal inventory or any difference between production and sales in 2018 will fully reverse in 2019. Is that still the expectation?

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [43]

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That's our expectation, yes, correct.

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Operator [44]

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We will now take our next question from Sergey Donskoy from Societe Generale.

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Sergey Donskoy, Societe Generale Cross Asset Research - Equity Analyst [45]

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Yes. I have a follow-up on your CapEx breakdown. I think that in the first quarter, about 1/3 of the total CapEx spend was in some other operations. It was not classified as alumina or aluminium. And I think actually last year was the same situation, around 1/3 of your CapEx was not really classified as either alumina or aluminium. If you could explain where this money is going, to what projects? And second thing, it's not really a question but it's maybe a request. BEMO is one of the integral parts of your business, really, but you don't actually provide any stand-alone financial information for this JV, not even any [highlights] as revenue or EBITDA or net debt. I think it would be very helpful in the future if you could enrich your slide pack and include some of those numbers.

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [46]

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Thank you. Thank you, Sergey. We will check our segment reporting. However, I would confirm that the absolute majority of our projects went to our alumina and aluminium assets, with exception of acquisition of K&K. But that, I believe, there is a separate line item on the cash flow. So we will check and come back to you on that. With respect to BEMO project, we will consider your request for our future presentations. But we do account for them using equity methods, similarly with the coal assets in Norilsk Nickel, and I believe that the disclosure of their financial -- key financial results is usually provided in our annual financial statements.

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Sergey Donskoy, Societe Generale Cross Asset Research - Equity Analyst [47]

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Yes, I realize that. But I just -- I think unlike your coal assets, BEMO is a much important part of your equity story. And as for Norilsk Nickel is concerned, we have plenty of information from the company itself. BEMO is kind of a black box.

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Alexandra Y. Bouriko, United Company RUSAL Plc - CFO [48]

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As I said, we will see what we can do on further disclosing it in our investor presentation. Thank you.

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Operator [49]

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There are no further questions at this time. I would like to turn the call back over to you, Mr. Gleb Diachkov-Gertcev, for any closing comments.

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Gleb Diachkov-Gertcev, [50]

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Thank you. Actually, I think this will end our call. Thank you, everyone, for your attention, and goodbye.