Rusal, controlled by tycoon Oleg Deripaska and partly owned by trading group Glencore, has long been focused on reducing its $8.3bn net debt, but its financial flexibility and ability to reward shareholders was improved in May by a refinancing deal involving a $1.7bn loan.
The group said it would pay a dividend of 1.97 cents per share for 2017, or $299mn in total, up 20% on the previous year.
For the three months through June 30, core earnings or EBITDA rose 48% to $510mn, broadly matching analysts’ expectations. London aluminium prices are up 25% this year due to strong demand and expectations that top producer China will reduce output during the winter as Beijing intensifies its war on pollution.
“Looking ahead to the second half of the year, our outlook for the aluminium industry is positive,” Vladislav Soloviev, chief executive of Hong Kong-listed Rusal, said in a statement. “Consumption of aluminium is set to remain healthy until the end of the year, increasing by 5.9% for the whole 2017.”
Rusal also said on Friday it and Russia’s largest lender Sberbank had agreed to extend the final maturity of loans secured against part of Rusal’s 27.8% stake in miner Norilsk Nickel (Nornickel) to 2024 from 2021.
Rusal’s debt to Sberbank was $4.5bn as of end-June.
However, Rusal shares were down 1.5% in Hong Kong, underperforming a 1.2% rise in the benchmark index, backtracking from recent gains and under pressure from a dividend announcement by Nornickel which was lower than some analysts expected.
Vladimir Sklyar at Renaissance Capital noted Norilsk’s decision to pay first-half dividend of 224.20 roubles ($3.79) per share was increasing a risk that cashflow from the Norilsk stake to Rusal will dry up, limiting Rusal’s capacity to pay its own dividends.
“Even though today’s announcement by Rusal on a new dividend policy clearly sends the message that dividends will become more sustainable in the long run, investors take the news cautiously, seeing risks from the development at Norilsk,” Sklyar added.
Along with higher aluminium prices, Rusal’s revenue was supported by stronger sales of value-added products (VAP) to a record share of 49.2% of the total in the second quarter, from 44.3% in the first quarter.
“Rusal is on target to further increase its VAP capacity in order to meet growing customer demand in various sectors from the automotive and electrical to construction and consumer sectors,” CEO Soloviev added.