Russia's Rusal to cut production as profit falls

Russian aluminium giant Rusal said Monday it would cut production after seeing its net profit fall 95.25 percent in the first six months of the year, hit by falling prices and rising costs. The Hong Kong-listed company said net profit for the six months ending June 30 was $37 million, from $779 million a year earlier. Revenue fell 9.66 percent to $5.71 billion. The world's biggest aluminum producer said it expects to cut up to 150,000 tons of aluminum production capacity by the end of 2012 to improve efficiency. "During the first half of 2012, continuing financial problems in the eurozone and a slower-than-expected growth in emerging economies resulted in a further weakening of global economic recovery," Chief Executive Oleg Deripaska said in a statement. "These challenging market conditions put a significant pressure on the aluminium industry, especially in the second quarter of 2012, leading to a sharp downturn in the price of aluminium," he added. The aluminium price has slumped to close to its lowest level for three years on the London Metal Exchange, hitting a low of $1,810 a tonne at the end of June. "The market conditions have warranted the company to introduce a series of cost-cutting measures to sustain its profitability," Deripaska said, adding these would be helped by the weaker ruble. The efficiency drive would see the "curtailment of high-cost smelting capacity, with the possibility of idling the corresponding alumina production in order to achieve the production capacity balance". Deripaska said that although global economic sentiment was expected to remain weak in the mid-term, there was "clear evidence of a stronger physical demand for aluminium, especially in North America and Asia". Chairman Barry Cheung Chun-yuen said the spread of the eurozone crisis to Italy and Spain was "alarming". "New lows in aluminium prices compounded with uncertainty as to when prices would rebound have made planning especially difficult," he said in the earnings report. "As for the second half of 2012, uncertainty is likely to continue to cloud the global economic outlook." Rusal in March reported a 91.7 percent drop in 2011 net profit, citing a write-down of its holding in the Norilsk Nickel miner and a steep fall in aluminum prices last year. The company posted a net loss of $974 million for the fourth quarter of 2011 compared with a net profit of US$1.45 billion the previous year. Rusal's share price slipped 0.23 percent to HK$4.34 on the Hong Kong exchange in morning trade.