Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Russia’s Rusal Flags Going Concern Risk as Sanctions Bite

Published 08/11/2022, 09:53 PM
Updated 08/11/2022, 09:55 PM
© Reuters.

By Ambar Warrick 

Investing.com-- Russian aluminum producer Rusal (MCX:RUAL) (HK:0486) reported a weaker half-year profit on Friday, and flagged uncertainty over its ability to continue operating amid a slew of Russian sanctions and volatility in commodity markets.

Rusal said in a statement to the Hong Kong Stock Exchange that a ban by the Australian government on alumina and bauxite exports to Russia, coupled with the suspension of production at its Mykolaiv Alumina Refinery in Ukraine, was likely to spur a vast increase in costs this year.

Rusal - once the world’s largest aluminum producer - reported a net profit of $1.68 billion for the six months to June 30, down from $2.02 billion reported last year. The group is still benefiting from higher global aluminum prices. 

Its existing stockpiles also allowed Rusal to keep aluminum production steady at 1.9 million tonnes in the first half of the year. 

But sanctions imposed by the United States and its allies on Russia - over the country’s military incursion into Ukraine - have made transacting with foreign banks significantly difficult for Russian companies.

Australia had earlier this year also banned the export of alumina - a key element in aluminum manufacturing - to Russia. This move had dented Rusal’s ability to source the element, and is expected to result in much higher costs for the firm.

Rusal, which is owned by Russian oligarch Oleg Deripaska, also saw its Ukrainian assets frozen earlier this year. 

The Russian sanctions, coupled with volatility in global markets, “create material uncertainty in the Group’s ability to meet its financial obligations on time and continue as a going concern entity,” Rusal said.

The firm, which is headquartered in Moscow, said it will see increased costs as it rebuilds its supply chain. It had filed a lawsuit against Australian miner Rio Tinto (ASX:RIO) in June over its 20% share of alumina jointly produced at a refiner in Queensland. 

The aluminum producer had recently launched bond placements in the Chinese yuan and the Russian rouble, as it attempts to circumvent damaging economic sanctions against Russian firms.

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.