UC RUSAL Sustainability report 2016


Strategy and sustainable development

Strategy

UC RUSAL’s development strategy sets the company's main directions and targets until 2021. The development vector is aimed at strengthening the leadership position of UC RUSAL in the aluminium industry by improving production effectiveness, improving own energy base and access to competitive sources of electricity, and ensuring the production of aluminium with own raw materials. It is also an important task to ensure the transport security of the business by optimising the logistics system. The company intends to strengthen its position in key sales markets, with particular emphasis on the Russian perspective market. G4-1

According to the strategy, the objectives of the Company are: HKEx Appendix 27 KPI 10

          maintaining the position of UC RUSAL as one of the most efficient producers of low-carbon aluminium;

          self-containment in terms of raw materials for full independence from third-party deliveries;

          carrying out R&D to improve production effectiveness, produce new types of aluminium alloys and products, and develop innovative technologies;

          increasing the flexibility of the production process to adapt quickly to changing market conditions;

          increasing the share of value-added products to maximise margins and improve customer service;

          increasing the share of sales in the key market for UC RUSAL – in Russia and in the CIS;

          creation of new applications for aluminium products that stimulate metal consumption in Russia;

          launching in Russia, in conjunction with partners, of new processing capacities, primarily based on the existing infrastructure of the production facilities, where primary aluminium production has been discontinued;

          improvement of the environmental performance of the production facilities and further enhancement growth of cleaner production;

          energy security through access to competitive power supplies;

          secure business transport security by optimising the logistics system;

          ensuring optimal capital structure, increasing the liquidity of shares and further reduction of financial indebtedness.

One of the most important strategic objectives is to make the Company the most efficient and green producer of aluminium in the world (in terms of production and technology). To achieve this goal, the Company invests in research engineering (including the production of new types of alloys, the introduction of RA-550 cell and inert anode technologies, the development of new products) and the modernisation of production capacities.

In the medium term, the Company intends to increase the share of value-added products in the structure of production (bringing it to 60%) and increase the sales of these products in key markets in Europe, Asia, and the United States. To this end, a comprehensive production development programme is being implemented, in the framework of which the Company intends to restructure the product portfolio, improve quality management system and UC RUSAL Business System. In the immediate plans of UC RUSAL leadership is the development of a new Company development strategy.

Another important task of UC RUSAL is to promote the demand for aluminium in Russia and the CIS. In order to increase the interaction between producers and consumers of aluminium, a combination of producers, suppliers and consumers of aluminium (Russian Aluminium Association) was established in Russia.  Through its existing contacts, the Company actively cooperates with domestic consumers in a constructive dialogue with them, and works together to create new products and to find new uses for aluminium products. The company, with the assistance of the Ministry of Industry and Trade of the Russian Federation, is implementing a programme to support domestic aluminium-consuming industries designed to stimulate import substitution.

UC RUSAL continues to make every effort to remain an effective and sustainable producer. This is achieved through continuous cost reduction and optimisation of supply, transportation and logistics. The programme of capacity rationalisation continues, with the mothballing of a number of production sites.

Despite the changed economic environment, strategic environmental priorities remain: investments are directed both at the maintenance of capacities and the technical retooling of production and, on a mandatory basis, at environmental protection.

In the area of environment and climate, UC RUSAL has the following objectives and targets: HKEx Appendix 27 KPI 10

 meeting air emission standards prescribed by laws of the countries of operation by production facilities of the Company by 2022;

 protecting the interests of the Company in the regulation of greenhouse gas emissions and reducing them by 2025 by 15% for aluminium smelters and by 10% for alumina refineries compared to 2015;

 establishment of closed recycled water supply systems for key production processes at the Company’s production facilities by 2020;

 annual increase in the share of waste processing and recycling, safe storage and disposal of waste;

 complete abandonment of equipment and exclusion of waste containing polychlorinated biphenyls (PCBs) by 2022;

 annual increase in the share of reclaimed land and promotion of preservation of biodiversity;

 establishment of a corporate management system for the management of environmental aspects and risks and certification by 2020 of all production facilities selling products in the market for compliance with ISO 140001; and

 promotion of the creation of a modern legal and regulatory framework for the protection of environment in the production of aluminium and alumina.

In addition, UC RUSAL plans to further modernise production and certify its production sites of alloys, foil, powders and silicon in accordance with ISO 14001. UC RUSAL will continue to pay due attention to protecting the environment and improving energy efficiency.

All social programmes in the regions of Company's operation, such as the development of education, health, culture and support for social initiatives in cities and villages of operations, have been maintained.

Created and distributed value for the 2013-2016, USD mln. USA       G4-ЕС1

Indicator

2013

2014

2015

2016

Created direct economic Value

9,811

9,387

8,703

8,002

 Revenue

9,760

9,357

8,680

7,983

 Financial income

51

30

23

19

Distributed economic value

14,449

17,465

11,435

12,539

Operating costs

9,562

8,230

7,084

6,922

Cost of sales

8,429

7,223

6,215

6,070

Selling expenses

488

402

336

331

Administrative expenses

645

605

533

521

Salaries and other payments and benefits to employees

1,124

1,007

761

781

Wages and salaries

869

795

616

619

Payments for defined contribution pension plans

246

207

143

160

Payments for defined contribution pension plans

9

5

2

2

Payments to capital providers

3,668

7,977

3,374

4,647

Interest expenses from operating activity

787

1,361

1,132

879

Interest paid within financing activity

631

677

516

452

Repayment of the principal

2,250

2,271

1,476

3,066

Dividends to shareholders

250

250

Payments to states

81

238

205

175

Income tax

81

238

205

175

Investments in communities

14

13

11

14

Charitable contributions

14

13

11

14

Undistributed economic value

–4,638

–8,078

–2,755

–4,537

 

Assets, liabilities and equity

2013

2014

2015

2016

Total assets

20,480

14,857

12,809

14,452

Net debt

10,109

8,837

8,372

8,421

Equity

6,550

2,237

1,391

3,299

Operating loss/profit, thousand tonnes

Indicator

2013

2014

2015

2016

Production of primary aluminium

3857

3601

3645

3685

Alumina production

7310

7253

7402

7528

Bauxite production

11,418

12,108

12,112

12187