Price of Rusal's acquisition of 30% stake in Chinese alumina producer HWNM rises to $316 mln - report
MOSCOW. Mach 14 (Interfax) - The consideration for the acquisition by UC Rusal of a 30% stake in Chinese alumina producer Hebei Wenfeng New Materials Co. (HWNM) has risen to $316 million, the Russian aluminum giant said in a financial report.
The valuation process was still ongoing as of the date the report was published and may be finalized within the next twelve months after the transaction date, Rusal said.
The consideration for the stake was initially $264 million, Rusal said earlier, adding that the terms of the transaction could be adjusted within twelve months of the transaction date. All rights attached to the interest acquired were transferred to Rusal in April 2024.
The fair value of the stake is $238 million, and the goodwill which arose on the acquisition amounted to $78 million, the report says.
Rusal acquired the stake in HWNM to solve its problems with access to alumina, which worsened in 2022 after it lost access to the Nikolayev Alumina Refinery and alumina supplies from Australia in 2022. These sources together accounted for about 40% of alumina consumption.
The 30% stake HWNM enabled Rusal to boost alumina output 25% to 6.43 million tonnes in 2024.
Rusal said last year that the HWNM deal would secure it access to alumina supplies at competitive prices, but at the end of 2024 the company announced plans to optimize aluminum production capacity, cutting it by 250,000 tonnes or about 6.5% of annual output, in the initial stage. The main reason was the growth of alumina prices, which overtook aluminum prices, hitting the company's margin. Rusal said it is forced to buy more than a third of the alumina it needs on world markets at commodity exchange prices.
The profitability of alumina supplies is at risk, among other things, from problems with the through capacity of railway infrastructure. Low priority in the hierarchy of transportation of metallurgical cargo is causing major problems in commodity supply chains and shipments of finished products to build up, representatives of Rusal, the Russian Steel Association, and ChEMK JSC said during a meeting at the Industry and Trade Ministry in December 2024.
Alumina imports are in last, 12th place in Russian Railways' prioritization of freight shipments, while aluminum exports are in tenth place, chair of the Aluminum Association, Irina Kazovskaya, has said.