MOSCOW, 29 January, 2003- Russian Aluminium (RUSAL), the world's second largest aluminium producer, today announced healthy volume increases across its major product lines for the full 2002 production year despite a marked softening in global demand. Year on year, the company’s smelters, refineries and downstream plants all recorded increased output.

The company also announced important advances on cost containment and management streamlining which, together, helped it enhance competitiveness and raise operating margins.

“We are pleased that, in the face of extremely challenging market conditions, we were able to substantially increase production and maintain revenues at approximately what they were in 2001,” said Alexander Boulygine, RUSAL Chief Operating Officer. Group revenues are estimated at US$3.96 billion, compared with $4.1 billion in 2001.

Other highlights for the year included:

Important progress on RUSAL’s efforts to tie down new sources of raw material as well as to expand its international presence, including negotiation of a 25-year lease management agreement for the Friguia alumina refinery in Guinea, and participation in international privatization tenders in India and Nigeria.

Establishment of a new Engineering and Technology Center in Krasnoyarsk, strengthening the company’s R&D base.

Major reorganization and rationalization of the management structure, including the recruitment of a number of international managers for key production and marketing positions across the company.

Major advances in the Group’s programme to spin off non-core business functions and the development of service centers for centralizing and outsourcing support and service activities.

A 8% reduction in staffing levels at the company’s smelters and refineries, greatly enhancing productivity.

Growth in higher-value product sales based on significant new investments in rolling slab and silicon alloy production, together with joint development, with Norway’s Hydro Aluminium, of new capacity in Sayanogorsk for the production and sourcing of high-quality extrusion ingots.

“We have shown an ability to adapt to market conditions and to apply strategic priorities,” Mr. Boulygine said. “With further cost reductions, modernization and capacity expansions planned for this year, we expect to be well positioned to capture market share once a new global growth cycle begins.”

Mr. Boulygine also pointed to steady progress in lowering the cost of external funds. “As a result of our sound financial planning and reporting systems, we have made considerable progress expanding our credit sources and securing better terms.” In particular, he cited $300 million in pre-export loans with terms of up to three years, and a three-year domestic bond issue worth $100 million, as major milestones in the company’s credit history. Mr. Boulygine said the Group’s total debt portfolio by the end of the year, $1.5 billion, a 40% increase over indebtedness a year earlier, carried significantly improved rates and terms.

Access to improved bank credit has helped RUSAL adjust commercial contract arrangements, allowing it to reduce its reliance on customer credit and bring contract terms into line with standard industry practice.

At the same time, the company has made a number of moves to stabilize its regional marketing strategies, gaining better positioning for direct sales to end-users. Lead market for this effort has been the United States, where RUSAL’s US office has led the way in generating new relationships.

Improved cost controls and collaborations with third parties permitted the Group to achieve its 2002 modernization and expansion goals in spite of reducing capital expenditure (excluding acquisitions and new projects) to $150 million, against $170 million in 2001.

In 2002 RUSAL spent $6.3 million directly on environmental programmes, resulting in an immediate 1.26% reduction in harmful emissions. Among the most important environmental initiatives are continuing modernization of gas cleaning systems at all smelters and alumina refineries, modernization of anode plants at Krasnoyarsk and Bratsk smelters etc. RUSAL will continue its environmental programmes this year and expects a further reduction in emissions by end of the year of 1.7%. Every percentage point reduction in emissions represents approximately 2,350 metric tons of material not dispersed.

Outlook for 2003

In the current year, RUSAL will continue to develop its production base, improving its smelting and refining facilities. Key modernization programmes will be carried out at KrAZ and SAZ, and across the Group new technology will be introduced with installation of 300 kA cells.

Consolidation of RUSAL assets will be completed with a view to transforming all group assets  into a holding company. In line with this, management structure rationalization will proceed, leading to further progress towards an ideal flat function-based hierarchy.

There will be continued expansion of the company’s capacities in smelting and refining and in downstream operations. Major projects to be launched this year include 260 000 MT expansion at SAZ and completion of the ROSTAR-2 beverage can plant.

There will be further cost-cutting across the company, with a further 10% personnel reduction planned.

Table 1 – Production results(metric tons, unless otherwise noted)

Table 2 – Bauxite & Alumina (metric tons)

Table 3 – PrimaryAluminium (metric tons)

Table 4 - Downstream Production Units (metric tons unless otherwise noted)

END

About RUSAL
RUSAL is the second largest primary aluminium producer in the world, formed in March 2000 from the merger of a number of the largest smelters and other aluminium producers located in the CIS. The Company accounts for 75% of Russia's primary aluminium output and 10% of the global primary aluminium output. RUSAL is a fully vertically integrated company with a complete production cycle from bauxite mining and the production of raw materials, to the production of primary metal, semi-products and aluminium-based end products. RUSAL is headquartered in Moscow.

For further information:

www.RUSAL.com
Eugenia Harrison, Moscow, +7 095 720 5170, or zharrison@rusal.ru;
Fred Harrison, London, +44 (0) 20 7431 7517, or fharrison@ansdellconsult.com;
Stan Neve, New York, +1 212 333 3810, or sneve@brunswickgroup.com