Vimetco releases interim results

Amsterdam/Zurich, 23 October 2008: Vimetco NV (LSE: VICO), the global producer of primary and processed aluminium products, today announces interim financial results for the six months ended 30 June 2008.

Financial Highlights:

Key Points:

·         Increased revenue benefitting from full period contribution from Chinese operations (9 days in H1 2007)

·         Capacity increase of 20% to 683,000 tpa due to full contribution from Linfeng

·         Expansion programme in China and investment of USD 550 million (for the full year 2008)

·         Continuing to deliver vertical integration strategy both up and down-stream (cold rolling mill upgrade in Romania,)

Post Period:

·         Further step in implementing full vertical integration by acquiring bauxite mine in Sierra Leone

·         Moving towards self-sufficiency in China with joint venture for coal mine assets

Christian Wüst, Chief Executive Officer, commented:

"We have made good progress in the first half of the year delivering a significant expansion programme in China. Since then we have made two important further steps towards full vertical integration, acquiring a bauxite mine in Sierra Leone and a coal mine in China.

"In recent weeks there has been a sharp deterioration in the aluminium price which has co-incided with continued pressure from high raw materials and energy prices. While we are confident that the aluminium price will recover in the course of 2009, we are currently taking action to mitigate the impact of these factors, including cutting production and delaying capital expenditures on new projects.

"We are convinced that when the aluminium price starts to recover, Vimetco will be well-positioned as a highly efficient aluminium producer in its markets."

- Ends -

There will be a conference call for analysts today at 9.30am UK time. Please contact Simon Hockridge at Hogarth PR on +44 (0) 20 7357 9477 for details.

For further information please contact:

Vimetco

Simona Gambini                                                            Tel: +41 (0) 43 299 69 24

Head of Corporate Communications &

Investor Relations

Notes to editors:

About Vimetco

Vimetco N.V. is a global, vertically integrated producer of primary and processed aluminium products with major production assets in Romania, Sierra Leone and China, a holding company in The Netherlands and a management unit located in Switzerland. Vimetco NV controls an aluminium production capacity of 680,000 tonnes pa and employs some 11,000 staff. Vimetco's shares are listed on the London Stock Exchange. www.vimetco.com

Chief Executive Officer's Review

Overview

During the first half of the year, Vimetco continued to pursue its ambitious strategy of global expansion supported by significant increases in aluminium production and revenue generation. 

Aluminium pricing developed favourably in the first half 2008. However, the rising costs of raw materials such as coal, electricity and alumina combined with higher inventories of primary aluminium, driven by a slowdown in demand, have impacted operating results.

We continued to pursue our planned expansion of production capacity and increased strategic focus on vertical integration and security of raw material supply. In the year to date we have clearly demonstrated our ability to execute on this strategy in both up and downstream activities, with the acquisition of a bauxite mine in West Africa and a coal mine in China and the further expansion and modernization of our facilities in both China and Romania.

Financial Review*

Revenues for the period were USD 948.6 million (H1 2007: USD 482.2 million), up 97% compared to the previous period. The increase was due primarily to the contribution of the Chinese operations which accounts for 56% of total revenues, which were fully consolidated in the first half 2008.

The cost of revenues grew by 121% to USD 738.1 million (H1 2007: USD 333.8 million) mainly due to rising raw material and energy costs. First cost cutting measures across the group have been implemented. Between January and June 2008 the head count at our Romanian operation has been reduced by 641 employees.

Operating profit increased by 46% to USD 168.1 million (H1 2007: USD 115.5 million) and net profit was up 43% to USD 127.0 million (H1 2007: USD 88.9 million).

Net cash from operating activities grew to USD 243.4 million (H1 2007: USD 74.9). Net cash used in investing activities increased to USD 433.7 million (H1 2007: USD 7.2 million) primarily as a result of cash used for the purchase of property, plant and equipment in China. Net cash from financing activities was USD 183.2 million (H1 2007: USD 51.1 million) primarily as a result of net cash inflows from loan facilities. Cash and cash equivalents as at 30 June 2008 were USD 137.0 million (31 December 2007: 137.1 million).

On 30 June 2008 net debts stood at USD 935 millions, up from USD 673 millions at the end of 2007. We successfully secured a long term loan of USD 270 million in February in China.

In June 2008, Vimetco entered into a shareholder loan for up to USD 250 million with its controlling shareholder, Vi Holding N.V. (formally Romal Holdings), as lender. The shareholder loan is to support the financing of potential projects enhancing the Group's vertical integration strategy as well as its expansion programme in China. The loan is repayable by Vimetco on May 31, 2013 or before that date voluntarily from time to time. As at 30 June 2008, no funds had been drawn down from this loan.

*H1 2007 full consolidation of Chinese operations for 9 days.

Operational update

Romania

Primary aluminium production in Romania was 144,000 tonnes (H1 2007: 139,000 tonnes) while processed aluminium production was 18,000 tonnes (H1 2007: 13,000 tonnes). Sales of primary aluminium amounted to 106,000 tonnes (H1 2007: 118,000 tonnes) while sales of processed aluminium were 19,000 tonnes (H1 2007: 14,000 tonnes).

Revenues amounted to USD 418.3 million (H1 2007: USD 445.4 million). The decrease in revenue was primarily due to lower sales volumes and the cold rolling mill upgrade.

Earlier this year, the Group successfully completed the modernization of the cold rolling mill following a USD 4.8 million investment to double the mill's processing capacity to 36,000 tpa and improve the quality of flat rolled products such as sheets and coils. As a consequence, the cold rolling mill was closed for two months during the period which in turn affected sheet and coil production and sales. With commissioning now complete, the mill is operating once again and we are beginning to see the benefits of the upgrade. The performance of the facility now ranks amongst the highest of modern mills in operation.

Early in the period we announced the formation of a joint venture with Interagro, TM Power SA, for the construction of a power plant to support the local operation of Alro's aluminium smelter in Slatina. Feasibility studies are currently ongoing with the most appropriate and economical option likely to be two 660 MW turbines.

China*

Primary aluminium production in China was 212,000 tonnes (H1 2007: 155,000 tonnes) while processed aluminium production reached 32,000 tonnes (H1 2007: 6,500 tonnes).  Sales of primary aluminium amounted to 179,000 tonnes (H1 2007: 158,000 tonnes) while sales of processed aluminium was 30,000 tonnes (H1 2007:6,000 tonnes).

Revenues reached USD 529.4 million (H1 2007: USD 37.0 million, as the Chinese operations were only consolidated from 21 June 2007), including revenues by Linfeng and first revenues of the newly added casted band capacity of 60,000 tpa at Yinhu.

In April, Vimetco announced an expansion programme in China to increase smelting capacity by 480,000 tpa using the latest technology available (400kA pots) and to construct a new cast house capable of producing an additional 300,000 tpa of primary aluminium such as billets, slabs and wire rods. These investments are being funded in part by the shareholder loan, and the first phase of the programme is on track to complete by the end of 2008.

Plans to increase power generating capacity are also on track with an additional 300 MW expected to come on stream in Q1 2009. This additional capacity will bring total operating capacity in China up to 1,300 MW.

*H1 2007 full consolidation of Chinese operations for 9 days.

Post Period Update

Bauxite mining

As part of our efforts to achieve vertical integration across the supply chain, in July 2008, Vimetco acquired rights to an operating bauxite mine under a mining lease with the Government of Sierra Leone.

The acquisition enables Vimetco to bring bauxite supply in-house and control costs against a backdrop of rising commodity prices. In addition, it provides a platform from which to capitalise on further resource and alumina refinery development opportunities in West Africa, which are currently under consideration. Production of 1.2 million tonnes is currently sold via off-take agreements which run until Q3 2009.

Processed products

In a demonstration of our commitment to the production of value-added products, Alro recently attained the National Aerospace and Defense Contractor Accreditation Program (NADCAP) certificate entitling the Company to supply to the aerospace industry. The accreditation was granted in recognition of the Company's conformity with international requirements with regard to its heat treatment and laboratory testing processes and was achieved thanks to the considerable efforts of the Alro team.

Energy supply

In another key step towards achieving Vimetco's goal to become a self-sufficient producer, in October 2008 we announced the acquisition of the Yaoling Coalmine in Henan Province, China, via a joint venture with the current mine operator and the Gongyi city government. Vimetco's acquisition of the coal mine ensures a guaranteed supply of raw material and strengthens the integrated power generation for our smelting plants.

Outlook

In spite of achieving record production, revenue and profit in the first half of 2008, in recent months, we have seen a marked deterioration in aluminium pricing combined with continued pressure from high raw materials and energy prices. While we are confident that the aluminium price will recover in the course of 2009, we are currently taking action to mitigate the impact of these factors, including cutting production and delaying capital expenditures on new projects. To this end, we closed down in October 80,000 tpa of older pots in China, originally planned for 2009. We additionally envisage delaying the commissioning of new capacities in Gongyi and Linzhou until mid or end of 2009.

Whilst we evaluate these options, we are also benefiting from the earlier-than-anticipated commissioning of a new, state-of-the-art smelter in China, which runs at greater efficiency and thus at lower cost than most existing facilities in China. Therefore, we remain confident in our expectations of achieving total production of around 675,000 tonnes for the full year.

We believe that the current environment will result in a shake-out of marginal producers with older technologies, particularly in China. And with Vimetco bearing the fruits of our investments in state-of-the-art technologies and operating at the lower end of the cost curve in China, we believe we are well placed to benefit when demand picks up and prices recover in what remains a large industry with compelling growth opportunities.

In common with many businesses in the metals industry we are experiencing the effects of the global economic and financial turmoil. We are pleased to report that in spite of this, we have not experienced any impact on our own credit and debt facilities. We are currently sufficiently financed and are continuing to grow the top line, with the flexibility of approach to adapt to changing industry dynamics.