The directors of Russian-owned Aughinish Alumina and auditors EY have warned of “material uncertainty” over the viability of the Co Limerick business because of Vladimir Putin’s war on Ukraine.
The company employs more than 400 staff in the Shannon Estuary, refining imported bauxite into alumina which is shipped to France and Sweden and smelted to make aluminium.
But it has racked up huge losses as Mr Putin’s invasion of Ukraine destabilised global energy markets and prompted tough western sanctions against Russian business interests.
Referring to the fallout from war, newly filed accounts say: “The directors are satisfied that the financial statements are prepared on a going concern basis, however, the events described above represent a material uncertainty which may cast significant doubt over the company’s ability to continue as a going concern.”
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In its audit report, EY drew attention to that statement by Aughinish directors and said “war in Ukraine and possible future escalation of sanctions may impact the ability of the parent company to continue to finance the ongoing activities of the company”.
Kremlin-linked Russian oligarch Oleg Deripaska is a key shareholder in the Limerick plant. Despite moves eight months ago to separate Aughinish from its parent, directors said in newly filed accounts that there was “no conclusive outcome” to date.
The accounts show Aughinish incurred a net loss of $377.58 million (€363.18 million) in the year before the invasion because of the rising price of gas, a key raw material, and $302.78 million in exceptional charges. Such charges included a $279.9 million impairment loss on the value of building, plant, equipment and construction work in progress.
Gas surged after the February invasion, further undermining Aughinish in its current financial year as the international backlash against Russia called the company’s future into question.
As a big supplier to European industry, Aughinish’s avoidance of European Union and United States penalties has been attributed to its strategic role in the manufacturing supply chain for cars, planes, construction and consumer goods.
The Government is keen for the plant to continue operating, not least because its $58 million in payroll are critical for the regional economy.
But with no end in sight to the war, recent US warnings that the Biden administration was considering new restrictions on imports of Russian aluminium underlines the vulnerability of the business.
Aughinish’s avoidance of EU penalties comes despite Mr Deripaska being hit with European, US and UK sanctions. He is the founder of United Company Rusal, which has provided a “letter of support” to continue funding Aughinish until the end of 2023.
The pressures bearing down on the Irish business are clear from the accounts, which were signed off on Friday and filed with the Companies Registration Office after the close of business. Aughinish had availed of special legal measures to delay such filings for months.
The directors of Limerick Alumina Refining, owner of the Aughinish plant, declared their “reasonable expectation” of trading for another 12 months.
Although no sanctions blocked financial support from Rusal, the directors said that “cannot be guaranteed into the future” and added that Rusal was “significantly impacted” by the war.
Rusal had disclosed that “the situation in Ukraine” led Australia to ban alumina and bauxite exports to Russia and the suspension of production of a refinery in Ukraine, the directors said.
“If such a situation persists or continues to develop significantly, it may affect the group’s business, financial condition, prospects and result of operations.”
