UC RUSAL's profits sank after Norilsk Nickel bought back its own shares, once owned by the Russian aluminum giant, hurting profits in a year that otherwise saw revenue increase, according to CEO Oleg Deripaska. REUTERS

UC Rusal, the world's biggest aluminum producer, posted a substantial loss in annual profits after the value of its stake in Norilsk Nickel, a major producer of nickel and palladium, was diminished by a share buyback, the company reported Monday.

The Moscow-based metal company, which accounted for 9 percent of global aluminum and alumina production last year, reported a 91.7 percent drop in profits for the year ended Dec. 31, 2011, to $237 million from $2.87 billion the year earlier.

The loss of share value in Norilsk Nickel, which bought back shares from Rusal, resulted in a $1.43 billion loss, which counteracted a 12 percent increase in revenue to $12.28 billion in 2011 compared with $10.98 billion in 2010. The increased annual earnings were driven by growing sales of primary aluminum and alloys, as well as a 15 percent increase in the price of aluminum.

Operating income fell to $1.75 billion from $2.03 billion in 2011, as an increase in raw materials, energy and tariffs overshadowed an increase in aluminum's price.

In spite of the deterioration of the global economy during the second half of 2011, ongoing cost pressures across the whole commodities sector and a particularly challenging fourth quarter in 2011, Rusal delivered a solid financial performance during the year, said CEO Oleg Deripaska. The ability of the company to maintain its Ebitda margin above 20% throughout the year was a testament to its focus on and commitment to operational efficiency and cost control.

The company's shares were up 3 cents to 76 cents in late afternoon trading in Hong Kong.