Questions? +1 (202) 335-3939 Login
Trusted News Since 1995
A service for investment professionals · Friday, March 29, 2024 · 699,696,423 Articles · 3+ Million Readers

Norsk Hydro: Third quarter 2018: Results up on realized prices, higher costs

Hydro's underlying earnings before financial items and tax increased to NOK 2,676 million in the third quarter, up from NOK 2,446 million for the same quarter last year, reflecting higher all-in aluminium and alumina prices, positive currency effects and strong contribution from the Energy business area. Continued production curtailment at the Alunorte alumina refinery and increased raw material costs had a negative impact.

  • Underlying EBIT of NOK 2 676 million
  • Alunorte, Paragominas and Albras producing at 50%, affecting results negatively
    • Technical and social agreements signed with Brazilian authorities
  • Higher realized all-in aluminium and alumina prices
  • Increased raw material and fixed costs
  • Higher power prices lift result in Energy
  • Stable downstream results
  • Better improvement program hit by Alunorte situation, will not reach 2018 target
  • 2018 global primary market expected in deficit
  • Continued market uncertainty on US tariffs, Rusal sanctions and Alunorte situation

"The third quarter reflected our continued challenges at Alunorte and increased raw material costs, while higher aluminium and alumina prices, as well as strong Energy results, contributed positively. The market for aluminium is tightening, and we expect the 2018 global primary market in deficit," says President and CEO Svein Richard Brandtzæg.

Underlying EBIT for Bauxite & Alumina increased compared to the third quarter of last year. Higher realized alumina sales prices and positive currency effects were partly offset by higher raw material prices and the effects of reduced production at both Alunorte and Paragominas.
An expense of NOK 519 million relating to the technical and social agreements was recognized as items excluded from underlying EBIT in Bauxite & Alumina in the third quarter.

"Signing the technical and social agreements in Brazil in September was a step in the right direction towards normalized production. We continue the dialogue with the authorities with the aim to resume full production at Alunorte, but the timing remains uncertain," says Brandtzæg.

Underlying EBIT for Primary Metal declined compared to the third quarter last year due to higher raw material and fixed costs, partly offset by higher all-in metal prices. In addition, there was a positive contribution from the sale of excess power following the production curtailment of the Albras smelter in Brazil.

Underlying EBIT for Metal Markets decreased compared to the third quarter of last year. Negative currency effects and a lower contribution from sourcing and trading activities were somewhat offset by improved results from the remelters.

Underlying EBIT for Rolled Products decreased slightly compared to the third quarter of 2017. Increasing margins and improved performance from automotive line 3 were offset by cost increases. Results for the Neuss smelter decreased, the positive effects of the new power contract, the UBC line and all-in metal price development were more than offset by increasing raw material prices.

Underlying EBIT for Extruded Solutions remained stable compared to the pro forma underlying EBIT for the third quarter 2017. The positive effect of higher margins and sales volumes were offset by increased production costs in connection with the ramp-up of new product lines in Europe, in addition to negative effects from a lower Midwest Premium and section 232 tariffs in North America. Additional costs due to the integration and restructuring of the two recently acquired Brazilian extrusion plants also had a negative effect on the quarter.

Underlying EBIT for Energy increased significantly compared to the same quarter in the previous year. The increase was mainly due to significantly higher prices and higher production, partly offset by negative effects from the repricing of an internal power contract with the Neuss smelter.  

Due to the situation in Alunorte, Hydro's "Better" improvement program will not reach the 2018 target of NOK 500 million.

Hydro's net debt position decreased from NOK 7.5 billion to NOK 6.5 billion at the end of the quarter. Net cash provided by operating activities amounted to NOK 2.6 billion. Net cash used in investment activities, excluding short term investments, amounted to NOK 1.5 billion.

In addition to the factors discussed above, reported earnings before financial items and tax (EBIT) and net income include effects that are disclosed in the below table. Items excluded from underlying EBIT and underlying net income (loss) are defined and described as part of the APM section in the quarterly report.

Key financial information

NOK million, except per share data
Third quarter 2018 Third quarter 2017 Change prior year quarter Second quarter 2018 Change prior quarter First 9 months 2018 First 9 months 2017 Year 2017
                 
Revenue 39 766   22 799   74 % 41 254   (4) % 120 991   70 416   109 220  
Earnings before financial items and tax (EBIT) 2 057   2 323   (11) % 2 986   (31) % 8 344   7 678   12 189  
Items excluded from underlying EBIT 620   123   >100 % (274 ) >100 % 192   (18 ) (974 )
Underlying EBIT 2 676   2 446   9 % 2 713   (1) % 8 535   7 660   11 215  
                 
Underlying EBIT :                
Bauxite & Alumina 685   413   66 % 364   88 % 1 789   1 831   3 704  
Primary Metal 861   1 298   (34) % 755   14 % 2 439   3 684   5 061  
Metal Markets (3 ) 91   >(100)% 237   >(100)% 412   359   544  
Rolled Products 82   95   (13) % 212   (61) % 526   285   380  
Extruded Solutions 497       957   (48) % 2 188     284  
Energy 652   368   77 % 417   56 % 1 347   1 075   1 531  
Other and eliminations (97 ) 181   >(100)% (229 ) 58 % (165 ) 426   (289 )
Underlying EBIT 2 676   2 446   9 % 2 713   (1) % 8 535   7 660   11 215  
                 
Earnings before financial items, tax, depreciation and amortization (EBITDA) 3 890   3 766   3 % 4 860   (20) % 13 942   11 863   18 344  
Underlying EBITDA 4 510   3 889   16 % 4 586   (2) % 14 134   11 845   17 369  
                 
Net income (loss) 925   2 184   (58) % 2 073   (55) % 5 074   5 585   9 184  
Underlying net income (loss) 1 696   1 785   (5) % 2 096   (19) % 5 994   5 580   8 396  
                 
Earnings per share 0.37   1.00   (63) % 1.03   (64) % 2.42   2.59   4.30  
Underlying earnings per share 0.74   0.82   (10) %   1.02   (27) %   2.81     2.61     3.95  
                 
Financial data:                
Investments 2 051   1 424   44 % 1 620   27 % 4 990   4 216   28 848  
Net cash(debt) (6 471 ) 7 697   >(100)% (7 528 ) 14 % (6 471 ) 7 697   (4 118 )
Adjusted net cash (debt) (18380 ) (2 976 ) >(100)% (20 209 ) 9 % (18 380 ) (2 976 ) (17 968 )
Key Operational information Third quarter 2018 Third quarter 2017 Change prior year quarter Second quarter 2018 Change prior quarter First 9 months 2018 First 9 months 2017 Year 2017
Bauxite production (kmt) 1 286   3 043   (58) % 1 348   (5) % 4 960   8 386   11 435  
Alumina production (kmt) 821   1 605   (49) % 829   (1) % 2 926   4 704   6 397  
Realized alumina price (USD/mt) 460   297   55 % 430   7 % 417   300   326  
Primary aluminium production (kmt) 497   527   (6) % 492   1 % 1 503   1 566   2 094  
Realized aluminium price LME (USD/mt)   2 194     1921   14 %   2183   -     2171     1859     1915  
Realized USD/NOK exchange rate   8.16     8.07   1 %   7.92   3 %   7.99     8.35     8.30  
Rolled Products sales volumes to external market (kmt) 235   236   -   251   (6) % 731   716   940  
Extruded Solutions sales volumes to external market (kmt) 343   170   >100 % 373   (8) % 1 078   527   845  
Power production (GWh) 2 888   2 509   15 % 2 550   13 % 7 871   7 746   10 835  
                 
Items excluded from underlying EBIT and net income

NOK million
Third quarter 2018 Third quarter 2017 Second quarter 2018 First 9 months 2018 First 9 months 2017 Year 2017    
                 
Unrealized derivative effects on LME related contracts 436   (30 ) (306 ) 17   80   220      
Unrealized derivative effects on power and raw material contracts (183 ) 7   92   (178 ) 155   246      
Metal effect, Rolled Products (153 ) 151   (60 ) (166 ) (273 ) (419 )    
Significant rationalization charges and closure costs -   -   -   -   -   210      
Alunorte agreements - provision 519    -    -     519    -    -      
Other effects -    -    -    -    -     212      
Transaction related effects (Sapa) -    -    -    -    -     (1463 )    
Items excluded in equity accounted investments (Sapa) -   (6 ) -   -   19   19      
Items excluded from underlying EBIT 620   123   (274 ) 192   (18 ) (974 )    
Net foreign exchange (gain)/loss 257   (520 ) 306   895   180   875      
Calculated income tax effect (105 ) 123   (8 ) (167 ) (41 ) (564 )    
Other adjustments to net income -   (125 ) -   -   (125 ) (125 )    
Items excluded from underlying net income 772   (398 ) 24   920   (5 ) (788 )    
                 
Income (loss) tax rate 43 % 22 % 19 % 28 % 24 % 17 %    
Underlying income (loss) tax rate 32 % 26 % 19 % 26 % 26 % 24 %    

Investor contact
Stian Hasle
+47 97736022
Stian.Hasle@hydro.com

Press contact
Halvor Molland
+47 92979797
Halvor.Molland@hydro.com

Cautionary note
Certain statements included in this announcement contain forward-looking information, including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objectives and strategies, such as planned expansions, investments, divestments, curtailments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro's markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, and (i) qualified statements such as "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to: our continued ability to reposition and restructure our upstream and downstream businesses; changes in availability and cost of energy and raw materials; global supply and demand for aluminium and aluminium products; world economic growth, including rates of inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro's key markets and competition; and legislative, regulatory and political factors.

No assurance can be given that such expectations will prove to have been correct.  Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Attachments

Hydro_Logo_Vertical_Blue_CMYK.png

Powered by EIN News


EIN Presswire does not exercise editorial control over third-party content provided, uploaded, published, or distributed by users of EIN Presswire. We are a distributor, not a publisher, of 3rd party content. Such content may contain the views, opinions, statements, offers, and other material of the respective users, suppliers, participants, or authors.

Submit your press release