Norsk Hydro third quarter 2012: Results hit by lower prices

Tue Oct 23, 2012 1:01am EDT

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Hydro's underlying earnings before financial items and tax fell to NOK 8 million in the third quarter from NOK 549 million in the previous quarter. Low realized alumina and aluminium prices weighed heavily on underlying results for Hydro's upstream operations for the quarter while cost improvement programs proceeded with full force to meet the challenging market situation.

  • Underlying EBIT NOK 8 million 

  • Sharp decline in alumina and aluminium prices 

  • Record-high bauxite production 

  • Reduced downstream sales volume, partly offset by lower operating cost 

  • Lower power prices and production in Energy 

"Realized alumina and aluminium prices for the quarter clearly reflect market and macro-economic uncertainty, hitting our weak quarterly results. Hydro's response is to focus our attention on operational performance, portfolio management and capital discipline," Hydro's President and CEO Svein Richard Brandtzæg said.

"The planned transaction with Orkla to form the world's leading aluminium solution provider is strengthening Hydro as a world-leading, resource-rich aluminium company as well as our extusion business. Most of our extrusion markets continue to be demanding and the new company will be better positioned to meet these challenges and to capture the longer-term growth perspectives for aluminium products,"said Brandtzæg.

Underlying EBIT for Bauxite & Alumina declined further from a weak result in the previous quarter mainly due to lower realized alumina prices and lower sales volumes.

Underlying EBIT for Primary Metal fell compared to the second quarter also impacted by lower realized prices. Lower operating costs partly offset the negative market effects. Underlying results for Qatalum declined compared to the second quarter which included the final insurance settlement relating to the power outage in 2010.

Excluding inventory and currency effects, underlying results for Hydro's midstream operations were stable during the quarter.

Lower operating costs for Hydro's downstream businesses had a positive impact on underlying EBIT for the quarter. However, underlying results for Extruded Products declined, affected by seasonally lower volumes and a further weakening in market demand. Results for the quarter continued to be impacted by difficult economic conditions in Europe.

Energy delivered lower underlying EBIT in the third quarter compared to the previous quarter due to lower production and lower prices.

Operating cash flow was NOK 1.1 billion for the quarter. Net cash used for investment activities amounted to NOK 1 billion. Hydro's net debt position was around zero at the end of the third quarter.

Hydro incurred a reported loss before financial items and tax of NOK 414 million in the third quarter including net unrealized derivative losses and negative metal effects of NOK 108 million and other items amounting to NOK 314 million. Other items included a loss on the disposal of Portalex of NOK 144 million and impairments of other assets of NOK 163 million. Other also included rationalization charges and closure costs of NOK 75 million relating to Extruded Products and Kurri Kurri and a gain of NOK 68 million relating to pensions.

In the previous quarter, Hydro incurred a reported loss before financial items and tax of NOK 720 million including net unrealized derivative gains of NOK 300 million, rationalization and closure costs of NOK 408 million, impairment charges amounting to NOK 1,175 million and positive metal effects of NOK 9 million.

Hydro incurred a net loss of NOK 231 million in the third quarter including net foreign exchange gains of NOK 283 million. In the previous quarter, Hydro incurred a net loss of NOK 1,712 million including net foreign exchange losses of NOK 883 million.

Key financial information

NOK million, except per share data
Third
quarter
2012
Second
quarter
2012
% change prior quarter Third
quarter
2011
% change prior year quarter First 9
months
2012
First 9
months
2011
Year
2011
Revenue 19 004 21 604 (12) % 23 829 (20) % 62 355 69 695 91 444
Earnings before financial items and tax (EBIT) (414) (720) 42 % 2 222 >(100) % (469) 10 189 9 827
Items excluded from underlying EBIT 422 1 269 (67) % (576) >100 % 1 583 (5 189) (3 694)
Underlying EBIT 8 549 (98) % 1 646 (99) % 1 115 5 000 6 133
Underlying EBIT :
Bauxite & Alumina (386) (188) >(100) % 302 >(100) % (718) 729 887
Primary Metal (10) 240 >(100) % 653 >(100) % 261 2 002 2 486
Metal Markets 7 44 (83) % 93 (92) % 139 480 441
Rolled Products 214 204 5 % 124 72 % 569 588 673
Extruded Products 27 53 (49) % 40 (33) % 95 241 151
Energy 220 362 (39) % 506 (57) % 1 137 1 442 1 883
Other and eliminations (64) (166) 61 % (73) 12 % (368) (482) (389)
Underlying EBIT 8 549 (98) % 1 646 (99) % 1 115 5 000 6 133
Underlying EBITDA 1 265 1 777 (29) % 2 985 (58) % 4 913 8 628 11 152
Net income (loss) (231) (1 712) 86 % 797 >(100) % (1 359) 7 498 6 749
Underlying net income (loss) (20) 268 >(100) % 1 071 >(100) % 505 3 071 3 947
Earnings per share (0.14) (0.78) 83 % 0.49 >(100) % (0.68) 3.84 3.41
Underlying earnings per share 0.00 0.12 (97) % 0.50 (99) % 0.25 1.47 1.89
Financial data:
Investments 965 777 24 % 1 125 (14) % 2 639 43 836 48 025
Key Operational information
Alumina production (kmt) 1 441 1 491 (3) % 1 553 (7) % 4 396 3 773 5 264
Primary aluminium production (kmt) 484 502 (3) % 522 (7) % 1 500 1 443 1 982
Realized aluminium price LME (USD/mt)    2022          2 167 (7) %         2 592 (22) %     2119         2 494         2 480
Realized aluminium price LME (NOK/mt)   11856       12 637 (6) %       14 225 (17) %   12321       13 906       13 884
Realized NOK/USD exchange rate 5.86 5.83 1 % 5.49 7 % 5.81 5.58 5.60
Metal products sales, total Hydro (kmt)       794            857 (7) %            850 (7) %    2522         2 499         3 303
Rolled Products sales volumes to external market (kmt) 228 228              - 228              - 683 714 929
Extruded Products sales volumes to external market (kmt) 125 137 (9) % 137 (9) % 395 415 536
Power production (GWh) 2 157 2 513 (14) % 2 737 (21) % 7 860 6 875 9 582

Investor contact
Contact     Rikard Lindqvist
Cellular    +47 41751199
E-mail      Rikard.Lindqvist@hydro.com

Press contact
Contact     Halvor Molland
Cellular    +47 92979797
E-mail      Halvor.Molland@hydro.com

                            *********
Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management's plans, objectives and strategies for Hydro, such as planned expansions, investments 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, as well as (i) statements preceded by "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar statements.

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 aluminium business; 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.Error: Reference source not found

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.




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