UPDATE 3-Norsk Hydro hopes for unchanged 2012 dividend

Thu Nov 29, 2012 8:00am EST

Related Topics

* Sees 4-6 pct annual growth in demand until 2022

* Wants to keep absolute dividend level for 2012

* Says $300 per tonne improvement programme on target

* CEO: U.S. and emerging markets improving, Europe weak

* Shares up 2.8 percent (Adds CEO, updates share)

By Victoria Klesty and Henrik Stolen

OSLO, Nov 29 (Reuters) - Norwegian aluminium group Norsk Hydro hopes to pay an unchanged dividend on 2012 earnings as the global market continues to recover from a slump.

The market outside China could grow 2-4 percent next year after this year's 2 percent rise as demand recovers, producers reduce capacity, and bloated stock levels are reduced, Hydro also said on Thursday in a presentation to investors.

Big producers cut output after aluminium dipped below $2,000 per tonne at the start of the summer, helping it recover above $2,200 before some idled production was restarted, leading prices back down toward $2,000.

"Our ambition is to maintain the absolute dividend level for 2012," Hydro said, confirming market expectations for a dividend of 0.75 crown, in line with the payout on 2011 earnings.

Hydro shares were up 2.8 percent at 1225 GMT.

"Although aluminium has seen the fastest-growing demand among base metals, we also saw strong growth in new capacity, resulting in low prices and inadequate returns," Hydro said.

Aluminium, used in applications from construction to automotive and packaging, is still gaining in popularity over metals such as copper and steel because of its light weight and resistance to corrosion.

That meant the long-term outlook for the metal was positive and it expected global growth of 4-6 percent annually over the next 10 years, chief executive Svein Richard Brandtzaeg said.

China, the largest consumer and producer of aluminium accounting for about 40 percent of the global market, was expected to continue to grow faster than the rest of the world and account for almost half of aluminium consumption in 2022.

Brandtzaeg said U.S. and emerging markets had improved while Europe - now about 15 percent of the global market - was still weak. "We expect Europe to remain weak in the months to come and maybe the whole of 2013," he told Reuters in an interview.

"(Overall,) there is a better balance between supply and demand now than we saw a year ago, and we see that the market prospects going forward are positive."

Hydro has already said it had sold about 85 percent of fourth-quarter volumes at a lower price than in the loss-making third quarter.

A $300 per tonne improvement programme in Primary Metal, launched in 2009, was developing in line with its 2013 completion target, it said.

Its flagship Qatalum joint venture in Qatar is producing above its annual nameplate capacity of 585,000 tonnes, it said.

The company is also changing its pricing formula for metal sales, to be based on one-month forward LME pricing rather than the current three-month formula, it said.

EARNINGS SCENARIOS

Hydro presented three scenarios for earnings potential based on different levels of aluminium prices and exchange rates, in all of which its EBITDA would remain significantly above capital expenditure required for existing facilities.

It expected expenditure of around 3 billion Norwegian crowns ($527 million) in 2013.

In its most optimistic scenario - an aluminium price of $2,500 - it sees annual EBITDA of around 10-12 billion crowns.

In the most pessimistic scenario - with aluminium at $2,000 - EBITDA was seen in a 5-7 billion crown range. ($1 = 5.6912 Norwegian crowns) (Editing by Dan Lalor)

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