* Q2 Underlying EBIT NOK 1.1 bln vs 900 mln avg fcast
* Repeats 12 pct market growth view for 2010
* Primary aluminium market balanced in Q2, surplus in 2010
* Qatalum plant ramping up, to take Q3 hit from lower prices
* Shares flat, Oslo bourse up 0.5 percent
(Adds quotes from CEO, CFO, updates shares)
By Wojciech Moskwa and Gwladys Fouche
OSLO, July 27 Norwegian aluminium producer Norsk
Hydro (NHY.OL) said the aluminium market may have hit its 2010
peak already in the second quarter and stuck to its forecast for
12 percent growth in its upstream and downstream markets.
Hydro posted above-forecast April-June core earnings and
said global aluminium markets remain oversupplied even as demand
picks up along with a moderate recovery in economic growth.
Bigger peer Alcoa (AA.N) also reported better-than-expected
second quarter profits but suggested that the aluminium sector
was picking up speed. [ID:nN12206110]
Hydro's underlying earnings before tax and interest stood at
1.1 billion crowns ($178.2 million) in April-June, against a
loss of 618 million a year ago and expectations for a profit of
900 million in a Reuters poll of 11 analysts.
Europe's third-biggest aluminium producer, whose business
extends from smelting aluminium to selling metal sheets to
carmaking and construction companies, attributed the results to
higher volumes, firm margins and tight cost control in a
But it was less upbeat on the rest of 2010, even though it
affirmed its market demand target of 12 percent this year.
"There is much evidence to suggest the second quarter will
be the strongest of 2010," Chief Executive Officer Svein Richard
Brandtzaeg told a news conference.
Brandtzaeg told Reuters he expected Hydro's earnings in the
second half of 2010 to be weaker than in the first half but did
not see weakening in 2011 compared to this year. [ID:nOSN004604]
Even with improving consumption, Hydro said the production
it curtailed -- about a quarter of its overall capacity -- was
unlikely to be restored before at least 2011.
"I cannot foresee restarting this capacity in 2010," Chief
Financial Officer Joergen Arentz Rostrup told Reuters.
He expected aluminium inventories to be mostly steady going
forward, or rising somewhat.
Shares in Norsk Hydro were flat at 1218 GMT, while Oslo's
.OSEBX index was up 0.5 percent. The stock is up about 25
percent so far in July.
"They are doing particularly well in the upstream business,
with higher prices, higher volumes and lower costs than
expected," Pareto analyst Samir Bendriss said.
Hydro said global demand for primary aluminium, excluding
China, strengthened in the second quarter reaching an annualized
consumption of around 24 million tonnes. Production outside
China increased to 25 million tonnes on an annualized basis.
"Production was relatively stable at around the same level
resulting in a balanced market during the quarter," it said,
adding that it expected a market surplus in 2010.
Hydro said its Qatalum plant in Qatar will continue
incurring operating losses during the ramp-up of production and
is on schedule to hit full capacity in the fourth quarter, with
Qatalum 2010 production seen at "more than 200,000 tonnes",
Brandtzaeg told Reuters.
($1=6.172 Norwegian Crown)
(Additional reporting by Terje Solsvik; Editing by Jon
Loades-Carter and Mike Nesbit)