OSLO (Reuters) - Norsk Hydro’s new chief executive vowed on Wednesday to boost the aluminum producer’s profitability and enforce stricter capital discipline following 15 months of production outages that have dragged down its earnings and share price.
On her first day as CEO, Hilde Merete Aasheim announced that the future of the Rolled Products division will be reviewed, and said all Hydro’s businesses would face stricter scrutiny in terms of how they spend the company’s cash.
“We’ve invested a lot, over many years, and now is the time to boost the return on those investments and reap greater profits,” Aasheim told Reuters in an interview at Hydro’s headquarters in Oslo.
The company said earlier in the day it would present revised financial targets in the third quarter.
Hydro’s Alunorte alumina refinery in Brazil, a key supplier to the global aluminum industry, is operating at half capacity following a spill in February 2018 that led regulators and courts to restrict the plant’s output.
The company is now awaiting the decision of a Brazilian federal judge on whether it can restart, which would immediately boost earnings, Aasheim said.
Hydro is also still working to overcome the effects of a cyber attack that paralyzed large parts of its operations in March and required the replacement of many automated processes with manual labor.
In the last decade, the company expanded throughout the aluminum value chain, adding bauxite mining and alumina production as well as large finished units to its traditional smelter operations.
The strategy contrasted with that of U.S. competitor Alcoa, which in 2016 split into separate companies focusing on aluminum making and products production respectively.
Hydro’s Rolled Products, a maker of large aluminum sheets used in the automotive, construction and packaging industries, among others, has underperformed for years, Aasheim said.
“The situation is unsustainable the way it is now,” she added, while declining to say whether all or parts of the business could be put up for sale.
“It’s like a world championship. Every unit (of the company) must deliver,” said Aasheim, who has headed Hydro’s primary metal division for more than a decade.
After completing the acquisition of aluminum products maker Sapa, Hydro’s revenues rose by 46 percent last year to 159.4 billion Norwegian crowns ($18.2 billion), but its net income fell 53 percent to 4.3 billion crowns.
The company’s shares are 15 percent lower year-to-date and down 40 percent since news of the Brazil outage first emerged in February last year.
When adjusting for Hydro’s annual dividend payment, the company’s shares fell by 0.7 percent on Wednesday, tracking a 0.8 percent drop in the price of aluminum.
Additional reporting by Gladys Fouche; Editing by Tom Hogue and Kirsten Donovan