First quarter 2012: Lower aluminium prices, strong Energy result

Hydro's underlying earnings before financial items and tax amounted to NOK 557 million in the first quarter, down from NOK 1,133 million in the previous quarter. Lower realized aluminium prices and continued weak markets, in particular for European extrusion operations, weighed down underlying results. Hydro's Energy business posted solid results along with power production at record levels.

April 27, 2012
  • Underlying EBIT NOK 557 million
  • Lower alumina and aluminium prices
  • Solid production performance
  • Strong Energy result, record production level
  • Aluminium sales volumes up on seasonal effects, alumina sales down
  • 2012 aluminium demand growth outlook around 3 percent outside China

"Continued weak demand and low aluminium prices weigh down first-quarter results. We will continue our restructuring efforts, reduce costs and take firm actions required to keep a steady course," Hydro's President and CEO Svein Richard Brandtzæg said.

"Dependent on the further macro-economic development in Europe, we expect global aluminium demand growth outside China at around 3 percent in 2012," he said.

"I am pleased to see strong production performance, particularly in the strategically important assets Qatalum, Paragominas and Alunorte, providing a firm foundation for progress when markets pick up. Effective and forceful improvement programs in our fully owned smelters are proceeding according to plan, also contributing to a solid platform for the future," Brandtzæg said.

Underlying EBIT for Bauxite & Alumina fell from the fourth quarter, mainly due to lower realized alumina prices and lower sales volumes. Bauxite and alumina production was stable.

Lower realized aluminium prices and lower premiums had a substantial negative effect on underlying EBIT for Primary Metal in the quarter, partly offset by higher sales volumes and lower raw material costs. Production volumes declined mainly due to the curtailment of one production line at the Kurri Kurri smelter in Australia.

Underlying results for Hydro's midstream operations rose from the fourth quarter which included significant negative currency effects. Underlying EBIT excluding currency effects increased in the first quarter, mainly due to higher volumes in the remelt operations.

Underlying EBIT for Hydro's downstream business, Rolled Products and Extruded Products, improved from the fourth quarter result which was hit by seasonal declines and poor market developments in Europe. Demand remained weak for Hydro's European extrusion business and Building Systems in particular.

The Energy business area continued to deliver solid underlying results for the quarter along with power production at record levels.

Operating cash flow amounted to NOK 0.6 billion for the quarter. Net cash used for investment activities amounted to NOK 0.9 billion. Hydro's net cash position was NOK 1.5 billion at the end of the first quarter.

Reported earnings before financial items and tax amounted to NOK 665 million in the first quarter including net unrealized derivative gains of NOK 307 million, negative metal effects of NOK 60 million and rationalization and closure costs of NOK 132 million. Amounts relating to other items of a special or infrequent nature were not significant for the first quarter.

Hydro had net income of NOK 585 million for the first quarter including net foreign exchange gains of NOK 410 million. In the fourth quarter, Hydro incurred a net loss amounting to NOK 749 million including net foreign exchange losses of NOK 28 million.

Key financial information
NOK million, except per share data First quarter
2012
Fourth quarter 2011 % change prior quarter First
quarter
2011
% change prior year quarter Year
2011
 
Revenue 21,748 21,749 - 21,138 3% 91,444
 
Earnings before financial items and tax (EBIT) 665 (362) >100% 5,855 (89)% 9,827
Items excluded from underlying EBIT (108) 1,494 >(100)% (4,408) 98% (3,694)
Underlying EBIT 557 1,133 (51)% 1,448 (62)% 6,133
 
Underlying EBIT:
Bauxite & Alumina (144) 159 >(100)% 155 >(100)% 887
Primary Metal 30 484 (94)% 583 (95)% 2,486
Metal Markets 87 (39) >(100)% 143 (39)% 441
Rolled Products 151 86 76% 232 (35)% 673
Extruded Products 14 (90) >100% 105 (86)% 151
Energy 556 441 26% 573 (3)% 1,883
Other and eliminations (137) 92 >(100)% (344) 60% (389)
Underlying EBIT 557 1,133 (51)% 1,448 (62)% 6,133
 
Underlying EBITDA 1,870 2,524 (26)% 2,415 (23)% 11,152
 
Net income (loss) 585 (749) >100% 5,154 (89)% 6,749
Underlying net income (loss) 256 876 (71)% 834 (69)% 3,947
 
Earnings per share 0.25 (0.36) >100% 2.89 (92)% 3.41
Underlying earnings per share 0.13 0.42 (70)% 0.45 (72)% 1.89
 
Financial data:        
Investments 898 4,190 (79)% 41,625 (98)% 48,025
Adjusted net interest-bearing debt (19,231) (19,895) 3% (20,490) 6% (19,895)
 
Key Operational information
Alumina production (kmt) 1,464 1,490 (2)% 773 89% 5,264
Primary aluminium production (kmt) 514 539 (5)% 415 24% 1,982
Realized aluminium price LME (USD/mt) 2,155 2,439 (12)% 2,358 (9)% 2,480
Realized aluminium price LME (NOK/mt) 12,404 13,834 (10)% 13,607 (9)% 13,884
Realized NOK/USD exchange rate 5.75 5.67 1% 5.77 - 5.60
Metal Markets sales volumes to external market (kmt) 591 564 5% 467 27% 2,091
Rolled Products sales volumes to external market (kmt) 227 215 6% 245 (7)% 929
Extruded Products sales volumes to external market (kmt) 133 121 10% 136 (2)% 536
Power production (GWh) 3,190 2,706 18% 2,308 38% 9,582

 


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.


Updated: October 11, 2016