Second quarter 2013: Result down on lower aluminium prices and power production

Hydro's underlying earnings before financial items and tax was NOK 518 million in the second quarter, down from NOK 1,077 million in the first quarter of 2013, as lower aluminium and alumina prices and seasonally lower power production weighed on results. Bauxite and alumina production was affected by power outages.

July 18, 2013
  • Underlying EBIT NOK 518 million
  • Lower alumina and aluminium prices
  • Lower result in Energy, mainly from seasonally lower production
  • Production in Bauxite & Alumina affected by power outages
  • Increased volumes lift result in Rolled Products
  • Aluminium demand growth outlook 2-4% outside China

"Although the global macroeconomic situation remains challenging, aluminium demand is expected to continue to show solid growth this year. Hydro maintains its outlook for a balanced aluminium supply and demand in 2013," Hydro's President and CEO Svein Richard Brandtzæg said.

Underlying EBIT for Bauxite & Alumina declined compared to the first quarter, mainly due to lower LME-linked alumina prices and reduced bauxite production. Alumina production declined further from weak levels experienced in the previous quarter following external power outages affecting the Alunorte refinery.

"Hydro's main focus is on our company-wide improvement efforts, where one of the key priorities is to implement actions to stabilize and lift production following the power outages that caused production disruptions at Alunorte," said Brandtzæg. The production disruptions will initially affect Bauxite & Alumina's improvement program "From B to A", but Hydro expects to reach savings of NOK 1 billion by end-2015, in line with original plans.

Primary Metal delivered lower underlying results for the second quarter, primarily due to lower realized aluminium prices. Underlying EBIT for Metal Markets was stable compared to the previous quarter.

Compared to the first quarter, underlying EBIT for Rolled Products improved, impacted by seasonally higher volumes partly offset by lower margins. Operating costs per metric tonne declined.

Underlying EBIT for Energy declined compared to the first quarter mainly due to seasonally lower production following high production levels in the first quarter.

Operating cash flow was NOK 1.0 billion for the second quarter. Net cash used for investment activities amounted to NOK 0.5 billion. Dividends paid in the quarter amounted to NOK 1.7 billion. Hydro's net debt position amounted to around NOK 1.3 billion at the end of the second quarter.

Reported earnings before financial items and tax amounted to NOK 375 million in the second quarter. In addition to the factors discussed above, reported EBIT included net unrealized derivative losses and positive metal effects amounting to NOK 74 million in total, rationalization and closure cost of NOK 86 million and divestment gains of NOK 16 million. In the previous quarter, reported EBIT amounted to NOK 705 million including net unrealized derivative losses and positive metal effects amounting to NOK 294 million in total and rationalization and closure costs of NOK 78 million.

Loss from continuing operations amounted to NOK 713 million in the second quarter including a net foreign exchange loss of NOK 1,291 million. In the previous quarter, income from continuing operations amounted to NOK 254 million including a net foreign exchange loss of NOK 115 million.

Income from discontinued operations amounted to NOK 48 million in the second quarter including rationalization and closure costs of NOK 77 million. In the previous quarter, income from discontinued operations amounted to NOK 9 million including rationalization and closure costs of NOK 40 million.

Hydro has sold forward around 50 percent of its expected primary aluminium production for the third quarter of 2013 at a price level of around USD 1,850 per mt. This excludes volumes from the Qatalum plant.

The Alunorte alumina refinery and the Albras aluminium smelter have entered into USD currency forward contracts in Brazil for second half 2013 and 2014, in total amounting to USD 800 million. The forward contracts reduce the net USD/BRL exposure of the entities and thereby of Hydro. The achieved exchange rate for the forward contracts is on average 2.25 and 2.37 for 2013 and 2014 respectively. Hedge accounting is applied to the forward contracts.

 Key financial information
NOK million, except per share data Second quarter 2013 First
quarter
2013
% change prior quarter Second
quarter
2012
% change prior year quarter First half 2013 First
half
2012
Year
2012
 
Revenue 16,053 16,111 - 16,829 (5) % 32,163 33,873 64,181
 
Earnings before financial items and tax (EBIT) 375 705 (47)% (610) >100% 1,080 100 571
Items excluded from underlying EBIT 144 372 (61)% 1,141 (87)% 516 1,008 725
Underlying EBIT 518 1,077 (52)% 531 (2)% 1,596 1,109 1,297
 
Underlying EBIT:
Bauxite & Alumina (244) (63) >(100)% (188) (30)% (308) (332) (791)
Primary Metal 237 364 (35)% 245 (3)% 602 281 335
Metal Markets 147 146 1% 45 >100% 292 132 210
Rolled Products 181 153 19% 203 (11)% 334 354 637
Energy 268 517 (48)% 362 (26)% 784 918 1,459
Other and eliminations (70) (38) (83)% (136) 48% (109) (244) (553)
Underlying EBIT 518 1,077 (52)% 531 (2)% 1,596 1,109 1,297
 
Underlying EBITDA 1,624 2,165 (25)% 1,648 (1)% 3,789 3,428 5,827
 
Underlying income (loss) from discontinued operations 112 49 >100% 36 >100% 163 33 (5)
Net income (loss) (665) 263 >(100)% (1,737) 62% (402) (1,162) (1,331)
Underlying net income (loss) 427 648 (34)% 243 76% 1,076 476 408
 
Earnings per share (0.31) 0.14 >(100)% (0.80) 61% (0.17) (0.56) (0.65)
Underlying earnings per share 0.19 0.30 (36)% 0.11 73% 0.49 0.22 0.21
 
Financial data:
Investments 612 1,056 (42)% 694 (12)% 1,668 1,469 3,382
Adjusted net interest-bearing debt (11,317) (9,290) (22)% (20,293) 44% (11,317) (20,293) (8,304)
 
 Key operational information
Alumina production (kmt) 1,248 1,361 (8)% 1,491 (16)% 2,609 2,955 5,792
Primary aluminium production (kmt) 483 478 1% 502 (4)% 961 1,016 1,985
Realized aluminium price LME (USD/mt) 1,926 2,043 (6)% 2,167 (11)% 1,986 2,161 2,080
Realized aluminium price LME (NOK/mt) 11,217 11,533 (3)% 12,637 (11)% 11,378 12,523 12,047
Realized NOK/USD exchange rate 5.82 5.64 3% 5.83 - 5.73 5.79 5.79
Metal products sales, total Hydro (kmt) 789 806 (2)% 857 (8)% 1,595 1,728 3,254
Rolled Products sales volumes to external market (kmt) 245 236 4% 228 8% 482 455 909
Power production (GWh) 2,090 2,904 (28)% 2,513 (17)% 4,993 5,703 10,307

  


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