Norsk Hydro: First quarter 2015: Record results on higher sales and currency tailwinds

Hydro's underlying earnings before financial items and tax increased to NOK 3,208 million in the first quarter, up from NOK 2,886 million in the fourth quarter of 2014. The results reflect higher sales across the value chain and a stronger US dollar.

August 29, 2015
Image of Brandtzæg on stage
Hydro President and CEO Svein Richard Brandtzæg.
  • Record-high quarterly underlying EBIT of NOK 3 208 million
  • Higher sales throughout the value chain
  • Positive currency developments
  • Acquisition of advanced sorting technology in Germany
  • Reduced market tightness due to Chinese semis exports

"I am pleased that we for the second quarter in a row can present record quarterly results since Hydro became a pure aluminium company in 2007. We will continue to deliver on the improvement programs, while looking for additional measures to expand the efforts already in scope," says President and CEO Svein Richard Brandtzæg.

Underlying EBIT for Bauxite and Alumina further improved in the first quarter reflecting higher alumina sales volumes and the strengthening USD. Results were also supported by cost and revenue improvements relating to the "From B to A" improvement program. Negative effects of lower LME-linked alumina prices were partly offset by an increase in alumina index based sales volumes. The extended maintenance at the Paragominas ball mill is completed and the bauxite mine is now back in full production.

Primary Metal underlying EBIT improved slightly in the first quarter influenced by a further increase in realized aluminium prices and premiums measured in Norwegian kroner. Positive developments were partly offset by higher costs for alumina and power, reflecting higher prices, and negative currency effects.

"We are operating in a highly competitive market, underlining the importance of our efforts to strengthen our position. We continue to high-grade our portfolio, including the acquisition of the world's most advanced sorting technology, the construction of a used beverage can recycling facility and a new automotive line in Germany, taking a lead in growing European markets," says Brandtzæg.

For Metal Markets, underlying EBIT declined substantially compared to the fourth quarter. Results were impacted by negative results from sourcing and trading activities as a result of a decline in standard ingot premiums. The negative results were partly offset by improved results from remelt operations due to higher product premiums and seasonally higher sales volumes in Europe.

Rolled Products delivered higher underlying EBIT compared with the fourth quarter of 2014, mainly due to seasonally higher sales volumes, higher operating margins and currency gains on export sales.

Underlying EBIT for Energy slightly increased compared to the fourth quarter due to higher production, partly offset by lower prices and increased production costs.

Underlying EBIT for Sapa increased compared to the previous quarter, due to higher seasonal demand, continued strong growth in North America and the positive effects of improvement programs.

Operating cash flow amounted to NOK 1.4 billion for the first quarter. Cash used for investment activities amounted to NOK 0.9 billion. Hydro's net debt position amounted to NOK 0.3 billion at the end of the first quarter also affected by currency translation effects of around NOK 0.7 billion mainly due to the strengthening USD compared to NOK.

Reported earnings before financial items and tax amounted to NOK 3,206 million in the first quarter. In addition to the factors discussed above, reported EBIT included net unrealized derivative gains and positive metal effects of NOK 72 million in total. Reported earnings also included a charge of NOK 74 million (Hydro's share) for Sapa mainly relating to unrealized derivative losses.

In the previous quarter reported earnings before financial items and tax amounted to NOK 2,295 million including net unrealized derivative losses and positive metal effects of negative NOK 72 million in total. Reported earnings also included impairment charges of NOK 145 million related to the rolling mill in Slim, Italy. In addition, reported EBIT included NOK 337 million (Hydro's share) relating to Sapa mainly for impairment and restructuring charges, and net other charges of NOK 36 million.

Net income amounted to NOK 1,072 million in the first quarter including a net foreign exchange loss of NOK 1,587 million mainly due to the strengthening of the USD. In the previous quarter, Hydro incurred a net loss amounting to NOK 168 million including a net foreign exchange loss of NOK 2,252 million. 

Key financial information
NOK million, except per share data First
quarter
2015
Fourth
quarter
2014
% change prior quarter First
quarter
2014
% change prior year quarter Year
2014
             
Revenue 23,290 21,656 8% 18,282 27% 77,907
             
Earnings before financial items and tax (EBIT) 3,206 2,295 40% 822 >100% 5,674
Items excluded from underlying EBIT 2 591 (100)% (50) >100% 18
Underlying EBIT 3,208 2,886 11% 772 >100% 5,692
             
Underlying EBIT:            
Bauxite & Alumina 780 528 48% (288) >100% (55)
Primary Metal 2,012 1,989 1% 312 >100 3,937
Metal Markets 24 221 (89)% 141 (83)% 634
Rolled Products 292 96 >100 181 62% 698
Energy 382 360 6% 435 (12)% 1,197
Other and eliminations 1) (281) (308) 9% (8) >(100)% (717)
Underlying EBIT 3,208 2,886 11% 772 >(100)% 5,692
             
Underlying EBITDA 4,437 4,170 6% 1,861 >100% 10,299
             
Underlying income (loss) from discontinued operations 1) - - - - - -
             
Net income (loss) 1,072 (168) >100% 462 >100% 1,228
Underlying net income (loss) 2,206 1,979 11% 388 >100% 3,728
             
Earnings per share 0.46 (0.18) >100% 0.19 >100% 0.39
Underlying earnings per share 0.95 0.83 14% 0.16 >100% 1.55
             
Financial data:            
Investments 2) 802 1,449 (45)% 546 47% 3,625
Adjusted net interest-bearing debt (13,478)  (13,587) 1% (11,230) (20)% (13,587)
             
Key operational information
Alumina production (kmt) 1,451 1,501 (3)% 1,428 2% 5,933
Primary aluminium production (kmt) 497 499 (1)% 484 3% 1,958
Realized aluminium price LME (USD/mt) 1,897 1,997 (5)% 1,749 8% 1,850
Realized aluminium price LME (NOK/mt) 3) 14,383 13,355 8% 10,702 34% 11,624
Realized NOK/USD exchange rate 3) 7.58 6.69 13% 6.12 24% 6.28
Metal products sales, total Hydro (kmt) 4) 767 768 - 869 (12)% 3,274
Rolled Products sales volumes to external market (kmt) 227 213 7% 243 (6)% 946
Power production (GWh) 3,071 2,823 9% 2,964 4% 10,206

 


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