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Norsk Hydro: Third quarter 2011: Improved production performance, higher raw material costs


October 27, 2011 - Oslo, Norway

Hydro had underlying earnings before financial items and tax (EBIT) of NOK1,646 million in the third quarter, down from NOK 1,906 million in the secondquarter. The quarter was marked by higher production performance in Bauxite &Alumina, while seasonal declines and higher raw material costs had a negativeimpact on underlying results. Energy posted record third-quarter results.

* Underlying EBIT NOK 1,646 million

* Further improved bauxite and alumina production performance

* Raw material cost pressure

* Solid contribution from energy business

* Qatalum at full production

* Streamlining of portfolio through divestments

* Seasonal sales decline and softening market

* Increased macro uncertainty

"Our efforts to improve operational performance in Bauxite & Alumina areshowingsolid results, with Paragominas and Alunorte reporting increased quarterlyproduction. We are strengthening our focus on the ongoing ambitious costimprovement programs, however, raw material cost pressures in the aluminiumindustry continue," said Hydro's President and CEO Svein RichardBrandtzæg.

"With current macro uncertainty, market visibility is low. We are keeping our2011 outlook aluminium demand growth outside China of seven percent, but basedon signs of weakening markets towards the end of the year, growth may come inonthe low side," Brandtzæg said.

Underlying EBIT for Bauxite & Alumina increased compared to the second quarterprimarily due to improved production performance and better results forcommercial activities.

Underlying EBIT for Primary Metal declined compared to the second quarter duetolower sales volumes and higher raw material costs, partly offset by higherrealized aluminium prices. Ramp-up of production at Qatalum, the 50/50 jointventure between Qatar Petroleum and Hydro, was completed and the plant reachedfull capacity contributing to increased production for the quarter.

"I am pleased to see the Qatalum plant reaching full production. Now runningatnameplate capacity, our focus is to optimize operations to capture its fullpotential," Brandtzæg said.

Hydro's midstream operations delivered lower underlying results compared totheprevious quarter, which was influenced by significant positive ingot inventoryvaluation and currency effects. Lower underlying results from remeltoperationsimpacts third quarter results negatively.

Underlying EBIT for Hydro's downstream business was weak, impacted by seasonaldeclines and softer markets. The ongoing rationalization measures in BuildingSystems have started to show effect, and the program will continue at fullspeedin the coming quarters.

Energy continued to deliver solid underlying results, its best-ever thirdquarter, due to high production throughout the quarter and relatively highprices in July and August.

Hydro completed the divestment of its non-strategic ownership interest in theNorwegian power production company SKS Produksjon AS. The divestment resultedina tax free gain of NOK 658 million in the third quarter. In addition Hydrosigned an agreement to divest its 35 percent stake in the Alpart aluminarefinery on Jamaica, with expected closing in the fourth quarter.

Operating cash flow amounted to NOK 3.4 billion for the quarter including adecrease in net operating capital of NOK 0.8 billion. Cash provided fromdivestments offset cash used in investment activities for the quarter. At theend of the quarter Hydro's net debt position was NOK 0.1 billion.

Key financial information



% change First
NOK million, Third Second % change Third prior Firs 9 9
except per quarter quarter prior quarter year months months Year
share data 2011 2011 quarter 2010 quarter 2011 2010 2010
---------------------------------------------------------------------------


Revenue 23 829 24 728 (4) % 18 424 29 % 69 695 56 348 75 754



Earnings
before
financial
items and tax
(EBIT) 2 222 2 111 5 % 274 > 100 % 10 189 2 417 3 184

Items
excluded from
underlying
EBIT (576) (206) >(100) % 690 > (100) % (5 189) 347 167
---------------------------------------------------------------------------
Underlying
EBIT 1 646 1 906 (14) % 965 71 % 5 000 2 763 3 351
---------------------------------------------------------------------------


Underlying
EBIT :

Bauxite &
Alumina 302 272 11 % 71 > 100 % 729 521 633

Primary Metal 653 765 (15) % 318 > 100 % 2 002 531 617

Metal Markets 93 244 (62) % 163 (43) % 480 259 321

Rolled
Products 124 232 (46) % 227 (45) % 588 759 864

Extruded
Products 40 96 (58) % 102 (61) % 241 420 444

Energy 506 363 40 % 169 > 100 % 1 442 934 1 416

Other and
eliminations (73) (65) (13) % (85) 14 % (482) (661) (945)
---------------------------------------------------------------------------
Underlying
EBIT 1 646 1 906 (14) % 965 71 % 5 000 2 763 3 351
---------------------------------------------------------------------------


Underlying
EBITDA 2 985 3 229 (8) % 1 720 74 % 8 628 5 037 6 420
---------------------------------------------------------------------------


Net income
(loss) 797 1 546 (48) % (63) > 100 % 7 498 1 460 2 118
---------------------------------------------------------------------------
Underlying
net income
(loss) 1 071 1 168 (8) % 545 96 % 3 071 1 476 1 852
---------------------------------------------------------------------------


Earnings per
share 0.49 0.69 (29) % (0.07) > 100 % 3.84 0.93 1.33
---------------------------------------------------------------------------
Underlying
earnings per
share 0.50 0.52 (4) % 0.33 53 % 1.47 0.94 1.14
---------------------------------------------------------------------------


Financial
data:
---------------------------------------------------------------------------
Investments 1 125 1 085 4 % 1 591 (29) % 43 836 4 618 6 231

Adjusted net
interest- (18 (8 (6
bearing debt(18 389) (20 777) 11 % (8 280) > (100) % 389) 280) 427)
---------------------------------------------------------------------------


Key
Operational
information


---------------------------------------------------------------------------
Alumina
production
(kmt) 1 553 1 448 7 % 491 > 100 % 3 774 1 483 1 976

Primary
aluminium
production
(kmt) 522 505 3 % 355 47 % 1 443 1 055 1 415

Realized
aluminium
price LME 2 2
(USD/mt) 2 592 2 509 3 % 2 179 19 % 494 125 2 113

Realized
aluminium
price LME
(NOK/mt) 14 225 13 803 3 % 13 503 5 % 13 906 12 753 12 674

Realized
NOK/USD
exchange rate 5.49 5.50 - 6.20 (11) % 5.58 6.00 6.00

Metal Markets
sales volumes
to external 1
market (kmt) 527 533 (1) % 429 23 % 1 527 300 1 717

Rolled
Products
sales volumes
to external
market (kmt) 228 242 (6) % 239 (5) % 714 712 945

Extruded
Products
sales volumes
to external
market (kmt) 137 142 (4) % 134 2 % 415 402 529

Power
production
(GWh) 2 737 1 830 50 % 1 479 85 % 6 875 5 881 8 144
---------------------------------------------------------------------------

Pro forma underlying financial and operating results

There are no differences between Hydro's actual and proforma underlyingfinancial and operating results for the third and second quarter comparativeperiods in 2011. Please see the Profoma information section later in thisreportfor a discussion on developments compared to earlier periods.

Key financial % changeinformation Third Second % change Third prior First 9 First 9 quarter quarter prior quarter year months months YearNOK million 2011 2011 quarter 2010 quarter 2011 2010 2010--------------------------------------------------------------------------- Revenue 23 829 24 728 (4) % 21 133 13 % 71 372 64 682 87 272 Earningsbeforefinancialitems and tax(EBIT) 2 222 2 111 5 % 289 >100 % 5 937 2 735 3 696 Items excludedfromunderlyingEBIT (576) (206) 941 (847) 561 445---------------------------------------------------------------------------UnderlyingEBIT 1 646 1 906 (14) % 1 230 34 % 5 090 3 296 4 141--------------------------------------------------------------------------- UnderlyingEBITDA 2 985 3 229 (8) % 2 555 17 % 9 094 7 237 9 450--------------------------------------------------------------------------- Net income(loss)attributableto Hydroshareholders 997 1 405 (29) % 157 >100 % 3 183 1 475 2 220--------------------------------------------------------------------------- Keyoperationalinformation ---------------------------------------------------------------------------Aluminaproduction(kmt) 1 553 1 448 7 % 1 442 8 % 4 337 4 357 5 805 Primaryaluminiumproduction(kmt) 522 505 3 % 469 11 % 1 518 1 391 1 867---------------------------------------------------------------------------

About Hydro's reporting

Underlying EBIT

To provide a better understanding of Hydro's underlying performance, thefollowing discussion of operating performance excludes certain items from EBIT(earnings before financial items and tax) and net income. See "Items excludedfrom underlying EBIT and net income" later in this report for more informationon these items.

Acquisition of Vale's aluminium business

On February 28, 2011 Hydro completed the take-over of the majority of Vale'saluminium business in Brazil. Effective from the first quarter of 2011, we areincluding a new operating segment, Bauxite & Alumina, in our reportingstructurein addition to our other five operating segments. In addition to the assetsacquired from Vale, Hydro's bauxite and alumina activities previously includedin the Primary Metal segment have been transferred to the new Bauxite &Aluminasegment and prior periods have been restated. Primary Metal includes theAlbrasaluminium plant in addition to Hydro's pre-transaction primary aluminiumproduction activities. Effective from the first quarter of 2011, eliminationofinternal gains and losses on alumina previously included in the Primary Metalsegment is included in Other and Eliminations, and prior periods have beenrestated.

The following discussion on reported and underlying operating results includesthe acquired bauxite and alumina activities from Vale from March 1, 2011.Amounts relating to previous periods have not been restated to reflect thereported and underlying results of the acquired assets.

Pro forma information related to acquisition of Vale's aluminium businessTo provide a presentation of Hydro's performance on comparable basis, certainpro forma financial and operating information is also presented in this reportbased on including the results of the acquired Vale assets for the fullcalendarquarter and for all previous periods presented in this report. See "Secondquarter report 2011" for more information on the acquisition and the pro formainformation included in our second quarter report.

Reported EBIT and net income

Reported EBIT for Hydro amounted to NOK 2,222 million in the third quarterincluding net unrealized derivative gains of NOK 6 million, negative metaleffects of NOK 77 million, rationalization and closure costs of NOK 28 millionand gains on divestments of NOK 674 million.

In the previous quarter, reported EBIT for Hydro amounted to NOK 2,111 millionincluding net unrealized derivative gains of NOK 266 million, positive metaleffects of NOK 28 million and other net negative effects of NOK 87 millioncomprised of rationalization and closure costs, impairment charges and gainsondivestments.

Net income for the third quarter amounted to NOK 797 million including netforeign exchange losses of NOK 1,248 million.In the second quarter net income amounted to NOK 1,546 million including netforeign exchange gains of NOK 334 million.

Market developments and outlook

Bauxite and alumina

Global demand for alumina outside China was slightly higher in the thirdquartercompared to the second quarter mainly due to the ramp-up of new productioncapacity. Annualized alumina production outside China amounted to about 54million mt.

Alumina demand and production in China continued to increase in the thirdquarter compared to the previous quarter, mainly due to commissioning of newprimary aluminium production and alumina projects.

Platts alumina spot prices have been trading around USD 370 per mt during thequarter, representing a range of roughly 15.3-15.8 percent of LME.(1))

1) Due to existing sales contracts, Hydro has limited volumes available forsalefor the next few years. As a result, short-term alumina market developmentshavelimited influence on Hydro's earnings for this period.

Primary aluminium

LME prices fell in the third quarter compared to the second quarter. Pricesstarted the quarter at a level around USD 2,500 per mt and ended around USD2,200 per mt. Prices measured in NOK and EUR have declined to a lesser extentdue to a strengthening of the USD during the quarter.

Demand for primary aluminium in the world outside China declined during thethird quarter compared to the second quarter, amounting to an annualizedconsumption of 25.7 million mt. Supply of primary aluminium has continued toincrease as new projects come on stream. Annualized production amounted to26.5million mt in the third quarter. Although market sentiment has weakened duringthe quarter due to growing economic uncertainty, we continue to foresee anoverall market growth of about 7 percent in 2011.

Consumption of primary aluminium in China decreased slightly in the thirdquarter following a historically high level in the previous quarter.Annualizedconsumption in the third quarter amounted to 19.7 million mt. The primaryaluminium market in China is expected to be largely balanced for 2011.

LME stocks increased slightly from 4.5 million mt in the second quarter to 4.6million mt in the third quarter. A large portion of the metal in warehousescontinue to be owned by several large financial investors.

Demand for metal products (extrusion ingot, sheet ingot, primary foundryalloysand wire rod) in Europe weakened compared to the previous quarter. Germany andthe Benelux countries are performing better than most countries in SouthernEurope but the overall market sentiment has deteriorated as a result of theweaker macroeconomic outlook.

Rolled products

European demand for rolled products decreased in the third quarter of 2011compared to the previous quarter due to seasonality in general and destockingbydistributors in the general engineering market segment in particular.

Demand for rolled products within the automotive segment remained healthy inthethird quarter, benefiting from high car exports to China. Overall consumptionwithin the building and construction segment was slightly below the volumesseenin the second quarter. Low demand in the southern part of Europe and the UKwasmostly compensated by sound demand in Germany and the Benelux countries.Consumption in the beverage can segment was firm compared to the secondquarterof 2011. The European market for thin gauge foil softened mainly due toseasonality and high inventory levels. Chinese imports continued at highlevelsoverall and within the general engineering segment in particular.

Consumption for rolled products is expected to be impacted by furtherdestockingmainly within the general engineering market segment, and seasonal declines ingeneral during the fourth quarter. Demand within the automotive segment isforecasted to decline due to declining demand for cars in Europe. However,demand for premium cars in China is expected to remain on a high level.Consumption of thin gauge foil is expected to remain stable at a low level.

Extruded products

European demand for extruded aluminium products declined seasonally in thethirdquarter of 2011, but was higher than the same quarter of 2010. Demand remainedweak within the building and construction sector, and in Southern Europe inparticular. Demand within the engineering and transport segments remainedstrongin most European markets. Margins continued to be under pressure in Europe.

Demand for extruded products in North America was slightly lower on a seasonalbasis compared with the second quarter of 2011, and was also somewhat lowerthanthe third quarter of 2010 despite high demand in the transport and automotivesegments. Imports into the US have fallen significantly compared to the thirdquarter of 2010 as a result of duties on Chinese products. Demand in SouthAmerica continued on a level similar to the same quarter of last year. As aresult, margins are under pressure due to increased production capacity in amarket experiencing lower growth than anticipated.

Demand in the precision tubing segment continued to be strong for the season,driven by demand for premium cars, but growth is slowing down.

Further seasonal declines are expected in the European and US extrusionmarketsin the fourth quarter. Currently we see no recovery in the building andconstruction segment in Southern Europe and we expect continued low demand forbuilding systems in this region. Automotive production in Europe is expectedtodecline in the fourth quarter due to reduced demand for cars in Europe.However,the market for premium cars in China is expected to remain firm. Demand isexpected to remain stable in North America supported by transport andautomotivesegments. The market outlook for South America remains positive.

Energy

Nordic electricity spot prices were volatile throughout the third quarter.Spotprices were relatively high in July and August, while in September, pricesdeclined to low levels due to high precipitation.

Water reservoir levels in Norway increased to 86 percent of capacity at theendof the third quarter. This is around normal level and 18 percentage pointsabovethe corresponding period of the prior year.

As consumption increases towards the winter season, Nordic spot prices areexpected to gradually increase.

Additional factors impacting Hydro

Hydro has sold forward around 85 percent of its expected primary aluminiumproduction for the fourth quarter at a price level of around USD 2,475 per mt.This excludes expected volumes from Qatalum. Hydro has also hedged themajorityof the net aluminium price exposure in the business acquired from Vale untiltheend of 2011. For the final quarter of 2011 the hedged volumes for Bauxite &Alumina amount to about 90,000 mt of aluminium, priced at about USD 2,400 permt.

Hydro's water reservoirs increased to a level well above normal in the thirdquarter and significantly higher than the corresponding period in 2010. As aresult, production is expected to remain high through the forth quarter 2011.

During the third quarter Hydro signed an agreement to divest its share of theAlpart alumina refinery in Jamaica. The transaction is expected to becompletedin the fourth quarter with a gain of about NOK 400 million.

Bauxite & Alumina

Underlying EBIT for Bauxite & Alumina increased compared to the second quarterprimarily due to improved production performance and better results for ourcommercial activities.

Primary Metal

Underlying EBIT for Primary Metal declined compared to the second quarter duetolower sales volumes and higher raw material costs. Higher realized aluminiumprices partly offset the negative developments. Please also see the section onPro forma information - Primary Metal later in this report.

Higher realized aluminium prices partly offset by lower premiums had a netpositive effect on underlying results amounting to about NOK 150 million forthequarter. Volume declines had a negative effect of about NOK 90 million. Higherraw material costs relating to alumina and coke in particular, had a negativeimpact of roughly NOK 150 million. Our USD 300 per mt cost improvement programtargeted to reach USD 175 per mt by the end of 2011 continued according toplan.

Production volumes increased compared to the second quarter mainly due toadditional volumes from Qatalum which reached full production capacity onSeptember 21.

Underlying results for Qatalum improved, mainly due to the higher productionvolumes.

Metal Markets

Underlying EBIT for Metal Markets decreased compared to the previous quarterwhich was influenced by significant positive ingot inventory valuation andcurrency effects. Excluding currency and ingot inventory valuation effects,underlying EBIT declined for the quarter mainly due to seasonally lowervolumesfor remelt operations, together with lower margins. Underlying results fromsourcing and trading activities were also somewhat lower.

Total metal product sales excluding ingot trading exhibited an expectedseasonaldecline due to the summer holidays but was also influenced by weaker demand.

Rolled Products

Underlying EBIT for Rolled Products was significantly lower compared to thesecond quarter mainly due to seasonally lower sales volumes and softeningdemand. Lower margins also contributed to the decline partly offset by lowerpersonnel and other operating costs.

Volume declines for general engineering and thin gauge foil were mainly drivenby customer destocking activities. Automotive shipments were seasonally lower.Can beverage volumes increased, supported by firm demand.

Extruded Products

Underlying EBIT for Extruded Products decreased significantly in the thirdquarter compared with the previous quarter due to seasonally lower salesvolumesand lower margins partly offset by lower fixed costs.

Lower volumes and margins resulted in further weakening of the results for ourbuilding systems operations. Rationalization measures have started to have apositive impact however, and fixed costs declined during the quarter.Additionalrationalization measures have been implemented in the third quarter and willbefurther expanded in the fourth quarter.

Underlying EBIT for our extrusion operations and precision tubing businessdeclined mainly due to seasonally lower volumes and lower margins.

Energy

Energy delivered solid underlying results due to high production throughoutthequarter and relatively high prices in July and August. Production levels wereinfluenced by high precipitation during the quarter.

Other and eliminations

Eliminations comprises mainly unrealized gains and losses on inventoriespurchased from group companies which fluctuates with product flows, volumesandmargin developments throughout Hydro's value chain.

Items excluded from underlying EBIT and net income

To provide a better understanding of Hydro's underlying performance, the itemsin the table below have been excluded from EBIT and net income.

Items excluded from underlying EBIT are comprised mainly of unrealized gainsandlosses on certain derivatives, impairment and rationalization charges, effectsof disposals of businesses and operating assets, as well as other items thatareof a special nature or are not expected to be incurred on an ongoing basis.

Items excluded from underlying netincome(1) Third Second Third First 9 First 9 quarter quarter quarter months months YearNOK million 2011 2011 2010 2011 2010 2010--------------------------------------------------------------------------- Unrealized derivative effects onLME related contracts(2) 50 (35) 515 94 651 489 Derivative effects on LME relatedcontracts (Vale Aluminium)(3) (32) (89) 99 (79) (221) (166) Unrealized derivative effects onpower contracts (4) (25) (162) (25) (227) 458 609 Unrealized derivative effects oncurrency contracts(5) - - (65) (1) (30) (50) Unrealized derivative effects onraw material contracts(6) 1 20 - 37 - (156) Metal effect, Rolled Products(7) 77 (28) 52 (127) (468) (560) Significant rationalizationcharges and closure costs(8) 28 75 - 104 (1) 130 Impairment charges (PP&E andequity accounted investments)(9) - 56 114 56 175 187 Pension(10) - - - - (151) (151) Insurance compensation(11) - - - - - (91) (Gains)/losses on divestments(12)(674) (44) - (718) (67) (74) Transaction related effects (ValeAluminium) (13) - - - (4 328) - ----------------------------------------------------------------------------Items excluded from underlyingEBIT (576) (206) 690 (5 189) 347 167---------------------------------------------------------------------------Net foreign exchange (gain)/loss(14) 1 248 (334) 246 944 (281) (513) Calculated income tax effect(15) (399) 162 (328) (181) (49) 80---------------------------------------------------------------------------Items excluded from underlying netincome 273 (378) 608 (4 427) 16 (266)---------------------------------------------------------------------------

1)Negative figures indicate a gain and positive figures indicate a loss.

2) Unrealized gains and losses on contracts used for operational hedgingpurposes where hedge accounting is not applied, as well as for LME derivativesinequity accounted investments and elimination of changes in fair value ofcertain internal physical aluminium contracts.

3) Realized and unrealized derivative effects on LME contracts related to thehedge of the net aluminium price exposure in Vale Aluminium not subject tohedge accounting. Realized effects recognized as of March 1, 2011 are includedin underlying EBIT.

4) Unrealized gains and losses on embedded derivatives in power contracts forown use and financial power contracts used for hedging purposes.

5) Relates to currency effects in equity accounted investments (Alunorte)prior to February 28, 2011.

6) Unrealized gains and losses on embedded derivatives in raw materialcontracts for own use.

7) Timing differences resulting from inventory adjustments due to changingaluminium prices during the production, sales and logistics process, as wellasinventory write-downs for Rolled Products.

8) Costs that are typically non-recurring for significant individual plants oroperations, for example termination benefits, plant removal costs and clean-upactivities in excess of legal liabilities.

9) Impairment charges reflect write-downs of assets or groups of assets toestimated recoverable amounts in the event of an identified loss in value.

10) Recognition of pension plan amendments, curtailments and settlements.

11) Insurance compensation for damaged assets recognized as income (includesequity accounted investments).

12) Net gain or loss on divested businesses and individual major assets.

13) Effects related to the acquisition of Vale Aluminium on February 28, 2011include the revaluation gain of Hydro's pre-transaction stake in Alunorte andCAP, gains and losses related to settlement of pre-existing contracts andagreements, as well as the fair value adjustment of inventory of finishedgoodssold.

14) Realized and unrealized gains and losses on foreign currency denominatedaccounts receivable and payables, funding and deposits, and forwardcurrency contracts purchasing and selling currencies that hedge net futurecash flows from operations, sales contracts and working capital.

15) In order to present underlying net income on a basis comparable with ourunderlying operating performance, we have calculated an income tax effect ofitems excluded from underlying income before tax. In third quarter we havechanged the calculation method in order to better reflect non taxable itemsexcluded from underlying income before tax. Prior periods in 2011 have beenrestated.

Finance

Net financial income (expense) amounted to negative NOK 1,363 million in thethird quarter compared with positive NOK 194 million in the previous quarter.

Net currency losses of NOK 1,248 million in the third quarter mainly relatedtolosses on debt denominated in USD. Of the total, approximately NOK 330 millionrelated to intercompany balances.

Tax

Income tax expense amounted to a charge of NOK 62 million in the third quartercompared to a charge of NOK 759 million in the previous quarter and a chargeofNOK 119 million in the third quarter of 2010.

For the first nine month of 2011 income tax expense was 16 percent of pre-taxincome. The low tax rate results from a tax-free gain on the sale of theshareholding in SKS Produksjon AS in the third quarter and the tax-free gainfrom the revaluation of Hydro's previous ownership interests in Alunorte andtheCAP joint-venture recognized in the first quarter.

Pro forma information Third quarter Second quarter Third quarter 2011 2011 2010 Year 2010 Underlying EBITand EBITDA Underlying Underlying Underlying Underlying per businessarea EBIT EBITDA EBIT EBITDA EBIT EBITDA EBIT EBITDA--------------------------------------------------------------------------- Bauxite &Alumina 302 775 272 756 348 813 1 225 3 061 Primary Metal 653 1 206 765 1 313 306 850 816 3 006 Metal Markets 93 118 244 269 163 189 321 428 Rolled Products 124 235 232 339 227 338 864 1 318 ExtrudedProducts 40 165 96 222 102 236 444 987 Energy 506 543 363 392 169 201 1 416 1 540 Other andeliminations (73) (57) (65) (62) (85) (72) (945) (889)---------------------------------------------------------------------------Underlying EBIT/ EBITDA 1 646 2 985 1 906 3 229 1 230 2 555 4 141 9 450---------------------------------------------------------------------------

Bauxite & Alumina

Underlying EBIT for Bauxite & Alumina increased compared to the second quarterprimarily due to improved production performance and better results for ourcommercial activities.

Both alumina and bauxite production increased compared to the second quarterdueto improved operational stability. Operating costs at the Paragominas mineimproved somewhat as a result of the higher production volumes while operatingcosts at Alunorte increased somewhat driven by higher raw material prices.

Realized alumina prices declined slightly having a negative impact onunderlyingEBIT for the quarter. Caustic and bauxite costs increased somewhat compared tothe second quarter.

Underlying results from our Commercial operations improved compared to secondquarter, mainly as a result of good margins on our contract portfolio.

Primary Metal

Underlying EBIT for Primary Metal declined compared to the second quarter duetolower sales volumes and higher raw material costs. Higher realized aluminiumprices partly offset the negative developments.

*********

Certain statements included within this announcement contain forward-lookinginformation, including, without limitation, those relating to (a) forecasts,projections and estimates, (b) statements of management's plans, objectivesandstrategies for Hydro, such as planned expansions, investments or otherprojects,(c) targeted production volumes and costs, capacities or rates, start-upcosts,cost reductions and profit objectives, (d) various expectations about futuredevelopments in Hydro's markets, particularly prices, supply and demand andcompetition, (e) results of operations, (f) margins, (g) growth rates, (h)riskmanagement, 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-lookingstatements are reasonable, these forward-looking statements are based on anumber of assumptions and forecasts that, by their nature, involve risk anduncertainty. Various factors could cause our actual results to differmaterially from those projected in a forward-looking statement or affect theextent to which a particular projection is realized. Factors that could causethese differences include, but are not limited to: our continued ability toreposition and restructure our upstream and downstream aluminium business;changes in availability and cost of energy and raw materials; global supplyanddemand for aluminium and aluminium products; world economic growth, includingrates of inflation and industrial production; changes in the relative value ofcurrencies and the value of commodity contracts; trends in Hydro's key marketsand competition; and legislative, regulatory and political factors.

No assurance can be given that such expectations will prove to have beencorrect. Hydro disclaims any obligation to update or revise any forward-lookingstatements, whether as a result of new information, future events orotherwise.

This information is subject of the disclosure requirements pursuant to section5-12 of the Norwegian Securities Trading Act.

Q3 Report:http://hugin.info/106/R/1558311/481353.pdf

Q3 Presentation:http://hugin.info/106/R/1558311/481354.pdf

This announcement is distributed by Thomson Reuters on behalf ofThomson Reuters clients. The owner of this announcement warrants that:

(i) the releases contained herein are protected by copyright and other applicable laws; and

(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: Norsk Hydro via Thomson Reuters ONE

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