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Norsk Hydro second quarter 2012: Weak markets and results, improvement ambitions stepped up


July 24, 2012 - Oslo, Norway

Hydro's underlying earnings before financialitems and tax amounted to NOK 549million in the second quarter, compared with NOK 557 million in the previousquarter. The weak quarterly results reflect low aluminium prices and achallenging macro-economic environment, while ambitious improvement programshelped reducing operating costs, contributing positively in the quarter.

* Underlying EBIT NOK 549 million

* Low aluminium prices

* Corrective measures and operational improvements

* Results positively influenced by lower operating costs

* Closure of Kurri Kurri aluminium plant, NOK 1.5 billion in charges

* 2012 aluminium demand growth outlook around 2 percent outside China

"The weak macro-economic environment continues to be a challenge in our mainmarkets, leading to low aluminium prices and a weak second quarter for Hydro,"Hydro's President and CEO Svein Richard Brandtzæg said.

"Weak markets and low aluminium prices require tough corrective measures,including capacity adjustment and operational improvements. We are continuingour efforts with unabated strength, and we are now finalizing programs acrossHydro which in total will yield improvements in the range of NOK 2-3 billionover the next two-three years. These programs are vital for Hydro's futuredevelopment, strengthening our competitive position in a demanding industrypicture," Brandtzæg said.

Bauxite & Alumina continued to deliver a weak underlying result for thequarterdue to low LME prices, pricing of long-term contracts and increasing energycosts.

Underlying EBIT for Primary Metal increased compared to the first quartermainlydue to somewhat higher aluminium prices and lower operating costs. Underlyingresults for Qatalum were higher, mainly due to the final insurance settlementrelating to the power outage in 2010.

Hydro's midstream operations delivered lower underlying results compared totheprevious quarter due to negative currency effects. Excluding currency effects,underlying EBIT was stable between the quarters.

Underlying EBIT improved for Hydro's downstream businesses from the firstquarter due to seasonally higher volumes for Extruded Products and loweroperating costs in general. However, results for the quarter continued to beaffected by the challenging macro-economic situation in Europe.

Energy delivered lower underlying EBIT in the second quarter compared to theprevious quarter, due to lower production and lower prices.

Operating cash flow amounted to NOK 0.8 billion for the quarter. Net cash usedfor investment activities amounted to NOK 0.8 billion. Dividends paid in thequarter amounted to NOK 1.7 billion. Hydro's net debt position was NOK 0.4billion at the end of the second quarter.

Hydro incurred a reported loss before financial items and tax of NOK 720millionin the second quarter including net unrealized derivative gains of NOK 300million, rationalization and closure costs of NOK 408 million, impairmentcharges amounting to NOK 1,175 million and positive metal effects of NOK 9million.

In June, Hydro decided to close the remaining production at its Kurri KurriAluminium plant in Australia following the curtailment of one production lineinJanuary. Reported EBIT for the second quarter included NOK 1,154 million ofimpairment charges and NOK 322 million of rationalization and closure costsrelating to the closure. Rationalization and restructuring initiatives inExtruded Products, involving Building Systems and Extrusion Eurasia, resultedinimpairment charges and rationalization costs of NOK 106 million.

Hydro incurred a reported net loss amounting to NOK 1,712 million in thesecondquarter including net foreign exchange losses of NOK 883 million. In theprevious quarter, Hydro had reported net income of NOK 585 million includingnetforeign exchange gains of NOK 410 million.


Key financial
information %
change
NOK million, Second First % change Second prior First First
except per quarter quarter prior quarter year half half Year
share data 2012 2012 quarter 2011 quarter 2012 2011 2011
---------------------------------------------------------------------------


Revenue 21 604 21 748 (1) % 24 728 (13) % 43351 45 867 91444



Earnings
before
financial
items and tax >(100)
(EBIT) (720) 665 >(100) % 2 111 % (54) 7 967 9 827

Items
excluded from
underlying
EBIT 1 269 (108) >100 % (206) >100 % 1 161 (4 613) (3694)
---------------------------------------------------------------------------
Underlying
EBIT 549 557 (1) % 1 906 (71) % 1 106 3 354 6 133
---------------------------------------------------------------------------


Underlying
EBIT :

Bauxite & >(100)
Alumina (188) (144) (31) % 272 % (332) 427 887

Primary Metal 240 30 >100 % 765 (69) % 271 1 348 2 486

Metal Markets 44 87 (50) % 244 (82) % 131 387 441

Rolled
Products 204 151 35 % 232 (12) % 355 463 673

Extruded
Products 53 14 >100 % 96 (44) % 68 201 151


Energy 362 556 (35) % 363 - 918 936 1 883

Other and >(100)
eliminations (166) (137) (21) % (65) % (303) (408) (389)
---------------------------------------------------------------------------
Underlying
EBIT 549 557 (1) % 1 906 (71) % 1 106 3 354 6 133
----------------------------------------------------------------------------


Underlying
EBITDA 1 777 1 870 (5) % 3 229 (45) % 3 648 5 643 11 152
---------------------------------------------------------------------------


Net income >(100)
(loss) (1 712) 585 >(100) % 1 546 % (1127) 6 701 6 749
---------------------------------------------------------------------------
Underlying
net income
(loss) 268 256 5 % 1 166 (77) % 524 2 000 3 947
---------------------------------------------------------------------------


Earnings per >(100)
share (0.78) 0.25 >(100) % 0.69 %(0.54) 3.41 3.41
----------------------------------------------------------------------------
Underlying
earnings per
share 0.12 0.13 (5) % 0.52 (77) % 0.25 0.97 1.89
---------------------------------------------------------------------------


Financial
data:
---------------------------------------------------------------------------
Investments 777 898 (13) % 1 085 (28) % 1 674 42 710 48025

Adjusted net
interest- (20
bearing debt (21125) (19231) (10) % 777) (2)%(21125)(20777)(19895)
---------------------------------------------------------------------------


Key
Operational
information


---------------------------------------------------------------------------
Alumina
production
(kmt) 1 491 1 464 2 % 1 448 3% 2 955 2 220 5 264

Primary
aluminium
production
(kmt) 502 514 (2) % 505 (1) % 1 016 921 1 982

Realized
aluminium
price LME
(USD/mt) 2167 2 155 1 % 2 509 (14) % 2161 2 441 2 480

Realized
aluminium
price LME
(NOK/mt) 12637 12 404 2 % 13 803 (8)% 12523 13 724 13 884

Realized
NOK/USD
exchange rate 5.83 5.75 1 % 5.50 6 % 5.79 5.62 5.60

Metal
products
sales,
total Hydro
(kmt) 857 872 (2) % 877 (2) % 1728 1 649 3 303

Rolled
Products
sales volumes
to external
market (kmt) 228 227 - 242 (6) % 455 487 929

Extruded
Products
sales volumes
to external
market (kmt) 137 133 3 % 142 (4) % 270 278 536

Power
production
(GWh) 2 513 3 190 (21) % 1 830 37% 5 703 4 138 9 582
---------------------------------------------------------------------------

*********

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.

Q2 Report:http://hugin.info/106/R/1628685/521565.pdf

Q2 presentation:http://hugin.info/106/R/1628685/521566.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

[HUG#1628685]

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