Norsk Hydro ASA — Earnings Release 2016

Jul 21, 2016

Norsk Hydro: Second quarter 2016: Results up on higher prices and sales, offset by currency

Norsk Hydro: Second quarter 2016: Results up on higher prices and sales, offset by currency

Hydro's underlying earnings before financial items and tax rose to NOK

1,618 million in the second quarter from NOK 1,501 million in the first quarter

2016. The improved results reflected higher realized aluminium and alumina

prices and stronger sales volumes, partly offset by currency developments.

* Underlying EBIT of NOK 1,618 million

* Higher realized alumina and all-in aluminium prices, offset by currency

developments

* Higher aluminium and alumina sales

* Significantly improved Sapa results

* Better improvement program on track for 2019 target of NOK 2.9 billion

* Positive cash flow in quarter with full-year dividend payment

* Global primary aluminium demand growth expected at 4-5%

"We have lifted annual global aluminium demand growth forecast to 4-5 percent

for 2016, up from previous forecast 3-4 percent. Higher-than-expected activity

in China means that we now see primary aluminium demand in China alone to grow

by 5-7 percent in 2016. Globally, we expect a largely balanced aluminium market

for the full year, " says President and CEO Svein Richard Brandtzæg.

"For this quarter, we see that increasing aluminium and alumina prices, along

with lower costs and higher volumes are partly offset by currency developments,"

Brandtzæg says. "I am also pleased to see the continued progress of our

ambitious Better improvement programs, and I am happy to see that we are on

track to reach total improvements of NOK 2.9 billion in 2019."

Underlying EBIT for Bauxite & Alumina decreased compared to first quarter.

Positive effects from higher realized alumina prices, driven by higher alumina

index prices during the quarter, further reduction in raw material consumption,

reduced raw material prices were offset by negative currency effects, as the BRL

strengthened against the USD, and increased other costs. Annualized production

volume at the Alunorte alumina refinery increased, approaching nameplate

capacity of 6.3 million mt per year. The Paragominas bauxite mine had lower

production due to scheduled maintenance of the bauxite ball mill in June.

Underlying EBIT for Primary Metal rose in the second quarter mainly due to

higher realized all-in metal prices, higher volumes, lower carbon costs and

seasonally lower fixed costs. This was partly offset by negative currency

effects. The result in second quarter was also positively influenced by

an insurance refund of NOK 50 million related to a power outage at the Årdal

primary aluminium plant in January, in addition to a positive effect of NOK 75

million related to a reversal of the Brazilian ICMS tax accrual on sales of

surplus power in Brazil in previous periods.

Underlying EBIT for Metal Markets declined in the second quarter mainly due to

negative currency and inventory valuation effects, in addition to somewhat lower

results from the remelters.

Rolled Products underlying EBIT remained little changed compared to the previous

quarter. Positive volume effects were offset by negative currency effects on

margins from a weakening USD versus Euro and declining results in the Neuss

primary aluminium plant mainly due to higher alumina prices.

Underlying EBIT for Energy declined compared to the previous quarter due to

seasonally lower production and higher area cost, partly offset by lower

production cost. The lower cost was mainly driven by transmission costs and

property taxes.

Underlying EBIT for Sapa, a 50/50 aluminium extruder joint venture, rose from

the previous quarter, mainly due to seasonally higher demand and stronger

margins.

Hydro's net cash position increased in the second quarter by NOK 0.8 billion to

NOK 4.8 billion at the end of the quarter. Net cash provided by operating

activities amounted to NOK 3.7 billion. Net cash used in investment activities,

excluding short term investments, amounted to NOK 0.9 billion. Dividends paid

amounted to NOK 2.0 billion in the quarter.

Reported earnings before financial items and tax amounted to NOK 1,978 million

in the second quarter. In addition to the factors discussed above, reported EBIT

included net unrealized derivative gains of NOK 32 million and positive metal

effects of NOK 17 million. Reported earnings also included a charge of NOK 67

million related to environmental commitments in Kurri Kurri, a gain of NOK 342

million for the sale of certain assets in Grenland, including Herøya Industrial

Park, and a negative adjustment of NOK 13 million related to the sale of the

Slim rolling mill in the fourth quarter of 2015. In addition, reported earnings

included a net gain of NOK 49 million in Sapa (Hydro's share net of tax),

relating to unrealized derivative gains and net foreign exchange gains.

In the previous quarter reported earnings before financial items and tax

amounted to NOK 1,693 million including net unrealized derivative gains and

negative metal effects of negative NOK 181 million in total. Reported earnings

also included a negative adjustment of NOK 15 million related to the sale of the

Slim rolling mill in the fourth quarter of 2015. In addition, reported earnings

included a net gain of NOK 26 million for Sapa (Hydro's share net of tax),

mainly relating to unrealized derivative gains.

Net income amounted to NOK 2,077 million in the second quarter including a net

foreign exchange gain of NOK 904 million mainly reflecting the strengthening BRL

versus US dollars affecting US dollar liabilities in Brazil, as well as the

strengthening Norwegian kroner versus Euro affecting liabilities in Euro in

Norway and embedded currency derivatives in power contracts. In the previous

quarter net income was NOK 2,382 million including a reduction in tax expense

and related interest income of NOK 700 million in total following settlement of

a tax case in April 2016. Reported earnings also included a net foreign exchange

gain of NOK 1,032 million mainly reflecting the strengthening BRL versus US

dollars affecting US dollar liabilities in Brazil, as well as the strengthening

Norwegian kroner versus Euro affecting liabilities in Euro in Norway and

embedded currency derivatives in power contracts.

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 2016 2016 quarter 2015 quarter 2016 2015 2015

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Revenue 20 391 20 138 1 % 22 436 (9) % 40 529 45 726 87 694

Earnings

before

financial

items and tax

(EBIT) 1 978 1 693 17 % 2 698 (27) % 3 672 5 904 8 258

Items

excluded from

underlying >(100)

EBIT (360) (192) (87) % (31) % (552) (29) 1 398

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Underlying

EBIT 1 618 1 501 8 % 2 667 (39) % 3 119 5 875 9 656

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Underlying

EBIT:

Bauxite &

Alumina 174 189 (8) % 482 (64) % 363 1 261 2 421

Primary Metal 702 318 >100 % 1 448 (52) % 1 020 3 459 4 628

Metal Markets 75 167 (55) % (89) >100 % 241 (65) 379

Rolled

Products 242 248 (2) % 315 (23) % 491 607 1 142

Energy 301 398 (24) % 179 68 % 699 560 1 105

Other and

eliminations 125 181 (31) % 333 (63) % 306 51 (19)

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Underlying

EBIT 1 618 1 501 8 % 2 667 (39) % 3 119 5 875 9 656

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Underlying

EBITDA 2 862 2 716 5 % 3 880 (26) % 5 578 8 317 14 680

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Net income

(loss) 2 077 2 382 (13) % 2 064 1 % 4 459 3 136 2 333

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Underlying

net income

(loss) 1 126 822 37 % 1 830 (38) % 1 949 4 036 6 709

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Earnings per

share 0.95 1.12 (15) % 0.94 1 % 2.08 1.4 0.99

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Underlying

earnings per

share 0.52 0.39 32 % 0.83 (38) % 0.91 1.78 2.98

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Financial

data:

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Investments 1 711 1 970 (13) % 1 192 44 % 3 681 1 993 5 865

Adjusted net

interest- (8

bearing debt (8758) (9 206) 5 % (11000) 20 % (8758) (11000) 173)

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Key

Operational

information

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Bauxite

production

(kmt) 2 609 2 682 (3) % 2 232 17 % 5 292 4 366 10 060

Alumina

production

(kmt) 1 554 1 517 2 % 1 437 8 % 3 071 2 888 5 962

Primary

aluminium

production

(kmt) 518 514 1 % 509 2 % 1 032 1 005 2 046

Realized

aluminium

price LME

(USD/mt) 1 546 1 497 3 % 1 803 (14) % 1 522 1 851 1 737

Realized

aluminium

price LME

(NOK/mt) 12 826 12 950 (1) % 13 923 (8) % 12 887 14 160 13 813

Realized

USD/NOK

exchange rate 8.30 8.65 (4) % 7.72 7 % 8.47 7.65 7.95

Rolled

Products

sales volumes

to external

market (kmt) 238 229 4 % 243 (2) % 467 471 948

Sapa sales

volumes (50%)

(kmt) 183 174 5 % 179 2 % 358 355 682

Power

production

(GWh) 2 674 3 160 (15) % 2 103 27 % 5 835 5 173 10 894

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Investor contact

Contact Stian Hasle

Cellular +47 97736022

E-mail Stian.Hasle@hydro.com

Press contact

Contact Halvor Molland

Cellular +47 92979797

E-mail Halvor.Molland@hydro.com

Cautionary note

Certain statements included in this announcement contain forward-looking

information, including, without limitation, information relating to (a)

forecasts, projections and estimates, (b) statements of Hydro management

concerning plans, objectives and strategies, such as planned expansions,

investments, divestments, curtailments 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, and (i) qualified statements such as "expected", "scheduled",

"targeted", "planned", "proposed", "intended" or similar.

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 businesses; 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.

This information is subject to the disclosure requirements pursuant to section

5-12 of the Norwegian Securities Trading Act.

[HUG#2029785]