Norsk Hydro ASA — Earnings Release 2015

Feb 17, 2016

Norsk Hydro : Fourth quarter 2015: Declining metal prices, lower costs and record production in Brazil

Norsk Hydro : Fourth quarter 2015: Declining metal prices, lower costs and record production in Brazil

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

1,566 million in the fourth quarter, down from NOK 2,215 million in the third

quarter of 2015. The decline mainly reflected lower aluminium and alumina prices

and a continued decline in realized premiums, partly offset by positive currency

effects. For the full year 2015, underlying EBIT climbed to NOK 9,656 million

from NOK 5,692 million in 2014, lifted by positive currency effects and

supported by successful industry-leading improvement programs across Hydro.

* Underlying EBIT of NOK 1 566 million for Q4, NOK 9 656 million for full-year

2015

* Proposed dividend for 2015 of NOK 1 per share

* Record high quarterly bauxite and alumina production

* Lower costs, including record low implied alumina cost

* Lower realized alumina and all-in aluminium prices, higher Nordic energy

prices

* Build decision for the Karmøy technology pilot

* NOK 800 million improvements delivered across the value chain in 2015

* 2016 global primary demand growth outlook of 3-4%, global market largely

balanced

"The decision to build the Karmøy technology pilot marks an important milestone

for aluminium, and our ambition to be the industry leader on technology and

innovation. We are investing for the future, challenging the current boundaries

of productivity and energy-efficiency," says President and CEO, Svein Richard

Brandtzæg.

Underlying EBIT for Bauxite & Alumina decreased compared to third quarter

primarily due to lower LME and index-linked alumina prices and higher

depreciation, partly offset by higher sales volumes and positive currency

effects from the weaker Brazilian Real. Production at both Paragominas and

Alunorte increased, reaching record levels for the quarter.

"I am very pleased with the record bauxite and alumina production in Brazil,

contributing to reaching another important milestone in the Bauxite & Alumina

business area with the successful completion of the 'From B to A' improvement

program," says Brandtzæg.

"Following several, successful improvement programs in our business areas, we

recently raised our combined improvement ambition with an additional 2.9 billion

NOK by end-2019. These efforts are vital in maintaining our industry lead," says

Brandtzæg.

Underlying EBIT for Primary Metal declined in the fourth quarter due to lower

realized prices and premiums. This was partly offset by a stronger US dollar and

a decline in raw material costs mainly due to lower alumina costs. Sales volumes

were somewhat lower mainly due to seasonality.

Underlying EBIT for Metal Markets decreased in the quarter mainly due

to negative currency effects.

Compared to the third quarter of 2015, underlying EBIT for Rolled Products

declined mainly due to seasonally lower sales volumes.

In the fourth quarter, underlying EBIT for Energy increased mainly due to

higher prices from the low level in the previous quarter and lower property

taxes.

Underlying EBIT for Sapa declined compared to the third quarter mainly due to

seasonally lower demand.

Operating cash flow amounted to NOK 4.3 billion for the fourth quarter,

including a working capital reduction of NOK 1.7 billion. Cash used for

investment activities amounted to NOK 2.1 billion. Hydro's net cash position

increased during the fourth quarter by NOK 1.8 billion to NOK 5.1 billion at the

end of the quarter. At the end of 2014, Hydro had a net debt position of NOK

0.1 billion, implying a positive net cash development of NOK 5.2 billion

throughout the year.

By the end of 2015, Hydro's industry-leading improvement programs contributed

roughly NOK 4.5 billion of annual improvements compared to 2011 including

about NOK 800 million realized in 2015. For the full year, underlying EBIT

improved significantly to NOK 9,656 million from NOK 5,692 million. In

2015, Bauxite & Alumina and Rolled Products achieved the best underlying

EBIT since Hydro became a pure aluminium company in 2007, while Sapa underlying

results doubled compared to the previous year. Negative effects from lower

realized LME prices and premiums were more than offset by positive currency

effects from the stronger USD and ongoing improvement efforts.

For 2015, Hydro's Board of Directors proposes to pay a dividend of NOK 1 per

share, demonstrating the company's commitment to provide a stable cash return to

shareholders, and taking into account the uncertain market outlook. The proposed

payment represents a 101 percent payout ratio for the year reflecting Hydro's

operational performance for 2015 and strong financial position.

Reported earnings before financial items and tax amounted to NOK 725 million in

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

included net unrealized derivative gains and negative metal effects of negative

NOK 139 million in total. Reported earnings also included charges of NOK 285

million relating to the termination of the Vækerø Park lease contract and net

losses on divestments of NOK 365 million including losses of NOK 434 million

related to the sale of the Slim rolling mill and gains of NOK 69 million in

total related to sale of other assets. In addition, reported earnings included

a net charge of NOK 53 million for Sapa (Hydro's share net of tax),

including NOK 88 million relating to restructuring charges, NOK 73 million

relating to unrealized derivative gains and NOK 38 million related to net

foreign exchange losses.

In the previous quarter reported earnings before financial items and tax

amounted to NOK 1,630 million including net unrealized derivative losses and

negative metal effects of NOK 520 million in total. Reported earnings also

included a charge of NOK 65 million for Sapa (Hydro's share net of tax),

including NOK 48 million relating to restructuring charges.

Net income amounted to NOK 541 million in the fourth quarter including a net

foreign exchange gain of NOK 48 million mainly reflecting marginal currency

fluctuations and effects for the period, as well as significantly reduced US

dollar intercompany debt. In the previous quarter, net income was negative NOK

1,345 million including a net foreign exchange loss of NOK 3,205 million mainly

due to unrealized currency losses on US dollar debt, in particular in Brazil,

and embedded derivatives in power contracts denominated in Euro.

For the full year 2015, reported earnings before financial items and tax

amounted to NOK 8,258 million including net unrealized derivative gains and

negative metal effects of negative NOK 454 million in total. Reported earnings

also included charges of NOK 285 million relating to the termination of

the Vækerø Park lease contract and other positive effects amounting to NOK 37

million. In addition, reported earnings included a net charge of NOK 331 million

for Sapa (Hydro's share net of tax), including NOK 256 million relating to

restructuring charges, NOK 66 million relating to unrealized derivative losses,

a net foreign exchange loss of NOK 23 million and other positive effects of NOK

14 million.

In the previous year, reported earnings before financial items and tax amounted

to NOK 5,674 million including net unrealized derivative gains and

positive metal effects of NOK 729 million in total. Reported earnings also

included impairment charges of NOK 207 million, net charges of NOK 512 million

in Sapa mainly relating to restructuring activities and impairments of fixed

assets in China (Hydro's share NOK 250 million) and other items amounting to a

net charge of NOK 28 million.

In 2015 net income amounted to NOK 2,333 million including a net foreign

exchange loss of NOK 4,397 million. The net exchange loss in 2015 was mainly

comprised of currency losses on US dollar debt in Brazil and embedded

derivatives in power contracts denominated in Euro. The net foreign

exchange loss also included losses on US dollar debt in Norway. In the previous

year net income amounted to NOK 1,228 million including a net foreign

exchange loss of NOK 3,161 million. In 2014 the net exchange loss related mainly

to debt denominated in US dollars and intercompany balances denominated in Euro.

In 2014 the foreign exchange loss also included unrealized losses on embedded

derivatives in power contracts denominated in Euro.

Key financial

information

%change

NOK million, Fourth Third %change Fourth prior

except per quarter quarter prior quarter year Year Year

share data 2015 2015 quarter 2014 quarter 2015 2014

Revenue 20374 21594 (6) % 21656 (6) % 87694 77907

Earnings

before

financial 725 1630 (56) % 2295 (68) % 8258 5674

items and tax

(EBIT)

Items excluded

from 841 586 44 % 591 42 % 1398 18

underlying

EBIT

Underlying 1566 2215 (29) % 2886 (46) % 9656 5692

EBIT

Underlying

EBIT :

Bauxite & 532 628 (15) % 528 1 % 2421 (55)

Alumina

Primary Metal 407 762 (47) % 1989 (80) % 4628 3937

Metal Markets 152 291 (48) % 221 (31) % 379 634

Rolled 204 331 (38) % 96 >100 % 1142 698

Products

Energy 353 191 85 % 360 (2) % 1105 1197

Other and (83) 12 >(100) % (308) (73) % (19) (717)

eliminations

Underlying 1566 2215 (29) % 2886 (46) % 9656 5692

EBIT

Underlying 2969 3394 (13) % 4170 (29) % 14680 10299

EBITDA

Net income 541 (1 345) >100 % (168) >100 % 2333 1228

(loss)

Underlying net 1296 1377 (6) % 1979 (34) % 6709 3728

income (loss)

Earnings per 0.23 (0.65) >100 % (0.18) >100 % 0.99 0.39

share

Underlying

earnings per 0.59 0.61 (3) % 0.83 (29) % 2.98 1.55

share

Financial

data:

Investments 2556 1316 94 % 1449 76 % 5865 3625

Adjusted net

interest- (8173) (9272) 12 % (13587) 40 % (8173) (13587)

bearing debt

Key Operational

information

Alumina

production 1577 1498 5 % 1501 5 % 5962 5933

(kmt)

Primary

aluminium 521 520 - 499 4 % 2046 1958

production

(kmt)

Realized

aluminium 1555 1685 (8) % 1997 (22) % 1737 1850

price LME

(USD/mt)

Realized

aluminium 13125 13779 (5) % 13355 (2) % 13813 11624

price LME

(NOK/mt)

Realized

NOK/USD 8.44 8.18 3 % 6.69 26 % 7.95 6.28

exchange rate

Metal products

sales. total 779 809 (4) % 769 1 % 3186 3274

Hydro (kmt)

Rolled

Products sales

volumes to 229 248 (8) % 213 7 % 948 946

external

market (kmt)

Power 2882 2839 2 % 2823 2 % 10894 10206

production

(GWh)

Investor contact

Contact Pål Kildemo

Cellular +47 97096711

E-mail Pal.Kildemo@hydro.com

Press contact

Contact Halvor Molland

Cellular +47 92979797

E-mail Halvor.Molland@hydro.com

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, startup 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.

This information is subject to the disclosure requirements pursuant to section

5-12 of the Norwegian Securities Trading Act.

[HUG#1986594]