Norsk Hydro ASA — Earnings Release 2017

Jul 25, 2017

Norsk Hydro: Results up on higher aluminium prices

Norsk Hydro: Results up on higher aluminium prices

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

2,930 million in the second quarter from NOK 2,284 million in

the first quarter, mainly driven by higher aluminium prices and favourable

currency developments. Lower realized alumina prices and increased raw material

costs had a negative impact on results.

·   Underlying EBIT of NOK 2 930 million

·   Higher realized aluminium prices, somewhat offset by lower realized alumina

prices and higher raw material costs

·   Weak Rolled Products results primarily due to reduced margins linked

to product mix and operational issues

·   Record quarterly result in Sapa

·   Better program on track for 2017 target of NOK 500 million

·   Agreement to acquire Sapa, closing expected in second half 2017

·   Karmøy Technology Pilot on time and budget, expected start-up Q4 2017

·   2017 global primary demand growth outlook 4-6%, global market largely

balanced

"Higher aluminium prices in the quarter are lifting results, and I am pleased to

see Sapa delivering record results, continuing the strong trend," says President

& CEO, Svein Richard Brandtzæg. "Hydro will confirm its position as the world's

leading integrated aluminium company with the agreement to acquire Orkla's 50

percent interest in world-leading extrusion company Sapa. The transaction

reinforces our strategic direction to become better, bigger and greener, with a

solid asset base, unique competencies and capabilities along the full value

chain," says Brandtzæg. Closing is expected in the second half of 2017, pending

regulatory approvals.

Underlying EBIT for Bauxite & Alumina decreased from the first quarter. Lower

realized alumina prices, driven by a weaker alumina index and higher raw

material consumption weighed on results, while higher sales volumes contributed

positively. The Alunorte alumina refinery and the Paragominas bauxite mine had

higher production in the second quarter following planned maintenance in

the first quarter. The ongoing ramp-up process of the new press filter operation

to remove and recycle caustic soda from bauxite residue caused additional cost

at the alumina refinery.

Underlying EBIT for Primary Metal increased in the second quarter due to higher

realized all-in metal prices, partly offset by higher raw material costs.

Underlying EBIT for Metal Markets improved significantly in the second quarter,

mainly due to positive inventory valuation and currency effects, in

addition to better results from sourcing and trading activities. Results from

remelters also improved in the second quarter driven by increased sales volumes

and contribution margins.

"We see a global primary aluminium deficit in the quarter. This is driven by

increasing deficit outside China. For the full year, we are maintaining our 4-6

percent annual aluminium demand growth outlook for 2017 and expect a largely

balanced, global aluminium market," says Brandtzæg.

Underlying EBIT for Rolled Products decreased in the quarter compared to the

first quarter of 2017. The decrease was primarily due to reduced average margins

driven by product mix, and an accrual for employee compensation mainly relating

to previous years. The operational issues in the first quarter were partly

resolved, reducing the negative cost effects on the second quarter results. The

Neuss aluminium plant benefited from the all-in metal price development and

lower alumina cost.

Underlying EBIT for Energy decreased compared to the previous quarter, mainly

due to seasonally lower production and prices.

Underlying EBIT for Sapa increased compared to the previous quarter, delivering

record quarterly result, in line with general seasonality in the industry but

also related to improved performance.

Hydro continued to make progress on its "Better" improvement program. While

slightly behind plan, Hydro still expects to reach both the year-end target of

NOK 500 million and the 2019 target of NOK 2.9 billion.

Hydro's net cash position increased by NOK 0.1 billion to NOK 6.0 billion at the

end of the quarter. Net cash provided by operating activities amounted to NOK

4.3 billion, including dividends received from Sapa of NOK 1.5 billion

and operating capital build-up due to seasonality and higher prices. Net cash

used in investment activities, excluding short term investments, amounted to NOK

1.1 billion. During the second quarter dividends paid to Norsk Hydro ASA

shareholders amounted to NOK 2.6 billion.

Reported earnings before financial items and tax amounted to NOK 2,946 million

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

EBIT included net unrealized derivative losses of NOK 66 million and

positive metal effects of NOK 138 million. Reported earnings also included

a net loss of NOK 56 million in Sapa (Hydro's share net of tax) relating

to unrealized derivative losses and net foreign exchange losses.

Net income amounted to NOK 1,562 million in the second quarter. This includes a

net foreign exchange loss, mainly unrealized, of NOK 918 million reflecting

a weakening of BRL against USD affecting US dollar debt in

Brazil, while the strengthening of EUR forward rates against NOK resulted in

an unrealized loss on the embedded derivatives in power contracts denominated in

EUR.

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 2017 2017 quarter 2016 quarter 2017 2016 2016

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Revenue 24,591 23,026 7 % 20,391 21 % 47,617 40,529 81,953

Earnings

before

financial

items and tax

(EBIT) 2,946 2,410 22 % 1,978 49 % 5,356 3,672 7,011

Items

excluded from

underlying

EBIT (16) (126) 87 % (360) 96 % (141) (552) (586)

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Underlying

EBIT 2,930 2,284 28 % 1,618 81 % 5,214 3,119 6,425

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Underlying

EBIT :

Bauxite &

Alumina 662 756 (12) % 174 >100 % 1,418 363 1,227

Primary Metal 1,486 900 65 % 702 >100 % 2,386 1,020 2,258

Metal Markets 244 24 >100 % 75 >100 % 268 241 510

Rolled

Products 84 106 (21) % 242 (65) % 191 491 708

Energy 284 423 (33) % 301 (6) % 707 699 1,343

Other and

eliminations 170 74 >100 % 125 37 % 245 306 380

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Underlying

EBIT 2,930 2,284 28 % 1,618 81 % 5,214 3,119 6,425

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Earnings

before

financial

items, tax,

depreciation

and

amortization

(EBITDA) 4,335 3,762 15 % 3,222 35 % 8,097 6,131 12,485

Underlying

EBITDA 4,319 3,637 19 % 2,862 51 % 7,956 5,578 11,474

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Net income

(loss) 1,562 1,838 (15) % 2,077 (25) % 3,401 4,459 6,586

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Underlying

net income

(loss) 2,214 1,580 40 % 1,126 97 % 3,795 1,949 3,875

-------------------------------------------------------------------------------

Earnings per

share 0.73 0.86 (16) % 0.95 (24) % 1.59 2.08 3.13

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Underlying

earnings per

share 1.04 0.75 38 %  0.52 >100 %  1.79  0.91  1.83

-------------------------------------------------------------------------------

Financial

data:

-------------------------------------------------------------------------------

Investments 1,420 1,372 4 % 1,711 (17) % 2,792 3,681 9,137

Adjusted net

cash (debt) (5,146) (5,358) 4 % (8,758) 41 % (5,146) (8,758) (5,598)

Key

Operational

information

-------------------------------------------------------------------------------

Bauxite

production

(kmt) 2,943 2,400 23 % 2,609 13 % 5,343 5,292 11,132

Alumina

production

(kmt) 1,576 1,523 3 % 1,554 1 % 3,099 3,071 6,341

Primary

aluminium

production

(kmt) 523 516 1 % 518 1 % 1,039 1,032 2,085

Realized

aluminium

price LME

(USD/mt)  1,902  1,757 8 %  1,546 23 %  1,828  1,522  1,574

Realized

aluminium

price LME

(NOK/mt)  16,265  14,798 10 %  12,826 27 %  15,517  12,887  13,193

Realized

USD/NOK

exchange rate 8.55 8.42 2 % 8.30 3 % 8.49 8.47 8.38

Rolled

Products

sales volumes

to external

market (kmt) 239 241 (1) % 238 0 % 480 467 911

Sapa sales

volumes (kmt) 180 178 1 % 183 (2) % 357 358 682

Power

production

(GWh) 2,369 2,869 (17) % 2,674 (11) % 5,238 5,835 11,332

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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.