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Norsk Hydro ASA — Earnings Release 2019
Jul 23, 2019
3684_rns_2019-07-23_fbd7226b-5187-4517-9d75-ff93a394557d.html
Earnings Release
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Norsk Hydro: Second quarter 2019: Results down on lower realized prices
Norsk Hydro: Second quarter 2019: Results down on lower realized prices
Hydro's underlying earnings before financial items and tax was NOK 875 million
in the second quarter, down from NOK 2,713 million in the same quarter last
year. This mainly reflected lower realized aluminium and alumina prices and
effects from the cyber-attack, partly offset by positive currency effects.
* Underlying EBIT of NOK 875 million
* Ramp-up progressing successfully at Alunorte, Paragominas and Albras
* Bauxite & Alumina up on increased production and currency, mostly offset by
lower realized alumina prices
* Primary Metal down on lower realized aluminium price
* Financial impact of cyber-attack estimated to NOK 250-300 million in Q2 -
main impact in Extruded Solutions
* Downstream results down on margin and volume, reflecting softening demand
* Energy down on lower volumes
* 2019 global primary aluminium market expected in deficit, demand growth
expectations for 2019 reduced to 1-2%
Underlying EBIT for Bauxite & Alumina increased compared to the second quarter
of last year, from NOK 364 million in Q2 2018 to NOK 415 million in Q2 2019. The
results were driven by positive effects from increased production following the
lifting of the production embargo on May 20, and positive currency effects
partly offset by a decrease in the realized alumina sales price.
"Alunorte reached 80-85 percent capacity utilization in June, within the
targeted 75-85 percent capacity utilization for the state-of-art press filter
technology. Paragominas and Albras are also ramping up successfully. This is a
great achievement by the Brazilian organization," says President and CEO Hilde
Merete Aasheim.
Underlying EBIT for Primary Metal declined from positive NOK 755 million in Q2
2018 to negative NOK 604 million in Q2 2019, mainly due to lower all-in metal
prices and lower margins on power sales in Brazil, somewhat offset by positive
currency effects.
"We maintain our view of a global primary aluminium market in deficit for 2019
in the range 1-1,5 million tonnes. We take down expected global primary demand
growth for 2019 to 1-2 percent, as we are seeing signs of weakening in some of
our market segments," says Aasheim.
Underlying EBIT for Metal Markets improved from NOK 237 million in Q2 2018 to
NOK 299 million in Q2 2019 due to increased results from the remelters and
higher results in the sourcing and trading activities, partly offset by negative
currency effects.
Underlying EBIT for Rolled Products decreased significantly compared to the
second quarter of 2018, from NOK 212 million in Q2 2018 to NOK 75 million in Q2
2019. The result from the rolling mills decreased, driven by lower volumes and
personnel cost increases, partly offset by positive currency effects. The Neuss
smelter result declined driven by lower all-in metal prices.
Underlying EBIT for Extruded Solutions decreased compared to the same quarter
last year, from NOK 957 million in Q2 2018 to NOK 772 million in Q2 2019.
Increased cost and reduced volumes mainly resulting from the cyberattack and a
somewhat softening market, were partly offset by higher margins.
Underlying EBIT for Energy decreased from NOK 417 million in Q2 2018 to NOK 176
million in Q2 2019. The decrease was mainly due to lower production and lower
commercial results.
The overall financial impact of the cyber-attack is estimated at NOK 250-300
million in the second
quarter 2019, of which NOK 150-200 million relates to Extruded Solutions. At the
end of the second quarter operations have largely returned to normal.
Hydro's "Better" improvement program will not reach its original 2019 target.
This is mainly due to the production embargo at Alunorte and subsequent
production curtailments at Alunorte's bauxite source Paragominas and Hydro's
part owned subsidiary Albras aluminium plant.
Hydro's net debt position increased from NOK 12.1 billion to NOK 15.1 billion at
the end of the quarter, Net cash provided by operating activities amounted to
NOK 2.6 billion. Net cash used in investment activities, excluding short term
investments, amounted to NOK 2.7 billion. During the second quarter dividends
paid to Norsk Hydro ASA shareholders amounted to NOK 2.6 billion.
Hydro's reported EBIT amounted to NOK 656 million for the second quarter 2019,
compared to NOK 2,986 million in the second quarter 2018.
In addition to the factors discussed above, reported earnings before financial
items and tax (EBIT) and net income include effects that are disclosed in the
attached quarterly report. Items excluded from underlying EBIT and underlying
net income (loss) are defined and described as part of the alternative
performance measures (APM) section in the quarterly report.
When Hilde Merete Aasheim assumed her position as Hydro's new President and CEO
May 8, Hydro announced its aim to lift profitability and drive sustainability.
Hydro will host an Investor Day on September 24 in Oslo to provide more insight
into these ambitions.
Investor contacts
Stian Hasle
+47 97736022
Olena Lepikhina
+47 96853035
Press contact
Halvor Molland
+47 92979797
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 the Norwegian Securities Trading Act