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Norsk Hydro ASA — Earnings Release 2019
Feb 7, 2020
3684_rns_2020-02-07_b2fdf876-35bc-4ddf-8541-37f669b5df09.html
Earnings Release
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Norsk Hydro: Fourth quarter 2019: Firm response in weak markets
Norsk Hydro: Fourth quarter 2019: Firm response in weak markets
Hydro's underlying earnings before financial items and tax was NOK 560 million
in the fourth quarter, a slight increase from NOK 534 million in the same
quarter last year. This mainly reflected positive effects from increased
production in Brazil, lower raw material costs and positive currency effects,
mostly offset by a decrease in the realized aluminium and alumina prices.
* Underlying EBIT of NOK 560 million
* Challenging markets weighing on results
* BNOK 1 in improvement program delivered in 2019, above target of BNOK 0.5
* Cash release ahead of target in 2019
* Increasing sales of low-carbon products
* Proposed dividend for 2019 of NOK 1.25 per share
"We have taken firm measures in a weak market. Our improvement program as well
as cash release ambition are ahead of plan. Our improvement efforts will
continue with full force, in line with our agenda towards lifting profitability
and driving sustainability," says President and CEO Hilde Merete Aasheim.
"The increasing pull for low-carbon products and solutions is an encouraging
trend and we are well positioned for a low-carbon future. Since we launched
CIRCAL one year ago, we have signed 60 new low-carbon building projects around
the world," says Aasheim.
Underlying EBIT for Bauxite & Alumina decreased compared to the fourth quarter
of last year, from NOK 493 million in Q4 2018 to negative NOK 75 million in Q4
2019. The results were driven by a decrease in the realized alumina sales price,
partly offset by positive effects from increased production following the
lifting of the production embargo on May 20, 2019, and positive currency
effects.
Underlying EBIT for Primary Metal increased from negative NOK 677 million in Q4
2018 to positive NOK 155 million in Q4 2019, mainly due to lower raw material
cost and positive currency effects, partly offset by lower all-in metal prices.
Underlying EBIT for Metal Markets declined from NOK 275 million in Q4 2018 to
NOK 132 million in Q4 2019 due to lower results from the remelters and negative
currency effects.
Underlying EBIT for Rolled Products increased, from negative NOK 113 million in
Q4 2018 to positive NOK 34 million in Q4 2019. The result from the rolling mills
was stable. The Neuss smelter result increased, driven by lower raw material
costs and insurance compensation, partly offset by lower all-in metal prices.
Underlying EBIT for Extruded Solutions decreased compared to the same quarter
last year, from NOK 202 million in Q4 2018 to NOK 85 million in Q4 2019. Results
in all business units were lower than the same quarter last year, mainly driven
by lower volumes due to the declining market, partially offset by higher
margins. Results were positively impacted by insurance compensation of NOK 187
million related to the cyber-attack in March 2019.
Underlying EBIT for Energy decreased significantly from NOK 500 million in Q4
2018 to NOK 296 million in Q4 2019. The decrease was mainly due to lower
production and somewhat lower prices, partly offset by higher commercial
results.
Hydro's underlying EBIT for 2019 was NOK 3,359 million, down from NOK 9,069
million in 2018. The weaker results reflect lower realized aluminium and alumina
prices, partly offset by the positive effects from increased production in
Brazil, lower raw material costs and positive currency effects.
The federal court in Belém, Brazil, lifted the final embargo on Alunorte's new
bauxite residue disposal area (DRS2) on September 26, 2019, allowing Alunorte to
resume activities of installation and commissioning at DRS2, ending a 19-month
embargo period which had restricted activities at the plant. Alunorte, with an
annual production capacity of 6.3 million mt, has reached 90 percent utilization
of its capacity in the fourth quarter. Commissioning of an additional press
filter started in November. With 9 fully operational press filters we expect a
capacity utilization of 100 percent by the end of 2020.
The cyber-attack on Hydro on March 19, 2019, affected our entire global
organization, with Extruded Solutions having suffered the most significant
operational challenges and financial losses. The financial impact of the cyber-
attack is estimated to be around NOK 650-750 million for the full year. Hydro
has robust cyber insurance in place with recognized insurers. Hydro has
recognized NOK 187 million insurance compensation in the fourth quarter with the
majority reflected in Extruded Solutions result. Further compensation will be
recognized when deemed virtually certain.
As outlined on Hydro's Investor Day, new improvement programs have been launched
across the company, representing NOK 7.3 billion in EBIT improvements by end of
2023 compared to 2018. The improvements include the restart of curtailed
capacity of the Brazilian assets with the effect of NOK 2.7 billion. At the end
of the fourth quarter NOK 1.0 billion in improvements was realized, ahead of the
NOK 0.5 billion target for 2019.
Hydro's net debt position decreased from NOK 14.5 billion to NOK 11.8 billion at
the end of the quarter. Net cash provided by operating activities amounted to
NOK 5.7 billion. Net cash used in investment activities, excluding short term
investments, amounted to NOK 2.9 billion.
For 2019, Hydro's Board of Directors proposes a dividend of NOK 1.25 per share
reflecting Hydro's robust financial situation, taking into account a demanding
year for the company and the volatility in the aluminium industry. The proposed
payment demonstrates the company's commitment to provide a predictable dividend
to shareholders. Hydro has a dividend policy of 40 percent payout ratio of
reported net income over the cycle with NOK 1.25 per share considered as a
floor. The average five-year payout ratio is 68 percent.
Hydro's reported EBIT amounted to negative NOK 399 million in Q4 2019, compared
to NOK 178 million in Q4 2018.
For the full-year 2019, Hydro's reported EBIT amounted to NOK 499 million,
compared to NOK 8 522 million in 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.
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