Norsk Hydro AS Norsk Hydro: Fourth Quarter 2016: Higher Alumina And Aluminium Prices Lift Results

 
TIDMNHY 
 
 
   Hydro's underlying earnings before financial items and tax rose to NOK 
1,829 million in the fourth quarter from NOK 1,477 million in the third 
quarter. Higher realized alumina and aluminium prices lifted results for 
the quarter, partly offset by seasonally higher costs and lower 
aluminium product sales. Hydro expects continued healthy demand for 
aluminium and aluminium products, forecasting global primary demand 
growth at 3-5 percent in 2017. 
 
 
   -- Underlying EBIT of NOK 1 829 million 
 
   -- Higher realized all-in aluminium and alumina prices 
 
   -- Record production at Alunorte and Paragominas 
 
   -- Weak Rolled Products results on lower sales and margins, increased costs 
 
   -- NOK 1.4 billion Better improvements in 2016 vs NOK 1.1 billion target 
 
   -- Karmøy Technology Pilot and new automotive line on time and budget 
 
   -- Proposed dividend for 2016 of NOK 1.25 per share 
 
   -- 2017 global primary demand growth outlook of 3-5%, global market largely 
      balanced 
 
 
   "Demand for aluminium remains firm and prices have increased, 
contributing to a solid quarter for Hydro. I am particularly pleased to 
see more and more car producers choosing aluminium for light-weighting 
and climate purposes. I am eager to see our new Rolled Products 
automotive line in Germany ramping up this year to meet the rapidly 
growing automotive demand," says President and CEO, Svein Richard 
Brandtzæg. 
 
   "We have made better-than-expected progress in our Better improvement 
efforts, delivering 1.4 billion NOK in improvements in 2016. These 
efforts will continue with full force in 2017, making Hydro's operations 
more robust across the value chain and the company well positioned for a 
better, bigger and greener future," says Brandtzæg. 
 
   Underlying EBIT for the Bauxite & Alumina business area increased 
significantly compared to the third quarter, due to higher realized 
alumina prices, driven by a higher alumina index and aluminium prices on 
the London Metal Exchange. Both the Paragominas bauxite mine and the 
Alunorte alumina refinery reached record yearly production in 2016 of 
11.1 million mt and 6.3 million mt, respectively. There was also a 
significant positive effect from the settlement of a compensation 
arrangement related to the acquisition of Paragominas in 2011, which was 
realized in combination with acquisition of the remaining shares in 
Paragominas. 
 
   "I am very pleased to see the record safety results for Hydro in 2016. 
Combined with record yearly production results at both the Paragominas 
bauxite mine and the Alunorte alumina refinery in Brazil, these results 
demonstrate our long-term commitment to operational excellence," says 
Brandtzæg. 
 
   Underlying EBIT for the Primary Metal business area decreased slightly 
in the fourth quarter. Lower volumes and seasonally higher fixed costs 
were largely offset by higher realized aluminium prices. 
 
   "The Karmøy Technology Pilot, aiming to verify the world's most 
energy and climate-efficient aluminium production, is well under way. We 
expect the first metal to be produced at the new plant during the fourth 
quarter 2017," says Brandtzæg. 
 
   Underlying EBIT for Metal Markets improved in the fourth quarter, mainly 
due to improved results from sourcing and trading activities, partly 
offset by somewhat lower results from remelters. 
 
   Underlying EBIT for the Rolled Products business area was significantly 
lower compared to the third quarter of 2016, primarily due to seasonally 
lower volumes, reduced margins, higher maintenance activities and higher 
costs. In addition, depreciation increased somewhat due to the start-up 
of the new automotive line in Grevenbroich, Germany, in the fourth 
quarter. The USD strengthening against the Euro contributed positively 
and the Neuss aluminium plant result improved due to an increase in the 
all-in metal price. 
 
   Underlying EBIT for the Energy business area increased compared to the 
previous quarter, mainly due to higher prices, lower area cost and 
improved contribution from commercial activities, partly offset by lower 
production. Production costs were lowered by seasonally lower property 
taxes, but partly offset by higher transmission cost and higher 
maintenance activity. Area cost declined later in the quarter in line 
with better transmission capacity and improved hydrology in Mid-Norway. 
 
   Underlying EBIT for the Sapa joint venture decreased compared to the 
previous quarter, mainly due to seasonally lower market demand. 
 
   For the full year, underlying EBIT decreased to NOK 6,425 million 
compared with NOK 9,656 million in 2015, mainly due to a decrease in 
realized alumina prices and all-in metal prices, partly compensated by 
positive currency effects, lower raw material costs and ongoing 
improvement efforts. In 2016, Bauxite & Alumina achieved record 
production at both Paragominas and Alunorte, Sapa performance continued 
to improve, while Rolled Products delivered a weaker result, driven by 
lower margins and higher costs. 
 
   Hydro made good progress on its "Better" improvement ambition targeting 
NOK 2.9 billion of annual improvements by 2019. For 2016, NOK 1.4 
billion of annual improvements was delivered, exceeding the 1.1 billion 
target. 
 
   Hydro's net cash position increased during the fourth quarter by NOK 0.6 
billion to NOK 6.0 billion at the end of the quarter. Net cash provided 
by operating activities amounted to NOK 4.2 billion. Net cash used in 
investment activities, excluding short term investments, amounted to NOK 
2.4 billion. 
 
   For 2016, Hydro's Board of Directors proposes an increased dividend of 
NOK 1.25 per share, demonstrating the company's commitment to provide a 
predictable and competitive cash return to shareholders, and taking into 
account the volatility in the aluminium industry. The proposed payment 
represents a 40% percent pay-out ratio of reported net income for the 
year reflecting Hydro's operational performance for 2016 and strong 
financial position. 
 
   Hydro's Board of Directors has revised the company's dividend policy to 
reflect the ambition to pay a stable or increasing dividend. Hydro's 
policy is in the long term to pay out, on average, 40 percent of 
reported net income as dividend over the cycle. 
 
   Reported earnings before financial items and tax amounted to NOK 1,964 
million in the fourth quarter. In addition to the factors discussed 
above, reported EBIT included net unrealized derivative gains of NOK 106 
million and positive metal effects of NOK 68 million. Reported earnings 
also included a charge of NOK 285 million reflecting partial write-down 
of capitalized costs due to a design review of the part-owned projected 
CAP alumina refinery and a compensation of NOK 254 million relating to 
the completion of outstanding contractual arrangements with Vale, both 
in Brazil. In addition, reported earnings included a charge of NOK 32 
million relating to a change in interest rate used in the calculation of 
environmental liabilities linked to idled sites in Germany, and a net 
gain of NOK 23 million in Sapa (Hydro's share net of tax) relating to 
unrealized derivative gains, rationalization charges and net foreign 
exchange gains. 
 
   In the previous quarter reported earnings before financial items and tax 
amounted to NOK 1,376 million including net unrealized derivative gains 
of NOK 100 million and positive metal effects of NOK 48 million. 
Reported EBIT also included a charge of NOK 124 million relating to the 
demolition of the Kurri Kurri site and an impairment charge of NOK 140 
million relating to the decision to divest the Hannover site. In 
addition, reported earnings included a net gain of NOK 15 million in 
Sapa (Hydro's share net of tax) relating to unrealized derivative gains, 
rationalization charges and net foreign exchange gains. 
 
   For the full year 2016, reported earnings before financial items and tax 
amounted to NOK 7,011 million including net unrealized derivative gains 
and positive metal effects of NOK 553 million in total. Reported 
earnings also included charges of NOK 192 million relating to the 
demolition of the Kurri Kurri site, impairment charges of NOK 426 
million relating to the part-owned projected CAP alumina refinery and 
the Hannover site, a net gain of NOK 314 million relating to the sale of 
certain assets in Grenland, in addition to a negative adjustment 
relating to the sale of the Slim rolling mill in the fourth quarter of 
2015. Other positive effects of NOK 223 million reflects the 
compensation relating to the completion of outstanding contractual 
arrangements with Vale and the charge of NOK 32 million relating to 
re-measurement of environmental liabilities in Germany. In addition, 
reported earnings included a net gain of NOK 113 million for Sapa 
(Hydro's share net of tax), relating to unrealized derivative gains, 
rationalization charges and net foreign exchange gains. 
 
   In the previous year, reported earnings before financial items and tax 
amounted to NOK 8,258 million including net unrealized derivative gains 
and negative metal effects of 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 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 331 million for Sapa (Hydro's share net of 
tax) relating to unrealized derivative losses, rationalization charges 
and net foreign exchange losses, together with a compensation of NOK 37 
million relating to insurance proceeds in Qatalum. 
 
   Net income amounted to NOK 1,008 million in the fourth quarter including 
a net foreign exchange loss of NOK 26 million mainly reflecting the 
strengthening Euro versus Norwegian kroner affecting liabilities in Euro 

in Norway and embedded currency derivatives in power contracts. 
 
   In the previous quarter net income was NOK 1,119 million including a net 
foreign exchange gain of NOK 358 million mainly reflecting the 
strengthening Norwegian kroner versus Euro affecting liabilities in Euro 
in Norway and embedded currency derivatives in power contracts. 
 
   In 2016 net income amounted to NOK 6,586 million including a net foreign 
exchange gain of NOK 2,266 million. The net foreign exchange gain in 
2016 was mainly comprised of unrealized currency gains on US dollar debt 
in Brazil and embedded derivatives in power contracts denominated in 
Euro. The net foreign exchange gain also included gains on internal debt 
denominated in Euro. 
 
   In the previous year income amounted to NOK 2,333 million including a 
net foreign exchange loss of NOK 4,397 million. The net foreign 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. 
 
 
 
 
                                                                                          % change 
                                                     Fourth    Third   % change  Fourth    prior 
Key financial information                            quarter  quarter   prior    quarter    year     Year     Year 
 NOK million, except per share data                   2016     2016    quarter    2015    quarter     2016    2015 
 
Revenue                                               21 250   20 174       5 %   20 374       4 %   81 953   87 694 
Earnings before financial items and tax (EBIT)         1 964    1 376      43 %      725    >100 %    7 011    8 258 
Items excluded from underlying EBIT                    (135)      101  >(100) %      841  >(100) %    (586)    1 398 
Underlying EBIT                                        1 829    1 477      24 %    1 566      17 %    6 425    9 656 
 
Underlying EBIT : 
Bauxite & Alumina                                        711      153    >100 %      532      34 %    1 227    2 421 
Primary Metal                                            601      637     (6) %      407      48 %    2 258    4 628 
Metal Markets                                            152      117      30 %      152         -      510      379 
Rolled Products                                            6      211    (97) %      204    (97) %      708    1 142 
Energy                                                   359      285      26 %      353       2 %    1 343    1 105 
Other and eliminations                                   (1)       75  >(100) %     (83)      99 %      380     (19) 
Underlying EBIT                                        1 829    1 477      24 %    1 566      17 %    6 425    9 656 
 
Earnings before financial items, tax, depreciation 
 and amortization (EBITDA)                             3 563    2 792      28 %    2 128      67 %   12 485   13 282 
Underlying EBITDA                                      3 143    2 753      14 %    2 969       6 %   11 474   14 680 
 
Net income (loss)                                      1 008    1 119    (10) %      541      86 %    6 586    2 333 
Underlying net income (loss)                             968      958       1 %    1 296    (25) %    3 875    6 709 
 
Earnings per share                                      0.52     0.53     (2) %     0.23    >100 %     3.13     0.99 
Underlying earnings per share                           0.47     0.46       2 %     0.59    (21) %     1.83     2.98 
 
Financial data: 
Investments                                            3 541    1 914      85 %    2 556      39 %    9 137    5 865 
Adjusted net interest-bearing debt                   (5 598)  (8 072)      31 %  (8 173)      32 %  (5 598)  (8 173) 
Underlying Return on average Capital Employed 
 (RoaCE)                                                                                              5.1 %    9.2 % 
 
Key Operational information 
 
Bauxite production (kmt)                               3 063    2 777      10 %    2 959       4 %   11 132   10 060 
Alumina production (kmt)                               1 635    1 635         -    1 577       4 %    6 341    5 962 
Primary aluminium production (kmt)                       526      526         -      521       1 %    2 085    2 046 
Realized aluminium price LME (USD/mt)                  1 647    1 612       2 %    1 555       6 %    1 574    1 737 
Realized aluminium price LME (NOK/mt)                 13 659   13 375       2 %   13 125       4 %   13 193   13 813 
Realized USD/NOK exchange rate                          8.29     8.30         -     8.44     (2) %     8.38     7.95 
Rolled Products sales volumes to external market 
 (kmt)                                                   213      231     (7) %      229     (7) %      911      948 
Sapa sales volumes (kmt)                                 155      170     (9) %      156         -      682      682 
Power production (GWh)                                 2 551    2 946    (13) %    2 882    (11) %   11 332   10 894 
 
   Investor contact 
 
   Contact Stian Hasle 
 
   Cellular [phone] 
 
   E-mail [e-mail] 
 
   Press contact 
 
   Contact Halvor Molland 
 
   Cellular [phone] 
 
   E-mail [e-mail] 
 
   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. 
 
   Q4 2016 Presentation: http://hugin.info/106/R/2077029/781251.pdf 
   Q4 2016 Report: http://hugin.info/106/R/2077029/781247.pdf 
 
   This announcement is distributed by Nasdaq Corporate Solutions on behalf 
of Nasdaq Corporate Solutions clients. 
 
   The issuer of this announcement warrants that they are solely 
responsible for the content, accuracy and originality of the information 
contained therein. 
 
   Source: Norsk Hydro via Globenewswire 
 
 
  http://www.hydro.com/en/?WT.mc_id=Pressrelease 
 

(END) Dow Jones Newswires

February 09, 2017 00:59 ET (05:59 GMT)

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