Norsk Hydro AS Norsk Hydro: Results Down On Increased Raw Material Costs And Currency

 
TIDMNHY 
 
 
   Hydro's underlying earnings before financial items and tax decreased to 
NOK 2 446 million in the third quarter, down from NOK 2 930 million in 
the second quarter. The decrease mainly reflects higher raw material 
costs and negative currency effects. 
 
 
   -- Underlying EBIT of NOK 2 446 million 
 
   -- Negative result effects from raw material costs and USD depreciation 
 
   -- Weak Rolled Products results on continued operational issues and negative 
      currency effect 
 
   -- Acquisition of Sapa completed on October 2, integration progressing 
      according to plan 
 
   -- Better improvement program on track for 2019 target of NOK 2.9 billion, 
      despite 2017 setback 
 
   -- Karmøy Technology Pilot on time and budget, expected start-up Q4 
      2017 
 
   -- Positive market sentiment on announced Chinese closures, global market 
      expected largely balanced in 2017 
 
 
   "We have lifted our global demand estimate for 2017 to 5-6%, indicating 
a continued strong demand for aluminium. There is a positive market 
sentiment for aluminium, mainly driven by curtailments of primary 
production in China, which have supported the market balance in the 
quarter," says President and CEO Svein Richard Brandtzæg. 
 
   "This quarter marks a new chapter in our history, adding Extruded 
Solutions as a fifth business area in Hydro. We are now 35,000-people 
strong, with 150 sites all over the world and 30,000 customers 
throughout the entire value chain of aluminium. We have a global reach 
as well as being very close to our customers and all the communities we 
serve," says Brandtzæg. 
 
   "We now have the best-possible platform for further growth and 
opportunities, innovation and product development," says Brandtzæg. 
 
   Underlying EBIT for Bauxite & Alumina decreased compared to the second 
quarter. Higher bauxite and caustic prices, negative currency effects 
and increased depreciation, primarily in Paragominas, were partly offset 
by improved consumption factors. The ongoing ramp-up process of the new 
press filter operation caused additional cost at the alumina refinery. 
 
   Underlying EBIT for Primary Metal declined in the third quarter due to 
negative currency effects, as the NOK strengthened against the USD, in 
addition to seasonally lower volumes and higher carbon costs. This was 
partly offset by lower alumina and fixed costs. 
 
   Underlying EBIT for Metal Markets declined in the third quarter, mainly 
due to negative inventory valuation and less positive currency effects. 
Results from remelters declined in the third quarter driven by lower 
sales volumes in Europe. 
 
   Underlying EBIT for Rolled Products in the third quarter improved 
slightly compared to the second quarter of 2017. The increase was 
primarily due to an accrual for employee compensation recognized in the 
second quarter. This was partly offset by negative currency developments 
and seasonal effects including summer shutdown in certain plants. The 
Neuss smelter result was on same level compared to prior quarter. 
 
   Underlying EBIT for Energy increased compared to the previous quarter, 
mainly due to improved commercial results and higher production, partly 
offset by periodically higher property tax. 
 
   Underlying EBIT for Sapa decreased compared to the previous quarter, in 
line with general seasonality in the extrusion business. 
 
   Due to the ongoing performance challenges in Rolled Products, progress 
on Hydro's "Better" improvement program is behind plan. While Hydro does 
not expect to reach the year end target of NOK 500 million, the delay is 
not expected to impact the ability to reach the 2019 target of NOK 2.9 
billion. 
 
   Hydro's net cash position increased by NOK 1.7 billion to NOK 7.7 
billion at the end of the quarter. Net cash provided by operating 
activities amounted to NOK 3.0 billion. Net cash used in investment 
activities, excluding short term investments, amounted to NOK 1.3 
billion. 
 
   Reported earnings before financial items and tax amounted to NOK 2,323 
million for the third quarter. In addition to the factors discussed 
above, reported EBIT included net unrealized derivative gains of NOK 23 
million and negative metal effects of NOK 151 million. 
 
   Net income amounted to NOK 2,184 million in the third quarter including 
a reduction in tax expense and related interest income of NOK 125 
million in total following a closed tax case in September 2017. Net 
income also includes net foreign exchange gains of NOK 520 million, 
mainly unrealized, reflecting a weakening of USD against BRL affecting 
US dollar debt in Brazil, while the weakening of EUR forward rates 
against NOK resulted in an unrealized gain on the embedded derivatives 
in power contracts denominated in EUR. 
 
 
 
 
                                                                                         Change 
                                                      Third   Second   Change    Third    prior   First 9  First 9 
Key financial information                            quarter  quarter   prior   quarter   year    months   months    Year 
 NOK million, except per share data                   2017     2017    quarter   2016    quarter   2017     2016     2016 
 
Revenue                                               22,799   24,591    (7) %   20,174     13 %   70,416   60,703   81,953 
Earnings before financial items and tax (EBIT)         2,323    2,946   (21) %    1,376     69 %    7,678    5,047    7,011 
Items excluded from underlying EBIT                      123     (16)   >100 %      101     21 %     (18)    (451)    (586) 
Underlying EBIT                                        2,446    2,930   (17) %    1,477     66 %    7,660    4,596    6,425 
 
Underlying EBIT : 
Bauxite & Alumina                                        413      662   (38) %      153   >100 %    1,831      516    1,227 
Primary Metal                                          1,298    1,486   (13) %      637   >100 %    3,684    1,657    2,258 
Metal Markets                                             91      244   (63) %      117   (22) %      359      358      510 
Rolled Products                                           95       84     12 %      211   (55) %      285      701      708 
Energy                                                   368      284     30 %      285     29 %    1,075      983    1,343 
Other and eliminations                                   181      170      7 %       75   >100 %      426      380      380 
Underlying EBIT                                        2,446    2,930   (17) %    1,477     66 %    7,660    4,596    6,425 
 
Earnings before financial items, tax, depreciation 
 and 
 amortization (EBITDA)                                 3,766    4,335   (13) %    2,792     35 %   11,863    8,922   12,485 
Underlying EBITDA                                      3,889    4,319   (10) %    2,753     41 %   11,845    8,331   11,474 
 
Net income (loss)                                      2,184    1,562     40 %    1,119     95 %    5,585    5,578    6,586 
Underlying net income (loss)                           1,785    2,214   (19) %      958     86 %    5,580    2,906    3,875 
 
Earnings per share                                      1.00     0.73     37 %     0.53     88 %     2.59     2.61     3.13 
Underlying earnings per share                           0.82     1.04   (21) %     0.46     80 %     2.61     1.37     1.83 
 
Financial data: 
Investments                                            1,424    1,420      0 %    1,914   (26) %    4,216    5,596    9,137 
Adjusted net cash (debt)                             (2,976)  (5,146)     42 %  (8,072)     63 %  (2,976)  (8,072)  (5,598) 
 
                                                                                          Change 
                                                       Third   Second   Change    Third    prior  First 9  First 9 
                                                     quarter  quarter    prior  quarter     year   months   months     Year 
Key Operational information                             2017     2017  quarter     2016  quarter     2017     2016     2016 
Bauxite production (kmt)                               3,043    2,943      3 %    2,777     10 %    8,386    8,069   11,132 
Alumina production (kmt)                               1,605    1,576      2 %    1,635    (2) %    4,704    4,706    6,341 
Primary aluminium production (kmt)                       527      523      1 %      526      0 %    1,566    1,559    2,085 
Realized aluminium price LME (USD/mt)                  1,921    1,902      1 %    1,612     19 %    1,859    1,552    1,574 
Realized aluminium price LME (NOK/mt)                 15,496   16,265    (5) %   13,375     16 %   15,510   13,049   13,193 
Realized USD/NOK exchange rate                          8.07     8.55    (6) %     8.30    (3) %     8.35     8.41     8.38 
Rolled Products sales volumes to external market 
 (kmt)                                                   236      239    (1) %      231      3 %      716      697      911 
Sapa sales volumes (kmt)                                 170      180    (6) %      170      0 %      527      527      682 
Power production (GWh)                                 2,509    2,369      6 %    2,946   (15) %    7,746    8,781   11,332 
 
   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. 
 
   Q3 2017 Presentation: http://hugin.info/106/R/2144192/821719.pdf 
   Q3 2017 Report: http://hugin.info/106/R/2144192/821711.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

October 25, 2017 01:00 ET (05:00 GMT)

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