Norsk Hydro: ICMS tax to impact bauxite and alumina business
January 29 2014 - 1:11AM
Norsk Hydro ASA's alumina refinery Alunorte in Brazil will be
subject to ICMS taxation on fuel oil starting February 1, following
a decision by the Brazilian state of Pará to change the collection
point of the ICMS tax on fuel-oil purchases. Assuming that the
decision is upheld, the estimated effect on Hydro will be an
increased cost of approximately BRL 60 million (NOK 150 million)
per quarter, which will be charged to Hydro's Bauxite & Alumina
business area. "We are concerned about the sudden changes in tax
legislation in Pará, and we are doing what we can to try to get the
decision reversed, in dialogue with Pará legislators," says
Executive Vice President and head of Bauxite & Alumina Johnny
Undeli. "Hydro's ambition is to develop robust and viable
operations in Pará and to be an enabler for sustainable growth for
this resource-rich region. In order to pursue that ambition, we
need stable and predictable framework conditions." ICMS is a tax on
goods and services, collected by Brazilian states. The aluminium
industry in Pará has an ICMS deferral, which needs to be renewed by
July 2015, resulting in an exemption on intra-state purchases of
goods and services. However, the recent changes on fuel oil will
move the collection point of ICMS from distributors to the oil
refineries, which are located outside the state of Pará. The
decision is similar to one made in 2012, when Alunorte temporarily
paid ICMS taxes on fuel oil for three quarters. The decision was
later reversed. In addition, Hydro and its supplier of electricity
have accepted to pay ICMS taxes on the purchase of electricity by
Alunorte and the Paragominas bauxite mine in the period following
the closing of the Vale transaction on February 28, 2011. The
settlement amounts to NOK 280 million, consisting of NOK 170
million relating to ICMS taxes on electricity purchases for the
period and NOK 110 million relating to tax penalties. The
obligation to pay ICMS taxes on electricity was previously disputed
by the companies, but in light of a recent unfavorable court ruling
between an electricity supplier and state authorities, it was
accepted to make the payment, thereby enabling the electricity
supplier's participation in the Pará state tax amnesty. The amnesty
gave the opportunity to settle the tax case with significantly
reduced penalties. Going forward, ICMS charges will be charged on
electricity purchases at a rate of BRL 8 million (NOK 20 million)
per quarter, mainly increasing the cost at Paragominas. Penalties
will be treated as items excluded in the fourth quarter 2013
results, while the ICMS charge will be included in underlying
results of the same quarter. Investor contact
Contact Rikard Lindqvist
Cellular +47 41751199
E-mail Rikard.Lindqvist@hydro.com
Press contact Contact Halvor Molland
Cellular +47 92979797
E-mail Halvor.Molland@hydro.com
********* Certain statements included within this announcement
contain forward-looking information, including, without limitation,
those relating to (a) forecasts, projections and estimates, (b)
statements of management's plans, objectives and strategies for
Hydro, such as planned expansions, investments 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,
as well as (i) statements preceded by "expected", "scheduled",
"targeted", "planned", "proposed", "intended" or similar
statements. 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 aluminium business; 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 of the disclosure requirements pursuant to section 5-12 of
the Norwegian Securities Trading Act.
HUG#1757637
Norsk Hydro (NYSE:NHY)
Historical Stock Chart
From Sep 2024 to Oct 2024
Norsk Hydro (NYSE:NHY)
Historical Stock Chart
From Oct 2023 to Oct 2024