Norsk Hydro : Third quarter 2016: Higher aluminium prices, more than offset by currency and seasonality
October 25 2016 - 12:06AM
Hydro's underlying earnings before financial items and tax declined
to NOK 1,477 million in the third quarter, down from NOK 1,618
million in the second quarter. The decrease mainly reflected
seasonally lower metal sales and negative currency effects, partly
offset by higher realized aluminium prices.
- Underlying EBIT of NOK 1 477 million
- Higher realized aluminium prices, offset by currency
developments
- Record-high alumina production of 6.5 million mt
- Seasonally lower metal sales
- Trial production started at new automotive line in Germany
- Better improvement program on track for 2019 target of NOK 2.9
billion
- Global primary aluminium demand growth expected at 4-5% in
2016
"Demand growth for aluminium remains healthy. We are sticking to
our forecast for global aluminium demand growth of 4-5 percent for
2016 and expect to land in the higher range of this estimate for
the full year," says President and CEO Svein Richard Brandtzæg.
"This comes on the back of higher-than-expected demand in China and
slower restarts of curtailed capacity", says Brandtzæg. "I'm
pleased to see the positive operational development in our bauxite
and alumina production. Both Paragominas and Alunorte produced
above nameplate capacity in the third quarter, with Hydro Alunorte
alumina production reaching a record-high production level. This is
a demonstration of long-term dedication by a highly competent and
committed organization in Brazil. We have succeeded in lifting the
bar and will continue these efforts to stabilize production at or
above nameplate capacity," says Brandtzæg. Underlying EBIT for
Bauxite & Alumina decreased compared to second quarter. While
the realized alumina price remained stable, alumina sourcing costs
increased somewhat. Further reduction in raw material consumption
and reduced bauxite costs were offset by negative currency effects,
as the Brazilian Real continued to strengthen against the USD.
Annualized production volume at Hydro Alunorte reached a record 6.5
million mt per year, exceeding name-plate capacity of 6.3 million
mt per year. Hydro Paragominas also increased the production after
lower production last quarter due to ball mill maintenance.
Underlying EBIT for Primary Metal declined in the third quarter.
Lower premiums and volumes, in addition to slightly higher raw
material costs and negative currency effects, were largely offset
by higher realized aluminium prices and lower fixed costs. The
second quarter was positively influenced by an insurance refund of
NOK 50 million related to a power outage in Årdal in January 2016,
in addition to a positive effect of NOK 75 million related to a
reversal of ICMS tax accrual on sales of surplus power in Brazil in
previous periods. Underlying EBIT for Metal Markets improved in the
third quarter mainly due to less negative currency and inventory
evaluation effects, in addition to improved results from sourcing
and trading activities. Results from remelters declined mainly due
to seasonally lower volumes. Underlying EBIT for Rolled Products
was lower compared to the second quarter of 2016, mainly due to
seasonally lower volumes and changes in the product mix. The Neuss
smelter result was higher due to an increase in the all-in metal
price. Underlying EBIT for Energy declined compared to the previous
quarter due to higher production cost and higher area cost, partly
offset by higher production. The higher production cost was driven
by seasonally higher property taxes, while area cost increased
mainly due to export restrictions out of Southern Norway during the
quarter. Underlying EBIT for Sapa decreased compared to the
previous quarter, mainly due to seasonally lower market demand.
During the third quarter Hydro made progress in accordance with
plan on its "Better" improvement ambition targeting NOK 2.9 billion
of annual improvements by 2019. Hydro's net cash position increased
during the third quarter by NOK 0.6 billion to NOK 5.4 billion at
the end of the quarter. Net cash provided by operating activities
amounted to NOK 2.3 billion. Net cash used in investment
activities, excluding short term investments, amounted to NOK 1.5
billion. Reported earnings before financial items and tax amounted
to NOK 1,376 million in the third quarter. In addition to the
factors discussed above, reported EBIT included net unrealized
derivative gains of NOK 100 million and positive metal effects of
NOK 48 million. Reported earnings also included a charge of NOK 124
million related to the demolition of the Kurri Kurri site and an
impairment charge of NOK 140 million related 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. In the previous quarter reported
earnings before financial items and tax amounted to NOK 1,978
million including net unrealized derivative gains of NOK 32 million
and positive metal effects of NOK 17 million. Reported EBIT also
included a charge of NOK 67 million related to environmental
commitments in Kurri Kurri, a gain of NOK 342 million for the sale
of certain assets in Grenland, including Herøya Industrial Park,
and a negative adjustment of NOK 13 million related to the sale of
the Slim rolling mill in the fourth quarter of 2015. In addition,
reported EBIT included a net gain of NOK 49 million in Sapa
(Hydro's share net of tax), relating to unrealized derivative gains
and net foreign exchange gains. Net income amounted to NOK
1,119 million in the third quarter 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 the
previous quarter net income was NOK 2,077 million including a net
foreign exchange gain of NOK 904 million mainly reflecting the
strengthening BRL versus US dollars affecting US dollar liabilities
in Brazil, as well as the strengthening Norwegian kroner versus
Euro affecting liabilities in Euro in Norway and embedded currency
derivatives in power contracts.
Key
financial information NOK million, except per share data |
Third quarter 2016 |
Second quarter 2016 |
%change prior quarter |
Third quarter 2015 |
%change prior year quarter |
First 9 months 2016 |
First 9 months 2015 |
Year 2015 |
|
|
|
|
|
|
|
|
|
Revenue |
20,174 |
20,391 |
(1)
% |
21,594 |
(7)
% |
60,703 |
67,320 |
87,694 |
Earnings before
financial items and tax (EBIT) |
1,376 |
1,978 |
(30)
% |
1,630 |
(16)
% |
5,047 |
7,533 |
8,258 |
Items excluded from
underlying EBIT |
101 |
(360) |
>100
% |
586 |
(83)
% |
(451) |
557 |
1,398 |
Underlying EBIT |
1,477 |
1,618 |
(9) % |
2,215 |
(33) % |
4,596 |
8,090 |
9,656 |
|
|
|
|
|
|
|
|
|
Underlying EBIT : |
|
|
|
|
|
|
|
|
Bauxite &
Alumina |
153 |
174 |
(12)
% |
628 |
(76)
% |
516 |
1,889 |
2,421 |
Primary Metal |
637 |
702 |
(9)
% |
762 |
(16)
% |
1,657 |
4,221 |
4,628 |
Metal Markets |
117 |
75 |
57
% |
291 |
(60)
% |
358 |
227 |
379 |
Rolled Products |
211 |
242 |
(13)
% |
331 |
(36)
% |
701 |
938 |
1,142 |
Energy |
285 |
301 |
(5)
% |
191 |
49
% |
983 |
752 |
1,105 |
Other and
eliminations |
75 |
125 |
(40)
% |
12 |
>100
% |
380 |
63 |
(19) |
Underlying EBIT |
1,477 |
1,618 |
(9) % |
2,215 |
(33) % |
4,596 |
8,090 |
9,656 |
|
|
|
|
|
|
|
|
|
Earnings before
financial items, tax, depreciation and amortization (EBITDA) |
2,792 |
3,222 |
(13)
% |
2,808 |
(1)
% |
8,922 |
11,154 |
13,282 |
Underlying EBITDA |
2,753 |
2,862 |
(4) % |
3,394 |
(19) % |
8,331 |
11,711 |
14,680 |
|
|
|
|
|
|
|
|
|
Net
income (loss) |
1,119 |
2,077 |
(46)
% |
(1,345) |
>100
% |
5,578 |
1,791 |
2,333 |
Underlying net income (loss) |
958 |
1,126 |
(15) % |
1,377 |
(30) % |
2,906 |
5,413 |
6,709 |
|
|
|
|
|
|
|
|
|
Earnings
per share |
0.53 |
0.95 |
(44) % |
(0.65) |
>100 % |
2.61 |
0.76 |
0.99 |
Underlying earnings per share |
0.46 |
0.52 |
(11) % |
0.61 |
(25) % |
1.37 |
2.39 |
2.98 |
|
|
|
|
|
|
|
|
|
Financial
data: |
|
|
|
|
|
|
|
|
Investments |
1,914 |
1,711 |
12 % |
1,316 |
45 % |
5,596 |
3,309 |
5,865 |
Adjusted
net interest-bearing debt |
(8,072) |
(8,758) |
8 % |
(9,272) |
13 % |
(8,072) |
(9,272) |
(8,173) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Operational
information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bauxite production (kmt) |
2,777 |
2,609 |
6
% |
2,735 |
2
% |
8,069 |
7,101 |
10,060 |
Alumina production
(kmt) |
1,635 |
1,554 |
5
% |
1,498 |
9
% |
4,706 |
4,385 |
5,962 |
Primary aluminium
production (kmt) |
526 |
518 |
2
% |
520 |
1
% |
1,559 |
1,525 |
2,046 |
Realized aluminium
price LME (USD/mt) |
1,612 |
1,546 |
4
% |
1,685 |
(4)
% |
1,552 |
1,795 |
1,737 |
Realized aluminium
price LME (NOK/mt) |
13,375 |
12,826 |
4
% |
13,779 |
(3)
% |
13,049 |
14,032 |
13,813 |
Realized USD/NOK
exchange rate |
8.30 |
8.30 |
- |
8.18 |
1
% |
8.41 |
7.82 |
7.95 |
Rolled Products sales
volumes to external market (kmt) |
231 |
238 |
(3)
% |
248 |
(7)
% |
697 |
719 |
948 |
Sapa sales volumes 50%
(kmt) |
170 |
183 |
(7)
% |
171 |
- |
527 |
526 |
682 |
Power
production (GWh) |
2,946 |
2,674 |
10 % |
2,839 |
4 % |
8,781 |
8,012 |
10,894 |
Investor contact Contact Stian Hasle Cellular +47 97736022
E-mail Stian.Hasle@hydro.com
Press contact Contact Halvor Molland Cellular +47 92979797
E-mail Halvor.Molland@hydro.com
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 because 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 Rapport http://hugin.info/106/R/2051008/767308.pdf Q3
Presentasjon http://hugin.info/106/R/2051008/767309.pdf
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