Norsk Hydro: First quarter 2017: Higher prices lift results, increased raw material costs
Hydro's underlying earnings before financial items and tax rose to NOK
2,284 million in the first quarter, from NOK 1,829 million in
the fourth quarter. The increase mainly reflected higher realized all-in metal
and alumina prices, somewhat offset by higher raw material costs.
· Underlying EBIT of NOK 2 284 million
· Higher realized all-in aluminium and alumina prices
· Raw material cost pressure
· Rolled Products result affected by operational issues
· Better program on schedule for 2017 target of NOK 500 million
· Karmøy Technology Pilot on time and budget for Q4 2017 start-up
· Product qualification at Automotive Line 3 in progress - ramp-up during 2017
· 2017 global primary demand growth outlook of 4-6%, global market largely
balanced
"We are raising our expected 2017 global primary demand growth outlook from 3-5
percent to 4-6 percent, and we expect a largely balanced global market. Hydro is
well positioned in this marketplace," says President and CEO, Svein Richard
Brandtzæg.
"Demand for aluminium in lightweighting and sustainable solutions continues to
grow, confirming our confidence in Hydro's integrated value chain, based on low-
carbon aluminium production," Brandtzæg says.
"Good financial and operational performance do not stand alone. It has to go
hand in hand with safety performance. In April, we experienced the most tragic
kind of accident - a fatality. We must never lose focus on our most important
task: to ensure that everyone comes home safely every day."
Underlying EBIT for Bauxite & Alumina increased compared to the fourth
quarter. Higher realized alumina prices, driven by a higher alumina index and
LME were partly offset by lower sales volumes, an increase in fuel oil and
caustic prices, and negative currency effects as the BRL strengthened against
the USD. Planned maintenance programs at Paragominas and Alunorte reduced the
bauxite and alumina production volume for the quarter. The fourth quarter was
positively influenced by NOK 151 million relating to outstanding contractual
arrangements with Vale.
Underlying EBIT for Primary Metal increased in the first quarter due to higher
realized all-in metal prices and higher volumes. This was partly offset by
significantly higher alumina costs.
Underlying EBIT for Metal Markets declined significantly in the
first quarter due to lower results from sourcing and trading activities in
addition to negative inventory valuation effects and currency effects.
Underlying EBIT for Rolled Products increased compared with the fourth quarter
2016. Seasonally higher sales volumes were partly offset by various operational
issues primarily related to the start-up of production after year end
maintenance and implementation of new equipment.
"We are opening our new 150,000 tonnes per year, state-of-the-art production
line for automotive products in Germany on May 4, raising Hydro's total
automotive capacity to 200,000 tonnes per year. Aluminium parts for the
automotive industry will lightweight millions of new cars, helping the
manufacturers to meet the lower emission targets and reducing global climate
emissions," says Brandtzæg.
Underlying EBIT for Energy increased compared to the previous
quarter. Higher production and lower area cost were somewhat offset by lower
prices and higher production cost. Production costs increased mainly due to
seasonally higher property taxes, these costs were partly offset by lower
transmission cost.
Underlying EBIT for Sapa increased compared to the previous quarter, in line
with general seasonality in the industry.
Hydro made progress on its "Better" improvement program, while slightly behind
plan, Hydro still expects to reach both the year-end target of NOK 500 million
and the 2019 target NOK 2.9 billion.
Hydro's net cash position decreased during the first quarter by NOK 0.1 billion
to NOK 5.9 billion at the end of the quarter. Net cash provided by operating
activities amounted to NOK 0.7 billion, impacted by operating capital build-up
due to seasonality and higher prices. Net cash used in investment activities,
excluding short term investments, amounted to NOK 1.2 billion.
Reported earnings before financial items and tax amounted to NOK 2,410 million
in the first quarter. In addition to the factors discussed above, reported EBIT
included net unrealized derivative losses of NOK 192 million and positive metal
effects of NOK 286 million. Reported earnings also included a net gain of NOK 32
million in Sapa (Hydro's share net of tax) relating to unrealized derivative
gains, and net foreign exchange gains.
In the previous quarter reported earnings before financial items and tax
amounted to NOK 1,964 million including 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 within
Bauxite & Alumina. 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.
Net income amounted to NOK 1,838 million in the first quarter. This includes a
net foreign exchange gain of NOK 218 million mainly reflecting the strengthening
of BRL against USD affecting USD debt in Brazil, while the weakening of EUR
forward rates against NOK gives an unrealized gain on the embedded derivatives
in power contracts denominated in EUR.
In the previous quarter net income was NOK 1,008 million 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.
Key financial
information
Change
NOK million, First Fourth Change First prior
except per quarter quarter prior quarter year
share data 2017 2016 quarter 2016 quarter Year 2016
-------------------------------------------------------------------------------
Revenue 23,026 21,250 8 % 20,138 14 % 81,953
Earnings before
financial items
and tax (EBIT) 2,410 1,964 23 % 1,693 42 % 7,011
Items excluded
from underlying
EBIT (126) (135) 7 % (192) 35 % (586)
-------------------------------------------------------------------------------
Underlying EBIT 2,284 1,829 25 % 1,501 52 % 6,425
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Underlying EBIT
:
Bauxite &
Alumina 756 711 6 % 189 >100 % 1,227
Primary Metal 900 601 50 % 318 >100 % 2,258
Metal Markets 24 152 (84) % 167 (85) % 510
Rolled Products 106 6 >100 % 248 (57) % 708
Energy 423 359 18 % 398 6 % 1,343
Other and
eliminations 74 (1) >100 % 181 (59) % 380
-------------------------------------------------------------------------------
Underlying EBIT 2,284 1,829 25 % 1,501 52 % 6,425
-------------------------------------------------------------------------------
Earnings before
financial
items, tax,
depreciation
and
amortization
(EBITDA) 3,762 3,563 6 % 2,908 29 % 12,485
Underlying
EBITDA 3,637 3,143 16 % 2,716 34 % 11,474
-------------------------------------------------------------------------------
Net income
(loss) 1,838 1,008 82 % 2,382 (23) % 6,586
-------------------------------------------------------------------------------
Underlying net
income (loss) 1,580 968 63 % 822 92 % 3,875
-------------------------------------------------------------------------------
Earnings per
share 0.86 0.52 66 % 1.12 (23) % 3.13
-------------------------------------------------------------------------------
Underlying
earnings per
share 0.75 0.47 60 % 0.39 92 % 1.83
-------------------------------------------------------------------------------
Financial data:
-------------------------------------------------------------------------------
Investments 1,372 3,541 (61) % 1,970 (30) % 9,137
Adjusted net
cash (debt) (5,358) (5,598) 4 % (9,206) 42 % (5,598)
Underlying Return on
average Capital Employed
(RoaCE) 5.3 %
-------------------------------------------------------------------------------
Key Operational
information
-------------------------------------------------------------------------------
Bauxite
production
(kmt) 2,400 3,063 (22) % 2,682 (11) % 11,132
Alumina
production
(kmt) 1,523 1,635 (7) % 1,517 0 % 6,341
Primary
aluminium
production
(kmt) 516 526 (2) % 514 0 % 2,085
Realized
aluminium price
LME (USD/mt) 1,757 1,647 7 % 1,497 17 % 1,574
Realized
aluminium price
LME (NOK/mt) 14,798 13,659 8 % 12,950 14 % 13,193
Realized
USD/NOK
exchange rate 8.42 8.29 2 % 8.65 (3) % 8.38
Rolled Products
sales volumes
to external
market (kmt) 241 213 13 % 229 5 % 911
Sapa sales
volumes (kmt) 178 155 15 % 174 2 % 682
Power
production
(GWh) 2,869 2,551 12 % 3,160 (9) % 11,332
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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
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.