Hydro's underlying earnings before financial items and tax increased to NOK
2,676 million in the third quarter, up from NOK 2,446 million for the same
quarter last year, reflecting higher all-in aluminium and alumina
prices, positive currency effects and strong contribution from the Energy
business area. Continued production curtailment at the Alunorte alumina
refinery and increased raw material costs had a negative impact.
* Underlying EBIT of NOK 2 676 million
* Alunorte, Paragominas and Albras producing at 50%, affecting results
negatively
* Technical and social agreements signed with Brazilian authorities
* Higher realized all-in aluminium and alumina prices
* Increased raw material and fixed costs
* Higher power prices lift result in Energy
* Stable downstream results
* Better improvement program hit by Alunorte situation, will not reach 2018
target
* 2018 global primary market expected in deficit
* Continued market uncertainty on US tariffs, Rusal sanctions and Alunorte
situation
"The third quarter reflected our continued challenges at Alunorte and increased
raw material costs, while higher aluminium and alumina prices, as well as
strong Energy results, contributed positively. The market for aluminium
is tightening, and we expect the 2018 global primary market in deficit," says
President and CEO Svein Richard Brandtzæg.
Underlying EBIT for Bauxite & Alumina increased compared to the third quarter of
last year. Higher realized alumina sales prices and positive currency effects
were partly offset by higher raw material prices and the effects of reduced
production at both Alunorte and Paragominas.
An expense of NOK 519 million relating to the technical and
social agreements was recognized as items excluded from underlying EBIT in
Bauxite & Alumina in the third quarter.
"Signing the technical and social agreements in Brazil in September was a
step in the right direction towards normalized production. We continue the
dialogue with the authorities with the aim to resume full production at
Alunorte, but the timing remains uncertain," says Brandtzæg.
Underlying EBIT for Primary Metal declined compared to the third quarter last
year due to higher raw material and fixed costs, partly offset by higher all-in
metal prices. In addition, there was a positive contribution from the sale of
excess power following the production curtailment of the Albras smelter in
Brazil.
Underlying EBIT for Metal Markets decreased compared to the third quarter of
last year. Negative currency effects and a lower contribution from sourcing and
trading activities were somewhat offset by improved results from the remelters.
Underlying EBIT for Rolled Products decreased slightly compared to the third
quarter of 2017. Increasing margins and improved performance from automotive
line 3 were offset by cost increases. Results for the Neuss smelter decreased,
the positive effects of the new power contract, the UBC line and all-in metal
price development were more than offset by increasing raw material prices.
Underlying EBIT for Extruded Solutions remained stable compared to the pro forma
underlying EBIT for the third quarter 2017. The positive effect of higher
margins and sales volumes were offset by increased production costs in
connection with the ramp-up of new product lines in Europe, in addition
to negative effects from a lower Midwest Premium and section 232 tariffs in
North America. Additional costs due to the integration and restructuring of the
two recently acquired Brazilian extrusion plants also had a negative effect on
the quarter.
Underlying EBIT for Energy increased significantly compared to the same quarter
in the previous year. The increase was mainly due to significantly higher prices
and higher production, partly offset by negative effects from the repricing of
an internal power contract with the Neuss smelter.
Due to the situation in Alunorte, Hydro's "Better" improvement program will not
reach the 2018 target of NOK 500 million.
Hydro's net debt position decreased from NOK 7.5 billion to NOK 6.5 billion at
the end of the quarter. Net cash provided by operating activities amounted to
NOK 2.6 billion. Net cash used in investment activities, excluding short term
investments, amounted to NOK 1.5 billion.
In addition to the factors discussed above, reported earnings before financial
items and tax (EBIT) and net income include effects that are disclosed in
the below table. Items excluded from underlying EBIT and underlying net income
(loss) are defined and described as part of the APM section in the quarterly
report.
Key financial
information
Change
NOK million, Third Third prior Second Change First 9 First 9
except per quarter quarter year quarter prior months months
share data 2018 2017 quarter 2018 quarter 2018 2017 Year 2017
----------------------------------------------------------------------------------------
Revenue 39 766 22 799 74 % 41 254 (4) % 120 991 70 416 109 220
Earnings before
financial items
and tax (EBIT) 2 057 2 323 (11) % 2 986 (31) % 8 344 7 678 12 189
Items excluded
from underlying
EBIT 620 123 >100 % (274 ) >100 % 192 (18 ) (974 )
----------------------------------------------------------------------------------------
Underlying EBIT 2 676 2 446 9 % 2 713 (1) % 8 535 7 660 11 215
----------------------------------------------------------------------------------------
Underlying EBIT
:
Bauxite &
Alumina 685 413 66 % 364 88 % 1 789 1 831 3 704
Primary Metal 861 1 298 (34) % 755 14 % 2 439 3 684 5 061
Metal Markets (3 ) 91 >(100)% 237 >(100)% 412 359 544
Rolled Products 82 95 (13) % 212 (61) % 526 285 380
Extruded
Solutions 497 957 (48) % 2 188 284
Energy 652 368 77 % 417 56 % 1 347 1 075 1 531
Other and
eliminations (97 ) 181 >(100)% (229 ) 58 % (165 ) 426 (289 )
----------------------------------------------------------------------------------------
Underlying EBIT 2 676 2 446 9 % 2 713 (1) % 8 535 7 660 11 215
----------------------------------------------------------------------------------------
Earnings before
financial
items, tax,
depreciation
and
amortization
(EBITDA) 3 890 3 766 3 % 4 860 (20) % 13 942 11 863 18 344
Underlying
EBITDA 4 510 3 889 16 % 4 586 (2) % 14 134 11 845 17 369
----------------------------------------------------------------------------------------
Net income
(loss) 925 2 184 (58) % 2 073 (55) % 5 074 5 585 9 184
----------------------------------------------------------------------------------------
Underlying net
income (loss) 1 696 1 785 (5) % 2 096 (19) % 5 994 5 580 8 396
----------------------------------------------------------------------------------------
Earnings per
share 0.37 1.00 (63) % 1.03 (64) % 2.42 2.59 4.30
----------------------------------------------------------------------------------------
Underlying
earnings per
share 0.74 0.82 (10) % 1.02 (27) % 2.81 2.61 3.95
----------------------------------------------------------------------------------------
Financial data:
----------------------------------------------------------------------------------------
Investments 2 051 1 424 44 % 1 620 27 % 4 990 4 216 28 848
Net cash(debt) (6 471 ) 7 697 >(100)% (7 528 ) 14 % (6 471 ) 7 697 (4 118 )
Adjusted net (20
cash (debt) (18380 ) (2 976 ) >(100)% 209 ) 9 % (18 380 ) (2 976 ) (17 968 )
----------------------------------------------------------------------------------------
Change
Third Third prior Second Change First 9 First 9
Key Operational quarter quarter year quarter prior months months
information 2018 2017 quarter 2018 quarter 2018 2017 Year 2017
----------------------------------------------------------------------------------------
Bauxite
production
(kmt) 1 286 3 043 (58) % 1 348 (5) % 4 960 8 386 11 435
Alumina
production
(kmt) 821 1 605 (49) % 829 (1) % 2 926 4 704 6 397
Realized
alumina price
(USD/mt) 460 297 55 % 430 7 % 417 300 326
Primary
aluminium
production
(kmt) 497 527 (6) % 492 1 % 1 503 1 566 2 094
Realized
aluminium price
LME (USD/mt) 2 194 1921 14 % 2183 - 2171 1859 1915
Realized
USD/NOK
exchange rate 8.16 8.07 1 % 7.92 3 % 7.99 8.35 8.30
Rolled Products
sales volumes
to external
market (kmt) 235 236 - 251 (6) % 731 716 940
Extruded
Solutions sales
volumes to
external market
(kmt) 343 170 >100 % 373 (8) % 1 078 527 845
Power
production
(GWh) 2 888 2 509 15 % 2 550 13 % 7 871 7 746 10 835
----------------------------------------------------------------------------------------
Items excluded
from underlying First
EBIT and net Third Third Second First 9 9
income quarter quarter quarter months months
NOK million 2018 2017 2018 2018 2017 Year 2017
----------------------------------------------------------------------
Unrealized
derivative
effects on LME
related
contracts 436 (30 ) (306 ) 17 80 220
Unrealized
derivative
effects on
power and raw
material
contracts (183 ) 7 92 (178 ) 155 246
Metal effect,
Rolled Products (153 ) 151 (60 ) (166 ) (273 ) (419 )
Significant
rationalization
charges and
closure costs - - - - - 210
Alunorte
agreements -
provision 519 - - 519 - -
Other effects - - - - - 212
Transaction
related effects
(Sapa) - - - - - (1463 )
Items excluded
in equity
accounted
investments
(Sapa) - (6 ) - - 19 19
----------------------------------------------------------------------
Items excluded
from underlying
EBIT 620 123 (274 ) 192 (18 ) (974 )
----------------------------------------------------------------------
Net foreign
exchange
(gain)/loss 257 (520 ) 306 895 180 875
Calculated
income tax
effect (105 ) 123 (8 ) (167 ) (41 ) (564 )
Other
adjustments to
net income - (125 ) - - (125 ) (125 )
----------------------------------------------------------------------
Items excluded
from underlying
net income 772 (398 ) 24 920 (5 ) (788 )
----------------------------------------------------------------------
Income (loss)
tax rate 43 % 22 % 19 % 28 % 24 % 17 %
Underlying
income (loss)
tax rate 32 % 26 % 19 % 26 % 26 % 24 %
----------------------------------------------------------------------
Investor contact
Stian Hasle
+47 97736022
Stian.Hasle@hydro.com
Press contact
Halvor Molland
+47 92979797
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.
Attachments
* Q3 2018 Report (https://prlibrary-eu.nasdaq.com/Resource/Download/0c68d84f-
17b6-4000-9f9b-e65547d99126)
* Q3 2018 Presentation (https://prlibrary-
eu.nasdaq.com/Resource/Download/8074fe09-c55c-47b2-b434-270bddfd184e)