Hydro's underlying EBIT for the second quarter of 2020 was NOK 949 million,
affected by Covid-19 induced weak markets weighing on prices and volumes. Hydro
has taken forceful actions in response to the uncertain situation, protecting
people and operations, while generating cash.
* Macro uncertainty amid Covid-19, strong measures in response
* Positive cost developments, weaker prices and downstream volumes
* Record-low production costs at Alunorte
* Improvement initiatives running at full speed
* Positioning Hydro for the future
Hydro's underlying EBIT for the second quarter was NOK 949 million, compared
with NOK 875 million for the same quarter last year. The ramp-up of Alunorte's
production and reduced costs, including record low production cost at Alunorte,
contributed positively to the second quarter results. These positive elements
were partly offset by reduced realized alumina and aluminium prices in addition
to reduced downstream volumes.
"We are maneuvering through a very demanding period, and I'm pleased by our
ability to protect people and operations, keeping the wheels turning while
preserving cash. At the same time, we are positioning the company for the
future," says President and CEO Hilde Merete Aasheim.
"We aim to strengthen Hydro's position as a leading sustainable industrial
company, through our low-carbon aluminium, represented by Hydro CIRCAL and Hydro
REDUXA. We will also aim to grow and diversify our portfolio where Hydro's
capabilities match the megatrends, such as recycling, renewable energy and
batteries," says Aasheim.
Hydro has taken forceful actions in response to the uncertain situation,
including strict precautionary actions to ensure health and safety, extensive
social and community support, financial measures to protect liquidity and
operational measures to adjust capacity, curtail production and cut costs.
"As we have observed the epicenter of Covid-19 move from Europe to the Americas,
sustaining our operations in Brazil is a top priority. We have taken extensive
precautionary measures to ensure the health and safety of our people and
maintain stable operations. Operations at Paragominas, Alunorte, and Albras are
running as normal, and risks are being assessed and managed on an ongoing
basis," says Aasheim.
"We will continuously evaluate further measures as the situation develops,"
says Aasheim.
The Covid-19 situation continues to cause significant market uncertainty, with
global GDP and industrial production falling during the quarter, leading to a
reduction in aluminium demand. Although uncertainty remains high, several
countries, and especially China, are showing signs of recovery towards the end
of the second quarter.
The global fall in demand and government-imposed restrictions have directly
affected certain operations in Hydro. Extruded Solutions, Rolled Products and
recycling facilities were impacted the most, with capacity utilization starting
to improve towards the end of the quarter. Extruded Solutions and Rolled
Products are operating at reduced capacity utilization. Metal Markets recycling
facilities were operating under a combination of full curtailments or reduced
capacity utilization during the quarter but were largely back to normal
operations by the end of the quarter.
Bauxite & Alumina, Primary Metal and Energy have been operating largely as
normal during the quarter.
Hydro's improvement efforts, targeting NOK 4.1 billion by 2020 and NOK 7.3
billion by 2023, are moving forward with full speed, focusing on the cost levers
Hydro can control in these uncertain times. Although results are being
negatively impacted by the Covid-19 induced market effects, we are seeing
positive contributions from cost improvement initiatives across the portfolio,
as well as the ramp-up of the Brazilian operations. Alunorte remains on target
to reach name-plate capacity by the end of 2020. These efforts have supported
the positive cash flow generation in the quarter, a key priority in light of the
current uncertain market environment.
Extruded Solutions recognized an impairment of NOK 1.5 billion in the second
quarter, reflecting weaker growth expectations in key market segments driven by
the negative macroeconomic effects of Covid-19. Primary Metal's majority-owned
primary aluminium plant, Slovalco, recognized an impairment of NOK 0.5 billion
in the second quarter, reflecting the continued weak market environment combined
with Slovalco's relatively high cost position.
Hydro had strong liquidity at the end of the second quarter 2020 and held NOK
15.4 billion in cash and cash equivalents, including NOK 7 billion raised in the
bond market, and NOK 4.2 billion in short-term deposits, included in short-term
investments. The revolving credit facility of USD 1.6 billion was fully
available at the end of the quarter.
Hydro's net debt position decreased from NOK 15.2 billion to NOK 13.2 billion at
the end of the quarter. Net cash provided by operating activities amounted to
NOK 2.2 billion. Net cash used in investment activities, excluding short-term
investments, amounted to NOK 1.2 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
attached quarterly report. Items excluded from underlying EBIT and underlying
net income (loss) are defined and described as part of the alternative
performance measures (APM) section in the quarterly report.
Investor contact
Line Haugetraa
+47 41406376
Line.Haugetraa@hydro.com
Press contact
Halvor Molland
+47 92979797
Halvor.Molland@hydro.com
This information is subject to the disclosure requirements pursuant to Section
5-12 the Norwegian Securities Trading Act
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.