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2016-02-17

Norsk Hydro : Fourth quarter 2015: Declining metal prices, lower costs and record production in Brazil

Hydro's underlying earnings before financial items and tax declined to NOK
1,566 million in the fourth quarter, down from NOK 2,215 million in the third
quarter of 2015. The decline mainly reflected lower aluminium and alumina
prices and a continued decline in realized premiums, partly offset by
positive currency effects. For the full year 2015, underlying EBIT climbed to
NOK 9,656 million from NOK 5,692 million in 2014, lifted by positive currency
effects and supported by successful industry-leading improvement programs
across Hydro.

* Underlying EBIT of NOK 1 566 million for Q4, NOK 9 656 million for
full-year 2015
* Proposed dividend for 2015 of NOK 1 per share
* Record high quarterly bauxite and alumina production
* Lower costs, including record low implied alumina cost
* Lower realized alumina and all-in aluminium prices, higher Nordic energy
prices
* Build decision for the Karmøy technology pilot
* NOK 800 million improvements delivered across the value chain in 2015
* 2016 global primary demand growth outlook of 3-4%, global market largely
balanced

"The decision to build the Karmøy technology pilot marks an important
milestone for aluminium, and our ambition to be the industry leader on
technology and innovation. We are investing for the future, challenging the
current boundaries of productivity and energy-efficiency," says President and
CEO, Svein Richard Brandtzæg.

Underlying EBIT for Bauxite&Alumina decreased compared to third quarter
primarily due to lower LME and index-linked alumina prices and higher
depreciation, partly offset by higher sales volumes and positive currency
effects from the weaker Brazilian Real. Production at both Paragominas and
Alunorte increased, reaching record levels for the quarter.

"I am very pleased with the record bauxite and alumina production in Brazil,
contributing to reaching another important milestone in the Bauxite&Alumina
business area with the successful completion of the 'From B to A' improvement
program," says Brandtzæg.

"Following several, successful improvement programs in our business areas, we
recently raised our combined improvement ambition with an additional 2.9
billion NOK by end-2019. These efforts are vital in maintaining our industry
lead," says Brandtzæg.

Underlying EBIT for Primary Metal declined in the fourth quarter due to lower
realized prices and premiums. This was partly offset by a stronger US dollar
and a decline in raw material costs mainly due to lower alumina costs. Sales
volumes were somewhat lower mainly due to seasonality.

Underlying EBIT for Metal Markets decreased in the quarter mainly due to
negative currency effects.

Compared to the third quarter of 2015, underlying EBIT for Rolled Products
declined mainly due to seasonally lower sales volumes.

In the fourth quarter, underlying EBIT for Energy increased mainly due to
higher prices from the low level in the previous quarter and lower property
taxes.

Underlying EBIT for Sapa declined compared to the third quarter mainly due to
seasonally lower demand.

Operating cash flow amounted to NOK 4.3 billion for the fourth quarter,
including a working capital reduction of NOK 1.7 billion. Cash used for
investment activities amounted to NOK 2.1 billion. Hydro's net cash position
increased during the fourth quarter by NOK 1.8 billion to NOK 5.1 billion at
the end of the quarter. At the end of 2014, Hydro had a net debt position of
NOK 0.1 billion, implying a positive net cash development of NOK 5.2 billion
throughout the year.

By the end of 2015, Hydro's industry-leading improvement programs contributed
roughly NOK 4.5 billion of annual improvements compared to 2011 including
about NOK 800 million realized in 2015. For the full year, underlying EBIT
improved significantly to NOK 9,656 million from NOK 5,692 million. In 2015,
Bauxite&Alumina and Rolled Products achieved the best underlying EBIT since
Hydro became a pure aluminium company in 2007, while Sapa underlying results
doubled compared to the previous year. Negative effects from lower realized
LME prices and premiums were more than offset by positive currency effects
from the stronger USD and ongoing improvement efforts.

For 2015, Hydro's Board of Directors proposes to pay a dividend of NOK 1 per
share, demonstrating the company's commitment to provide a stable cash return
to shareholders, and taking into account the uncertain market outlook. The
proposed payment represents a 101 percent payout ratio for the year
reflecting Hydro's operational performance for 2015 and strong financial
position.

Reported earnings before financial items and tax amounted to NOK 725 million
in the fourth quarter. In addition to the factors discussed above, reported
EBIT included net unrealized derivative gains and negative metal effects of
negative NOK 139 million in total. Reported earnings also included charges of
NOK 285 million relating to the termination of the Vækerø Park lease contract
and net losses on divestments of NOK 365 million including losses of NOK 434
million related to the sale of the Slim rolling mill and gains of NOK 69
million in total related to sale of other assets. In addition, reported
earnings included a net charge of NOK 53 million for Sapa (Hydro's share net
of tax), including NOK 88 million relating to restructuring charges, NOK 73
million relating to unrealized derivative gains and NOK 38 million related to
net foreign exchange losses.

In the previous quarter reported earnings before financial items and tax
amounted to NOK 1,630 million including net unrealized derivative losses and
negative metal effects of NOK 520 million in total. Reported earnings also
included a charge of NOK 65 million for Sapa (Hydro's share net of tax),
including NOK 48 million relating to restructuring charges.

Net income amounted to NOK 541 million in the fourth quarter including a net
foreign exchange gain of NOK 48 million mainly reflecting marginal currency
fluctuations and effects for the period, as well as significantly reduced US
dollar intercompany debt. In the previous quarter, net income was negative
NOK 1,345 million including a net foreign exchange loss of NOK 3,205 million
mainly due to unrealized currency losses on US dollar debt, in particular in
Brazil, and embedded derivatives in power contracts denominated in Euro.

For the full year 2015, reported earnings before financial items and tax
amounted to NOK 8,258 million including net unrealized derivative gains and
negative metal effects of negative NOK 454 million in total. Reported
earnings also included charges of NOK 285 million relating to the termination
of the Vækerø Park lease contract and other positive effects amounting to NOK
37 million. In addition, reported earnings included a net charge of NOK 331
million for Sapa (Hydro's share net of tax), including NOK 256 million
relating to restructuring charges, NOK 66 million relating to unrealized
derivative losses, a net foreign exchange loss of NOK 23 million and other
positive effects of NOK 14 million.

In the previous year, reported earnings before financial items and tax
amounted to NOK 5,674 million including net unrealized derivative gains and
positive metal effects of NOK 729 million in total. Reported earnings also
included impairment charges of NOK 207 million, net charges of NOK 512
million in Sapa mainly relating to restructuring activities and impairments
of fixed assets in China (Hydro's share NOK 250 million) and other items
amounting to a net charge of NOK 28 million.

In 2015 net income amounted to NOK 2,333 million including a net foreign
exchange loss of NOK 4,397 million. The net exchange loss in 2015 was mainly
comprised of currency losses on US dollar debt in Brazil and embedded
derivatives in power contracts denominated in Euro. The net foreign exchange
loss also included losses on US dollar debt in Norway. In the previous year
net income amounted to NOK 1,228 million including a net foreign exchange
loss of NOK 3,161 million. In 2014 the net exchange loss related mainly to
debt denominated in US dollars and intercompany balances denominated in Euro.
In 2014 the foreign exchange loss also included unrealized losses on embedded
derivatives in power contracts denominated in Euro.

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| Key financial information Fourth quarter 2015 Third quarter 2015 %change prior quarter Fourth quarter 2014 %change prior year quarter Year 2015 Year 2014 |
| |
| |
|NOK million, except per share data |
| Revenue 20374 21594 (6) % 21656 (6) % 87694 77907 |
| Earnings before financial items and tax (EBIT) 725 1630 (56) % 2295 (68) % 8258 5674 |
| Items excluded from underlying EBIT 841 586 44 % 591 42 % 1398 18 |
| Underlying EBIT 1566 2215 (29) % 2886 (46) % 9656 5692 |
| |
| Underlying EBIT : |
| Bauxite&Alumina 532 628 (15) % 528 1 % 2421 (55) |
| Primary Metal 407 762 (47) % 1989 (80) % 4628 3937 |
| Metal Markets 152 291 (48) % 221 (31) % 379 634 |
| Rolled Products 204 ...

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