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2016-07-21

Norsk Hydro: Second quarter 2016: Results up on higher prices and sales, offset by currency

Hydro's underlying earnings before financial items and tax rose to NOK 1,618
million in the second quarter from NOK 1,501 million in the first quarter
2016. The improved results reflected higher realized aluminium and alumina
prices and stronger sales volumes, partly offset by currency developments.

* Underlying EBIT of NOK 1,618 million
* Higher realized alumina and all-in aluminium prices, offset by currency
developments
* Higher aluminium and alumina sales
* Significantly improved Sapa results
* Better improvement program on track for 2019 target of NOK 2.9 billion
* Positive cash flow in quarter with full-year dividend payment
* Global primary aluminium demand growth expected at 4-5%

"We have lifted annual global aluminium demand growth forecast to 4-5 percent
for 2016, up from previous forecast 3-4 percent. Higher-than-expected
activity in China means that we now see primary aluminium demand in China
alone to grow by 5-7 percent in 2016. Globally, we expect a largely balanced
aluminium market for the full year, " says President and CEO Svein Richard
Brandtzæg.

"For this quarter, we see that increasing aluminium and alumina prices, along
with lower costs and higher volumes are partly offset by currency
developments," Brandtzæg says. "I am also pleased to see the continued
progress of our ambitious Better improvement programs, and I am happy to see
that we are on track to reach total improvements of NOK 2.9 billion in 2019."

Underlying EBIT for Bauxite&Alumina decreased compared to first quarter.
Positive effects from higher realized alumina prices, driven by higher
alumina index prices during the quarter, further reduction in raw material
consumption, reduced raw material prices were offset by negative currency
effects, as the BRL strengthened against the USD, and increased other costs.
Annualized production volume at the Alunorte alumina refinery increased,
approaching nameplate capacity of 6.3 million mt per year. The Paragominas
bauxite mine had lower production due to scheduled maintenance of the bauxite
ball mill in June.

Underlying EBIT for Primary Metal rose in the second quarter mainly due to
higher realized all-in metal prices, higher volumes, lower carbon costs and
seasonally lower fixed costs. This was partly offset by negative currency
effects. The result in second quarter was also positively influenced by an
insurance refund of NOK 50 million related to a power outage at the Årdal
primary aluminium plant in January, in addition to a positive effect of NOK
75 million related to a reversal of the Brazilian ICMS tax accrual on sales
of surplus power in Brazil in previous periods.

Underlying EBIT for Metal Markets declined in the second quarter mainly due to
negative currency and inventory valuation effects, in addition to somewhat
lower results from the remelters.

Rolled Products underlying EBIT remained little changed compared to the
previous quarter. Positive volume effects were offset by negative currency
effects on margins from a weakening USD versus Euro and declining results in
the Neuss primary aluminium plant mainly due to higher alumina prices.

Underlying EBIT for Energy declined compared to the previous quarter due to
seasonally lower production and higher area cost, partly offset by lower
production cost. The lower cost was mainly driven by transmission costs and
property taxes.

Underlying EBIT for Sapa, a 50/50 aluminium extruder joint venture, rose from
the previous quarter, mainly due to seasonally higher demand and stronger
margins.

Hydro's net cash position increased in the second quarter by NOK 0.8 billion
to NOK 4.8 billion at the end of the quarter. Net cash provided by operating
activities amounted to NOK 3.7 billion. Net cash used in investment
activities, excluding short term investments, amounted to NOK 0.9 billion.
Dividends paid amounted to NOK 2.0 billion in the quarter.

Reported earnings before financial items and tax amounted to NOK 1,978 million
in the second quarter. In addition to the factors discussed above, reported
EBIT included net unrealized derivative gains of NOK 32 million and positive
metal effects of NOK 17 million. Reported earnings 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 earnings 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.

In the previous quarter reported earnings before financial items and tax
amounted to NOK 1,693 million including net unrealized derivative gains and
negative metal effects of negative NOK 181 million in total. Reported
earnings also included a negative adjustment of NOK 15 million related to the
sale of the Slim rolling mill in the fourth quarter of 2015. In addition,
reported earnings included a net gain of NOK 26 million for Sapa (Hydro's
share net of tax), mainly relating to unrealized derivative gains.

Net income amounted to NOK 2,077 million in the second quarter 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. In the
previous quarter net income was NOK 2,382 million including a reduction in
tax expense and related interest income of NOK 700 million in total following
settlement of a tax case in April 2016. Reported earnings also included a net
foreign exchange gain of NOK 1,032 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 Second quarter 2016 First quarter 2016 %change prior quarter Second quarter 2015 %change prior year quarter First half 2016 First half 2015 Year 2015 |
|million, except per share data |
| |
| Revenue 20 391 20 138 1 % 22 436 (9) % 40 529 45 726 87 694 |
| Earnings before financial items and 1 978 1 693 17 % 2 698 (27) % 3 672 5 904 8 258 |
|tax (EBIT) |
| Items excluded from underlying EBIT (360) (192) (87) % (31) >(100) % (552) (29) 1 398 |
| Underlying EBIT 1 618 1 501 8 % 2 667 (39) % 3 119 5 875 9 656 |
| |
| Underlying EBIT: |
| Bauxite&Alumina 174 189 (8) % 482 (64) % 363 1 261 2 421 |
| Primary Metal 702 318 >100 % 1 448 (52) % 1 020 3 459 4 628 |
| Metal Markets 75 167 (55) % (89) >100 % 241 (65) 379 |
| Rolled Products 242 248 (2) % 315 (23) % 491 607 1 142 |
| Energy 301 398 (24) % 179 68 % 699 560 1 105 |
| Other and eliminations 125 181 (31) % 333 (63) % 306 51 (19) |
| Underlying EBIT 1 618 1 501 8 % 2 667 (39) % 3 119 5 875 9 656 |
| |
| Underlying EBITDA 2 862 2 716 5 % 3 880 (26) % 5 578 8 317 14 680 |
| |
| Net income (loss) 2 077 2 382 (13) % 2 064 1 % 4 459 3 136 2 333 |
| Underlying net income (loss) 1 126 822 37 % 1 830 (38) % 1 949 4 036 6 709 |
| |
| Earnings per share 0.95 1.12 (15) % 0.94 1 % 2.08 1.4 0.99 |
| Underlying earnings per share 0.52 0.39 32 % 0.83 ...

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