Indicative price and currency sensitivities 2008
| NOK mill |
Income
before tax |
Net
income |
Change |
| Aluminium price per tonne |
700 |
500 |
100 USD |
| Aluminium price per tonne excl. strategic hedges |
800 |
600 |
100 USD |
| |
|
|
|
| US dollar before financial items |
3,800 |
2,700 |
1 NOK |
| US dollar financial items |
(2,700) |
(1,900) |
1 NOK |
| US dollar Net income |
1,100 |
800 |
1 NOK |
Quick overview
Hydro faces many risks and uncertainties within the global marketplace in which we operate. Changes in competitive and market conditions may affect margin and volume developments. Complex projects are challenging in terms of timing and cost control. Our primary smelting operations are highly dependent on securing substantial amounts of energy and adequate supplies of alumina at competitive prices. We are exposed to increasing legislation on CO2 emissions.
Hydro’s main strategy for mitigating risk related to volatility in cash flows is to maintain a solid financial position and strong credit-worthiness.
Highlights
Commodity and currency exposure
Hydro’s operating results are primarily affected by price developments of its main products, aluminium and power, in addition to foreign currency fluctuation of the most significant currencies, the US dollar and the Euro, against the Norwegian Krone. Hydro’s main risk management strategy for its upstream operations is to accept exposure to aluminium and energy prices movements. Downstream and other margin-based operations are to a certain extent hedged to protect processing and manufacturing margins against raw material price fluctuations.
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