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Third quarter 2013: Lower costs, high electricity generation

Hydro's adjusted earnings before interest and taxes (EBIT) increased to NOK 659 million in the third quarter, compared to NOK 518 million in the second quarter of 2013. The main reasons for this were higher electricity generation and lower operating costs. Lower production in the Alunorte alumina refinery weighed on the quarterly result. A milestone in the quarter was the realization of the joint venture Sapa, a global market leader for extruded products.

  • Adjusted EBIT of NOK 659 million
  • Lower costs offset weaker prices for alumina and aluminum
  • Low production at Alunorte after power outages
  • Higher electricity generation in the Energy business area
  • New joint venture Sapa founded
  • Forecast for global aluminum demand in 2013: around 2 percent growth outside of China

"I am pleased to say that we are well on the way to realizing cost savings of US $ 300 per ton in our company's smelters by the end of 2013. It's a great achievement for Hydro and our organization. Our striving to achieve the best and keep getting better is a good platform for the future, ”says Hydro Svein CEO Richard Brandtzæg.

The positive development in the third quarter was partly due to a further deterioration in adjusted earnings in the Bauxite & amp; Alumina balanced. Adjusted EBIT for Bauxite & amp; Alumina declined compared to the second quarter, mainly due to lower LME prices linked to the LME and a continued weak production volume in the Alunorte alumina refinery after the power cuts in the first half of 2013.

After the power outages at Alunorte and the resulting production interruptions in the previous months, we immediately mobilized resources to stabilize and increase production in the refinery again. After stabilization, we are now experiencing that production will gradually increase again after the interruptions, albeit from a low level, ”says Brandtzæg.

The Primary Metal business area saw an increase in adjusted EBITS despite lower aluminum prices. Lower alumina and electricity costs, higher premiums and seasonal lower fixed costs had a positive impact on adjusted earnings in the quarter. Primary Metal placed about 50 percent of its expected primary aluminum production on the market in the fourth quarter of 2013, at a price of around $ 1,800 a ton.

Adjusted EBIT in the Metal Markets segment decreased compared to the previous quarter, mainly due to the seasonally lower volume and lower margins.

Compared to the second quarter, adjusted EBIT in the Rolled Products business area was stable. Sales were lower due to the season, but operating costs also decreased.

Adjusted EBIT for the Energy business area increased compared to the second quarter. This was due to higher electricity generation and spot prices, which were influenced by low rainfall.

Cash flow from operations in the third quarter was NOK 1.1 billion. Cash flow for investing activities was NOK 0.7 billion. Hydro's net debt was approximately NOK 0.5 billion at the end of the third quarter.

Reported earnings before interest and taxes in the third quarter were NOK 597 million. Reported EBIT includes unrealized gains from derivatives and negative metal effects with a total loss of NOK 80 million, gains from sales of NOK 53 million and other items with a net loss of NOK 36 million.

The Alunorte alumina refinery and the Albras smelter in Brazil have closed additional forward exchange contracts in US dollars for the second half of 2013 and 2014. The agreed average exchange rate for the futures contracts is 2.30 and 2.41 for 2013 and 2014, respectively.

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Key financial information
NOK million, except per share data Third
quarter
2013
Second & nbsp;
quarter
2013
% change prior quarter Third
quarter
2012
% change prior year quarter First 9
months

2013
First 9
months
2012
Year
2012
& nbsp;
Revenue 16,146 16,053 1% 14,722 10% 48,309 48,596 64,181
& nbsp;
Earnings before financial items and tax (EBIT) 597 375 59% (232) & gt; 100% 1,677 (132) 571
Items excluded from underlying EBIT 62 144 (57)% 249 (75)% 577 1,257 725
Underlying EBIT 659 518 27% 16 & gt; 100% 2,254 1.125 1,297
& nbsp;
Underlying EBIT: & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Bauxite & amp; Alumina (370) (244) (51)% (386) 4% (678) (718) (791)
Primary Metal 337 237 42% (4) & gt; 100% 938 277 335
Metal Markets 111 147 (24)% 8 & gt; 100% 404 140 210
Rolled Products 182 181 1% 213 (15)% 516 567 637
Energy 485 268 81% 220 & gt; 100% 1,270 1,137 1,459
Other and eliminations (87) (70) (23)% (35) & gt; (100)% (195) (278) (553)
Underlying EBIT 659 518 27% 16 & gt; 100% 2,254 1.125 1,297
& nbsp;
Underlying EBITDA 1,753 1,624 8% 1,149 53% 5,541 4,577 5,827
& nbsp;
Underlying income (loss) from discontinued operations 57 112 (49)% 16 & gt; 100% 220 49 (5)
& nbsp;
Net income (loss) 321 (665) & gt; 100% (256) & gt; 100% (81) (1,418) (1,331)
& nbsp;
Underlying net income (loss) 393 427 (8)% (44) & gt; 100% 1,470 432 408
& nbsp;
Earnings per share 0.11 (0.31) & gt; 100% (0.15) & gt; 100% (0.06) (0.70) (0.65)
Underlying earnings per share 0.14 0.19 (26)% (0.01) & gt; 100% 0.63 0.22 0.21
& nbsp;
Financial data: & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Investments 948 612 55% 806 18% 2,615 2,275 3,382
Adjusted net interest-bearing debt & nbsp; (10,732) (11,317) 5% (12,918) 17% & nbsp; (10,732) (12,918) (8,304)
& nbsp;
Key operational information
Alumina production (kmt) 1,316 1,248 5% 1,441 (9)% 3,925 4,396 5,792
Primary aluminum production (kmt) 491 483 2% 484 1% 1,452 1,500 1,985
Realized aluminum price LME (USD / mt) 1,822 1,926 (5)% 2,022 (10)% 1,932 2,119 2,080
Realized aluminum price LME (NOK / mt) 10,938 11,217 (2)% 11,856 (8)% 11,233 12,321 12,047
Realized NOK / USD exchange rate 6.00 5.82 3% 5.86 2% 5.81 5.81 5.79
Metal products sales, total Hydro & nbsp; (kmt) 792 789 - 794 - 2,387 2,522 3,254
Rolled Products sales volumes to external market (kmt) 234 245 (5%) 228 3% 715 683 909
Power production (GWh) 2,838 2,090 36% 2,157 32% 7,831 7,860 10.307 & nbsp;

& nbsp; & nbsp;

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