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Fourth quarter of 2011: Results affected by low prices and volumes, but solid production

Hydro's earnings before interest and taxes totaled NOK 1,133 million in the fourth quarter, compared to NOK 1,646 million in the previous quarter. Lower aluminum prices, seasonal fluctuations in demand and weaker markets had a negative influence on the quarter's results.

• NOK 1,133 million EBITDA
• Lower volumes and metal prices
• Lower product demand and seasonal fluctuations
• Solid results for Energy
• Record production in Paragominas and Qatalum
• Strengthening repositioning efforts
• Expected growth of demand by 3-5% outside China
• Proposed dividend of NOK 0.75 per share for 2011
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“Based on the ambitious improvement measures of 2011, Hydro enters the year 2012 with a robust financial situation and a good operating platform. The results for the fourth quarter reflect the downturn in the markets and the reduction in demand for aluminum and aluminum products, especially in Europe, where we will clearly have to continue the restructuring work, ”says President and CEO Svein Richard Brandtzæg. < br /> & nbsp;
«We quickly implement measures to improve operations and are prepared for many other corrective measures. In addition, we maintain our expectations for demand growth of three to five percent outside China, despite the weak macroeconomic situation and short-term challenges. However, the essence of the aluminum industry remains positive, says Brandtzæg.
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Due to deteriorating market conditions and pressure on prices, Hydro has written off assets worth NOK 1.3 billion in the quarter. Such amortizations were excluded from the underlying results.
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The underlying EBITDA for Bauxite and Alumina was lower compared to the third quarter, especially as a result of the fall in aluminum prices linked to the London Stock Exchange. Bauxite production reached a record level, thanks to better operational stability. & Nbsp;
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At Metal Primário, aluminum prices were realized at lower levels, margins were lower and sales volume was reduced, influencing the EBITDA in the fourth quarter. Production volume, on the other hand, increased, especially because of Qatalum's larger volumes.
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Hydro's midstream operations led to losses for the quarter, in response to significantly negative exchange effects. The underlying LAJIR was somewhat less, affected by the poor results of commercial activities.

The underlying EBITDA of the downstream businesses was lower than in the third quarter, impacted by the seasonal decline and the weak market trend, in particular for the European extrusion market.

Energy, on the contrary, presented solid results before interest and taxes and its & nbsp; production was high, although there was some drop compared to the third quarter.

In response to the market trend, Hydro reduced its production of refunded products, reinforced improvement programs and vitalized its financial discipline. Cost reduction and other improvement measures at Primary Metal added up to approximately one billion in 2011, compared to 2009 operating cost levels. In January 2012, Hydro decided to temporarily close 60,000 tons per year of the Kurri reflow mill capacity Kurri, Australia, due to the negative influence of low aluminum prices, the increase in raw materials and the rise of the Australian dollar. In addition, several measures were implemented to increase production efficiency and reduce costs across Hydro's downstream operations, including measures that will put Building Systems on track again - with a goal of reducing cost of 40 million euros by the end of 2012, compared to 2010 levels.

Approximately NOK one billion of the depreciation mentioned above is related to the plant in Kurri Kurri. Of the remaining amount, around NOK 230 million is related to the activities of Hydro's construction system in southern Europe. In addition, Hydro has written off about NOK 300 million of deferred tax assets from activities in Australia and southern Europe.
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In the fourth quarter, Hydro completed the sale of its stake in the Alpart aluminum refinery in Jamaica, making an after-tax profit of NOK 465 million.
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Operating cash flow totaled NOK 3.5 billion in the quarter and the net cash flow used for investments was NOK 1.3 billion. At the end of 2011, Hydro's net cash flow situation was NOK 1.7 billion.
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For the year 2011 as a whole, the underlying LAJIR increased to NOK 6,133 million in compared to NOK 3,351 million in 2010. Due to the acquisition of Vale and the conclusion of Qatalum, the realization of alumina and aluminum at higher prices and higher production volumes had a positive effect for the year.
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We still suffer from the great insecurity related to the economic trend, which can have consequences for the entire aluminum industry in general. In southern Europe, & nbsp; the market is especially expected to follow a weak development trend.

Hydro's Board of Directors has proposed that the 2011 dividend should be NOK 0.75 per share, reflecting the company's commitment to provide its shareholders with financial income.

This text is machine translated. To view the original Portuguese text, click on PT on the top right of this window

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