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Fourth quarter of 2013: Lower energy production, seasonality and improvements at Alunorte

Hydro's earnings before interest and income tax (LAJIR) fell to NOK 483 million in the fourth quarter of 2013 compared to NOK 659 million in the third quarter, especially due to seasonal factors and lower hydroelectric power production.

Although the price of aluminum is lower, operating profit increased from 1.297 million in 2012 to 2.737 million in 2013, thanks to cost cuts, Qatalum's strong performance and higher premium products.

  • NOK 483 million LAJIR
  • Completion of the "300 Dollars" program with NOK 1.5 billion improvements
  • Growth in Alunorte's production that suffers from ICMS taxes
  • Primary Metal benefits from Qatalum insurance
  • Downstream businesses affected by seasonality and lower energy production
  • Proposed dividends of NOK 0.75 per share for 2013
  • Expected 2-4% growth in aluminum demand outside China in 2014

"The results of 2013 were positively impacted by the intense improvement programs, despite the fact that the market remains uncertain and the price of aluminum is low. Even if the situation remains uncertain, 2014 already shows certain positive trends, such as that world demand for aluminum outside China slightly outpaces production this year, "says Hydro’s executive chairman Svein Richard Brandtzæg.

The operating profit of Bauxita & amp; Alumina improved in the fourth quarter with the increase in production at the Alunorte refinery, after several interruptions in 2013, but was negatively influenced by the ICMS issue in the State.

"It is a pleasure to report that Alunorte's production has returned to 2012 levels and that today our supply of high quality alumina is stable, as one of our top priorities in 2014 is to stabilize and consolidate operations at Alunorte", says Brandtzæg.

"However, stable and predictable conditions are fundamental for Hydro, wherever we operate and are a prerequisite for us to develop our business in the long term. Currently, we are in dialogue with the Brazilian authorities and doing the best that we can to ensure that this is also the situation in Brazil ".

The "300 Dollars" program, aimed at Hydro's fully owned aluminum factories, was completed at the end of the year, achieving annual improvements of around NOK 1.5 billion at the end of 2013, compared to the levels of 2009 costs.

"After four years of hard work, the successful completion of the industry's most ambitious improvement program is a historic moment for Hydro. We are looking for opportunities with unbeatable strength in all parts of operations, to consolidate our robustness" says Brandtzæg.

The LAJIR of the Primary Metal business area also improved in the fourth quarter compared to the previous quarter, this time influenced by the insurance received from a fire in the cooling tower of the Qatalum plant in Qatar in 2012. Throughout the year, the Qatalum maintained its production stable and above the capacity for which it was designed, ensuring a cost position among the 10% best aluminum companies in the world.

Mercados de Metal ended the quarter with higher EBITDA, due to higher margins and better results in sales and purchasing activities.

LAJIR in the Rolled Products business area, on the other hand, declined in the fourth quarter as a result of lower seasonal volumes and more maintenance activities.

Compared to the previous quarter, the LAJIR of the Energy business area also declined in the fourth quarter, largely because energy production was lower than in the third quarter, when it was abnormally high.

At Sapa, a joint extrusion company in which Hydro holds 50% of the shares, LAJIR also fell, reflecting a seasonally lower quarter and expenses related to inventory and receivable impairments.

Operating cash flow was NOK 2.5 billion in the fourth quarter. The flow of net capital used for investments totaled NOK 0.9 billion. Hydro's net cash position increased by NOK 1.2 billion, totaling NOK 0.7 billion at the end of the period.

Reported earnings before interest and income taxes totaled a negative balance of NOK 3 million in the fourth quarter. The reported LAJIR includes unrealized derivative losses and negative effects of the metal for a total of NOK 151 million.

Reported profits also include the loss of NOK 69 million from divestment of a rolling mill in Malaysia, expenses of NOK 392 million related to the rental of Hydro's headquarters, penalties of NOK 109 million related to the settlement of taxes in Brazil and NOK 172 million expenses related mainly to the rationalization of activities at Sapa. In addition, reported earnings include gains of NOK 390 million retirement cuts from restructuring retirement plans in Norway.

Hydro's Board of Directors proposes to pay NOK 0.75 of dividends per share for 2013, reflecting the firm commitment of the company to give a return to its shareholders. The dividends also reflect our operational performance in 2013 and the strong financial position we have, already taking into account the uncertain market outlook.

In English: & nbsp;

Key financial information
NOK million, except per share data Fourth
quarter
2013
Third
quarter
2013
% change prior quarter Fourth
quarter
2012
% change prior year quarter Year
2013
Year 2012
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Revenue 16,571 16,146 3% 15,585 6% 64,880 64,181
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Earnings before financial items and tax (EBIT) (3) 597 & gt; (100)% 704 & gt; (100)% 1,674 571
Items excluded from underlying EBIT 485 62 & gt; 100% (532) & gt; 100% 1,063 725
Underlying EBIT 483 659 (27)% 172 & gt; 100% 2,737 1,297
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Underlying EBIT: & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Bauxite & amp; Alumina (379) (370) (2)% (73) & gt; (100)% (1,057) (791)
Primary Metal 484 337 44% 58 & gt; 100% 1,422 335
Metal Markets 190 111 70% 70 & gt; 100% 594 210
Rolled Products 111 182 (39)% 70 59% 627 637
Energy 383 485 (21)% 322 19% 1,653 1,459
Other and eliminations (306) (87) & gt; (100)% (275) (11)% (502) (553)
Underlying EBIT 483 659 (27)% 172 & gt; 100% 2,737 1,297
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Underlying EBITDA 1,578 1,753 (10)% 1,250 26% 7,119 5,827
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Underlying income (loss) from discontinued operations - 57 (100)% (54) 100% 220 (5)
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Net income (loss) (758) 321 & gt; (100)% 87 & gt; (100)% (839) (1,331)
Underlying net incomme (loss) 140 393 (64)% (24) & gt; 100% 1,610 408
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Earnings per share (0.39) & nbsp; 0.11 & nbsp; & gt; (100)% & nbsp; 0.06 & nbsp; & gt; (100)% & nbsp; & nbsp; (0.45) (0.65) & nbsp;
Underlying earnings per share 0.02 0.14 (83)% (0.01) & gt; 100% 0.65 0.21
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;   & nbsp;
Financial data: & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;   & nbsp;
Investments 971 948 2% 1,107 (12)% 3,586 3,382
Adjusted net interest-bearing debt (9,503) (10,732) 11% (8,304) (14)% (9,503) (8,304)
Key operational information
Alumina production (kmt) 1,452 1,316 10% 1,397 4% 5,377 5,792
Primary aluminum production (kmt) 492 491 - 485 2% 1,944 1,985
Realized aluminum price LME (USD / mt) 1,802 1,822 (1)% 1,940 (7)% 1,902 2,080
Realized aluminum price LME (NOK / mt) 10,916 10,938 - 11,069 (1)% 11,160 12,047
Realized NOK / USD exchange rate 6.06 6.00 1% 5.71 6% 5.87 5.79
Metal products sales, total Hydro & nbsp; (kmt) 777 792 (2)% 731 6% 3,164 3,254
Rolled Products sales volumes to external market (kmt) 226 234 (3)% 226 - 941 909
Power production (GWh) 2,411 2,838 (15)% 2,448 (1)% 10,243 10.307

 

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