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Third quarter of 2014: Reduced costs at Alunorte and all-in prices increase results

Norsk Hydro ASA's earnings before interest and taxes (LAJIR) increased to NOK 1.490 billion in the third quarter, compared to NOK 544 million in the second quarter. The results are a consequence of cost reductions at the Alunorte alumina refinery, higher all-in prices and better prices for alumina.

  • NOK 1.490 billion LAJIR
  • All-in metal and alumina prices achieved higher during the period
  • Lower operating costs at Alunorte
  • Expectation of 3-4% growth in demand for primary aluminum in the world outside China
  • Demand for primary aluminum in the world, outside China, continues to exceed production

"All-in metal prices continued to rise this quarter, reflecting the tougher market we saw last quarter and the continued deficit balance in the market,” said Hydro's executive chairman, Svein Richard Brandtzæg. “ The demand for aluminum is growing and we now see that the growth in demand is between three and four percent in the world, apart from China, for 2014, helped with the replacement that has been happening in the automotive market ”, explains Brandtzæg.

THE LAJIR of Bauxite & amp; Alumina improved significantly in the third quarter, reflecting higher realized alumina prices and lower operating costs at Alunorte. The realized price of alumina, however, was negatively impacted by a smaller share of sales at indexed prices.

"It is a pleasure to see that the improvement program“ From B to A ”has been progressing as planned and that the efforts made at Bauxita & amp; Alumina are being reflected in profits. Alunorte's operating costs are falling and this is a excellent opportunity to achieve our goals, ”added Brandtzæg.

The Primary Metal business area improved EBITDA substantially in the third quarter, influenced by the higher realized alumina prices and the increase in premium products. This positive development was partially affected by the increase in raw material costs and the seasonally lower sales volumes.

The EBITDA of Mercado de Metais was higher compared to the previous quarter due to a better result on the issue of supply and commercial activities and also by the positive effects of the appreciation of the stock of ingots.

The Laminated Products business area had a substantially higher EBITDA compared to the second quarter of 2014, especially due to the positive contribution of the Rheinwerk plant, which was reflected in the metal's all-in prices. There was more pressure on margins, but this was partially offset by lower seasonal costs. The volumes remained stable.

Compared to the second quarter, the LAJIR of the Energy business area was higher, mainly due to the increase in hydroelectric energy prices in our production areas and differences in lower price areas.

Sapa, however, showed a decrease in LAJIR compared to the second quarter, partly influenced by the lower sales volumes of this season in Europe.

Operating cash flow totaled NOK 1.1 billion in the third quarter, including an increase of NOK 0.9 billion in working capital. The net cash used for investment activities reached NOK 0.9 billion. Hydro's net debt was NOK 2.1 billion at the end of the third quarter.

Earnings reported before interest and taxes totaled NOK 1.937 million in the third quarter. In addition to the factors discussed above, the reported LAJIR includes net gains on realized derivatives and positive metal effects of NOK 476 million in total. Reported earnings also include NOK 30 million in other expenses.

In the previous quarter, reported earnings before interest and taxes amounted to NOK 620 million, including net gains on realized derivatives and positive metal effects of NOK 154 million in all. Reported profits also included expenses of NOK 87 million at Sapa (Hydro's share), due in particular to rationalization activities.

Revenue from continuing operations totaled NOK 665 million in the third quarter, including a net foreign exchange loss of NOK 1.001 billion. In the previous quarter, revenue from continuing operations totaled NOK 269 million, including net foreign exchange loss of NOK 101 million.

In English:

Key financial information
NOK million, except per share data Third
quarter
2014
Second & nbsp;
quarter
2014
% change prior quarter Third
quarter
2013
% change prior year quarter First 9
months

2014
First 9
months
2013
Year
2013
& nbsp;
Revenue 19,698 18,272 8% 16,145 22% 56,251 48,306 64,877
& nbsp;
Earnings before financial items and tax (EBIT) 1,937 620 & gt; 100% 596 & gt; 100% 3,379 1,677 1,663
Items excluded from underlying EBIT (447) (75) & gt; (100) 62 & gt; (100)% (573) 577 1,063
Underlying EBIT 1,490 544 & gt; 100% 658 & gt; 100% 2,806 2,254 2,725
& nbsp;
Underlying EBIT:
Bauxite & amp; Alumina (26) (269) 90% (370) 93% (583) (678) (1,057)
Primary Metal 1,216 420 & gt; 100% 337 & gt; 100% 1,948 938 1,422
Metal Markets 171 100 72% 111 54% 412 404 594
Rolled Products 243 177 37% 181 34% 601 515 615
Energy 234 169 39% 485 (52)% 838 1,270 1,653
Other and eliminations (349) (52) & gt; (100)% (87) & gt; (100)% (409) (195) (502)
Underlying EBIT 1,490 544 & gt; 100% 658 & gt; 100% 2,806 2,254 2,725
& nbsp;
Underlying EBITDA 2,615 1,653 58% 1,801 45% 6,129 5,687 7.306
& nbsp;
Underlying income (loss) from discontinued operations - - - 57 (100)% - 220 220
& nbsp;
Net income (loss) 665 269 & gt; 100% 321 & gt; 100% 1,396 (81) 839
Underlying net income (loss) 1,043 318 & gt; 100% 393 & gt; 100% 1,748 1,470 1,610
& nbsp;
Earnings per share 0.29 0.09 & gt; 100% 0.11 & gt; 100% 0.57 (0.06) (0.45)
Underlying earnings per share 0.43 0.13 & gt; 100% 0.14 & gt; 100% 0.72 0.63 0.65
& nbsp;
Financial data:
Investments 889 740 20% 975 (9)% 2,176 2,704 3,761
Adjusted net interest-bearing debt & nbsp; (14,061) & nbsp; (13,551) & nbsp; (4)% & nbsp; (10,732) & nbsp; (31)% & nbsp; (14,061) & nbsp; (10,732) & nbsp; (10,128)
& nbsp;
Key operational information
Alumina production (kmt) 1,478 15.26 (3)% 1,316 12% 4,432 3,925 5,377
Primary aluminum production (kmt) 487 488 - 491 (1)% 1,459 1,452 1,944
Realized aluminum price LME (USD / mt) 1,906 1,762 8% 1,822 5% 1,803 & nbsp; 1,932 1,902
Realized aluminum price LME (NOK / mt) 11,909 10,660 12% 10,938 9% 11,075 11,233 11,160
Realized NOK / USD exchange rate 6.25 6.05 3% 6.00 4% 6.14 5.81 5.87
Metal products sales, total Hydro & nbsp; (kmt) 811 843 (4)% 792 2% 2,525 2,387 3,164
Rolled Products sales volumes to external market (kmt) 244 245 - 234 5% 732 715 941
Power production (GWh) 2,170 2,248 (3)% 2,838 (24)% 7,382 7,831 10,243

 

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