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Fourth quarter of 2014: Record results, more robust market and good performance

Norsk Hydro ASA's earnings before interest and taxes (LAJIR) increased to NOK 2 886 million in the fourth quarter, compared to NOK 1 490 million in the third quarter. The result of the Bauxite & amp; Alumina and Primary Metal were the highest since 2007.

  • Record quarterly WASH of NOK 2 886 million
  • Proposed NOK 1 per share dividend for 2014
  • Review of the dividend policy - 40% of net revenue above the cycle
  • Higher realization prices for alumina and all-in metal *, supported by favorable exchange rates
  • Better operational performance at Alunorte and Paragominas
  • Decision on investment in the Karmøy technology pilot project

Higher realized prices for aluminum, premium products and realized prices for alumina had a significantly positive impact in the fourth quarter, along with the strengthening of the US dollar compared to the Norwegian krone and the real.

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THE LAJIR of Bauxite & amp; Alumina was substantially higher in the period, reflecting higher realized prices for alumina, higher sales volumes and lower operating costs at Alunorte, coupled with favorable exchange rates. Bauxite production grew to 10.2 million metric tons in the period, if annualized.

"It is a great satisfaction to see the highest reported quarterly results since we became an integrated aluminum company in 2007. For the second consecutive quarter, we see a solid improvement in operating costs at Alunorte and Paragominas, as well as an increase in level of production, reflecting the robustness of our operations ”, comments Brandtzæg. Due to our commitment to shareholders, the Board of Directors proposed that the annual dividend be increased from NOK 0.75 to NOK 1.00 per share and, at the At the same time, it revised the dividend policy from 30% to 40% of net revenue above the cycle, ”said Brandtzæg.

The underlying LAJIR of the Primary Metal business area was substantially better in the fourth quarter, influenced by better aluminum prices and premium products. The strengthening of the US dollar, compared to the Norwegian krone and the real, also had a strong impact on the quarter's results.

“After ESA approved financial support last week, I am delighted that we have decided to move forward with the technology pilot project in Karmøy. The project will demonstrate the next generation of technology to produce aluminum with the lowest energy consumption in the world and with the lowest possible CO2 footprint per ton of metal, ”said Brandtzæg.

"We will not stop working with improvements in 2015, both at an operational and commercial level, because, as the prospects for return have improved, the time has come to really show the value of our culture of improvements", highlights Brandtzæg.

The results for the fourth quarter of the Primary Metal business area were also better than the previous quarter, influenced by exchange effects and improved remelting operations, results that were partially neutralized by outsourcing and trading activities.

The underlying LAJIR of the Rolled Products business area fell compared to the third quarter of 2014, especially due to weaker seasonal volumes. Margins remain under pressure, although partially offset by foreign exchange gains from export sales.

The positive contribution of all-in prices at Rheinwerk had a positive effect on the area's results.
Compared with the third quarter, the LAJIR of the Energy business area grew at the pace of increased production. The SAJIR of the joint venture Sapa declined due to lower seasonal demand.

Operating cash flow totaled NOK 4.4 billion in the fourth quarter. The net cash used for investment activities reached NOK 0.8 billion, net after sales revenues. Net debt was NOK 0.1 billion at the end of the fourth quarter, also influenced by unrealized foreign exchange losses, payment of dividends from minority interests and payment of the first of two installments of the remaining shares in Paragominas.

For the year as a whole, the underlying LAJIR more than doubled, reaching NOK 5 692 million (compared to NOK 2 725 million in 2013), under the influence of the sharp increase in all-in prices, together with the strengthening of the US dollar against the Norwegian krone and the real. After several years of highly challenging market conditions, the global aluminum market showed a significant improvement, due to the prices of all-in metal and a greater balance between supply and demand for primary metal, with a market deficit currently of approx. one million metric tons in the world outside China. The operational and commercial improvements implemented across Hydro's value chain have reinforced Hydro's ability to generate value in a situation where key market factors are better.

The Board of Directors has proposed the payment of NOK 1 of dividend per share for 2014, in order to reflect the company's strong commitment to return to its shareholders. The dividend also reflects our operating performance in 2014 and our strong financial position, as well as better earnings expectations in 2015. Hydro's Board of Directors reviewed the dividend policy and decided that dividends represented 30% to 40% of company's net results above the cycle.

Reported earnings before interest and taxes amounted to NOK 2 295 million in the fourth quarter. In addition to the factors discussed above, the reported LAJIR includes unrealized derivative losses and positive effects of the metal, which, in total, represent a loss of NOK 72 million. Reported profits also include NOK 145 million in depreciation that are linked to Hydro's laminate plant in the Italian city Slim. In addition, the reported LAJIR includes expenses of NOK 337 million (Hydro's share) related to Sapa's impairment and reorganization, and other expenses of NOK 36 million.

In the previous quarter, earnings reported before interest and taxes amounted to NOK 1 937 million, including unrealized derivative gains and positive effects of NOK 476 million in total. Reported profits also include other expenses of NOK 30 million.

Losses from continuing operations totaled NOK 168 million in the fourth quarter, in which NOK 2 252 million is the result of net foreign exchange losses. In the previous quarter, revenues from continuing activities amounted to NOK 665 million, including net foreign exchange losses of NOK 1.001 million.

* All-in price: aluminum price on the London Stock Exchange + additional premium.

In English:

Key financial information
NOK million, except per share data Fourth
quarter
2014
Third
quarter
2014
% change prior quarter Fourth
quarter
2013
% change prior year quarter Year
2014
Year 2013
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Revenue 21,656 19,698 10% 16,570 31% 77,907 64,877
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Earnings before financial items and tax (EBIT) 2,295 1,937 19% (14) & gt; 100% 5,674 1,663
Items excluded from underlying EBIT 591 (447) & gt; 100% 485 22% 18 1,063
Underlying EBIT 2,886 1,490 94% 471 & gt; 100% 5,692 2,725
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Underlying EBIT: & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Bauxite & amp; Alumina 528 (26) & gt; 100 (379) & gt; 100% (55) (1,057)
Primary Metal 1,989 1,216 64% 484 & gt; 100% 3,937 1,422
Metal Markets 221 171 29% 190 17% 634 594
Rolled Products 96 243 (60)% 100 (3)% 698 615
Energy 360 234 54% 383 (6)% 1,197 1,653
Other and eliminations (308) (349) 12% (306) (1)% (717) (502)
Underlying EBIT 2,886 1,490 94% 471 & gt; 100% 5,692 2,725
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Underlying EBITDA 4,170 2,615 59% 1,619 & gt; 100% 10,299 7.306
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Underlying income (loss) from discontinued operations - - - - - - 220
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Net income (loss) (168) 665 & gt; (100)% (758) 78% 1,228 (839)
Underlying net income (loss) 1,979 1,043 90% 140 & gt; 100% 3,728 1,610
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Earnings per share (0.18) & nbsp; 0.29 & gt; (100)% & nbsp; (0.39) & nbsp; 53% & nbsp; & nbsp; 0.39 (0.45) & nbsp;
Underlying earnings per share 0.83 0.43 96% 0.02 & gt; 100% 1.55 0.65
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;   & nbsp;
Financial data: & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;   & nbsp;
Investments 1,449 889 63% 1,057 37% 3,625 3,761
Adjusted net interest-bearing debt (13,587) (14,061) 3% (10,128) (34)% (13,587) (10,128)
Key operational information
Alumina production (kmt) 1.501 1,478 2% 1,452 3% 5,933 5,377
Primary aluminum production (kmt) 499 487 2% 492 1% 1,958 1,944
Realized aluminum price LME (USD / mt) 1.997 1,906 5% 1,802 11% 1,850 1,902
Realized aluminum price LME (NOK / mt) 13,355 11,909 12% 10,916 22% 11,624 11,160
Realized NOK / USD exchange rate 6.69 6.25 7% 6.06 10% 6.28 5.87
Metal products sales, total Hydro & nbsp; (kmt) 780 811 (4)% 777 - 3,305 3,164
Rolled Products sales volumes to external market (kmt) 213 244 (13)% 226 (5)% 946 941
Power production (GWh) 2,823 2,170 30% 2,411 17% 10.206 10,243
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