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Second quarter of 2016: better results with sales and rising prices, offset by the exchange rate

Hydro's earnings before interest and taxes were NOK 1.61 billion (R $ 615 million) in the second quarter of 2016, compared to the previous quarter's result of NOK 1.5 billion (R $ 573 million). The improvement in results reflects the increase in the realized price of aluminum and alumina and the increase in sales volume, offset by the exchange rate variation in the same period.

  • Underlying EBIT: NOK 1.61 billion (R $ 615 million).
  • Higher realized prices for alumina and all-in aluminum, but offset by exchange rate fluctuations.
  • Higher sales of aluminum and alumina.
  • Significantly better results at Sapa.
  • Better improvement program on track to reach the NOK 2.9 billion (R $ 1.1 billion) target by 2019;
  • Positive cash flow in the quarter, with dividends paid throughout the year.
  • Expected to increase the global demand for primary aluminum to 4-5%.

"At the moment, we have an expectation of 4-5% growth in annual global aluminum demand for the year 2016, compared to the previous expectation of 3-4%. The above-expected increase in activities in China makes with our expectation, only in China, of a 5-7% growth in primary aluminum demand in 2016. In global terms, we see that the market is quite balanced for the whole year ”, said the President and CEO, Svein Richard Brandtzæg.

"In this quarter, higher aluminum and alumina prices, cost reductions and increased sales were partly affected by currency fluctuations," said Brandtzæg. "But I am pleased to see that we continue to make progress with our ambitious Better improvement program. It is a pleasure to see that we are on track to reach the target of NOK 2.9 billion (R $ 1.1 billion) by 2019. "

EBIT for the Bauxite & amp; Alumina fell when compared to the first quarter. The positive effect of higher realized alumina prices, as a result of higher indexed prices for alumina during the quarter, the continued reduction in consumption and lower raw material costs were affected by the lower exchange rate, with the strengthening of the real against the dollar and the increase in other costs. The annual production volume of the Hydro Alunorte alumina refinery increased again, approaching even more the nominal capacity of 6.3 million tons per year. The Hydro Paragominas bauxite mine reduced its production as a result of planned maintenance at the ball mill in June.

The Primary Metal area EBIT was better in the second quarter, especially because of the higher realized all-in prices, lower costs of carbon emissions and also lower seasonal fixed costs, which were partially affected by exchange rate fluctuations negative results for the period. However, the quarter was also positively influenced by the reimbursement of NOK 50 million (R $ 19 million) of insurance due to a power outage at the primary aluminum plant in Aardal in January, and also by the positive effect of a reversal of NOK 75 million (R $ 28 million) of ICMS tax calculated on the sale of surplus energy in Brazil in previous periods.

The decrease shown in the EBIT of Mercados de Metal in the second quarter was the result, in general, of the negative exchange effects and inventory valuation effects, in addition to the somewhat lower results of the refineries.

The Rolled Products area had an EBIT close to that of the previous quarter. The positive effect of its sales volumes was offset by the negative exchange rate effect on margins, weakened by a lower dollar against the euro and less favorable results at the primary aluminum plant Neuss, which suffered from higher alumina prices. < / p>

EBIT in the Energy area showed a decline compared to the previous quarter, basically due to the seasonal fall in production and the increase in costs in the area, which were partly offset by the reduction in production costs. The drop in costs was driven mainly by lower transmission values and equity taxes.

At Sapa, an extrusion company in which Hydro owns 50% of the shares, EBIT was higher than in the first quarter, due to greater seasonal demand and higher margins.

The net cash of this quarter surpassed that of the first quarter by NOK 0.8 billion (R $ 306 million), reaching NOK 4.8 billion (R $ 1.8 billion) at the end of the period. Net cash from operating activities totaled NOK 3.7 billion (R $ 1.4 billion). The net cash used for investment activities, not including short-term activities, totaled NOK 0.9 billion (R $ 344 million). Dividends paid amounted to NOK 2 billion (R $ 765 million) in the period. & Nbsp;

Earnings reported before interest and taxes totaled NOK 1.97 billion (R $ 753 million) in the second quarter. In addition to the factors presented above, reported EBIT includes net unrealized derivative gains of NOK 32 million (R $ 12 million) and positive effects of NOK 17 million metal (R $ 6.5 million). Reported profits also include a cost of NOK 67 million (R $ 25 million) related to environmental commitments in Kurri Kurri, a gain of NOK 342 million (R $ 130 million) from the sale of certain assets in Grenland, including the Herøya industrial park , and a negative adjustment of NOK 13 million (R $ 4.9 million) related to the sale of the Slim rolling mill in the fourth quarter of 2015. In addition, reported earnings include a net gain of NOK 49 million (R $ 18.7 million) from Sapa (Hydro's net after-tax quota), referring to unrealized derivative gains and net foreign exchange gains.

In the previous quarter, earnings reported before interest and taxes had been NOK 1.69 billion (R $ 646 million), including unrealized derivative gains and negative effects of the metal in the order of NOK 181 million (R $ 69 million) in all. Reported profits also included a negative adjustment of NOK 15 million (R $ 5.7 million) related to the sale of the rolling mill & nbsp; Slim in the fourth quarter of 2015, in addition to a net profit of NOK 26 million (R $ 9.9 million) from Sapa (Hydro's net quota after taxes), mainly from unrealized derivative gains.

Net revenue totaled NOK 2.07 billion (R $ 791 million) in the second quarter, including a net foreign exchange gain of NOK 904 million (R $ 345 million), which mainly reflect the strengthening of the real against the US dollar, which it affected dollar-denominated debt in Brazil, as well as the strengthening of the Norwegian krone against the euro, which affected euro bonds in Norway and foreign exchange derivatives integrated into energy contracts. In the previous quarter, net revenue had been NOK 2.38 billion (R $ 910 million), already counting a reduction in tax expenses and interest income in line with NOK 700 million (R $ 267 million) as a result of a April 2016 tax process. Reported profits also included net foreign exchange gains of NOK 1.03 billion (R $ 393 million) linked to the strengthening of the real against the US dollar, affecting dollar obligations in Brazil, and the strengthening of the crown Norwegian currency against the euro, which affected euro bonds in Norway and foreign exchange derivatives integrated into energy contracts.

In English:

NOK million, except per share data Second quarter 2016 First & nbsp; quarter 2016 % change prior quarter Second quarter 2015 % change prior year quarter First half 2016 First half 2015 Year 2015
Key financial information
Revenue 20,391 20,138 1% 22,436 (9)% 40,529 45,726 87,694
Earnings before financial items and tax (EBIT) 1,978 1,693 17% 2,698 (27)% 3,672 5.904 8,258
Items excluded from underlying EBIT (360) (192) (87)% (31) & gt; (100)% (552) (29) 1,398
& nbsp;
Underlying EBIT 1,618 1.501 8% 2,667 (39)% 3,119 5,875 9,656
& nbsp;
Bauxite & amp; Alumina 174 189 (8)% 482 (64)% 363 1,261 2,421
Primary Metal 702 318 & gt; 100% 1,448 (52)% 1,020 3,459 4,628
Metal Markets 75 167 (55)% (89) & gt; 100% 241 (65) 379
Rolled Products 242 248 (2)% 315 (23)% 491 607 1,142
Energy 301 398 (24)% 179 68% 699 560 1.105
Other and eliminations 125 181 (31)% 333 (63)% 306 51 (19)
Underlying & nbsp; EBIT 1,618 1.501 8% 2,667 (39)% 3,119 5,875 9,656
& nbsp;
Underlying EBITDA 2,862 2,716 5% 3,880 (26)% 5,578 8,317 14,680
& nbsp;
Net income (loss) 2,077 2,382 (13)% 2,064 1% 4,459 3,136 2,333
Underlying net income (loss) 1,126 822 37% 1,830 (38)% 1,949 4,036 6.709
& nbsp;
Earnings per share 0.95 1.12 (15)% 0.94 1% 2.08 1.40 0.99
Underlying earnings per share 0.52 0.39 32% 0.83 (38)% 0.91 1.78 2.98
& nbsp;
Financial data:
Investments 1,711 1,970 (13)% 1,192 44% 3,681 1.993 5,865
Adjusted net interest-bearing debt (8,758) (9.206) 5% (11,000) 20% (8,758) (11,000) (8,173)
& nbsp;
& nbsp; Key Operational information
Bauxite production (kmt) 2,609 2,682 (3)% 2,232 17% 5,292 4,366 10,060
Alumina production (kmt) 1,554 1,517 2% 1,437 8% 3,071 2,888 5,962
Primary aluminum production (kmt) 518 514 1% 509 2% 1,032 1.005 2,046
Realized aluminum price LME (USD / mt) 1,546 1,497 3% 1.803 (14)% 1,522 1,851 1,737
Realized aluminum price LME (NOK / mt) 12,826 12,950 (1)% 13,923 (8)% 12,887 14,160 13,813
Realized USD / NOK exchange rate 8.30 8.65 (4)% 7.72 7% 8.47 7.65 7.95
Rolled Products sales volumes to external market (kmt) 238 229 4% 243 (2)% 467 471 948
Sapa sales volumes 50% (kmt) 183 174 5% 179 2% 358 355 682
Power production (GWh) 2,674 3,160 (15)% 2.103 27% 5,835 5,173 10,894

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