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Third quarter of 2016: higher aluminum price, offset by exchange and seasonal sales

Hydro's earnings before interest and taxes fell to NOK 1.477 billion (R $ 561 million) in the third quarter, compared to NOK 1.618 billion (R $ 614 million) in the second quarter. The decline mainly reflects the low seasonal sales of the metal and the negative currency effects, which were partially offset by higher realized aluminum prices.

  • Adjusted EBIT of NOK 1.477 billion (R $ 561 million)
  • Higher realized aluminum prices, offset by exchange rate fluctuations
  • Record alumina production of 6.5 million tonnes
  • Seasonally lower metal sales
  • Beginning of experimental production of the new automotive line in Germany
  • Improvement program “Better” on track to reach the target of NOK 2.9 billion (R $ 1.1 billion) by 2019
  • Expectation of global growth in demand for primary aluminum of & nbsp; 4-5% in 2016

"The growth in demand for aluminum remains positive. Although we maintain our forecast of a global growth in demand for aluminum of 4-5% for the year 2016, we hope to reach the top of this scale for the year as a whole” , said President and CEO Svein Richard Brandtzæg. “This expectation results from greater than expected demand in China and a slower restart of previously discontinued capabilities,” explains Brandtzæg.

"It is a great satisfaction to see that the operational development is positive in our production of bauxite and alumina. Both Hydro Paragominas and Hydro Alunorte produced above nominal capacity in the period, and the production of alumina at Hydro Alunorte reached a record level. These achievements are a demonstration of the long dedication of our highly competent and committed organization in Brazil. We have managed to go further and continue our efforts to stabilize production at or above nominal capacity, "added Brandtzæg.

The adjusted EBIT of the Bauxite & amp; Alumina was lower in the third quarter, compared to the second quarter. Although the realized price of alumina remained stable, the purchase price of alumina increased slightly. The further reductions in the consumption of raw materials and the reduced costs of bauxite were offset by the negative exchange effects, as the real continued to strengthen against the US dollar. Hydro Alunorte's annualized production reached a record of 6.5 million tons per year, exceeding the nominal capacity of 6.3 million tons per year. Production at Hydro Paragominas also increased, after a certain drop in the previous quarter due to maintenance work on a ball mill. & Nbsp; & nbsp;

Adjusted EBIT in the Primary Metal business area also declined in the third quarter. Lower sales volumes and premium products, in addition to slightly higher raw material costs and negative exchange effects, were largely offset by higher realized aluminum prices and lower fixed costs. The second quarter had the positive influence of an insurance payment of NOK 50 million (R $ 19 million), related to the power outage in Aardal in January 2016, in addition to a positive effect of NOK 75 million (R $ 28 million) related to the reversal of the increase in the ICMS tax on the sale of surplus energy in Brazil in previous periods.

The adjusted EBIT of the Metal Markets business area improved in the third quarter, especially due to the effects of less unfavorable inventory and exchange rates and, also, better results from commercial activities. The results of the refusers, in turn, decreased due to seasonally lower sales volumes.

In the Rolled Products business area, adjusted EBIT for the quarter was lower than the second quarter of 2016, mainly due to lower seasonal volumes and changes in the product mix. The smelterNeuss result, however, was higher because of the increase in the all-in price.

The adjusted EBIT of the Energy business area was lower than the previous quarter, due to higher production costs and higher area costs, which were partially offset by higher production volume. The rise in production costs was caused by seasonally higher property taxes, while area costs increased as a result of export restrictions in southern Norway during the period.

Sapa's adjusted EBIT was reduced compared to the previous quarter, in particular due to the seasonally milder market demand.

During the third quarter, Hydro moved forward as planned in its “Better” improvement program, which has an ambitious goal of saving NOK 2.9 billion (R $ 1.1 billion) & nbsp; by 2019 through of the improvements implemented ..

Hydro's net cash flow increased by NOK 0.6 billion (R $ 228 million) during the third quarter, adding up to NOK 5.4 billion (R $ 2 billion) at the end of the quarter. Net cash transferred from operating activities amounted to NOK 2.3 billion (R $ 837 million) in the period. The net cash flow used for investments, excluding short-term investments, amounted to NOK 1.5 billion (R $ 569 million).

The result reported before interest and taxes amounted to NOK 1.37 billion (R $ 522 million) in the third quarter. In addition to the factors mentioned above, reported EBIT included unrealized net gains on derivatives of NOK 100 million (R $ 38 million) and positive effects of NOK 48 million (R $ 18 million). Reported results also included expenses of NOK 124 million (R $ 47 million), related to the demolition of the facilities in Kurri Kurri and depreciation costs of NOK 140 million (R $ 53 million), related to the decision to divest in the Hannover. In addition, reported earnings included a net gain of NOK 15 million (R $ 5.7 million) at Sapa (Hydro's tax-free quota), arising from unrealized derivative gains, rationalization costs and net foreign exchange gains. < / p>

In the previous quarter, net income before interest and taxes amounted to NOK 1.97 billion (R $ 751 million), including unrealized gains in derivatives of NOK 32 million (R $ 12 million) and positive effects of NOK metal 17 million (R $ 6.5 million). Reported EBIT also included a cost of NOK 67 million (R $ 25 million), related to environmental commitments in Kurri Kurri, a profit of NOK 342 million (R $ 130 million) from the sale of certain assets in Grenland, including the industrial park Heroeya, and a negative adjustment of NOK 13 million (R $ 5 million), related to the sale of the Slim rolling mill in the fourth quarter of 2015. & nbsp; Reported EBIT also included a net gain of NOK 49 million (R $ 19 million) at Sapa (Hydro's tax-free quota), resulting from unrealized gains on derivatives and net foreign exchange gains.

Net revenue totaled NOK 1.12 billion (R $ 425 million) in the third quarter, including a net foreign exchange gain of NOK 358 million (R $ 136 million), which reflects the consolidation of the Norwegian krone against the euro , affecting Norway's euro debts and foreign exchange derivatives included in energy supply contracts.

In the past quarter, net revenue totaled NOK 2.07 billion (R $ 788 million) and included a net foreign exchange gain of NOK 904 million (R $ 343 million), which mainly reflected the consolidation of the real in against the US dollar and that affected dollar debts in Brazil, as well as the consolidation of the Norwegian krone against the euro, which, in turn, affected euro debt in Norway and foreign exchange derivatives included in energy supply contracts.

In English:
NOK million, except per share data Third quarter 2016 Second & nbsp; quarter 2016 % change prior quarter Third quarter 2015 % change prior year quarter First 9 months 2016 First 9 months 2015 Year 2015
Key financial information
Revenue 20,174 20,391 (1)% 21,594 (7)% 60,703 67,320 87,694
Earnings before financial items and tax (EBIT) 1,376 1,978 (30)% 1,630 (16)% 5,047 7,533 8,258
Items excluded from underlying EBIT 101 (360) & gt; 100% 586 (83)% (451) 557 1,398
& nbsp;
Underlying EBIT 1,477 1,618 (9)% 2,215 (33)% 4,596 8,090 9,656
& nbsp;
Bauxite & amp; Alumina 153 174 (12)% 628 (76)% 516 1,889 2,421
Primary Metal 637 702 (9)% 762 (16)% 1,657 4,221 4,628
Metal Markets 117 75 57% 291 (60)% 358 227 379
Rolled Products 211 242 (13)% 331 (36)% 701 938 1,142
Energy 285 301 (5)% 191 49% 983 752 1.105
Other and eliminations 75 125 (40)% 12 & gt; 100% 380 63 (19)
Underlying & nbsp; EBIT 1,477 1,618 (9)% 2,215 (33)% 4,596 8,090 9,656
& nbsp;
Earnings before financial items, tax, depreciation and amortization (EBITDA) 2,792 3,222 (13)% 2.808 (1)% 8,922 11,154 13,282
Underlying EBITDA 2,753 2,862 (4)% 3,394 (19)% 8,331 11,711 14,680
& nbsp;
Net income (loss) 1,119 2,077 (46)% (1,345) & gt; 100% 5,578 1,791 2,333
Underlying net income (loss) 958 1,126 (15)% 1,377 (30)% 2.906 5,413 6.709
& nbsp;
Earnings per share 0.53 0.95 (44)% (0.65) & gt; 100% 2.61 0.76 0.99
Underlying earnings per share 0.46 0.52 (11)% & nbsp; 0.61 -25% 1.37 2.39 2.98
& nbsp;
Financial data:
Investments 1,914 1,711 12% 1,316 45% 5,596 3.309 5,865
Adjusted net interest-bearing debt (8,072) (8,758) 8% (9,272) 13% (8,072) (9,272) (8,173)
& nbsp;
& nbsp; Key Operational information
Bauxite production (kmt) 2,777 2.609 6% 2,735 2% 8,069 7.101 10,060
Alumina production (kmt) 1,635 1,554 5% 1,498 9% 4.706 4,385 5,962
Primary aluminum production (kmt) 526 518 2% 520 1% 1,559 1,525 2,046
Realized aluminum price LME (USD / mt) 1,612 1,546 4% 1,685 (4)% 1,552 1,795 1,737
Realized aluminum price LME (NOK / mt) 13,375 12,826 4% 13,779 (3)% 13,049 14,032 13,813
Realized USD / NOK exchange rate 8.30 8.30 - 8.18 1% 8.41 7.82 7.95
Rolled Products sales volumes to external market (kmt) 231 238 (3)% 248 (7)% 697 719 948
Sapa sales volumes 50% (kmt) 170 183 (7)% 171 - 527 526 682
Power production (GWh) 2,946 2,674 10% 2,839 4% 8,781 8,012 10,894

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