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Second quarter of 2017: Better results thanks to higher aluminum prices

Hydro's adjusted earnings before interest and taxes increased to NOK 2.93 billion in the second quarter of 2017, compared to NOK 2.28 billion in the first quarter, mainly due to higher aluminum prices and favorable exchange rate developments . However, the lower realized alumina prices and the increased raw material cost had a negative impact on the results.

  • Adjusted profit of NOK 2.93 billion
  • Higher all-in aluminum prices realized, but partially affected by lower alumina prices and higher raw material costs
  • Results of Laminated Products affected by reduced margins linked to product mix and operational challenges
  • Record quarterly result at Sapa
  • « Better » program up to date to reach NOK 500 million target in 2017
  • Sapa acquisition agreement, expected to be completed in the second half of 2017
  • Karmoy technology project on time and on budget, due to start in the fourth quarter of 2017
  • Global primary aluminum growth expectation of 4-6% for 2017, with a market largely in balance.

“The rise in aluminum prices in the quarter led to encouraging results. I am also pleased to see that Sapa had record results, continuing its strong trend, ”said Hydro President and CEO Svein Richard Brandtzæg. “Hydro will confirm its position as the world's leading integrated aluminum company with the purchase agreement for Orkla's 50% stake in the world's leading extrusion company Sapa. The transaction reinforces our strategic direction to become better, bigger and greener, with a solid asset base and unique skills and capabilities across the value chain, ”said Brandtzæg. The conclusion of the agreement is scheduled for the second half of 2017, pending approval by regulatory authorities.

Adjusted EBIT for the Bauxite & amp; Alumina fell when compared to the first quarter. Lower alumina prices, affected by a weaker alumina index and higher consumption of raw materials, weighed on results, while higher sales volumes contributed positively. Production at the Hydro Alunorte alumina refinery and the Hydro Paragominas bauxite mine was higher in the second quarter, after planned maintenance in the first quarter. The start of operations of the new pressure filter system, to remove and recycle the caustic soda from the bauxite residues, resulted in additional costs for the refinery.

Adjusted EBIT in the Primary Metal business area was higher in the second quarter, due to higher all-in realized metal prices, although partially affected higher raw material costs.

Adjusted EBIT for Metal Markets improved significantly in the second quarter, largely due to the positive valuation of inventory and exchange rate effects, in addition to better provisioning results and commercial activities. Refusers' results were also better in the second quarter, impacted by the increase in sales volume and contribution margins.

“We see that there was a global deficit of primary aluminum in the quarter, caused by the increase in the deficit outside of China and partially affected by the surplus in China. For the year as a whole, we maintain our expectation of 4-6% global primary aluminum growth for 2017, and we expect the global aluminum market to remain broadly balanced, ”said Brandtzæg.

Adjusted EBIT for the Rolled Products business area decreased in the second quarter, compared to the first quarter of 2017. The decrease was mainly due to the reduction in average margins, caused by the product mix , and allocations for employee compensation, largely related to previous years. The first quarter's operational challenges were partially resolved, reducing the effects of negative costs on the second quarter's results. The Neuss aluminum plant benefited from the all-in price of metal and lower alumina costs.

Adjusted EBIT for the Energy business area was lower compared to the previous quarter, especially due to lower seasonal production and prices.

Sapa's adjusted EBIT, on the contrary, was high compared to the first quarter, with record quarterly results and according to the general seasonality of the industry, but also because of a better overall performance .

Hydro continues to make progress with its “ Better ” improvement program. Despite being slightly behind schedule, the company expects to reach both the NOK 500 million target for 2017 and the 2.9 billion target for 2019.

Hydro's net cash position2) & nbsp; increased by NOK 0.1 billion, totaling NOK 6 billion at the end of the second quarter. Net cash from operating activities totaled NOK 4.3 billion, including dividends received from Sapa of NOK 1.5 billion and the increase in operating capital due to seasonality and higher prices. The net cash used for investment activities, not including short-term investments, amounted to NOK 1.1 billion. During the second quarter, dividends paid to Norsk Hydro ASA shareholders totaled NOK 2.6 billion.

Reported earnings before interest and taxes reached NOK 2.94 billion for the second quarter. In addition to the factors mentioned above, reported EBIT included unrealized net derivative losses of NOK 66 million and positive foreign exchange effects of NOK 138 million. Reported profits also included a net loss of NOK 56 million from Sapa (Hydro's quota after tax), related to unrealized derivative losses and net foreign exchange losses.

Net revenue amounted to NOK 1.56 billion in the second quarter, including net exchange losses, basically unrealized, of NOK 918 million, which reflect the weakening of the real against the US dollar, affecting dollar debts in Brazil, and the strengthening of the euro against the Norwegian krone in future rates, which resulted in an unrealized loss on derivatives embedded in euro energy contracts.

(in English) & nbsp;

Key financial information Second quarter 2017 First quarter 2017 Change prior quarter Second quarter 2016 Change prior year quarter First half 2017 First half 2016 Year 2016
NOK million, except per share data
Revenue 24,591 23,026 7% 20,391 21% 47,617 40,529 81,953
Earnings before financial items and tax (EBIT) 2,946 2,410 22% 1,978 49% 5,356 3,672 7,011
Items excluded from underlying EBIT (16) (126) 87% (360) 96% (141) (552) (586)
Underlying EBIT 2,930 2,284 28% 1,618 81% 5,214 3,119 6,425
& nbsp;
Underlying EBIT:
Bauxite & amp; Alumina 662 756 (12)% 174 & gt; 100% 1,418 363 1,227
Primary Metal 1,486 900 65% 702 & gt; 100% 2,386 1,020 2,258
Metal Markets 244 24 & gt; 100% 75 & gt; 100% 268 241 510
Rolled Products 84 106 (21)% 242 (65)% 191 491 708
Energy 284 423 (33)% 301 (6)% 707 699 1,343
Other and eliminations 170 74 & gt; 100% 125 37% 245 306 380
Underlying EBIT 2,930 2,284 28% 1,618 81% 5,214 3,119 6,425
& nbsp;
Earnings before financial items, tax, depreciation and amortization (EBITDA) 4,335 3,762 15% 3,222 35% 8,097 6,131 12,485
Underlying EBITDA 4,319 3,637 19% 2,862 51% 7,956 5,578 11,474
& nbsp;
Net income (loss) 1,562 1,838 (15)% 2,077 (25)% 3,401 4,459 6,586
Underlying net income (loss) 2,214 1,580 40% 1,126 97% 3,795 1,949 3,875
& nbsp;
Earnings per share 0.73 0.86 (16)% 0.95 (24)% 1.59 2.08 3.13
Underlying earnings per share 1.04 0.75 38% 0.52 & gt; 100% 1.79 0.91 1.83
& nbsp;
Financial data:
Investments 1,420 1,372 4% 1,711 (17)% 2,792 3,681 9,137
Adjusted net cash (debt) (5,146) (5,358) 4% (8,758) 41% (5,146) (8,758) (5,598)
& nbsp;
Key Operational information
Bauxite production (kmt) 2,943 2,400 23% 2.609 13% 5,343 5,292 11,132
Alumina production (kmt) 1,576 1,523 3% 1,554 1% 3,099 3,071 6,341
Primary aluminum production (kmt) 523 516 1% 518 1% 1,039 1,032 2,085
Realized aluminum price LME (USD / mt) 1,902 1,757 8% 1,546 23% 1,828 1,522 1,574
Realized aluminum price LME (NOK / mt) 16,265 14,798 10% 12,826 27% 15,517 12,887 13,193
Realized USD / NOK exchange rate 8.55 8.42 2% 8.30 3% 8.49 8.47 8.38
Rolled Products sales volumes to external market (kmt) 239 241 (1)% 238 0% 480 467 911
Sapa sales volumes (kmt) 180 178 1% 183 (2)% 357 358 682
Power production (GWh) 2,369 2,869 (17)% 2,674 (11)% 5,238 5,835 11,332
This text is machine translated. To view the original Portuguese text, click on PT on the top right of this window

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