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Third quarter 2012: Low prices weigh on earnings

Hydro reported adjusted earnings before financial items and taxes of NOK 8 million in the third quarter, compared to NOK 549 million in the previous quarter. The low prices for alumina and aluminum have had a strong impact on adjusted earnings in Hydro's upstream business, while cost-cutting programs have continued at full force to address the difficult market situation.

  • Adjusted EBIT of NOK 8 million
  • Substantial drop in prices for alumina and aluminum
  • Record bauxite mining
  • Lower sales in the downstream area, partly offset by lower operating costs
  • Lower electricity prices and production in the Energy business area

“The quarterly prices for alumina and aluminum clearly reflect the uncertainty in the markets and in the global economy and have had a major impact on our weak quarterly results. Hydro responds to this by focusing on operational performance, portfolio management and capital discipline, "said CEO Svein Richard Brandtzæg.
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" The proposed transaction with Orkla to form a global leader of aluminum solutions, Hydro strengthens as a global, resource-rich aluminum company, and also our extrusion business. & nbsp; Most of the markets for extruded products remain difficult, and the new company will be better positioned to meet these challenges and take advantage of long-term growth prospects for aluminum products, ”said Brandtzæg.
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Adjusted EBIT in Bauxite & amp; Alumina continued to decline compared to the weak earnings in the previous quarter, mainly due to the lower prices for alumina and lower sales.
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Adjusted EBIT in the Primary Metal division fell compared to the second quarter, and was also influenced by lower prices. Lower operating costs partially offset the negative market impact. Adjusted earnings for Qatalum were weaker than in the second quarter, which included a final insurance benefit linked to the 2010 power outage.
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Excluding inventory and currency effects Hydro's adjusted midstream business was stable in the quarter.
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Lower operating costs in Hydro's downstream business had a positive impact on adjusted earnings for the quarter. However, adjusted earnings for Extruded Products declined as lower seasonal sales and demand continued to decrease. & Nbsp; Quarterly results continue to be impacted by difficult economic conditions in Europe.
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Energy posted lower adjusted EBIT in the third quarter than in the previous quarter due to lower production and lower prices.
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Cash flow from operating activities was NOK 1.1 billion in the quarter. Cash flow for investing activities was NOK 1 billion. Hydro's net debt was approximately zero at the end of the third quarter.
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Hydro recorded a reported loss before financial items and taxes of NOK 414 million in the third quarter, which includes unrealized losses from derivatives and negative metal effects of NOK 108 million and other items in NOK 314 million. Other items include a loss from the sale of Portalex of NOK 144 million and from depreciation of other assets of NOK 163 million. Other items also include NOK 75 million in rationalization and closure costs related to Extruded Products and Kurri Kurri, and NOK 68 million in pension benefits.
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Hydro recorded a reported pre-tax loss and tax loss of NOK 720 million in the last quarter, which included unrealized gains on derivative financial instruments of NOK 300 million, cost of rationalization and closings of 408 million NOK, depreciation of NOK 1,175 million and positive metal effects of NOK 9 million.
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Hydro reported a net loss of NOK 231 million in the third quarter, which includes a currency gain of NOK 283 million. & nbsp; Hydro reported a net loss of NOK 1,712 million in the previous quarter, which included a currency loss of NOK 883 million.

In English:

Key financial information
NOK million, except per share data Third
quarter
2012
Second & nbsp;
quarter
2012
% change prior quarter Third
quarter
2011
% change prior year quarter First 9
months

2012
First 9
months
2011
Year
2011
& nbsp;
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Revenue 19.004 21.604 (12)% 23,829 (20)% 62,355 69,695 91,444
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Earnings before financial items and tax (EBIT) (414) (720) 42% 2,222 & gt; (100)% (469) 10,189 9,827
Items excluded from underlying EBIT 422 1,269 (67)% (576) & gt; 100% 1,583 (5,189) (3,694)
Underlying EBIT 8 549 (98)% 1,646 (99)% 1,115 5,000 6.133
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Underlying EBIT: & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Bauxite & amp; Alumina (386) (188) & gt; (100)% 302 & gt; (100)% (718) 729 887
Primary Metal (10) 240 & gt; (100)% 653 & gt; (100)% 261 2.002 2,486
Metal Markets 7 44 (83)% 93 (92)% 139 480 441
Rolled Products 214 204 5% 124 72% 569 588 673
Extruded Products 27 53 (49)% 40 (33)% 95 241 151
Energy 220 362 (39)% 506 (57)% 1,137 1,442 1,883
Other and eliminations (64) (166) 61% (73) 12% (368) (482) (389)
Underlying EBIT 8 549 (98)% 1,646 (99)% 1,115 5,000 6.133
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Underlying EBITDA 1,265 1,777 (29)% 2,985 (58)% 4,913 8,628 11,152
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Net income (loss) (231) (1,712) 86% 797 & gt; (100)% (1,359) 7,498 6,749
Underlying net income (loss) (20) 268 & gt; (100)% 1,071 & gt; (100)% 505 3,071 3,947
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Earnings per share (0.14) (0.78) 83% 0.49 & gt; (100)% (0.68) 3.84 3.41
Underlying earnings per share 0.00 0.12 (97)% 0.50 (99)% 0.25 1.47 1.89
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Financial data: & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;
Investments 965 777 24% 1.125 (14)% 2,639 43,836 48,025
& nbsp; & nbsp; & nbsp; & nbsp; & nbsp; & nbsp;   & nbsp; & nbsp;
Key operational information
Alumina production (kmt) 1,441 1,491 (3)% 1,553 (7)% 4,396 3,773 5,264
Primary aluminum production (kmt) 484 502 (3)% 522 (7)% 1,500 1,443 1,982
Realized aluminum price LME (USD / mt) 2,022 2,167 (7)% 2,592 (22)% 2,119 2,494 2,480
Realized aluminum price LME (NOK / mt) 11,856 12.637 (6)% 14,225 (17)% 12,321 13.906 13,884
Realized NOK / USD exchange rate 5.86 5.83 1% 5.49 7% 5.81 5.58 5.60
Metal products sales, total Hydro & nbsp; (kmt) 794 857 (7)% 850 (7)% 2,522 2,499 3.303
Rolled Products sales volumes to external market (kmt) 228 228 - 228 - 683 714 929
Extruded Products sales volumes to external market (kmt) 125 137 (9)% 137 (9)% 395 415 536
Power production (GWh) 2,157 2,513 (14)% 2,737 (21)% 7,860 6,875 9,582
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