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Second quarter of 2013: Weaker earnings due to lower aluminum prices

Hydro reported adjusted earnings before financial items and taxes of NOK 518 million in the second quarter, compared to NOK 1,077 million in the first quarter. Lower aluminum and alumina prices and a seasonal decline in electricity generation had a negative impact on earnings. The production of bauxite and alumina was affected by a power cut.

  • Adjusted EBIT of NOK 518 million
  • Lower prices for alumina and aluminum
  • Weaker earnings for Energy, mainly due to low seasonal production
  • Production at Bauxite & amp; Alumina affected by power failure
  • Higher result for Rolled Products thanks to increasing sales
  • Growth prospects for aluminum demand outside of China: 2-4%

“Even if the global macroeconomic environment continues to pose challenges, it can be expected that aluminum demand will continue to increase this year. Hydro expects supply and demand to strike a balance in 2013, ”said Hydro Svein CEO Richard Brandtzæg.

The adjusted result for bauxite & amp; Alumina declined compared to the first quarter, primarily due to the LME-linked alumina prices and lower bauxite mining. Alumina production was even lower than in the previous quarter when it was already at a low level. The reason for this was an external power failure that affected the Alunorte alumina refinery.

"Hydro's main focus is on company-wide improvement measures, the most important being the implementation of measures to stabilize and increase production after the power failure, which led to production interruptions at Alunorte," says Brandtzæg. The interruptions will initially focus on the From B to A improvement program in the Bauxite & amp; Alumina will impact, but Hydro expects to save NOK 1 billion in savings by the end of 2015, as originally planned.

Primary Metal posted lower adjusted earnings in the second quarter, mainly due to lower aluminum prices. Adjusted EBIT for Metal Markets was stable compared to the previous quarter.

Compared to the first quarter, adjusted EBIT of Rolled Products increased due to seasonally higher sales, which was partially offset by lower margins. The operating costs per ton decreased.

Adjusted EBIT for the Energy business area declined compared to the first quarter, primarily due to the seasonally lower power generation after a high level of production was achieved in the first quarter.

Cash flow from operations in the second quarter was NOK 1.0 billion. Cash flow for investing activities was NOK 0.5 billion. A dividend of CZK 1.7 billion was paid out in the quarter. Hydro's net debt was approximately NOK 1.3 billion at the end of the second quarter.

Reported earnings before interest and taxes in the second quarter were NOK 375 million. In addition to the factors mentioned above, reported EBIT included unrealized losses from derivatives and positive metal effects totaling NOK 74 million, as well as rationalization and closure costs of NOK 86 million and gains on divestments of NOK 16 million. In the previous quarter, adjusted EBIT was NOK 705 million, including unrealized gains from derivatives and positive metal effects of NOK 294 million and rationalization and closure costs of NOK 78 million.

Continuing operations reported a loss of NOK 713 million in the second quarter, including a net currency loss of NOK 1,291 million. In the previous quarter, the result from continuing operations was NOK 254 million, including a net currency loss of NOK 115 million.

Income from discontinued operations was NOK 48 million in the second quarter, which includes rationalization and closure costs of NOK 77 million. In the previous quarter, the result from discontinued operations was NOK 9 million, which included NOK 40 million in rationalization and closure costs.

Hydro already placed about 50 percent of the expected aluminum production on the market in the third quarter of 2013, at a price of around $ 1,850 per ton. The volumes of the Qatalum hut are not included.

The Alunorte alumina refinery and Albras smelter have signed forward exchange contracts in US dollars for the second half of 2013 and for 2014 totaling $ 800 million. This reduces the USD / BRL exchange rate risk of the units and thus that of Hydro. The agreed average exchange rate for the futures contracts is 2.25 and 2.37 for 2013 and 2014, respectively. Forward contracts are accounted for as hedges. & nbsp;

In English:

& nbsp; Key financial information
NOK million, except per share data Second quarter 2013 First
quarter
2013
% change prior quarter Second
quarter
2012
% change prior year quarter First half 2013 First
half
2012
Year
2012
& nbsp;
Revenue 16,053 16,111 - 16.829 (5)% 32,163 33,873 64,181
& nbsp;
Earnings before financial items and tax (EBIT) 375 705 (47)% (610) & gt; 100% 1,080 100 571
Items excluded from underlying EBIT 144 372 (61)% 1,141 (87)% 516 1.008 725
Underlying EBIT 518 1,077 (52)% 531 (2)% 1,596 1.109 1,297
& nbsp;
Underlying EBIT:
bauxite & amp; Alumina (244) (63) & gt; (100)% (188) (30)% (308) (332) (791)
Primary Metal 237 364 (35)% 245 (3)% 602 281 335
Metal Markets 147 146 1% 45 & gt; 100% 292 132 210
Rolled Products 181 153 19% 203 (11)% 334 354 637
Energy 268 517 (48)% 362 (26)% 784 918 1,459
Other and eliminations (70) (38) (83)% (136) 48% (109) (244) (553)
Underlying EBIT 518 1,077 (52)% 531 (2)% 1,596 1.109 1,297
& nbsp;
Underlying EBITDA 1,624 2,165 (25)% 1,648 (1)% 3,789 3,428 5,827
& nbsp;
Underlying income (loss) from discontinued operations 112 49 & gt; 100% 36 & gt; 100% 163 33 (5)
Net income (loss) (665) 263 & gt; (100)% (1,737) 62% (402) (1,162) (1,331)
Underlying net income (loss) 427 648 (34)% 243 76% 1,076 476 408
& nbsp;
Earnings per share (0.31) 0.14 & gt; (100)% (0.80) 61% (0.17) (0.56) (0.65)
Underlying earnings per share 0.19 0.30 (36)% 0.11 73% 0.49 0.22 0.21
& nbsp;
Financial data:
Investments 612 1,056 (42)% 694 (12)% 1,668 1,469 3,382
Adjusted net interest-bearing debt (11,317) (9,290) (22)% (20,293) 44% (11,317) (20,293) (8,304)
& nbsp;
& nbsp; Key operational information
Alumina production (kmt) 1,248 1,361 (8)% 1,491 (16)% 2,609 2,955 5,792
Primary aluminum production (kmt) 483 478 1% 502 (4)% 961 1,016 1,985
Realized aluminum price LME (USD / mt) 1,926 2,043 (6)% 2,167 (11)% 1,986 2,161 2,080
Realized aluminum price LME (NOK / mt) 11,217 11,533 (3)% 12.637 (11)% 11,378 12,523 12,047
Realized NOK / USD exchange rate 5.82 5.64 3% 5.83 - 5.73 5.79 5.79
Metal products sales, total Hydro (kmt) 789 806 (2)% 857 (8)% 1,595 1,728 3,254
Rolled Products sales volumes to external market (kmt) 245 236 4% 228 8% 482 455 909
Power production (GWh) 2,090 2.904 (28)% 2,513 (17)% 4,993 5.703 10.307
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