- Underlying EBIT of NOK 559 million
- Production embargos at Alunorte lifted by Federal Court – Alunorte, Paragominas and Albras resuming production
- Financial impact of cyber attack NOK 300-350 million in Q1 – main impact in Extruded Solutions
- Strong performance in Extruded Solutions, in particular in North American operations
- Primary Metal results down on price and raw material cost
- Strong Energy results on high prices
- 2019 global primary market expected in deficit, continued macro uncertainty
"I am pleased that the production embargoes at Alunorte have been lifted, so that we can focus our efforts on safely returning Alunorte, Paragominas and Albras towards normal operations. Our Brazilian operations are a fundament for Hydro’s overall agenda and our ambition to lift profitability,” says President and CEO Hilde Merete Aasheim.
“We remain optimistic about the long-term prospects for aluminium. However, due to current market uncertainty and industry-wide profitability challenge, we will lift our improvement ambitions, perform a strategic review of Rolled Products and ensure stricter financial discipline and higher earnings,” says Aasheim, adding that Hydro will host an Investor Day on September 24 to present updated ambitions for the company.
Underlying EBIT for Bauxite & Alumina decreased significantly compared to the first quarter of last year, from NOK 741 million in Q1 2018 to NOK 153 million in Q1 2019. The results were driven by the effects of reduced production at both Alunorte and Paragominas, as a consequence of the production embargo, and higher raw material prices partly offset by positive currency effects.
Underlying EBIT for Primary Metal declined from positive NOK 823 million in Q1 2018 to negative NOK 771 million in Q1 2019 mainly due to lower all-in metal prices and higher raw material costs.
Underlying EBIT for Metal Markets improved from NOK 178 million in Q1 2018 to NOK 190 million in Q1 2019 due to increased results from the remelters and higher results in the sourcing and trading activities, partly offset by negative contribution from currency and inventory valuation effects
Underlying EBIT for Rolled Products decreased from NOK 232 million in Q1 2018 to NOK 138 million in Q1 2019. Results from the rolling mills were stable, positive currency effects were offset by personnel cost increases. Results from the Neuss smelter decreased due to lower all-in metal prices and increased alumina cost.
Underlying EBIT for Extruded Solutions decreased from NOK 734 million in Q1 2018 to NOK 593 million in Q1 2019 as a direct effect of the cyber-attack. The impact of the cyber-attack was partly offset by higher margins, particularly from our North American operations
Underlying EBIT for Energy increased from NOK 278 million in Q1 2018 to NOK 517 million in Q1 2019. The increase was mainly due to higher prices and improved commercial results.
Hydro's "Better" improvement program will not reach its original 2019 target. This is mainly due to the production embargo at Alunorte and subsequent production curtailments at Alunorte’s bauxite source Paragominas and Hydro’s part owned subsidiary Albras aluminium plant
Hydro's net debt position increased from NOK 8.7 billion to NOK 12.1 billion at the end of the quarter, which included a debt increase of NOK 3.1 billion as a result of implementation of IFRS 16 – Leases. Net cash provided by operating activities amounted to NOK 0.8 billion. Net cash used in investment activities, excluding short term investments, amounted to NOK 1.6 billion.
Hydro's reported EBIT amounted to NOK 20 million for the first quarter 2019, compared to NOK 3 301 million in the first quarter 2018.
In addition to the factors discussed above, reported earnings before financial items and tax (EBIT) and net income include effects that are disclosed in the attached quarterly report. Items excluded from underlying EBIT and underlying net income (loss) are defined and described as part of the alternative performance measures (APM) section in the quarterly report.
Certain statements included in this announcement contain forward-looking information, including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objectives and strategies, such as planned expansions, investments, divestments, curtailments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro's markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, and (i) qualified statements such as "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to: our continued ability to reposition and restructure our upstream and downstream businesses; changes in availability and cost of energy and raw materials; global supply and demand for aluminium and aluminium products; world economic growth, including rates of inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro's key markets and competition; and legislative, regulatory and political factors.
No assurance can be given that such expectations will prove to have been correct. Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.