Hydro faces many risks and uncertainties within its worldwide business operations and the global marketplace. We are exposed to changing economic and market conditions and price volatility can have a significant impact on Hydro's reported and operating. Repositioning and restructuring activities are important in determining the viability of our future aluminium operations.
Our primary smelting operations are highly dependent on securing substantial amounts of energy at competitive prices. We are exposed to increasingly onerous legislation on CO2 emissions that impact Hydro directly, relating to aluminium production, and indirectly, through higher power prices.
Risk management in Hydro is based on the principle that risk evaluation is an integral part of all business activities. Hydro's main strategy for mitigating risk related to volatility in cash flow is to maintain a solid financial position and strong credit worthiness. Hydro is also taking proactive measures to reduce credit risk, improve its financial position and further adjust the cost of its smelter operations.
Indicative price and currency sensitivities 2011 1)
|EBIT||Financial items||Income before tax||Net
attributable to majority share-holders
|1) Assumptions: Annual sensitivities based on expected business volumes for 2011 (including Vale assets from beginning of March), LME USD 2,500, NOK/USD 6.00, NOK/BRL 3.33 and NOK/EUR 7.70. Aluminium price sensitivity is net of aluminium price indexed costs and exclusive of Vale-hedge and unrealized effects related to operational hedging. Currency sensitivity on financial items are based on year-end financial position.|