Risk review

factory workers

Hydro is subject to a range of risks and uncertainties which may affect its business operations, financial condition and results of operations. Changes in the regulatory framework or political environment in which Hydro operates could have a material adverse effect on the company’s operating results and financial position. Hydro is exposed to the risk of unfavorable macroeconomic developments. Our operations are exposed to competition from China and we may be unable to achieve or maintain the operational targets necessary to secure the competitiveness of the company’s business. Major projects and acquisitions are subject to significant risk and uncertainty. Hydro's business is subject to risks which could result in disruptions to operations, damage to properties or the environment, personal injury or death. Hydro could be negatively affected by investigations, legal proceedings, material CSR incidents or major noncompliance with internal or external regulations.  Hydro is exposed to the threat of cyber attacks which may disrupt its business operations, and result in reputational harm and other negative consequences.

Risk management in Hydro is based on the principle that risk evaluation and mitigation is an integral part of all business activities. A core strategy to reduce the risks related to weak economic and unfavorable market developments is the continual improvement of our business in terms of operational efficiency, cost reductions and enhanced commercial strategies. Hydro's main strategy for mitigating risk related to volatility in cash flow is to maintain a solid financial position and strong credit worthiness.

Commodity price sensitivity +10%Footnote 1
NOK Million EBIT
Hydro Group  
Aluminium 2,892

Footnote 1 Excluding Sapa JV 

Currency sensitivities + 10%Footnote 2
NOK Million USD BRL EUR
Sustainable effect      
EBIT 2,951  (890)  (272)
One-off reevaluation effect      
Financial items (550) 516 (2,069)

Footnote 2Annual sensitivities based on normal annual business volumes, LME NOK12,795 per mt, Oil 330 per mt, petroleum coke 350 per mt, caustic soda 275 per mt, coal 50 per mt, NOK/ 8.40, NOK/BRL 2.20, NOK/NOK86

  • Aluminium price sensitivity is net of aluminium price indexed costs and excluding unrealized effects related to operational hedging
  • BRL sensitivity calculated on a long-term basis with fuel oil assumed in USD. In the short-term, fuel oil is BRL-denominated
  • Excludes effects of priced contracts in currencies different from underlying currency exposure (transaction exposure)
  • Currency sensitivity on financial items includes effects from intercompany positions
  • 2016 Platts alumina index (PAX) exposure used

 


Updated: September 12, 2016