• Underlying EBIT of NOK 1,618 million
• Higher realized alumina and all-in aluminium prices, offset by currency developments
• Higher aluminium and alumina sales
• Significantly improved Sapa results
• Better improvement program on track for 2019 target of NOK 2.9 billion
• Positive cash flow in quarter with full-year dividend payment
• Global primary aluminium demand growth expected at 4-5%

"We have lifted annual global aluminium demand growth forecast to 4-5 percent for 2016, up from previous forecast 3-4 percent. Higher-than-expected activity in China means that we now see primary aluminium demand in China alone to grow by 5-7 percent in 2016. Globally, we expect a largely balanced aluminium market for the full year, " says President and CEO Svein Richard Brandtzæg.

"For this quarter, we see that increasing aluminium and alumina prices, along with lower costs and higher volumes are partly offset by currency developments," Brandtzæg says. "I am also pleased to see the continued progress of our ambitious Better improvement programs, and I am happy to see that we are on track to reach total improvements of NOK 2.9 billion in 2019."

Underlying EBIT for Bauxite & Alumina decreased compared to first quarter. Positive effects from higher realized alumina prices, driven by higher alumina index prices during the quarter, further reduction in raw material consumption, reduced raw material prices were offset by negative currency effects, as the BRL strengthened against the USD, and increased other costs. Annualized production volume at the Alunorte alumina refinery increased, approaching nameplate capacity of 6.3 million mt per year. The Paragominas bauxite mine had lower production due to scheduled maintenance of the bauxite ball mill in June.

Underlying EBIT for Primary Metal rose in the second quarter mainly due to higher realized all-in metal prices, higher volumes, lower carbon costs and seasonally lower fixed costs. This was partly offset by negative currency effects. The result in second quarter was also positively influenced by an insurance refund of NOK 50 million related to a power outage at the Årdal primary aluminium plant in January, in addition to a positive effect of NOK 75 million related to a reversal of the Brazilian ICMS tax accrual on sales of surplus power in Brazil in previous periods.

Underlying EBIT for Metal Markets declined in the second quarter mainly due to negative currency and inventory valuation effects, in addition to somewhat lower results from the remelters.

Rolled Products underlying EBIT remained little changed compared to the previous quarter. Positive volume effects were offset by negative currency effects on margins from a weakening USD versus Euro and declining results in the Neuss primary aluminium plant mainly due to higher alumina prices.

Underlying EBIT for Energy declined compared to the previous quarter due to seasonally lower production and higher area cost, partly offset by lower production cost. The lower cost was mainly driven by transmission costs and property taxes.

Underlying EBIT for Sapa, a 50/50 aluminium extruder joint venture, rose from the previous quarter, mainly due to seasonally higher demand and stronger margins. 
Hydro's net cash position increased in the second quarter by NOK 0.8 billion to NOK 4.8 billion at the end of the quarter. Net cash provided by operating activities amounted to NOK 3.7 billion. Net cash used in investment activities, excluding short term investments, amounted to NOK 0.9 billion. Dividends paid amounted to NOK 2.0 billion in the quarter.

Reported earnings before financial items and tax amounted to NOK 1,978 million in the second quarter. In addition to the factors discussed above, reported EBIT included net unrealized derivative gains of NOK 32 million and positive metal effects of NOK 17 million. Reported earnings also included a charge of NOK 67 million related to environmental commitments in Kurri Kurri, a gain of NOK 342 million for the sale of certain assets in Grenland, including Herøya Industrial Park, and a negative adjustment of NOK 13 million related to the sale of the Slim rolling mill in the fourth quarter of 2015. In addition, reported earnings included a net gain of NOK 49 million in Sapa (Hydro's share net of tax), relating to unrealized derivative gains and net foreign exchange gains.

In the previous quarter reported earnings before financial items and tax amounted to NOK 1,693 million including net unrealized derivative gains and negative metal effects of negative NOK 181 million in total. Reported earnings also included a negative adjustment of NOK 15 million related to the sale of the Slim rolling mill in the fourth quarter of 2015. In addition, reported earnings included a net gain of NOK 26 million for Sapa (Hydro's share net of tax), mainly relating to unrealized derivative gains.

Net income amounted to NOK 2,077 million in the second quarter including a net foreign exchange gain of NOK 904 million mainly reflecting the strengthening BRL versus US dollars affecting US dollar liabilities in Brazil, as well as the strengthening Norwegian kroner versus Euro affecting liabilities in Euro in Norway and embedded currency derivatives in power contracts. In the previous quarter net income was NOK 2,382 million including a reduction in tax expense and related interest income of NOK 700 million in total following settlement of a tax case in April 2016. Reported earnings also included a net foreign exchange gain of NOK 1,032 million mainly reflecting the strengthening BRL versus US dollars affecting US dollar liabilities in Brazil, as well as the strengthening Norwegian kroner versus Euro affecting liabilities in Euro in Norway and embedded currency derivatives in power contracts.