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Terceiro trimestre de 2010: Controle de custo firme em trimestre sazonalmente fraco

A Hydro teve rendimentos básicos antes de encargos financeiros e impostos (EBIT) de NOK 965 milhões no terceiro trimestre, uma queda dos NOK 1.110 milhões registrados no segundo trimestre. Os volumes de venda sazonalmente mais baixos, resultados básicos mais fracos de Alumina e Matérias-Primas e perdas na joint venture da Qatalum contribuíram para a queda nesses resultados básicos.

  • EBIT básico de NOK 965 milhões
  • Volumes mais baixos devido ao declínio sazonal em demanda
  • Upstream mais fraco devido ao resultado mais baixo de alumina e à queda de energia na Qatalum
  • Desempenho operacional do midstream estável e afetado positivamente pelos efeitos de câmbio
  • Downstream sazonalmente mais fraco, efeitos positivos de medidas internas
  • Energia estável com continuidade da baixa produção de energia
  • Aquisição dos negócios de alumínio da Vale em andamento para fechamento no T4
  • Operações da Qatalum projetadas para atingirem produção plena até o final do T1 de 2011
  • Crescimento de aproximadamente 17% fora da China em 2010

"As bases de mercado demonstram sinais de melhoria, mas os volumes de venda estão mais baixos, seguindo as flutuações comuns nessa época do ano no mercado. Com base na demanda de alumínio mais alta do que o esperado nos primeiros nove meses, a previsão é de que haja um crescimento na demanda fora da China de aproximadamente 17% em 2010, em relação a 2009", afirmou o Presidente e CEO da Hydro Svein Richard Brandtzæg.

"A Hydro está em meio a uma transação transformadora, que tornará a companhia uma empresa líder em alumínio verdadeiramente global. Nosso enfoque atual está no planejamento da integração e no fechamento da transação com a Vale no quarto trimestre, enquanto aumentamos a produção na Qatalum à sua capacidade total até o final do primeiro trimestre de 2011", contou Brandtzæg.

"Ao mesmo tempo, o firme controle de custos continuará a impulsionar o desempenho operacional da Hydro e estou contente de ver que o trabalho de cortar custos em nosso sistema de produção (smelter) está chegando à meta de US$ 300 por tonelada de alumínio", disse.

Os resultados básicos de Metal Primário caíram durante o trimestre, devido aos resultados mais baixos em Alumina e Matérias-Primas. A refinaria de alumina Alunorte, da qual 34% da propriedade atualmente pertence à Hydro, incorreu em uma perda no trimestre como resultado dos preços da alumina vinculados à Bolsa de Londres (LME, London Metal Exchange) e aos custos mais altos de energia e matéria-prima. Os resultados das atividades comerciais da alumina caíram no terceiro trimestre.

A fábrica de alumínio Qatalum, cuja propriedade é igualmente dividida em 50/50 pela Hydro e pela Qatar Petroleum, incorreu em perdas maiores relativas à perda de produção e de vendas devido a uma queda de energia que interrompeu a produção em agosto. As operações da fábrica foram retomadas em meados de setembro e estão previstas para alcançar produção total até o final do primeiro trimestre de 2011. O seguro deverá cobrir a maior parte dos custos e das perdas decorrentes da interrupção dos negócios.

O EBIT básico de Mercados de Metal aumentou durante o trimestre, principalmente devido a efeitos positivos de câmbio resultantes do fortalecimento do Euro frente ao dólar norte-americano.

As operações downstream da Hydro, Produtos Extrudados e Produtos Laminados, registraram um EBIT básico mais baixo devido, principalmente, aos volumes de vendas sazonalmente mais baixos. As margens caíram para Produtos Laminados em decorrência do custo mais alto de frete e material e de desenvolvimentos do câmbio. Essas margens caíram ligeiramente para a maioria dos setores de negócios dentro de Produtos Extrudados. O enfoque em custos continuou com mais aprimoramentos na posição de custo para Produtos Laminados e Produtos Extrudados.

Os resultados básicos para a área de negócios de Energia mantiveram-se estáveis no terceiro trimestre, com continuidade da baixa produção de energia durante esse período.

A receita líquida gerada pelas atividades operacionais somaram NOK 1,0 bilhão no trimestre. Os investimentos totalizaram NOK 1,6 bilhões, sendo aproximadamente NOK 1,1 bilhões relacionados à Qatalum. Os investimentos na Qatalum estão previstos para manterem esse mesmo nível no quarto trimestre. A Hydro apresentava uma posição de receita líquida total de NOK 8,9 bilhões ao final do trimestre.

Os negócios de alumínio com a Vale no Brasil, anunciados em maio, estão planejados para serem fechados no quarto trimestre. A Hydro protegeu-se (hedge) da maior parte da exposição de preço líquido do alumínio nos negócios adquiridos até o final de 2011 em aproximadamente US$ 2.400 por t. Para parcialmente financiar a transação, apoiar a classificação do grau de investimento da empresa, bem como a capacidade de implementar projetos futuros, a Hydro lançou uma oferta de direitos para fortalecer seu patrimônio líquido em NOK 10 bilhões. A oferta de direitos foi concluída com êxito em 16 de julho de 2010.

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Key financial information
NOK million, except per share data Third
quarter
2010
Second
quarter
2010
% change prior quarter Third
quarter
2009
% change prior year quarter First 9
months
2010
First 9
months
2009
Year
2009
                 
Revenue 18,424 19,779 (7) % 16,795 10 % 56,348 50,982 67,409
                 
Earnings before financial items and tax (EBIT) 274 1,157 (76) % 719 (62) % 2,417 (469) (1,407)
Items excluded from underlying EBIT 690 (47)   (1,512)   347 (1,435) (1,148)
Underlying EBIT 965 1,110 (13) % (793) >100 % 2,763 (1,904) (2,555)
                 
Underlying EBIT:              
Primary Metal 399 657 (39) % (760) >100 % 1,007 (1,839) (2,556)
Metal Markets 163 31 >100 % (15) >100 % 259 (63) (83)
Rolled Products 227 309 (27) % 51 >100 % 759 (31) 26
Extruded Products 102 201 (49) % 95 8 % 420 (136) (67)
Energy 169 177 (5) % 217 (22) % 934 945 1,240
Other and eliminations (95) (265) 64 % (381) 75 % (616) (781) (1,114)
Underlying EBIT 965 1,110 (13) % (793) >100 % 2,763 (1,904) (2,555)
                 
Net income (loss) (63) 598 >(100) % 1,001 >(100) % 1,460 1,003 416
                 
Underlying net income (loss) 545 530 3 % (1,222) >100 % 1,476 (2,274) (3,066)
                 
Earnings per share (0.07) 0.40 >(100) % 0.79 >(100) % 0.93 0.68 0.24
                 
Underlying earnings per share 0.33 0.34 (4) % (0.96) >100 % 0.94 (1.89) (2.50)
                 
Financial data:              
Investments 1,591 1,261 26 % 2,126 (25) % 4,618 3,576 5,947
Adjusted net interest-bearing debt (8,280) (18,191) 54 % (19,044) 57 % (8,280) (19,044) (15,645)
                 
Key Operational information
Primary aluminium production (kmt) 355 362 (2) % 330 8 % 1,055 1,064 1,396
Realized aluminium price LME (USD/mt) 2,179 2,200 (1) % 1,523 43 % 2,125 1,667 1,698
Realized aluminium price LME (NOK/mt) 13,503 13,302 2 % 9,480 42 % 12,753 10,851 10,764
Realized NOK/USD exchange rate 6.20 6.05 2 % 6.22 - 6.00 6.51 6.34
Metal Markets sales volumes to external market (kmt) 429 457 (6) % 395 9 % 1,300 1,093 1,468
Rolled Products sales volumes to external market (kmt) 239 242 (2) % 205 17 % 712 583 794
Extruded Products sales volumes to external market (kmt) 134 141 (5) % 118 13 % 402 337 453
Power production (GWh) 1,479 1,621 (9) % 1,682 (12) % 5,881 5,968 7,897

About Hydro's reporting

To provide a better understanding of Hydro's underlying performance, the following discussion of operating performance excludes certain items from EBIT (earnings before financial items and tax) and net income. See "Items excluded from underlying EBIT and net income" for more information on these items.

Reported EBIT and net income

Reported EBIT for Hydro amounted to NOK 274 million for the third quarter of 2010 including net negative effects of NOK 690 million comprised of net unrealized derivative losses of NOK 524 million, negative metal effects of NOK 52 million and impairment charges relating to Qatalum amounting to NOK 114 million.
 
In the previous quarter, reported EBIT for Hydro amounted to NOK 1,157 million including net positive effects of NOK 47 million comprised of net unrealized derivative losses of NOK 292 million, positive metal effects of NOK 206 million and other positive effects of NOK 133 million, mainly related to changes in pension plans in Norway.
 
Hydro incurred a net loss for the quarter amounting to NOK 63 million including net foreign exchange losses of NOK 246 million. In the second quarter, net income amounted to NOK 598 million including net foreign exchange gains of NOK 59 million.

Market developments and outlook

LME prices increased during the quarter with some volatility. Three month prices started the quarter at a level of around USD 1,950 per mt and ended at USD 2,348 per mt. Average LME three month prices for the third quarter was stable compared to the second quarter.
 
Global demand for primary aluminium excluding China weakened in the third quarter due to seasonal effects as well as lower levels of customer restocking. Annualized consumption and production amounted to 23.7 million mt and 25.1 million mt respectively. Primary aluminium consumption outside China is expected to amount to about 24 million tonnes in 2010 representing around 17 percent growth from 2009. The current market surplus is expected to continue at a level around 1 million tonnes.
 
Demand for primary aluminium in China decreased from the previous quarter to around 17 million mt on an annual basis. Production also declined due to energy savings targets, resulting in a largely balanced market during the quarter.
 
LME stocks were relatively stable around 4.4 million mt during the quarter.
 
European demand for metal products (extrusion ingot, sheet ingot, foundry alloys and wire rod) was seasonally lower in third quarter compared to the second quarter while demand improved somewhat in the US market.
 
Consumption in the European flat rolled products market was seasonally lower in the quarter compared to the second quarter of 2010. Most of the demand recovery from the low levels experienced in the previous year appears to have been realized in the first nine months of 2010 and restocking activities are softening. Demand is expected to be stable or somewhat lower for the remainder of the year but with a normal seasonal decline.
 
European demand for extruded aluminium products was seasonally lower compared with the second quarter of 2010. Overall demand in the European and US extrusion markets is expected to be stable in the fourth quarter but with a normal seasonal decline. Demand recovery in the construction segment is expected to remain slow.
 
Nordic electricity spot prices were slightly higher in the third quarter compared with the second quarter. The Nordic hydrological balance continues to be negative in particular due to low reservoir levels in Norway.

Additional factors impacting Hydro

Hydro has sold forward substantially all of its primary aluminium production for the fourth quarter at a price level of around USD 2,050 per mt, excluding expected Qatalum production.
 
For the fourth quarter, Hydro expects its share of underlying results for Qatalum to amount to a loss of about NOK 400 million excluding any insurance reimbursement. Insurance is expected to cover a majority of the loss related to the power outage. The first payment from the insurers is expected to be requested during the fourth quarter of 2010.
 
In the autumn of 2009, Hydro launched a cost improvement program in order to reduce conversion costs by USD 100 per mt of primary aluminium produced by the end of 2011, compared to the 2009 level. The program is on schedule. To further improve the competitiveness of Hydro's wholly-owned smelters and restore their profitability to a sustainable level the improvement ambition has been increased to USD 300 per mt. The program is expected to be completed by the end of 2014.
 
Due to low power production during the second and third quarters, Hydro's reservoirs were approaching normal levels in the middle of October and we expect high power production in the fourth quarter.
 
During 2009, Hydro curtailed production capacity and reduced production at several plants. If it becomes necessary to permanently close plants that have been curtailed on a temporary basis, additional substantial closure costs will be incurred.

Primary Metal

Underlying results for Primary Metal declined during the quarter compared to the second quarter mainly due to expected lower results for Alumina and Raw materials in addition to increased losses for Qatalum following a power outage at the smelter in August.
 
Alumina and Raw Materials' underlying results declined during the quarter as expected. Alunorte incurred an underlying loss for the quarter as a result of lower alumina prices and higher energy and bauxite costs. Energy costs increased more significantly due to a maintenance shutdown of the coal boilers at the plant that required the use of higher cost alternative fuel. Production volumes declined somewhat mainly due to maintenance activities. Underlying results in the second quarter were positively impacted by a settlement of a claim for business interruption insurance.
 
Underlying results for alumina commercial activities declined in the third quarter mainly due to lower volumes and unrealized losses on LME forward contracts compared to unrealized gains in the previous quarter. Related gains and losses on physical contracts are not recognized in underlying results until realized.
 
Underlying results for Primary Aluminium were impacted by increased losses for Qatalum relating to lost production and sales due to a power outage which stopped production at the plant. Impairment charges relating to the incident amounting to NOK 114 million, primarily related to damaged metal in the cells, are excluded from underlying EBIT. Ramp-up of the plant restarted in the middle of September. The plant is expected to reach full production at the end of the first quarter of 2011.
 
Realized aluminium prices were stable during the quarter declining slightly measured in US dollars but increasing somewhat measured in Norwegian kroner contributing about NOK 60 million to underlying EBIT compared to the second quarter. Higher realized premiums contributed roughly NOK 85 million. Seasonally lower sales volumes had a negative impact on underlying results amounting to around NOK 120 million for the quarter.
 
Variable costs increased by roughly NOK 100 million during the quarter mainly due to higher petroleum coke prices. Higher variable costs were offset by lower fixed costs for the quarter.

Metal Markets

Underlying EBIT for Metal Markets increased during the quarter compared with the second quarter mainly due to positive currency effects amounting to approximately NOK 120 million resulting from the strengthening Euro against the US dollar. The positive effects were partly offset by lower underlying EBIT for our metal sourcing and trading operations. Currency effects in the second quarter were negative amounting to about NOK 140 million.
 
Underlying results from remelt operations were stable compared with the second quarter. Negative effects from lower production and sales volumes as a result of seasonal maintenance shutdowns were offset by higher operating margins.
 
Total metal sales from own production and third party contracts decreased somewhat compared with the second quarter of 2010 mainly due to seasonally lower shipments of extrusion ingots in all markets sectors.
 
Underlying EBIT declined for our metal sourcing and trading operations for the quarter. Operating margins improved but hedging losses relating to standard ingot inventories had a negative impact on underlying results amounting to NOK 70 million. Offsetting gains on physical inventories are not recognized in underlying results until realized. In the second quarter, realized gains on physical inventories amounted to NOK 60 million.
 
In total, currency effects and the inventory related hedging gains and losses had a net positive effect of about NOK 50 million in the third quarter compared with a net negative impact of NOK 80 million in the second quarter. Excluding these effects, Metal Markets' operating performance was stable for the quarter.

Rolled Products

Underlying EBIT for Rolled Products declined compared with the second quarter of 2010 due to lower margins and somewhat lower sales volumes due to seasonality.
 
Most market segments experienced expected seasonal declines. General engineering sales volumes declined by 5 percent but underlying demand was stable. Volumes for automotive applications were 2 percent lower due to OEM's holiday period. Shipments for the construction segment were 15 percent lower also due to the holiday period. However, demand was firm and production was close to available capacities. Lithography shipments declined by 3 percent with somewhat weaker market demand at the end of the third quarter. Other product segments were stable or improved. Shipment of thin gauge foil applications increased 5 percent based on a good demand. Demand for the can beverage segment was strong but shipments were on same level as in the second quarter limited by capacity constraints.
 
Margins were negatively impacted mainly by higher metal premiums and inbound freight costs in addition to currency effects on export sales. Cost focus continued and cost per mt declined further compared with the second quarter. Labor productivity also continued to improve compared to the second quarter and was above the level achieved in 2008 even though volumes continued to be lower.

Extruded Products

Underlying results for Extruded Products decreased compared with the second quarter of 2010 due to seasonally lower volumes, increased maintenance costs and slightly lower margins in most business sectors.
 
Our extrusion operations in Europe and the Americas delivered somewhat lower volumes compared with the second quarter reflecting lower seasonal demand. Volumes for our building systems operations declined about 14 percent as the recovery in the building and construction markets remains weak. In particular, demand in southern Europe fell in the third quarter partly due to reduced public spending. Volumes for our precision tubing business were also seasonally down falling by around 8 percent. Volumes were also impacted by capacity constraints at our plants in China and Brazil, where market growth is strong. Overall demand in the automotive market continued to improve but at a lower growth rate. Margins were somewhat lower for most business sectors. Planned shutdowns resulted in higher maintenance costs compared with the second quarter.

Energy

Underlying EBIT for Energy declined somewhat compared to the second quarter of 2010. Production declined further during the quarter influenced by low reservoir levels. Lower production costs partly offset the negative impact of the reduced production volumes.

Other and eliminations

Underlying EBIT for Other and eliminations amounted to a charge of NOK 95 million in the third quarter compared with a charge of NOK 265 million in the previous quarter and a charge of NOK 381 million in the third quarter of 2009. Underlying EBIT includes the elimination of internal gains and losses on inventories purchased from group companies which amounted to an income of NOK 24 million in the third quarter compared with a charge of NOK 85 million in the previous quarter and a charge of NOK 131 million in the third quarter of 2009. Underlying EBIT for Other and eliminations for the second quarter included costs related to the acquisition of Vale's aluminium operations of about NOK 50 million.
 
Hydro's solar activities incurred an underlying loss of NOK 19 million in the third quarter compared with a loss of NOK 47 million in the previous quarter and a loss of NOK 18 million in the third quarter of 2009.

Items excluded from underlying EBIT and net income

To provide a better understanding of Hydro's underlying performance, the items in the table below have been excluded from EBIT and net income.
 
Items excluded from underlying EBIT are comprised mainly of unrealized gains and losses on certain derivatives, impairment and rationalization charges, effects of disposals of businesses and operating assets, as well as other items that are of a special nature or are not expected to be incurred on an ongoing basis.
 
Linked to the agreement to acquire the majority of Vale's aluminium businesses in Brazil (Vale Aluminium) it was decided to hedge the majority of the net aluminium price exposure in Vale Aluminium until end 2011. The hedges are aimed at mitigating the risk of a weaker aluminium price and will secure a robust cash flow from the acquired assets in the transition phase. The hedges are not conditional upon completion of the transaction. The significant part of the positions expiring after closing of the transaction are subject to hedge accounting and included in other comprehensive income. Recognized unrealized and realized effects of positions not subject to hedge accounting are classified as items excluded from underlying EBIT.

Items excluded from underlying net income
NOK million Third
quarter
2010
Second
quarter
2010
Third
quarter
2009
First 9
months
2010
First 9
months
2009
Year
2009
             
Unrealized derivative effects on LME related contracts  515 389 (1,406) 651 (1,902) (2,630)
Derivative effects on LME related contracts (Vale Aluminium) 99 (320) - (221) - -
Unrealized derivative effects on power contracts (25) 211 (54) 458 (516) (198)
Unrealized derivative effects on currency contracts (65) 12 (102) (30) (325) (345)
Metal effect, Rolled Products 52 (206) (141) (468) 746 588
Significant rationalization charges and closure costs - 18 30 (1) 453 518
Impairment charges (PP&E and equity accounted investments) 114 - 286 175 300 438
Pension - (151) (52) (151) (52) (52)
Insurance compensation - - (73) - (139) (152)
(Gains)/losses on divestments - - - (67) - 684
Items excluded from underlying EBIT 690 (47) (1,512) 347 (1,435) (1,148)
Net foreign exchange (gain)/loss 246 (59) (992) (281) (2,559) (2,774)
Calculated income tax effect (328) 38 280 (49) 716 441
Items excluded from underlying net income 608 (68) (2,224) 16 (3,277) (3,481)

Finance

Financial expense amounted to NOK 218 million in the second quarter compared with financial expense of NOK 97 million in the previous quarter.
 
Interest income increased in the third quarter due to higher cash balances. In the second quarter, interest expense was higher due to interest on tax claims in Germany.
 
Currency losses in the third quarter mainly related to US dollar financial assets, due to weaker US dollar against the Norwegian kroner. There were no significant currency gains or losses on intercompany balances in the third quarter.1)
 
In the second quarter, currency gains on intercompany balances denominated in Euro amounted to NOK 151 million, due to a weaker Euro against the Norwegian kroner. Other net currency losses amounted to NOK 92 million.

Tax

Income tax expense amounted to a charge of NOK 119 million in the third quarter compared with a charge of NOK 462 million in the previous quarter and a charge of NOK 707 million in the third quarter of 2009.
 
For the first nine months of 2010 income tax expense was roughly 45 percent of pre-tax income. The high tax rate for the third quarter reflects mainly the losses in Qatalum, an equity accounted investment, in which earnings are recognized net of tax.
 

*********
Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management’s plans, objectives and strategies for Hydro, such as planned expansions, investments 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, as well as (i) statements preceded by “expected”, “scheduled”, “targeted”, “planned”, “proposed”, “intended” or similar statements.

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 aluminium business; 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.

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