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Quarterly guidance

Ahead of the quarterly results release, Hydro Investor Relations reminds analysts and investors about the relevant publicly available information and guidance for the next quarter.

Business area outlook for Q1 2019 as provided in the Q4 2018 presentation:

Bauxite & Alumina

  • Alunorte and Paragominas producing at 50% capacity
  • Lower external alumina sourcing
  • Alumina prices realized with ~1 month lag

Primary Metal

  • ~ 60% of primary production for Q1 priced at USD ~1 975 per mt
  • ~ 55% of premiums affecting Q1 booked at USD ~430 per mt
  • Q1 realized premium expected in the range of 325-375 USD/mt
  • Raw material costs trending downwards
  • Albras producing at 50% capacity

Metal Markets

  • Volatile trading and currency effects
  • Remelt production affected by Henderson plant outage

Rolled Products

  • Softening demand growth in some market segments
  • Raw material costs trending downwards for Neuss

Extruded solutions

  • Softening demand growth in some market segments

Energy

  • Price and volume uncertainty
  • Planned maintenance affecting production in RSK

Additional information

  • The latest available price and currency sensitivities for earnings (as well as information on the price time lags for revenues and costs), are included in the Q4 18 Investor presentation 
  • As of January 1, 2019 the new IFRS 16 standard will require that all leases are recognized on the balance sheet. As communicated previously, this is estimated to increase our net debt by some 3 BNOK, and the adjusted net debt by around 1.5 BNOK. The new IFRS16 standard will also have a P&L effect – positive impact on EBITDA, minor impact on EBIT - since lease-related costs will be taken out of EBITDA and reported mainly as depreciation and partly as interest cost. Operating lease expense in 2018 amounted to around ~650 MNOK. 
  • Our total capex guidance for 2019 is 10-10,5 BNOK, of which 7-7,5 BNOK is sustaining capex
  • Hydro has been subject to a cyber attack since February 19, 2019 impacting operations in some business areas. Based on a high-level evaluation, the preliminary estimated financial impact for the first full week following the cyber attack is around NOK 300-350 million, the majority stemming from lost margins and volumes in the Extruded Solutions business area. The impact on the second and the subsequent weeks should decrease as Hydro continues to approach normal operations after the cyber attack. Please refer to hydro.com for more details.
  • Aluminium production at Neuss has been affected by damages to roof construction. The damages and production effect are being evaluated, but early estimates indicate that the production impact will be between 10 000 and 20 000 mt for the year 2019, while financial impact is estimated to be limited.

Publicly available information regarding the market prices and currency developments in Q1:

  • The average LME-cash market rate in Q1 was USD 1859 vs USD 1 978 in Q4
  • The average spot PAX alumina price in Q1 was USD 387 vs USD 450 in Q4
  • The average USD/NOK market rate in Q1 was 8.58 vs 8.43 in Q4
  • The average USD/BRL market rate in Q1 was 3.76 vs 3.80 in Q4
  • The Nordpool power price for NO2 (where Hydro has ~2/3 of the production) in Q1 was NOK/MWh 468 vs 455 NOK/MWh in Q4 
  • The Nordpool power price for NO5 (where Hydro has ~1/3 of the production) in Q1 was NOK/MWh 468 vs 446 NOK/MWh in Q4
  • The Nordpool power price for NO3 in Q1 was 451 NOK/MWh vs 454 NOK/MWh in Q4

Updated: June 19, 2019