Norsk Hydro second quarter 2012: Weak markets and results, improvement ambitions stepped up

Hydro's underlying earnings before financial items and tax amounted to NOK 549 million in the second quarter, compared with NOK 557 million in the previous quarter. The weak quarterly results reflect low aluminium prices and a challenging macro-economic environment, while ambitious improvement programs helped reducing operating costs, contributing positively in the quarter. * Underlying EBIT NOK 549 million * Low aluminium prices * Corrective measures and operational improvements * Results positively influenced by lower operating costs * Closure of Kurri Kurri aluminium plant, NOK 1.5 billion in charges * 2012 aluminium demand growth outlook around 2 percent outside China "The weak macro-economic environment continues to be a challenge in our main markets, leading to low aluminium prices and a weak second quarter for Hydro," Hydro's President and CEO Svein Richard Brandtzæg said. "Weak markets and low aluminium prices require tough corrective measures, including capacity adjustment and operational improvements. We are continuing our efforts with unabated strength, and we are now finalizing programs across Hydro which in total will yield improvements in the range of NOK 2-3 billion over the next two-three years. These programs are vital for Hydro's future development, strengthening our competitive position in a demanding industry picture," Brandtzæg said. Bauxite & Alumina continued to deliver a weak underlying result for the quarter due to low LME prices, pricing of long-term contracts and increasing energy costs. Underlying EBIT for Primary Metal increased compared to the first quarter mainly due to somewhat higher aluminium prices and lower operating costs. Underlying results for Qatalum were higher, mainly due to the final insurance settlement relating to the power outage in 2010. Hydro's midstream operations delivered lower underlying results compared to the previous quarter due to negative currency effects. Excluding currency effects, underlying EBIT was stable between the quarters. Underlying EBIT improved for Hydro's downstream businesses from the first quarter due to seasonally higher volumes for Extruded Products and lower operating costs in general. However, results for the quarter continued to be affected by the challenging macro-economic situation in Europe. Energy delivered lower underlying EBIT in the second quarter compared to the previous quarter, due to lower production and lower prices. Operating cash flow amounted to NOK 0.8 billion for the quarter. Net cash used for investment activities amounted to NOK 0.8 billion. Dividends paid in the quarter amounted to NOK 1.7 billion. Hydro's net debt position was NOK 0.4 billion at the end of the second quarter. Hydro incurred a reported loss before financial items and tax of NOK 720 million in the second quarter including net unrealized derivative gains of NOK 300 million, rationalization and closure costs of NOK 408 million, impairment charges amounting to NOK 1,175 million and positive metal effects of NOK 9 million. In June, Hydro decided to close the remaining production at its Kurri Kurri Aluminium plant in Australia following the curtailment of one production line in January. Reported EBIT for the second quarter included NOK 1,154 million of impairment charges and NOK 322 million of rationalization and closure costs relating to the closure. Rationalization and restructuring initiatives in Extruded Products, involving Building Systems and Extrusion Eurasia, resulted in impairment charges and rationalization costs of NOK 106 million. Hydro incurred a reported net loss amounting to NOK 1,712 million in the second quarter including net foreign exchange losses of NOK 883 million. In the previous quarter, Hydro had reported net income of NOK 585 million including net foreign exchange gains of NOK 410 million. Key financial information % change NOK million, Second First % change Second prior First First except per quarter quarter prior quarter year half half Year share data 2012 2012 quarter 2011 quarter 2012 2011 2011 -------------------------------------------------------------------------------- Revenue 21 604 21 748 (1) % 24 728 (13) % 43351 45 867 91444 Earnings before financial items and tax >(100) (EBIT) (720) 665 >(100) % 2 111 % (54) 7 967 9 827 Items excluded from underlying EBIT 1 269 (108) >100 % (206) >100 % 1 161 (4 613) (3694) -------------------------------------------------------------------------------- Underlying EBIT 549 557 (1) % 1 906 (71) % 1 106 3 354 6 133 -------------------------------------------------------------------------------- Underlying EBIT : Bauxite & >(100) Alumina (188) (144) (31) % 272 % (332) 427 887 Primary Metal 240 30 >100 % 765 (69) % 271 1 348 2 486 Metal Markets 44 87 (50) % 244 (82) % 131 387 441 Rolled Products 204 151 35 % 232 (12) % 355 463 673 Extruded Products 53 14 >100 % 96 (44) % 68 201 151 Energy 362 556 (35) % 363      - 918 936 1 883 Other and >(100) eliminations (166) (137) (21) % (65) % (303) (408) (389) -------------------------------------------------------------------------------- Underlying EBIT 549 557 (1) % 1 906 (71) % 1 106 3 354 6 133 -------------------------------------------------------------------------------- Underlying EBITDA 1 777 1 870 (5) % 3 229 (45) % 3 648 5 643 11 152 -------------------------------------------------------------------------------- Net income >(100) (loss) (1 712) 585 >(100) % 1 546 % (1127) 6 701 6 749 -------------------------------------------------------------------------------- Underlying net income (loss) 268 256 5 % 1 166 (77) % 524 2 000 3 947 -------------------------------------------------------------------------------- Earnings per >(100) share (0.78) 0.25 >(100) % 0.69 % (0.54) 3.41 3.41 -------------------------------------------------------------------------------- Underlying earnings per share 0.12 0.13 (5) % 0.52 (77) % 0.25 0.97 1.89 -------------------------------------------------------------------------------- Financial data: -------------------------------------------------------------------------------- Investments 777 898 (13) % 1 085 (28) % 1 674 42 710 48025 Adjusted net interest- (20 bearing debt (21125) (19231) (10) % 777) (2) % (21125) (20777) (19895) -------------------------------------------------------------------------------- Key Operational information -------------------------------------------------------------------------------- Alumina production (kmt) 1 491 1 464 2 % 1 448 3 % 2 955 2 220 5 264 Primary aluminium production (kmt) 502 514 (2) % 505 (1) % 1 016 921 1 982 Realized aluminium price LME (USD/mt)    2167  2 155 1 % 2 509 (14) %    2161  2 441 2 480 Realized aluminium price LME (NOK/mt)   12637 12 404 2 % 13 803 (8) %  12523 13 724 13 884 Realized NOK/USD exchange rate 5.83 5.75 1 % 5.50 6 % 5.79 5.62 5.60 Metal products sales, total Hydro (kmt) 857    872 (2) %    877 (2) %    1728  1 649 3 303 Rolled Products sales volumes to external market (kmt) 228 227      - 242 (6) % 455 487 929 Extruded Products sales volumes to external market (kmt) 137 133 3 % 142 (4) % 270 278 536 Power production (GWh) 2 513 3 190 (21) % 1 830 37 % 5 703 4 138 9 582 -------------------------------------------------------------------------------- Investor contact Contact     Rikard Lindqvist Cellular    +47 41751199 E-mail      Rikard.Lindqvist@hydro.com Press contact Contact     Halvor Molland Cellular    +47 92979797 E-mail      Halvor.Molland@hydro.com                                        ********* 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. This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act. Q2 Report: http://hugin.info/106/R/1628685/521565.pdf Q2 presentation: http://hugin.info/106/R/1628685/521566.pdf This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Norsk Hydro via Thomson Reuters ONE [HUG#1628685]