Norwegian based global aluminium supplier Norsk Hydro (OSE: NHY) opened above 40 NOK per share level after the company reported quarterly numbers that were considerably above estimates. Underlying earnings before financial items and tax of (EBIT) was 1.906 billion Norwegian kroner generated from second quarter revenue of 24.7 billion. Underlying earnings per share were 61 øre per share.
Bauxite & Alumina business unit improved production performance. The integration of Vale’s bauxite & aluminina activities is on track. Hydro’s interest expenses grew as a result of debt assumed in the Vale transaction and Hydro also took on price hedges for the transaction, which offset some of gains from the realized higher alumina prices on the market. The unit’s contribution to EBIT was 272 million, up from 155 million in Q1
Primary Metal unit’s result also improved as a result of higher aluminium prices and higher volumes. These were not fully offset by higher raw material costs. Qatalum plant is expected to reach full production by the end of third quarter. Primary metals contribution to underlying EBIT was 765 million.
Midstream operations volumes and margins were up and downstream EBIT was stable. Energy unit activity was at a lower level compared to Q1 due to seasonally lower power production and lower prices but underlying result was strong. Hydro has agreed to divest non-strategic 20% ownership stake in northern Norwegian power production company SKS Produksjon AS for NOK 1 billion in cash to Salten Kraftsamband AS
CEO Svein Richard Brandtzæg said the company continues to focus on cost repositioning along aluminium value chain. He says the company remains optimistic about the prospects of aluminium demands but concedes that more volatile macro environment may result in increased demand fluctuations in the coming months. Hydro is guiding improved production stability, increased production and raw material cost pressure. Hydro has 180 000 mt aluminium hedged for H2 at LME ~USD 2 400 per mt.
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