Norsk Hydro ASA (OSE: NHY) will be taking 1.3 billion of charges in write-downs in its fourth-quarter 2011 accounts. Weakening demand conditions particularly in Southern Europe and low prices combined with pressure on raw material prices and currency effects are to be blamed for this. Hydro says it continues to implement corrective measures to address current imbalances in aluminium markets.
The most significant write-down will be on the asset value of its Kurri Kurri smelter in Austrailia. Hydro recently announced closure of one potline at the plant. Back then it was estimated that the entire production site may be in danger and the latest 1 billion NOK impairment certainly does not improve that sentiment. There were no new comments on the efforts to secure financing for the plant besides a comment that the financial situation is challenging. Remaining book value of Kurri Kurri fixed assets stands at 1.2 billion NOK.
Hydro does not see any near-term improvement in extrusion business operations in Southern Europe. Therefore the company also writes down assets within Building Systems in Spain, Portugal and Italy and also takes a restructuring charge on ongoing measures aimed at reducing costs base by around 300 million NOK by the end of 2012 at these sites. Hydro’s stock has recovered to trade on par with yesterday’s closing. It opened up deep in the red but has been helped by a positive market sentiment so far today. Hydro is due to report its Q4 2011 earnings on February 16th.
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