Norsk Hydro: Strong upstream results, building downstream robustness

24 Oct 2024 07:00 CEST

Hydro's adjusted EBITDA for the third quarter of 2024 was NOK 7,367 million, up
from NOK 3,899 million in the same quarter last year, positively impacted by
higher aluminium and alumina prices, lower raw material costs and positive
currency effects. This was partly offset by lower recycling margins, Extrusions
volumes and Energy prices resulting in an adjusted RoaCE of 8.5 percent over the
last twelve months and free cash flow of NOK 1.7 billion.

* Solid upstream results from increasing alumina and aluminium prices
* 2024 improvement programs on track, Extrusions building robustness in weaker
core markets
* Energy executing on renewable ambitions with Illvatn pumped storage project
* Reducing ownership from 30 to 19.9 percent and impairing NOK 956
million investments in Vianode
* Hydro and Mercedes-Benz extend partnership to foster socioeconomic
development in Brazilian Amazon

"The positive development in our upstream revenue drivers continued in the third
quarter, supporting strong results in our upstream business, countering the
overall effects of the challenging downstream market," says Eivind Kallevik,
President & CEO of Hydro.

Positive upstream revenue drivers continued into the third quarter, supporting
record results in Bauxite & Alumina. The Platts Alumina Index (PAX) gradually
increased to USD 562 per tonne by quarter's end as global alumina supply
tightened. Chinese alumina prices also rose due to bauxite sourcing constraints,
keeping the market balanced. Alunorte continued the fuel switch project,
producing alumina with natural gas during the third quarter, and is expected to
be fully implemented by the end of this year. The three-month aluminium price
rose from USD 2,515 to USD 2,612 per tonne during the third quarter, supporting
solid results in Aluminium Metal.

"The fuel switch at Alunorte exemplifies sustainability and profitability going
hand in hand, yielding significant savings in carbon intensity as well as costs.
Combined with the higher alumina price driven by the tight alumina market, the
investment impacts Bauxite & Alumina's result positively this quarter," says
Kallevik.

The downstream aluminium market continued to be challenged by weak demand and
recycling margins in Europe and North America. Automotive extrusion demand
remains weak due to low electrical vehicle sales in Europe, especially in
Germany. Building and construction, and industrial demand continues to be
moderate with potential 2025 support from lower interest rates. Low activity in
these markets limits aluminium scrap supply, squeezing recycling margins and
reducing remelt production in both Hydro Extrusions and Metal Markets.

"Hydro is responding with short and long-term actions to strengthen robustness
in Extrusions. While responding to the challenging market with firm mitigating
actions, we are continuing to invest in the long-term robustness of our
operations," says Kallevik.

Hydro Extrusions is actively navigating challenging markets to address weak
demand. By leveraging production flexibility and implementing cost-cutting
programs, Extrusions aims to maintain margins. The recent investment in an
automated press in Cressona in the U.S., replacing two old presses, exemplifies
the commitment in Extrusions to enhance efficiency and productivity. However,
achieving the NOK 8 billion EBITDA target for 2025 will require an extrusion
market recovery of more than 20 percent volume growth and a recovery of remelt
margins in line with historical averages, both in total representing NOK 2-3
billion improved EBITDA.

Weak markets are pressuring recycling margins, and active measures are taken to
boost profitability and secure competitive scrap sourcing. Critical to this
effort are enhanced capabilities in advanced scrap sorting. In the third
quarter, the Alusort joint venture launched commercial operations of HySort in
the U.S., enabling plants to process more post-consumer scrap. This expands
Hydro's HySort portfolio, to soon five machines in operation, including four
across Europe, reinforcing the company's leadership in recycling more post-
consumer scrap.

By leveraging a fully integrated, traceable value chain from mine to component,
Hydro is attracting strategic partnerships with industry frontrunners like
Mercedes-Benz. The collaboration advanced significantly during the third
quarter, as both companies committed to a long-term initiative aimed at driving
positive change in the Brazilian Amazon. The Corridor program focuses on
protecting human rights, generating income for local communities, restoring
nature and building low-carbon value chains, underscoring that sustainability in
aluminium solutions goes beyond just reducing carbon footprint.

"The agreement with Mercedes-Benz extends our partnership beyond low-carbon
product development to create positive social and environmental impact in the
state of Pará. Together, we aim to lift sustainability throughout our shared
value chain, from mine to end-consumer product," says Kallevik.

Securing renewable power is key to growth in low-carbon aluminium. Hydro made an
investment decision for the Illvatn pumped storage plant in Luster, Norway,
aiming to generate 84 GWh of renewable energy annually and improving flexibility
in its production system. This will strengthen Hydro Energy's portfolio,
powering industrial production in Norway.

On October 22, Hydro decided to reduce its ownership in the synthetic graphite
producer Vianode, based in Norway, from 30 to 19.9 percent. Hydro will step down
from the board and no longer provide capital to Vianode to focus on projects
supporting Hydro's strategic priorities towards 2030. Impairments of NOK 956
million of investments in Vianode are taken in the third quarter, with NOK 581
million impacting reported EBITDA and shareholder loan in Vianode of NOK 375
million is impacting Finance expense.

Results and market development per business area

Adjusted EBITDA for Bauxite & Alumina increased compared to the third quarter of
last year, from NOK 93 million to NOK 3,410 million, mainly driven by higher
alumina sales prices, lower cost of raw materials and positive currency effects,
partly offset by increased alumina sourcing costs and decreased sales volume.
PAX started the quarter at USD 505 per mt, traded down to USD 478 per mt in
July, before increasing gradually to USD 562 per mt at the end of the quarter as
the World ex-China alumina market continued tightening.

Adjusted EBITDA for Energy in the third quarter decreased compared to the same
period last year, from NOK 762 million to NOK 626 million. Lower prices and
lower gain on price area differences were partly offset by the expiry of a 12-
month internal fixed price purchase contract from Aluminium Metal at a loss in
the same period last year. Average Nordic power prices in the third quarter
2024 decreased, both compared to the same quarter last year and the previous
quarter. The decrease compared to the second quarter in 2024 was primarily a
result of strengthened hydrological balance and seasonally reduced consumption.
Price area differences between the south and the north of the Nordic market
region decreased compared to the same quarter last year and increased compared
to the previous quarter.

Adjusted EBITDA for Aluminium Metal increased in the third quarter of 2024, from
NOK 1,379 million to NOK 3,234 million compared to the third quarter of 2023,
mainly due to higher all-in metal prices, reduced carbon cost, higher level in
CO2 compensation and positive currency effects, partly offset by increased
alumina cost and higher fixed cost. Global primary aluminium consumption was up
1.6 percent compared to the third quarter of 2023, driven by a 2.3 percent
increase in China. The three-month aluminium price increased throughout the
third quarter of 2024, starting the quarter at USD 2,515 per mt and ending at
USD 2,612 per mt.

Adjusted EBITDA for Metal Markets decreased in the third quarter compared to the
same period last year, from NOK 568 million to NOK 277 million, due to lower
results from recyclers and negative currency effects, partly offset by strong
results from sourcing and trading activities. Lower results from recyclers are
due to reduced sales prices in a weakening market and additional margin pressure
in a tightening scrap market.

Extrusions adjusted EBITDA for the third quarter of 2024 decreased compared to
the same quarter last year, from NOK 1,322 million to NOK 879 million driven by
lower sales volumes and decreased margins from recycling. General inflation
pressured fixed and variable costs, partly offset by cost measures. European
extrusion demand is estimated to have decreased 7 percent in the third quarter
of 2024 compared to the same quarter last year, and 21 percent compared to the
second quarter partly driven by seasonality. Automotive extrusion demand
continues to be challenged by weak sales of electric vehicles across Europe,
particularly in Germany. Demand for building and construction, and industrial
segments has remained moderate after summer with no clear signs of improvement
over the coming months, although lower interest rates may support demand into
2025. North American extrusion demand is estimated to have decreased 4 percent
during the third quarter of 2024 compared to the same quarter last year and 7
percent compared to the second quarter. The transport segment has been
particularly weak, driven by lower trailer build rates. Automotive demand is
facing headwinds due to weaker sales of electric vehicles. Demand continues to
be soft in the building and construction, and industrial segments, however,
underlying demand is expected to gradually improve into 2025 driven by lower
interest rates.

Other key financials

Compared to the second quarter 2024, Hydro's adjusted EBITDA increased from NOK
5,839 million to NOK 7,367 million in the third quarter 2024. Higher realized
aluminium and alumina prices combined with lower fixed costs were partly offset
by lower Extrusions and recycling volume.

Net income (loss) amounted to NOK 1,409 million in the third quarter of 2024.
Net income (loss) included a NOK 907 million unrealized derivative loss on LME
related contracts and a net foreign exchange gain of NOK 139 million. The result
also includes the impairment of the equity accounted battery investment Vianode
of NOK 581 million and NOK 129 million in rationalization charges and closure
costs. Further, foreign exchange losses of NOK 1,092 and losses on a loan to
Vianode of NOK 375 million are adjusted for. The tax effect on these adjustments
reflects a standardized tax rate for taxable gains and tax deductible losses.

Hydro's net debt decreased from NOK 16.2 billion to NOK 14.8 billion during the
third quarter of 2024. The net debt decrease was mainly driven by EBITDA
contributions, partly offset by investments and other operating cash flows.

Adjusted net debt decreased from NOK 26.1 billion to NOK 25.0 billion, largely
due to the decrease in net debt of NOK 1.5 billion, partly offset by increased
net pension liabilities of NOK 0.3 billion and increased collateral of NOK 0.2
billion.

Reported earnings before financial items and tax (EBIT), and net income include
effects that are disclosed in the quarterly report. Adjustments to EBITDA, EBIT
and net income (loss) are defined and described as part of the alternative
performance measures (APM) section in the quarterly report.


Investor contact:
Martine Rambøl Hagen
+47 91708918
Martine.Rambol.Hagen@hydro.com

Media contact:
Halvor Molland
+47 92979797
Halvor.Molland@hydro.com

The information was submitted for publication from Hydro Investor Relations and
the contact persons set out above. Certain statements included in this
announcement contain forward-looking information, including, without limitation,
information relating to (a) forecasts, projections and estimates, (b) statements
of Hydro management concerning plans, objectives and strategies, such as planned
expansions, investments, divestments, curtailments 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, and (i) qualified statements such as "expected", "scheduled",
"targeted", "planned", "proposed", "intended" or similar. 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 businesses; 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. Except where required by law,
Hydro disclaims any obligation to update or revise any

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630254_NHY Report Q3 2024.pdf
630254_NHY Presentation Q3 2024.pdf