Norsk Hydro: Bauxite & Alumina record results, partnering for a green transition

14 Feb 2025 07:00 CET

Hydro's adjusted EBITDA for the fourth quarter of 2024 was NOK 7,701 million, up
from NOK 3,737 million in the same quarter last year. The results increased from
higher alumina and all-in aluminium prices, and positive currency effects. This
was partly offset by higher raw material costs, lower Extrusions volumes and
recycling margins, higher fixed and other costs, including a tax settlement in
Aluminium Metal and a provision for future social projects in Bauxite & Alumina.
Hydro generated NOK 1.7 billion in free cash flow during the fourth quarter and
2024 adjusted RoaCE ended at 8.5 percent.

* Bauxite & Alumina record results, driven by alumina price increase
* 2025 emission reduction target of 10 percent achieved, one year ahead of
time
* Hydro Extrusions restructuring to manage continued weak demand, saving cost
and improving efficiency
* Partnering with Rio Tinto and Siemens Mobility to accelerate the green
transition
* Proposed cash dividend of 50 percent of adjusted net income (NOK 2.25 per
share)

"Hydro's fourth quarter results reflect Hydro's relentless efforts to strengthen
robustness and execute on our strategic agenda. Despite headwinds in the
downstream market, Hydro is delivering strong results, continuing to push
forward on our growth ambitions and decarbonization roadmap. Heading into a year
where geopolitical unpredictability is accelerating, continued diligence on our
improvement efforts will enable Hydro to push forward on our 2030 strategy and
reduce emissions, while continuing to deliver attractive shareholder value,"
says Eivind Kallevik, President and CEO of Hydro.

The Board of Directors propose to distribute NOK 4.5 billion in shareholder
distribution, which represents 50 percent of the 2024 adjusted net income, as
NOK 2.25 per share of cash dividends. The proposed distribution prioritizes
shareholder distribution by utilizing over the cycle adjusted net debt
flexibility. Going forward, Hydro's capital structure policy to maintain an
adjusted net debt over the cycle of around NOK 25 billion, including shareholder
distribution, remains unchanged. The final shareholder distribution for 2024 is
subject to approval by the Annual General Meeting (AGM) on May 9, 2025.

Strong upstream revenue drivers resulted in record fourth quarter results in
Bauxite & Alumina, with an adjusted EBITDA of NOK 5 billion. The Platts Alumina
Index (PAX) hit a record USD 805 per tonne in early December amid bauxite supply
concerns from Guinea, before correcting to USD 672 per tonne by quarter end.

On February 10, President Trump signed proclamations imposing 25 percent section
232 tariff on all imported steel and aluminium, while revoking exclusions
effective as of March 12. As the U.S. is a major aluminium importer, tariffs
will likely raise premiums and costs, with Midwest premiums already surging to
the highest levels since April 2023. Hydro faces little direct impact, as
Extrusions' operations rely mostly on domestic raw materials, with limited
exposure to cross border trade. In Extrusions, higher LME prices and premiums
have historically been passed on to customers. The Hydro Recycling business has
minor exposure to cross border scrap sourcing, but may benefit from rising
premiums. Hydro continues to take and evaluate mitigation actions for exposed
trade flows across the U.S. border.

While the global primary aluminium consumption was up 2.7 percent compared to
the same quarter last year, driven by a 3.2 percent increase in world ex-China,
the downstream aluminium market continues to face weak demand and tight
recycling margins in Europe and North America. Low electrical vehicle sales,
especially in Germany, weigh on automotive extrusion demand, while building and
construction, and industrial sectors remain moderate, with potential 2025
support from lower interest rates. Limited market activity continues to restrict
aluminium scrap supply, squeezing recycling margins and reducing remelt
production in Hydro Extrusions and Metal Markets. In response to continued weak
markets, Hydro Extrusions is taking proactive steps to enhance operational
effectiveness, investing NOK 350 million in restructuring throughout 2024. This
includes reducing total personnel by over 900 full time employees through the
closures of several recyclers and extruders across Europe and the U.S., while
implementing cost saving measures and efficiency improvements.

"Creating meaningful change requires collaboration across industrial value
chains. Partnering with Siemens Mobility to advance a truly circular solution
for Europe's next generation trains is incredibly exciting. Closed loop
recycling significantly reduces the environmental impact and emissions
associated with producing large industrial products like trains. Together with
Siemens Mobility, we will set a new standard for more sustainable transport
infrastructure," says Kallevik.

Hydro's partnership with Siemens Mobility and a national railway company enables
a train to train closed loop recycling solution, integrating post-consumer
recycled aluminium into new trains. With 40,000 trains set for decommissioning
over the next 15 years in Europe, generating 400,000 tonnes of aluminium scrap,
the initiative reduces Siemens' scope 3 emissions and promotes a circular
economy. A pilot phase with 10 to 13 trains will assess material quality for
reuse, driving sustainability in rail manufacturing.

In the fourth quarter, Hydro achieved its 2025 target of a 10 percent CO2
emission reduction one year ahead of schedule by switching from heavy fuel oil
to natural gas and adding two electric boilers at the alumina refinery Alunorte
in Brazil. Further progress was made on decarbonizing casthouse operations, with
bio-methane installation commencing operations and final build decision taken on
the plasma pilot at Sunndal, as well as starting construction of the hydrogen
pilot at Høyanger. On the electrolysis side, HalZero and carbon capture
technologies are progressing towards industrial scale by 2030, with ongoing
carbon capture tests at Sunndal.

On carbon capture, Hydro and Rio Tinto partnered to invest USD 45 million over
five years in developing carbon capture technologies for the aluminium
electrolysis process. Their collaboration encompasses everything from lab tests
to large-scale pilot projects focused on advancing commercial carbon capture
solutions, with work conducted at Hydro's Norwegian and Rio Tinto's European
facilities. Both will also continue independent decarbonization efforts.

Access to renewable power is vital for low-carbon aluminium growth. Due to lower
than expected production, several Swedish wind parks are facing financial
difficulties, leading Hydro to be entitled to up to EUR 248 million in
compensation through a settlement with Markbygden Ett AB from disrupted
deliveries since the beginning of 2023. From November, Hydro has faced further
power supply disruptions from Cloud Snurran AB of 60 GWh impacting the fourth
quarter. An active sourcing agenda compensates for the expected near and longer-
term disruptions, and Hydro Energy has secured three new long-term power
purchase agreements (PPAs) in the fourth quarter, totaling 0.7 TWh annually from
2025, and 0.9 TWh annually from 2026.  In Brazil, restricted energy production
and squeezed profits from solar and wind projects led to around NOK 400 million
in impairments in Brazilian energy assets owned through Hydro Rein, Bauxite &
Alumina and Aluminium Metal. Despite these challenges, power is being delivered
to Albras, Alunorte and Paragominas as per PPAs to secure future low-carbon
offerings fueled by renewable energy.

Hydro is committed to supporting local communities and maintaining its social
license to operate. Launched in Pará, Brazil in 2019, the Hydro Sustainability
Fund has invested around NOK 80 million to drive sustainable development,
impacting over 100,000 lives through seven programs focused on community and
female entrepreneurship. Additionally, in December 2024, agreements were signed
to support communities along the pipeline from the Paragominas mine to the
Alunorte refinery, funding infrastructure, local production facilities and
skills development. Around NOK 300 million was provisioned in the fourth quarter
of 2024 for future projects.

On January 16, Hydro successfully issued a EUR 500 million senior unsecured
green bond under its Euro Medium Term Note (EMTN) Programme, with a 7 year tenor
and a fixed 3.625 percent annual coupon (3.649 percent reoffer yield). The
proceeds will fund eligible projects under Hydro's Green and Sustainability-
Linked Financing Framework, supporting its strategy to accelerate the green
aluminium transition.

Results and market development per business area

Adjusted EBITDA for Bauxite & Alumina increased in the fourth quarter of 2024
compared to the same period last year, to NOK 4,969 million from NOK 481
million, mainly driven by higher alumina sales prices partly offset by costs
related to social projects and negative hedge effects. PAX started the quarter
at USD 564 per tonne, rising to an all time high of USD 805 per tonne at the
beginning of December. The rise was driven by bauxite supply concerns following
suspensions of shipments from a mine in Guinea, in an already very tight global
alumina market. PAX then corrected, ending the quarter at USD 672 per tonne.

Adjusted EBITDA for Energy increased in the fourth quarter of 2024 compared to
the same period last year, to NOK 1,151 million from NOK 805 million. This is
mainly due to recognized insurance compensation for a power plant outage,
recognition of expected compensation for termination of the Markbygden power
purchase agreement and higher commercial results, partly offset by lower gain on
price area differences. Net spot sales increased despite lower production due to
lower net contract sales volumes. Average Nordic power prices in the fourth
quarter decreased compared to the same quarter last year and increased compared
to the previous quarter. The decrease in prices from last year is primarily due
to hydrology, while the increase compared to the previous quarter is mainly due
to higher seasonal demand.

Adjusted EBITDA for Aluminium Metal is on the same level in the fourth quarter
of 2024 compared to the same period last year, with NOK 1,949 million in the
fourth quarter of 2024 compared to NOK 1,937 million in the fourth quarter of
2023. Higher all-in metal prices and reduced carbon cost are offset by increased
alumina cost and a tax settlement in Brazil of approximately NOK 600 million.
Global primary aluminium consumption was up 2.7 percent compared to the third
quarter of 2023, driven by a 3.2 percent increase in world ex-China. The three
month aluminium price was rangebound throughout the fourth quarter of 2024,
starting the quarter at USD 2,648 per tonne and ending at USD 2,552 per tonne.

Adjusted EBITDA for Metal Markets increased in the fourth quarter of 2024
compared to the same period last year, to NOK 319 million from a negative NOK
38 million. This is mainly due to positive results from sourcing and trading
activities, and positive currency and inventory valuation effects, partly offset
by lower results from recyclers.

Adjusted EBITDA for Extrusions decreased in the fourth quarter of 2024 compared
to the same period last year, to NOK 371 million from NOK 923 million driven by
lower extrusion sales volumes, decreased margins from recyclers and
restructuring costs. European extrusion demand is estimated to have decreased 8
percent in the fourth quarter of 2024 compared to the same quarter last year,
but increased 5 percent compared to the third quarter partly driven by
seasonality. Automotive extrusion demand continues to be challenged by weak
sales and production of electric vehicles across Europe, particularly in
Germany. Demand for building and construction, and industrial segments has
stabilized at moderate levels, with some improvements expected into the second
half of 2025 along with lower interest rates and higher consumer spending. North
American extrusion demand is estimated to have decreased 1 percent in the fourth
quarter of 2024 compared to the same quarter last year and 5 percent compared to
the third quarter. Extrusion demand has been particularly weak in the commercial
transport segment as trailer builds have continued to be soft. In addition,
automotive build rates were down year over year in the fourth quarter. Demand
continues to be moderate 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

Adjusted EBITDA for the full year of 2024 amounted to NOK 26,318 million,
compared with NOK 22,258 million in 2023. Higher alumina price, lower raw
material costs and positive currency effects were partly offset by lower
extrusions and recycling volumes, higher fixed costs, and lower contributions
from sale of power.

Compared to the third quarter 2024, Hydro's adjusted EBITDA increased from NOK
7,367 million to NOK 7,701 million in the fourth quarter 2024. Higher realized
alumina prices and upstream volumes were partly offset by higher raw material
costs and higher fixed costs.

Net income (loss) amounted to NOK 1,782 million in the fourth quarter of 2024.
Net income (loss) included a NOK 944 million unrealized derivative gain, mainly
on LME related contracts, and a net foreign exchange gain of NOK 170 million.
The result also includes compensation for termination of a power contract of
which NOK 642 million is related to future periods, impairment in equity
accounted investments of NOK 499 million, reimbursement of duty and reversal of
a provision related to the divested Rolling activity with NOK 225 million, and
NOK 189 million in rationalization charges and closure costs. Further, foreign
exchange losses of NOK 2,147 million are also adjusted for, mainly unrealized,
primarily reflecting a loss from a weaker BRL versus USD negatively impacting
USD borrowing in Brazilian entities, and a weaker NOK versus EUR affecting EUR
embedded energy contracts and other liabilities denominated in EUR. The tax
effect on these adjustments reflects a standardized tax rate for taxable gains
and tax deductible losses.

Hydro's net debt increased from NOK 14.7 billion to NOK 16.0 billion during the
fourth quarter of 2024. The net debt increase was mainly driven by EBITDA
contribution being more than offset by investments, build in operating capital,
share buybacks and translation effects.

Adjusted net debt decreased from NOK 25.0 billion to NOK 24.1 billion, where
increased net debt of NOK 1.3 billion was more than offset by reduced
adjustments of NOK 2.1 billion, driven by lower net pension liabilities,
collateral and financial liabilities.

On January 7, 2025, Hydro finalized the open market repurchase of the 2024-2025
share buyback program as announced on September 10, 2024. The total program
comprises 30,526,862 shares, of which 20,067,969 shares were repurchased in the
market at a weighted average price of NOK 65.52. The remaining 10,458,893 shares
will be purchased from the Norwegian state, keeping their ownership interest of
34.26 percent unchanged. The 30,526,862 shares will be cancelled following
approval by the Annual General Meeting in May.

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

More information:
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638718_NHY Presentation Q4 2024.pdf
638718_NHY Report Q4 2024.pdf