Norsk Hydro Q3 2016 results decline over lower metal sales and negative currency effects

Norsk Hydro has reported its third quarter 2016 results. Hydro's underlying EBIT declined to NOK 1,477 million in Q3 from NOK 1,618 million in Q2 2016. The decline was due to lower metal sales and negative currency effects, slightly offset by higher realized aluminium prices.

Commenting on the results, Svein Richard Brandtzæg, President and CEO of Hydro said, "Demand growth for aluminium remains healthy. We are sticking to our forecast for global aluminium demand growth of 4-5 percent for 2016 and expect to land in the higher range of this estimate for the full year…This comes on the back of higher-than-expected demand in China and slower restarts of curtailed capacity."

 Highlights:

• NOK 1 477 million of underlying EBIT
• Higher realized all-in aluminium prices, slightly offset by currency developments
• Lower sales volume
• Record-high alumina production of 6.5 million mt
• New automotive line in Germany starts trial production
• Improvement program on track to realize 2019 target of NOK 2.9 billion
• Projected aluminium demand growth at 4-5%

Underlying EBIT for Primary aluminium declined in the third quarter mainly due to the following factors:

• Lower premiums and sales volumes
• higher raw material costs
• negative currency effects

These negative factors were partially offset by higher realized aluminium prices and lower fixed costs. Underlying EBIT for Metal Markets improved in the second quarter caused mainly by less negative currency and inventory evaluation effects, in addition to improved results from sourcing and trading activities. Results from remelters declined mainly due to seasonally lower volumes.

Underlying EBIT for Rolled Products dropped as compared to the previous quarter caused by lower sales volume and changes in the product mix. The Neuss smelter result was higher due to an increase in aluminium price.
 
Underlying EBIT for Sapa also dropped sequentially due to seasonally lower market demand.

Hydro's net cash flow increased to NOK 5.4 in the third quarter. Net cash provided by operating activities amounted to NOK 2.3 billion. Reported earnings before financial items and tax dropped to NOK 1,376 million in the third quarter compared to NOK 1,978 million in Q2. Net income dropped to NOK 1,119 million compared to NOK 2,077 million in Q2.
 
Hydro is however, making good progress towards its "Better" improvement ambition to achieve its 2019 target of NOK 2.9 billion.

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