Strongest Hydro Figures – E24

The aluminum producer makes an adjusted (underlying) operating profit of NOK 1.45 billion in the fourth quarter, according to a report.

In the same quarter last year, adjusted operating profit was NOK 560 million.

An adjusted operating profit of NOK 1.4 billion was expected in advance, based on an average of estimates from Infront and TDN Direkt.

The adjusted figure eliminates a number of unique effects and noise and, according to the company, will give a better picture of the underlying development in the business than the bottom line.

Hydro explains the progress with better prices and higher volumes. In addition, lower raw material costs and positive currency effects contributed.

In the opposite direction were the additional costs related to maintenance in the bauxite and alumina segment.

Hydro’s board proposes paying a dividend of NOK 1.25 for 2020. This is considered a minimum level for the company.

– Exceeded the goal

– I’m impressed with our organization, which manages to keep the wheels rolling in a year marked by the pandemic, while also achieving our improvement goals, says CEO Hilde Merete Aasheim at Norsk Hydro.

On the company’s capital market day this fall, Hydro said it is expanding its improvement program and sets a higher target of NOK 8.5 billion by 2025. Many of these improvements will be made in 2021.

– We exceeded the cost improvement target with total savings of NOK 4.2 billion in 2020. This constitutes about half of the overall ambition for 2025 and has also contributed to positive cash flow development in the fourth quarter, says Aasheim.

Hydro reports that the company’s net debt fell to NOK 7.8 billion, from NOK 9.9 billion at the end of the previous quarter.

Strong numbers on the bottom line

Hydro also changes from low to high on the bottom line.

The company makes an after-tax profit of NOK 7.28 billion and a turnover of NOK 35.89 billion in the fourth quarter.

In the same quarter of the previous year, the profit after tax was minus NOK 460 million. The turnover was NOK 35.49 billion.

An after-tax profit of just over NOK 1 billion was expected upfront for the fourth quarter, and a turnover of NOK 35.32 billion.

The big jump in the bottom line is mainly due to an agreement with Lyse on the additional operation of the Røldal-Suldal power plants, where Hydro reports a profit of up to 5.3 billion NOK.

In addition, the result is affected by the strengthening of the crown against the euro, which affects the value of the company’s energy contracts in the derivatives market.

Adjusted for these effects, Hydro’s underlying profit after tax was NOK 834 million.

Previous year’s progress

Considering the entire year 2020, Hydro made an after-tax profit of NOK 3.56 billion and a turnover of NOK 138.12 billion. The underlying operating profit was just over NOK 6 billion last year.

In comparison, the profit after tax in 2019 was minus NOK 2.37 billion and the turnover was NOK 149.77 billion. The underlying operating profit was NOK 3.36 billion for all of 2019.

Here are some of Hydro’s milestones last year:

• Line B at the Husnes plant reopened in November, after 1.5 billion in upgrades. By then, the plant had been in operation for half a machine since the financial crisis.
• In December, the company transferred the Røldal-Suldal power plants to a jointly owned company with publicly owned Lyse, so the company avoided reverting to the state.
• Hydro has announced a significant investment in batteries, recycling, and solar and wind power. Among other things, the company is now seeking land in Norway for a large battery factory together with Panasonic and Equinor.

Best Primary Aluminum Numbers

This was the case in some of the company’s most important segments in the fourth quarter:

• Hydro in particular reports progress in the primary aluminum segment, where adjusted earnings increased to NOK 844 million, from NOK 155 million a year earlier.
• The bauxite and alumina segment posted adjusted earnings of 116 million, down from minus 75 million a year earlier.
• The Hydro Extrusions segment returned an adjusted result of NOK 511 million, compared to NOK 85 million the previous year.

– Hydro’s volume growth outpaced market growth in both the Rolling laminating company and the Extrusions extrusion business in Q4 2020, says Hydro’s CFO Pål Kildemo.

– This is due to the increase in important segments such as auto parts, beverage cans and buildings and facilities. In the Aluminum Metal business area, the ratio between processed and standard products has improved to a historically high level of about 70 percent for processed products, he says.

According to Kildemo, the company’s operations were largely normal in the fourth quarter, but the crown crisis continues to create uncertainty in the market.

Read Hydro’s Q4 report here