Underlying EBIT for Bauxite and Alumina decreased compared to the third quarter of last year
Underlying EBIT for Primary Metal declined from positive NOK 861 million in Q3 2018 to negative NOK 39 million in Q3 2019
Underlying EBIT for Metal Markets improved from negative NOK 3 million in Q3 2018 to positive NOK 362 million in Q3 2019
Hydro's underlying earnings before financial items and tax was NOK 1 366 million in the third quarter, down from NOK 2 676 million in the same quarter last year.
This mainly reflected a decrease in realized aluminium and alumina prices, partly offset by lower raw material costs and positive effects from higher production in Brazil.
Highlights:
- Underlying EBIT of NOK 1 366 million
- Final Alunorte embargo lifted
- Results down on lower aluminium and alumina prices
-Positive effects from higher upstream production and lower raw material costs
New improvement program on track for 2019 target
- Increased market uncertainty and reduced demand expectations
Underlying EBIT for Bauxite and Alumina decreased compared to the third quarter of last year, from NOK 685 million in Q3 2018 to NOK 481 million in Q3 2019.
The results were driven by a decrease in the realized alumina sales price partly offset by positive effects from increased production following the lifting of the production embargo on May 20, 2019.
Underlying EBIT for Primary Metal declined from positive NOK 861 million in Q3 2018 to negative NOK 39 million in Q3 2019, mainly due to lower all-in metal prices and lower earnings on power sales in Brazil, somewhat offset by lower raw material cost and positive currency effects.
Underlying EBIT for Metal Markets improved from negative NOK 3 million in Q3 2018 to positive NOK 362 million in Q3 2019 due to increased results from the remelters, higher results in the sourcing and trading activities and positive currency effects.
Underlying EBIT for Rolled Products increased compared to the third quarter of 2018, from NOK 82 million in Q3 2018 to NOK 166 million in Q3 2019.
The result from the rolling mills was stable, positive currency effects were offset by inflationary cost increases and depreciation.
The Neuss smelter result increased driven by lower raw material costs and insurance compensation partly offset by lower all-in metal prices.
Underlying EBIT for Extruded Solutions increased compared to the same quarter last year, from NOK 497 million in Q3 2018 to NOK 559 million in Q3 2019.
Higher margins were partly offset by increased costs and lower volumes mainly due to the softening market.
Extrusion North America results increased driven by higher margins, while Extrusion Europe results were lower driven by a decline in most market segments.
Underlying EBIT for Energy decreased significantly from NOK 652 million in Q3 2018 to NOK 254 million in Q3 2019.
The decrease was mainly due to lower production and lower prices.
The federal court in Belem, Brazil, lifted the final embargo on Alunorte’s new bauxite residue disposal area (DRS2) on September 26, allowing Alunorte to resume activities of installation and commissioning at DRS2, ending a 19-month embargo period which has restricted activities at the plant.
Alunorte, with an annual production capacity of 6.3 million mt, reached 83 percent utilization of its capacity in the third quarter.
As outlined on Hydro’s Investor Day, new improvement programs have been launched across the company, representing NOK 6.4 billion in EBIT improvements over the next five years, in addition to NOK 0.9 billion targeted in Rolled Products over the same time period.
The improvements include the curtailment reversal of the Brazilian assets with the effect of NOK 2.7 billion.
At the end of the third quarter the improvement programs are progressing according to plan.
Hydro has initiated a strategic review and comprehensive restructuring of the Rolled Products business area to mitigate the declining profitability the business has faced over the last years.
The aim is to significantly turn this development around by lifting organizational and operational efficiency as well as shifting the product portfolio away from declining markets and towards growth markets like automotive and can.
The improvement target is NOK 0.9 billion by 2023.
A provision for restructuring costs of NOK 1,145 million was recognized in the third quarter and this has been excluded from underlying EBIT.
The cyberattack on Hydro on March 19, affected the entire global organization, with Extruded Solutions having suffered the most significant operational challenges and financial losses.
The financial impact of the cyberattack is estimated to around NOK 550-650 million in the first half year with limited financial effects for the third quarter.
Hydro has a robust cyber insurance in place with recognized insurers.
Hydro has recognized NOK 33 million insurance compensation in the third quarter.
Further compensation will be recognized when deemed virtually certain.
Hydro's net debt position decreased from NOK 15.1 billion to NOK 14.5 billion at the end of the quarter.
Net cash provided by operating activities amounted to NOK 3.5 billion.
Net cash used in investment activities, excluding short term investments, amounted to NOK 2.0 billion.
Hydro's reported EBIT amounted to NOK 222 million in Q3 2019, compared to NOK 2 057 million in Q3 2018. ■