Hydro’s underlying earnings before financial items and tax rose to NOK 659 million in the third quarter from NOK 518 million in the second quarter of 2013, lifted by higher hydropower production and lower operating costs. Low production at the Alunorte alumina refinery weighed on results in the quarter. A milestone reached in the quarter was the completion of the Sapa joint venture transaction, creating a global leader in extruded products.
“I am pleased to report that we are on track to deliver the USD 300 per mt cost improvements for our fully-owned smelters by the end of 2013, contributing to a more robust cost position and bottom line. This is a great achievement for Hydro and our organization. Stretching for excellence and always striving to become better provide us with a solid platform for the future,” said Hydro’s President and CEO, Svein Richard Brandtzæg.
The positive developments in the third quarter were partly offset by a further weakening of underlying results for Bauxite & Alumina. Underlying EBIT for Bauxite & Alumina declined compared to the second quarter due to lower LME-linked alumina prices and continued low production volumes at the Alunorte alumina refinery, following power outages in first half of 2013.
“Following the power outages at Alunorte and disruption to production earlier this year, we immediately mobilized resources to stabilize and increase production at the refinery. After stabilizing the production we now see production gradually increasing after the outages, although from a low level,” said Brandtzæg.
Primary Metal delivered improved underlying EBIT despite lower realized aluminium prices. Lower costs for alumina and power, higher premiums and seasonally lower fixed costs had a positive effect on underlying results for the quarter. Primary Metal has sold forward around 50 percent of its expected primary aluminium production for the fourth quarter of 2013 at a price level of around USD 1,800 per mt. This excludes volumes from Qatalum.
Underlying EBIT for Metal Markets declined compared to the previous quarter, mainly affected by seasonally lower volumes and lower margins.
Compared to the second quarter, underlying EBIT for Rolled Products was stable. Sales were seasonally lower, while operating costs declined.
Underlying EBIT for Energy improved compared to the second quarter mainly due to higher power production and spot prices supported by low precipitation levels.
Operating cash flow was NOK 1.1 billion for the third quarter. Net cash used for investment activities amounted to NOK 0.7 billion. Hydro’s net debt position amounted to around NOK 0.5 billion at the end of the third quarter.
Reported earnings before financial items and tax amounted to NOK 597 million in the third quarter. Reported EBIT also included net unrealized derivative gains and negative metal effects amounting to a loss of NOK 80 million in total, divestment gains of NOK 53 million and other items amounting to a net loss of NOK 36 million.
The Alunorte alumina refinery and the Albras aluminium smelter have entered into additional USD currency forward contracts in Brazil for the second half 2013 and full year 2014. The total program value amounted to USD 1,220 million, including settled amounts, split 30 percent and 70 percent for 2013 and 2014, respectively. The achieved average exchange rates for the total program are 2.30 and 2.41 for 2013 and 2014, respectively.