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products. Hydro Aluminium Metal and Hydro Extrusions business areas reported
record quarterly results.
- Record result in Aluminium Metal supported by LME prices and premiums
- Robust operations, improvement program ahead of plan
- Strong performance in Extrusions and progress on growth initiatives
- Strengthening sustainability position with growth investments in recycling
- Sale of Hydro Rolling business area to KPS Capital Partners completed
Higher all-in metal prices and volumes in Aluminium Metal, improved margins and
volumes in Extrusions, and better results from Hydro Energy contributed
positively to adjusted EBITDA. These positive elements were partly offset by
higher raw material costs upstream and negative currency effects.
The second quarter saw a continuation of the global recovery which began in late
2020. The global economic outlook continues to improve, supported by progress on
vaccination and fewer new cases of Covid-19. As a result, global demand for
aluminium increased, and the primary aluminium market for 2021 is expected to
remain largely balanced.
“The continued strong market sentiment and our strong performance are
contributing to the record results in the quarter. Our target to deliver return
on capital above 10% over the cycle is progressing well and our improvement
program is running ahead of plan. In addition, we are actively positioning our
products in the market, lifting our capacity to meet the increasing demand for
low-carbon products in line with our 2025 strategy to improve profitability and
sustainability,” says President and CEO Hilde Merete Aasheim.
Hydro continues to address the effects of the Covid-19 pandemic, both in terms
of safety for its people and the communities where it operates. Hydro’s
operations have been operating largely as normal in the second quarter.
During the quarter, the London Metal Exchange cash price for aluminium traded at
its highest level in close to a decade, and the strong demand dynamics have
also lifted premiums. These factors have supported the record high result in
Aluminium Metal of NOK 2,807 million in adjusted EBITDA. Aluminium Metal also
completed the ramp-up of the aluminium plant in Husnes, Norway, during the
second quarter. The plant is now back at full capacity of 195,000 tonnes for the
first time since the partial curtailment in 2009.
“Restarting one of the two production lines at our Husnes smelter in Norway
brings another 100,000 tonnes of low-carbon primary aluminium to the market
every year. This is in line with the EU’s Fit for 55 agenda, where European
aluminium industry contributes to lowering emissions from industry production,
while aluminium also plays an important role to reduce emissions in its use
phase,” says Aasheim.
Extrusions achieved record results in the second quarter, topping the previous
record set in the first quarter of 2021. The results were driven by strong
volume growth, improved margins, and continued cost savings from improvement
program initiatives. The quarter saw sustained momentum in automotive in Europe
and solid growth in the industrial segment and residential building &
construction. To further improve performance and cash generation in Extrusions,
investment decisions have been made to invest in new press capacity in Cressona,
U.S. and Nenzing, Austria. The investments will improve performance and increase
capacity by around 30,000 kt and grow volumes in attractive segments, including
automotive and transportation, engineering and building & construction.
Strong performance in Extrusions is the main driver for being ahead of the 2025
improvement program target of NOK 7.4 billion, where NOK 5.1 billion is targeted
by the end of 2021, compared to the baseline of 2018.
Hydro has set out a clear strategic direction toward 2025 and aims to strengthen
its position in low-carbon aluminium, while exploring growth
opportunities in new energy. On March 5, 2021, Hydro entered into an agreement
to sell its Rolling business to KPS Capital Partners, and the sale was completed
on June 1, 2021. The total enterprise value for Rolling, including the Bonn,
Germany, property sold to Cube Real Estate, was EUR 1,407 million. The
sale strengthens Hydro’s ability to deliver on its strategic direction.
Sustainability is one of Hydro’s competitive advantages and a key enabler for
successfully delivering on the 2025 strategy. During the second quarter, Hydro
Bauxite & Alumina received the license to operate its advanced bauxite residue
deposit DRS2, which will reduce the required storage area for bauxite tailings.
In addition, Bauxite & Alumina signed an agreement with the University of São
Paulo to research more-sustainable alternatives for bauxite waste in civil
construction.
“Circular economy and increased recycling are key elements in the transition
towards a low-carbon economy. Our strategy is to double recycling of post-
consumer aluminium by 2025, and we have announced several key investments this
quarter. To further reduce emissions from our operations and leveraging our
unique position in the energy value chain, we are continuing to grow Hydro REIN
and our Hydrogen company, adding new projects to their portfolios while
preparing for their process to raise capital,” says Aasheim.
During the quarter, Aluminium Metal signed a letter of intent with Midwest
Energy and Communications to build an aluminium recycling plant in Michigan,
U.S. The facility is projected to produce 120,000 tonnes of aluminium per year
from 2023 and marks the first large-scale production of low-carbon Hydro
CIRCAL in North America. In addition, investment decisions to increase recycling
capacity by a total of 65,000 tonnes have been made at our operations in Sjunnen
in Sweden, Navarra in Spain, and Rackwitz in Germany.
Hydro has also explored growth opportunities and partnerships in new energy
during the quarter. Hydro’s dedicated company for renewables development, Hydro
REIN, and Swedish wind developer Eolus agreed to acquire Stor-Skälsjön, a
licensed wind power project in Sweden totaling 260 MW. Hydro REIN, along
with Equinor and RWE Renewables, has also signed a collaboration agreement to
prepare and submit an application to develop a large-scale fixed-bottom
offshore wind farm in the Norwegian North Sea (Sørlige Nordsjø II).
Hydro sees a substantial potential for industrial hydrogen consumption, which
will help reduce our CO2 emissions. In the second quarter, Hydro’s newly
established hydrogen company signed a Memorandum of Understanding with Everfuel.
The two companies will use the capacity in future Hydro-owned or jointly owned
hydrogen production facilities to supply the maritime sector, industry and the
green mobility market in Europe with renewable hydrogen.
Hydro’s strong shareholder focus and commitment to paying a predictable
dividend continues in 2021. Hydro’s Board of Directors’ proposal to pay a
dividend of NOK 1.25 per share for 2020 was approved at the Annual General
Meeting and paid to shareholders on May 19, 2021, amounting to 95% of adjusted
net income. Hydro’s dividend policy remains to pay out a minimum of 50% of
adjusted net income over the cycle with a NOK 1.25 per share dividend floor. The
policy, which was updated in 2021, reflects Hydro’s ambition to lift performance
and cash returns for shareholders.
Compared to the first quarter 2021, Hydro’s adjusted EBITDA increased from
NOK 5,182 million to NOK 6,598 million in second quarter 2021. Higher all-in
metal prices in Aluminium Metal, higher results in Metal Markets, and higher
margins and volumes in Extrusions contributed to the improvement. This
improvement was partly offset by higher raw material costs upstream,
lower realized alumina prices, and lower Energy production.
Adjusted EBITDA for the first half of 2021 increased, compared to the same
period last year. Higher all-in metal prices and volumes in Aluminium Metal,
improved margins and volumes in Extrusions, and better results
from Energy, contributed positively to adjusted EBITDA. These positive elements
were partly offset by higher raw material costs upstream and negative currency
effects.
Net income from continuing operations amounted to NOK 2,397 million in the
second quarter. In addition to the factors described above, Net income from
continuing operations included a net foreign exchange gain of NOK 550 million
and a NOK 1,646 million unrealized loss on LME-related contracts.
Hydro’s net debt position decreased from NOK 8.3 billion to NOK 3.6 billion at
the end of the quarter. Net cash provided by operating activities excluding
changes in short-term collateral amounted to NOK 4 billion. Net cash used in
investment activities, excluding short term investments, amounted to
NOK 1.6 billion.
Hydro held NOK 20.1 billion in cash and cash equivalents and NOK 0.9 billion in
money market funds, included in short-term investments, at the end of the second
quarter. Money market funds are normally available at short notice. The
revolving credit facility of USD 1.6 billion was fully available at the end of
the quarter.
In addition to the factors discussed above, reported earnings before financial
items and tax (EBIT) and net income include effects that are disclosed in the
quarterly report. Net debt, 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.
Cautionary note:
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 and the value
of commodity contracts; trends in Hydro’s key markets and competition; and
legislative, regulatory and political factors.
No assurance can be given that such expectations will prove to have been
correct. Hydro disclaims any obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
This information is subject to the disclosure requirements pursuant to Section
5-12 the Norwegian Securities Trading Act
Investor contact
Line Haugetraa
+47 41406376
Line.Haugetraa@hydro.com
Press contact
Halvor Molland
+47 92979797
Halvor.Molland@hydro.com
Kilde
