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alumina sales prices, and higher raw material costs negatively affected results,
partly offset by positive currency effects.
- Robust results despite volatile markets and weaker demand
- Balanced aluminium markets and falling raw material prices supporting
margins
- Capturing greener demand growth
- Strategic growth in Recycling and Extrusions
- Hydro and Glencore to become partners to further develop Alunorte
“Hydro is delivering robust financial results and executing on our strategic
objectives, despite volatile markets and weaker demand. Looking forward, growing
demand for our greener offerings combined with long-term, stable access to raw
materials and energy gives confidence as we continue targeted investments to
strengthen our position for the long-term where demand for greener aluminium is
expected to be in high demand,” says President and CEO, Hilde Merete Aasheim.
On April 27, Hydro signed an agreement with Glencore, who will acquire 30
percent of the Brazilian alumina refinery Hydro Alunorte and Hydro’s 5 percent
ownership in the Brazilian bauxite producer Mineracão Rio do Norte (MRN).
“We look forward to joining forces with Glencore to reinforce the position of
Alunorte as the world’s largest and leading Alumina refinery, serving Hydro and
the market with high quality, low-carbon alumina for the future. Furthermore,
proceeds from the transaction will be used for strategic growth and shareholder
distribution,” says Aasheim.
Glencore will acquire an additional 40 percent stake in MRN which is currently
owned by Vale. This 40 percent interest will be acquired by Hydro from Vale and
immediately sold to Glencore on a back-to-back basis. After the transactions
Hydro will no longer have an ownership position in MRN. The transactions will
have a total enterprise value of USD 1.15 billion which shall be adjusted for
debt like items and working capital. Closing is expected in the second half of
2023.
The transaction is an important step to deliver on Hydro’s strategy. Alunorte
remains a core strategic asset for Hydro and is a key source of low-carbon
alumina supply to our primary aluminum smelters. Hydro will continue to be long
alumina, but now more balanced in relation to the demand from our aluminium
smelter portfolio.
Health and safety remain Hydro’s top priority for both employees and the
communities where the company operates. The total recordable injury rate (TRI)
continues on a positive trend, reaching 2.3 by the end of first quarter.
Hydro continues its strong commitment to reduce costs and improve operational
excellence. The improvement program is a key lever to deliver on Hydro’s 2025
strategy, and Hydro estimates it will reach its year-end target of NOK 8.4
billion of accumulated improvements.
The global economic growth rate slowed towards the end of 2022 and into the
first quarter of 2023, amid continued high energy prices, and as central banks
raised interest rates rapidly to tackle high inflation. External sources
forecast global economic growth for 2023 in the range of 2 to 3 percent,
reflecting a gradual improvement in the macroeconomic environment.
Global primary aluminium consumption was down 6 percent compared to the very
strong first quarter of 2022, driven by a decrease of 17 percent in Europe. For
2023, external sources estimate a global deficit of primary aluminium between
0.1 million mt and 0.8 million mt. High energy prices led to further
curtailments of aluminium production facilities in Europe and elevated energy
costs continue to pose a risk of further curtailments.
The green transition drives demand for aluminium with an additional 5 million
tonnes demand expected until 2050 in Europe, mainly driven by growth in
electrical vehicles (EV), electrical grid and solar. The average content of
aluminium per vehicle continues to increase and is expected at around 250-300 kg
per car, up from around 150-200 kg in 2020, supported by the growth in EVs.
Hydro’s customers across industry sectors such as transportation, construction,
packaging and electrical are setting ambitious decarbonization targets. On April
26, Hydro and Porsche AG announced a collaboration to further reduce the carbon
footprint of Porsche’s car models. Hydro will deliver Porsche and Porsche’s
component suppliers with low-carbon and ultimately zero-carbon aluminium. In
addition, the two companies will collaborate on an innovative value chain
concept for battery materials and battery recycling.
“We are excited to work together with Porsche and leverage our expertise across
the entire value chain, from Bauxite & Alumina to Aluminium Metal, to Extrusions
and new energy solutions to provide low- and ultimately zero-carbon aluminium to
their future vehicle projects. In addition, we will also collaborate on
exploring an innovative value chain concept for battery materials, supporting
Hydro’s strategic investments in sustainable battery materials,” says Aasheim.
To enable customers’ decarbonization journey and grow its margins, Hydro is
pursuing three decarbonization paths to further reduce the carbon footprint of
aluminium. In the first quarter the company is preparing for the first CO2
capture following the conclusion of successful technology trials in Sunndal
together with technology partner Verdox. Additionally, the company is preparing
for HalZero testing at scale and constructing a HalZero test facility with
support from the Norwegian government via state enterprise Enova.
Recycling is also an important enabler to strengthen Hydro’s position in low-
carbon aluminium. On April 27, Hydro announced its plan to relaunch a tender
offer process for the acquisition of 100 percent of the shares of the Polish
recycler Alumetal S.A. The tender offer was first launched in April 2022, which
later expired during the European Commission’s extended merger review, still
pending with a provisional decision deadline of May 23. The tender offer
represents an aggregate equity purchase price of approximately PLN 1,230 million
(approximately EUR 267 million).
The proposed acquisition would be a strong strategic fit towards delivering on
Hydro’s recycling strategy by widening its product offering in the low-carbon
and scrap based foundry alloy market. Following the acquisition of Alumetal,
Hydro will increase the post-consumer scrap (PCS) usage of approximately
150,000 tonnes per year, well exceeding the company’s 2020 ambition to double
PCS recycling by 2025.
Extrusions is an important growth area for Hydro. It has delivered strong
earnings improvements over the last eight years, from NOK 1.9 billion in
adjusted EBITDA for Sapa in 2014 to NOK 7.0 billion in 2022, and is well
underway to deliver NOK 8 billion adjusted EBITDA by 2025. Despite current
weaker markets, margins are continuing to improve. In the first quarter, Hydro’s
acquisition of Hueck building systems and extrusion business closed. The
acquisition strengthens Hydro’s presence in Germany and other European markets.
It is expected to offer clear operational and commercial synergies linked to
extrusion, systems and recycling business.
Hydro has continued to execute on its strategy to grow in new energy areas that
can decarbonize high emitting industries, including renewable energy production,
investment in battery value chains and production of green hydrogen.
Hydro Rein is progressing on construction of Stor-Skälsjön, Mendubim, Feijao and
Boa Sorte together with the relevant partners. The process to raise capital for
Hydro Rein is ongoing.
Batteries continues to develop its portfolio according to plan. Hydrovolt is
further increasing volumes, while Vianode’s fast track plant is under
construction.
Hydro announced a EUR 5 million investment in the Dutch advanced materials
company E-magy, a developer of silicon anode materials for future battery
generations. The investment strengthens Hydro’s portfolio within emerging
technologies and anode materials. Furthermore, Hydro strengthened its position
in sustainable battery materials in the first quarter through the acquisition of
a 12 percent stake in Lithium de France.
Hydro’s green hydrogen unit, Hydro Havrand continues to mature the world’s first
pilot for green hydrogen in aluminium at Høyanger, Norway.
Results and market development per business area
First quarter 2023 adjusted EBITDA for Bauxite & Alumina decreased compared to
the first quarter of last year, driven mainly by increased prices for caustic,
and lower alumina sales prices. The average Platts alumina index (PAX) increased
in the first quarter to USD 360 per mt, compared to USD 317 per mt in the fourth
quarter 2022.
Adjusted EBITDA for Aluminium Metal decreased in the first quarter of 2023
compared to the first quarter of 2022, mainly due to lower all-in metal prices
and higher carbon cost, partly offset by positive currency effects, positive
contribution from power sales, and lower energy cost.
On April 17, Hydro Karmøy and Hydro Årdal went on strike following a breach in
mediation between The Confederation of Norwegian Enterprise (NHO), the
Confederation of the Vocational Unions (YS) and the Norwegian Labor Union (LO),
employees organized in Industri Energi and FLT. The strike ended April 20, with
limited financial consequences for Hydro.
Adjusted EBITDA for Metal Markets increased in the first quarter compared to the
same quarter last year due to higher results from sourcing and trading
activities and positive currency and inventory valuation effects, partly offset
by a decrease in the results from the recyclers, compared to a record strong
first quarter 2022.
Adjusted EBITDA for Extrusions was slightly lower in the first quarter compared
to the same quarter last year. Increased sales margins and positive currency
effects were partly compensated by lower sales volumes and decreased results
from the recyclers. Inflationary cost pressure remains on fixed and variable
costs.
European demand for extrusions in the first quarter of 2023 is estimated to have
decreased 18 percent compared to the same quarter last year, but increasing 10
percent compared to the fourth quarter of 2022, driven by seasonality. North
American extrusion demand is estimated to have decreased 10 percent during the
first quarter of 2023, compared to the same quarter last year, but increasing 9
percent compared to the fourth quarter of 2022.
First quarter 2023 adjusted EBITDA for Energy decreased significantly compared
to the same quarter last year, mainly due to significant loss on a 12-month
internal fixed price purchase contract from early October 2022, lower gain on
price area differences, lower prices and lower power production, somewhat offset
by increased hedging results.
Nordic power prices were on average lower in the first quarter of 2023 compared
to the same quarter last year, and significantly lower than the previous
quarter. Significant price area differences in the Nordic region have continued
through the first quarter, but at a lower level than the previous quarter and
significantly lower than the same quarter last year.
Other key financials
Compared to the fourth quarter, Hydro’s adjusted EBITDA increased from NOK
7,184 million to NOK 7,525 million in the first quarter 2023. Higher realized
aluminium and alumina prices, and positive currency effects were slightly offset
by lower sales volumes.
Net income from continuing operations amounted to NOK 1,144 million in the first
quarter. In addition to the factors described above, net income from continuing
operations included a net foreign exchange gain of NOK 156 million, a NOK 458
million unrealized loss on power and raw material contracts, and a NOK 708
million unrealized loss on LME related contracts.
Hydro’s net cash decreased from NOK 1.3 billion at the end of the fourth quarter
2022 to a net debt position of NOK 1.7 billion at the end of the first quarter
2023. Net cash provided by operating activities, excluding release of
collateral, amounted to NOK 2.9 billion. Net cash used in investment activities,
excluding short term investments, amounted to NOK 3.9 billion.
Adjusted net debt increased from NOK 6.0 billion to NOK 8.5 billion, largely due
to the increase in net debt, partly offset by reduced collateral of NOK 0.7
billion.
Hydro’s existing share buyback program, initiated in September 2022, completed
its purchases in the market on March 10. The redemption and cancellation of
shares held by the Norwegian state is subject to approval by the Annual General
Meeting on May 10, 2023.
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. 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.
Investor contact:
Line Haugetraa
+47 41406376
Martine Rambøl Hagen
+47 91708918
Media contact:
Halvor Molland
+47 92979797
The information was submitted for publication from Hydro Investor Relations and
the contact persons set out above. 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. Except where required by law,
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 considered to be inside information pursuant to the EU
Market Abuse Regulation and is subject to the disclosure requirements pursuant
to Section 5-12 the Norwegian Securities Trading Act.
Kilde
