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Full year 2023 adjusted EBITDA amounted to NOK 22,258 million, compared with NOK
39,664 million in 2022. Lower aluminium and alumina sales prices, lower
Extrusions and recycling volumes, higher fixed costs, and lower contributions
from sale of power negatively impacted results, partly offset by lower raw
material costs, higher Extrusions margins and currency.
- Weaker results in challenging markets, managing short term volatility and
freeing up cash
- Exceeding 2023 improvement targets and commercial ambitions
- Growing in recycling by increasing capacity and post-consumer scrap
upscaling
- Delivering on decarbonization roadmap across the value chain, pushing
boundaries with Hydro CIRCAL
- Proposed cash dividend of 59 percent of adjusted net income (NOK 2.5 per
share) and NOK 2 billion share buyback program
“Challenging markets led to a weaker result in the fourth quarter of 2023. We
are managing the short-term volatility through continued execution on our
improvement programs and commercial ambitions. This enables us to continue our
positioning in pursuit of the long-term value creation opportunities for
aluminium,” says President and CEO, Hilde Merete Aasheim.
All business areas, except Bauxite & Alumina, delivered returns above their cost
of capital in challenging markets during 2023. The adjusted RoaCE for 2023 ended
at 7.1 percent, heavily influenced by challenging alumina market conditions, as
well as high growth and return-seeking investments in the year. Over the last 5
years, the adjusted RoacE has been 11 percent, above Hydro’s target of 10
percent over the cycle.
Due to expected challenging alumina markets in the short and medium term, as
well as long-term power price insecurity for the partly owned Tomago aluminium
plant in Australia, Hydro reported a total impairment loss of approximately NOK
4.9 billion in the fourth quarter results. However, during the last couple of
months the alumina market has tightened, and PAX price increased on the back of
refinery curtailments and concerns around bauxite shipments from Guinea.
In the aluminium market, demand growth for residential building and
construction, and industrial segments has continued to remain negative due to
macro-economic headwinds, while demand for automotive has been performing better
as the share of electric vehicle registrations over total auto registrations has
increased. At the same time, lower trailer build rates in North America have
started to negatively impact demand in the transport segment. A weakening
extrusion ingot market is further putting pressure on product premiums and
several remelters are faced with negative margins, consequently.
“With a solid balance sheet, strong improvement drive and targeted measures to
free up cash from working capital which surpassed previous guidance, we propose
shareholder distributions in line with our policy,” says Aasheim.
Hydro responds with mitigating measures to handle short-term market volatility.
Within recycling and Hydro Extrusions, current production flexibility and
adaption abilities are utilized to maneuver falling demand. Hydro is reducing
inventories to release cash, realizing a working capital release of NOK 3
billion in the fourth quarter, and NOK 7 billion cash effective release for the
full year of 2023. Hydro’s robustness is also strengthened as the improvement
program and commercial ambitions are ahead of the target, with an accumulated
delivery of NOK 11.6 billion by 2023.
These initiatives and Hydro’s solid balance sheet, enable shareholder
distributions above previous guidance, as the Board of Directors propose to
distribute NOK 7 billion in shareholder distribution, which represents
approximately 81.5 percent of the 2023 adjusted net income, as a combination of
NOK 2.5 per share of cash dividends, 59 percent of adjusted net income, and NOK
2 billion of share buybacks. The final shareholder distribution for 2023 is
subject to approval by the Annual General Meeting (AGM) on May 7, 2024.
During the fourth quarter, an important milestone towards the 2025 strategy was
the completion of the USD 1.11 billion transaction for the sale of 30 percent of
the Brazilian alumina refinery Hydro Alunorte and Hydro’s 5 percent interest in
the bauxite producer Mineracão Rio do Norte (MRN). With the transaction taking
place on December 1, 2023, Hydro will be more balanced in relation to the demand
of alumina from the aluminium smelter portfolio. The transactions enable capital
reallocation into strategic growth areas, strengthening Hydro’s earnings
resilience in a rapidly changing global landscape.
Towards 2030, Hydro is stepping up growth investments in Extrusions and
recycling, and heightening ambitions in renewable power generation to ensure
affordable renewable energy throughout the aluminium value chain at attractive
returns. In addition, Hydro remains committed to forcefully executing its
decarbonization and technology roadmap, actively contributing to nature
conservation and a just transition, and collaboratively shaping the market for
greener aluminium in partnership with customers. During the fourth quarter,
several strategic steps have been taken toward delivering on the ambitious 2030
targets.
Achieving a recycling EBITDA of NOK 5-8 billion by 2030 means building,
expanding and upgrading recycling facilities. The greenfield recycler Hydro
Cassopolis in Michigan, U.S. was officially opened on November 16, aiming to
supply aluminium and in particular Hydro CIRCAL, to the automotive and the U.S.
market. Further, the investment into another greenfield recycler in Torija,
Spain was approved, with an estimated investment of EUR 180 million. The final
building decision is expected in the second half of 2024. The two recyclers will
in total contribute with an additional 240,000 tonnes annual recycling capacity,
including 110,000 tonnes post-consumer scrap capacity (PCS).
By the end of 2023, Hydro has 560 kt post-consumer scrap consumption capacity,
achieving the 2025 target of 520-670 kt. As part of this achievement, the
recently announced joint venture with Padnos enables more upcycling of 20,000
tonnes annual PCS, by industrializing Hydro’s proprietary sorting technology,
HySort, bringing this advanced aluminium sorting technology to the U.S. By
2030, Hydro targets an annual PCS capacity between 850-1,200 kt, pending capital
availability.
An enabler to produce more low-carbon aluminium is access to renewable power,
and several projects to deliver on this agenda have been initiated in recent
months. In Energy, Hydro and Lyse have applied for a license for five new
hydropower plants in Røldal-Suldal to add an additional gross 800 GWh annual
power production and 650 MW output. Hydro Rein is signing a cooperation
agreement with Årdal Energi to develop renewable projects in Årdal. The parties
will collaborate to identify energy solutions contributing to new green industry
in Årdal, as well as strengthen existing industry.
In November, Hydro was notified about a company reorganization of Markbygden Ett
AB, where Hydro Energi AS has a long-term power purchase agreement (PPA) since
2017 for an annual baseload of 1.65 TWh. During the fourth quarter, the external
power sourcing volumes in Energy were affected by non-delivered volumes of 0.5
TWh, and a non-delivery of 1.3 TWh in total for 2023. Hydro continues to seek
compensation for the non-delivered volumes.
During the fourth quarter, Hydro has made several steps towards carbon reduction
goals. Targeting a 30 percent reduction in carbon emissions by 2030, is
primarily driven by fuel switching and boiler electrification at the Alunorte
alumina refinery, allowing Alunorte to supply one of the lowest-carbon smelter
grade Alumina available. The floating storage and regasification unit (FSRU)
with natural gas to replace heavy fuel oil at Alunorte is just days away from
the arriving at the harbor in Barcarena. Despite Hydro’s lower ownership share
in Alunorte, reducing the impact of these efforts in Hydro’s numbers, Hydro is
committed to maintain a 30 percent reduction target by 2030, effectively
stretching its ambitions, as announced at the Capital Markets Day in November.
The two technology paths to zero, HalZero for new capacity and carbon capture
for existing smelters, are progressing according to plan toward industrial scale
by 2030. The construction of a new HalZero test facility in Porsgrunn, Norway
was officially approved during the fourth quarter. At the 2023 Climate Change
Conference in Dubai on December 5, Hydro received recognition for the HalZero
technology from the COP28 UAE Presidency as an Energy Transition Changemaker for
pioneering the green aluminium transition.
To further strengthen the commitment to decarbonization targets and the green
aluminium transition, Hydro joined forces with the world’s leading global
companies through the First Movers Coalition (FMC) in December. Hydro will take
the FMC Aluminium sector commitment via its Extrusions business, committing to
at least 10 percent (by volume) of all primary aluminium procured externally
annually, being near-zero emissions by 2030. Hydro has also, as one of only two
suppliers in the aluminium industry, qualified as an FMC supplier with Hydro
REDUXA 3.0.
At COP28, Hydro also announced a strategic partnership with Volvo Group to
enable the global transport manufacturer to reach its 2040 target of delivering
net-zero vehicles. As partners in the FMC, the two companies further pledged to
support each other’s journeys towards zero-emission value chains.
Delivering low-carbon products creates value for Hydro’s customers and enables
premium pricing with bottom line effects for the company. As part of the
roadmap towards 2030, Hydro will continue to develop its product offering both
within primary and recycled aluminium, and drive down product footprint. As of
January 2024, Hydro can deliver Hydro CIRCAL recycled aluminium with a
documented carbon footprint of 1.9 kg of CO2e per kg aluminium, down from
previous 2.3 kg of CO2e per kg, through advances in sourcing, sorting and
traceability of post-consumer aluminium scrap.
Based on the greener premiums Hydro is receiving today and the capacity
available in 2030, there is a potential for NOK 2 billion in greener premium
earnings uplift as Hydro further develops and offers industry leading products.
This potential will depend on a range of factors and how the market develops,
but with a current starting point and roadmap towards zero, Hydro is dedicated
to creating value for customers, creating value for Hydro, all while driving
down CO2 emissions in a responsible way.
Results and market development per business area
Fourth quarter adjusted EBITDA for Bauxite & Alumina increased compared to the
fourth quarter of 2022, mainly driven by lower raw material prices, partly
offset by currency effects, lower bauxite production and fixed costs. PAX traded
in a narrow range between USD 326 per mt and USD 339 per mt until the last week
of the quarter, when PAX increased driven by higher Chinese alumina prices due
to Chinese refinery curtailments and concerns around bauxite shipments from
Guinea following an explosion at the country’s main fuel depot in Conakry. PAX
ended the quarter at USD 350 per mt. Compared to the fourth quarter of 2022, the
average Platts alumina index was USD 16 per mt higher.
Adjusted EBITDA for Energy in the fourth quarter decreased compared to the same
period last year. Lower prices, lower gain on price area differences, and lower
trading and hedging results were partly offset mainly by higher production and
no fourth quarter loss from a 12-month internal fixed price purchase contract
from Aluminium Metal. Average Nordic power prices in the fourth quarter 2023
ended significantly below prices in the same quarter last year, but above prices
in the previous quarter. Increased prices compared to the previous quarter, can
primarily be explained by below normal inflow and wind, as well as seasonally
higher demand. Price area differences between the south and the north of the
Nordic market region declined compared to the previous quarter, and were
significantly lower than the same quarter last year.
Adjusted EBITDA for Aluminium Metal decreased in the fourth quarter of 2023
compared to the fourth quarter of 2022, mainly due to lower all-in metal prices
and reduced contribution from power sales, partly offset by reduced raw material
cost, adjusted CO2 compensation and positive currency effects. Global primary
aluminium consumption was up 2 percent compared to the fourth quarter of 2022,
driven by a 3 percent increase in China. The three-month aluminium price
increased throughout the fourth quarter of 2023, starting the quarter at USD
2,321 per mt and ending at USD 2,384 per mt.
Adjusted EBITDA for Metal Markets improved in the fourth quarter 2023 compared
to the same quarter last year. Lower results from recyclers due to reduced
premiums in a weakening extrusion ingot market were offset by stronger results
from sourcing and trading activities, and positive inventory valuation and
currency effects.
Extrusions adjusted EBITDA for the fourth quarter 2023 is slightly lower than
the same quarter last year, driven by lower sales volumes, and higher fixed and
variable costs, positively offset by increased sales margin and currency
effects. European extrusion demand is estimated to have decreased 14 percent in
the fourth quarter of 2023 compared to the same quarter last year, but
increasing 3 percent compared to the third quarter of 2023, as market demand has
started to stabilize, although at moderate levels. Demand growth for residential
building and construction, and industrial segments have continued to remain
negative due to macro-economic headwinds, while demand for automotive has been
performing better as the share of electric vehicle registrations over total auto
registrations has increased. North American extrusion demand is estimated to
have decreased 9 percent during the fourth quarter of 2023, compared to the same
quarter last year, and 7 percent compared to the third quarter of 2023. Demand
continues to be weak in the residential building and construction sector, while
demand is still positive in the automotive segment. At the same time, lower
trailer build rates have started to negatively impact demand in the transport
segment.
Other key financials
Compared to the third quarter, Hydro’s adjusted EBITDA decreased from NOK 3,899
million to NOK 3,737 million in the fourth quarter 2023. Lower realized
aluminium and alumina prices combined with lower Extrusions and recycling
volumes were partly offset by lower raw material costs and positive currency
effects.
Full year 2023 adjusted EBITDA amounted to NOK 22,258 million, compared with NOK
39,664 million in 2022. Lower aluminium and alumina sales prices, lower
Extrusions and recycling volumes, higher fixed costs, and lower contributions
from sale of power negatively impacted results, partly offset by lower raw
material costs, higher Extrusions margins and currency.
Net income (loss) from continuing operations amounted to NOK (2,771) million in
the fourth quarter of 2023. Net income (loss) from continuing operations
included an impairment loss of NOK 4,421 million, a NOK 1,227 million unrealized
derivative gain on LME related contracts, a net foreign exchange gain of NOK
250 million, a NOK 172 million loss from unrealized derivative power and raw
material contracts, and NOK 171 million in rationalization charges and closure
costs.
Hydro’s net debt decreased from NOK 13.8 billion to NOK 8.2 billion during the
fourth quarter of 2023. The net debt decrease was mainly driven by proceeds from
sale of shares in Alunorte to Glencore, combined with EBITDA contribution and
net operating capital release, partly offset by NOK 4.9 billion investments.
Adjusted net debt decreased from NOK 20.4 billion to NOK 18.0 billion, mainly
due to the decrease in net debt of NOK 5.7 billion, which was partially offset
by an increase in pension liabilities and financial liabilities from the sale of
shares in Alunorte to Glencore.
On January 31, 2024, Hydro finalized the open market repurchase of the
2023-2024 buyback program as announced on September 22, 2023. The total program
comprises 32,192,623 shares, of which 21,163,019 shares were repurchased in the
market at a weighted average price of NOK 62.13. The remaining 11,029,604 shares
will be purchased from the Norwegian state, keeping their ownership interest of
34.26 percent unchanged. The 32,192,623 shares will be cancelled following
approval by the annual general meeting in May.
Investor contact:
Martine Rambøl Hagen
+47 91708918
Martine.Rambol.Hagen@hydro.com
Media contact:
Halvor Molland
+47 92979797
Halvor.Molland@hydro.com
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
