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negatively impacted results, partly offset by lower raw material costs. This
resulted in an adjusted RoaCE of 5.6 percent over the last twelve months.
- Results down on weaker demand and recycling margins, revenue drivers
increasing
- Increasing recycling and post-consumer scrap capacity, supporting greener
product offering
- Mendubim and Boa Sorte solar plants in commercial operation, securing
renewable power for Hydro
- Hydro Alunorte starts using natural gas, improving profitability and
executing decarbonization roadmap
- CO2 compensation agreement supporting decarbonization and greener
investments
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 a positive trend, reaching 2.3 by the end of first quarter.
“Despite weaker markets impacting results, the macroeconomic indicators as well
as revenue drivers are showing signs of improvement towards year end. Hydro is
well positioned to capitalize on strengthening demand for aluminium products,”
says President and CEO, Hilde Merete Aasheim.
The economic outlook improved during the first quarter, reducing the risk of
recessions and central banks are re-considering rate cuts amid easing inflation.
Primary aluminium demand outside China slowed and was down 2 percent year-on-
year, while Chinese demand remained robust in renewables and electric vehicles
(EV), supporting overall growth in global primary demand of 5 percent year-on-
year.
Residential and industrial building construction demand remained muted through
the quarter, especially in Europe. The weak building and construction market
continues the pressure on billet premiums. Decreased construction and demolition
activity also leads to lower aluminium scrap generation. Coupled with rising
scrap exports to Asia, this supports elevated scrap prices, squeezing recycling
margins in both Metal Markets and Hydro Extrusions.
Despite continued growth in EV and hybrid demand, projections were tempered due
to subsidy cuts in Germany and heightened competition from China. Reduced EV
production in Europe had an adverse effect in Hydro Extrusions during the first
quarter, being exposed to the EV segment. The North American transport segment
faced constraints from low trailer build rates.
Positive indicators emerged during the first quarter with revenue drivers like
LME, premiums and alumina prices showing signs of improvement. LME aluminium
prices increased at the end of the quarter and into April, rising above USD
2,500 per tonne mid-April. European and the U.S. ingot premiums rose, indicating
market optimism. Alumina prices trended upward, reaching USD 378 per tonne mid-
April, influenced by Chinese production challenges. On April 12, the U.S. and UK
sanctions restricted trade of Russian aluminium, banning imports of metal
produced after April 13. Hydro ceased purchasing Russian aluminium after the
Ukraine invasion in 2022, and urges the EU to sanction Russian aluminium in the
forthcoming fourteenth package, expected in May.
Through ongoing improvement programs and commercial initiatives, Hydro continues
to reinforce robustness and remains on track to deliver additional improvements
of NOK 8.5 billion by 2030.
Hydro continues to safeguard recycling margins and secure scrap in the short
term, while securing long-term growth through expanding scrap sourcing and
utilization. Recent milestones, including the inauguration of new recycling
units at Hydro Årdal and Hydro Høyanger, will increase annual recycled aluminium
capacity by more than 60,000 tonnes, supporting the Hydro REDUXA 3.0 offering.
Hydro also entered a multi-year agreement with Sims Alumisource in North America
to secure access to 36,000 tonnes of post-consumer aluminium scrap. Plans to
build a scrap sorting plant at the Wrexham casthouse in the UK, with 30,000
tonnes of scrap sorting capacity, will enable Hydro to process and recycle a
wider range of post-consumer aluminium scrap. These initiatives reinforce
Hydro’s market presence within recycling, fostering growth and resilience in
alignment with the 2030 recycling targets.
Hydro Extrusions is committed to expanding its market presence through strategic
investments aimed at lifting profitability and sustainability. Hydro Extrusions
is growing with the customers and four new OEM contracts were signed since
Capital Market Day in November, accumulating contracts worth EUR 1.9-2.0 billion
since the beginning of 2023. Additional EUR 0.9-1.0 billion worth of contracts
are in process, promising solid EBITDA contributions with attractive margins.
Through ongoing partnerships, invested capacity expansions and sustainability
focus, Hydro Extrusions is positioned to deliver on the 2025 EBITDA target of
NOK 8 billion when markets recover.
“We have made good progress on our decarbonization agenda this quarter. Hydro
Rein has successfully brought Mendubim and Boa Sorte into commercial operation
on time and on budget, supplying Alunorte and Albras with affordable renewable
energy. At Alunorte, we are now producing alumina fueled by LNG, with
significant CO2 reduction, as well as cost savings when fully ramped up by the
second half of this year, lifting profitability and driving sustainability,”
says Aasheim
Securing access to renewable power is crucial for growing in low-carbon
aluminium. In Energy, Hydro has secured two new long-term power purchase
agreements (PPAs) during the first quarter. Statkraft will supply 1.28 TWh from
2024 to 2027, and Alpiq will provide 0.54 TWh from 2025 to 2033. Hydro Rein has
started commercial operations in the Brazilian solar plants Mendubim and Boa
Sorte, providing approximately 1.55 TWh of renewable power to Hydro Alunorte and
the Albras smelter. Both projects were delivered on time and cost. The
transaction with Macquarie Asset Management is progressing as planned and is
expected to be completed by the end of the second quarter.
During the first quarter, Hydro executed on its ambitious decarbonization
roadmap, aiming for a 30 percent reduction in carbon emissions by 2030. At
Alunorte, fuel switching and boiler electrification are driving this effort,
enabling the production of low-carbon smelter grade alumina. Hydro Alunorte
started producing alumina with natural gas in March and this is expected to cut
annual emissions by 700,000 tonnes of CO2, yielding substantial cost savings
estimated at USD 160 to 190 million annually based on current spot and forward
price spreads when fully implemented by the second half of this year. This is
supporting the ongoing work to lift profitability above 10 percent adjusted
RoaCE in Bauxite & Alumina.
Regulatory advancements include the agreement on the CO2 compensation scheme in
Norway, effective from 2024 to 2030, setting an annual maximum compensation of
NOK 7 billion, eliminating the CO2 quota price floor, and requiring
participating industries to implement emission reduction measures equivalent to
40 percent of the compensation received.
“The recently announced agreement with Norwegian authorities on the future of
the CO2 compensation scheme is an important enabler for our continued
investments in decarbonizing our Norwegian portfolio, while providing
predictability towards 2030,” says Aasheim.
The revised CO2 compensation scheme will be subject to approval by EFTA
Surveillance Authority (ESA), as well as the Norwegian parliament’s annual
approval as part of the ordinary state budget process.
Results and market development per business area
First quarter adjusted EBITDA for Bauxite & Alumina increased compared to the
first quarter of last year, from NOK 437 million to NOK 804 million, driven by
decreased raw material prices partly offset by lower sales volume from lower
production. PAX started the quarter at USD 350 per tonne and increased to USD
372 per tonne in mid-January, driven by higher Chinese alumina prices on the
back of refinery curtailments in China and concerns around bauxite shipments
from Guinea following an explosion at the main fuel depot of the country in
December 2023. PAX traded in a narrow range throughout the quarter, ending the
quarter at USD 365 per tonne.
Adjusted EBITDA for Energy in the first quarter increased compared to the same
period last year, from NOK 726 million to NOK 1,152 million. Lower prices, lower
gain on price area differences, and lower trading and hedging results were more
than offset by the expiry of a 12-month internal fixed price purchase contract
from Aluminium Metal at a significant loss in the same period last year. Average
Nordic power prices in the first quarter ended below prices in the same quarter
last year and slightly higher compared to the previous quarter. 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. The decline was primarily a result of lower prices in the
south due to weather and hydrology as well as lower continental spot prices.
Adjusted EBITDA for Aluminium Metal decreased in the first quarter of 2024
compared to the first quarter of 2023, from NOK 3,972 million to NOK 1,965
million, mainly due to lower all-in metal prices, reduced contribution from
power sales, and increased fixed cost, partly offset by reduced carbon cost and
positive currency effects. Global primary aluminium consumption was up 5 percent
compared to the first quarter of 2023, driven by an 8 percent increase in China.
The three-month aluminium price decreased slightly throughout the first quarter
of 2024, starting at USD 2,384 per tonne and ending the quarter at USD 2,337 per
tonne.
Adjusted EBITDA for Metal Markets decreased in the first quarter compared to the
first quarter of 2023, from NOK 669 million to NOK 269 million, due to lower
results from recyclers and reduced results from sourcing and trading activities.
Lower results from recyclers are due to reduced sales premiums in a weakening
extrusion ingot market.
Adjusted EBITDA for Extrusions decreased in the first quarter compared to the
first quarter of 2023, from NOK 2,223 million to NOK 1,437 million, driven by
lower extrusion sales volumes and decreased margins from recyclers. General
inflation pressured fixed and variable costs, partly offset by cost measures and
currency effects. European extrusion demand is estimated to have decreased 10
percent in the first quarter of 2024 compared to the same quarter last year, but
increasing 7 percent compared to the fourth quarter of 2023 partly driven by
seasonality. Annual demand growth for residential building and construction, and
industrial segments remains negative, but to a lesser extent than previous
quarters as demand has started to stabilize. Automotive demand has been
challenged by weaker production of electric vehicles, negatively impacting order
intakes. North American extrusion demand is estimated to have decreased 9
percent during the first quarter of 2024 compared to the same quarter last year,
but increasing 10 percent compared to the fourth quarter of 2023 partly driven
by seasonality. The transport segment has been particularly weak, driven by
lower trailer build rates. Demand continues to be moderate in the residential
building and construction, and industrial segments.
Other key financials
Compared to the fourth quarter 2023, Hydro’s adjusted EBITDA increased from NOK
3,737 million to NOK 5,411 million in the first quarter 2024. Higher realized
aluminium and alumina prices combined with higher Extrusions and recycling
volumes and reduced fixed costs, were partly offset by lower production in
Bauxite & Alumina and negative currency effects.
Net income (loss) amounted to NOK 428 million in the first quarter of 2024. Net
income (loss) included a NOK 50 million unrealized derivative loss on LME
related contracts, a net foreign exchange gain of NOK 135 million, a NOK 24
million gain from unrealized derivative power and raw material contracts, and
NOK 32 million in rationalization charges and closure costs.
Hydro’s net debt increased from NOK 8.2 billion to NOK 13.9 billion during the
first quarter of 2024. The net debt increase was mainly driven by tax payments,
performance based renumerations, investments of NOK 3.7 billion and net
operating capital build, partly offset by EBITDA contribution.
Adjusted net debt increased from NOK 18.0 billion to NOK 22.5 billion, mainly
due to the increase in net debt of NOK 5.7 billion, which was partially offset
by a decrease in pension liabilities and financial liabilities.
Hydro’s existing share buyback program, initiated in September 2023, completed
its purchases in the market on January 31, 2024. The redemption and cancellation
of shares held by the Norwegian state is subject to approval by the Annual
General Meeting on May 7, 2024.
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
