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last year, negatively impacted by lower Extrusions volumes, recycling margins
and Energy spot sales, and higher fixed costs. This was partly offset by higher
alumina prices and lower raw material costs resulting in an adjusted RoaCE of
4.4 percent over the last twelve months and free cash flow of NOK 2.8 billion.
- Revenue drivers continue to rise, supporting solid upstream results
- Weak demand and low recycling margins impacting downstream results,
mitigating measures in place
- Hydro Rein joint venture established, supporting industrial decarbonization
and long-term value creation
- Strong demand for Hydro CIRCAL, scaling up recycling to meet increased
demand
- Shaping the greener aluminium market in partnership with Porsche
“The positive development in our key revenue drivers from the first quarter
continued into the second quarter, supporting solid results in our upstream
businesses. We are mitigating the challenges of a weak downstream market by
executing cost-saving measures and maintaining extrusion margins,” says Eivind
Kallevik, President & CEO of Hydro.
On July 9, a contractor passed away while performing maintenance work at Hydro’s
joint venture Albras in Brazil.
“I am deeply saddened by this tragic incident which underlines the critical role
safety has in everything we do. My deepest condolences go out to the family and
the affected colleagues,” says Kallevik.
Economic growth forecasts stabilized at relatively low levels during the second
quarter, while the economic uncertainty continued to decrease with both headline
and core inflation trending downwards, and external sources estimating real GDP
growth of around 2.7 percent in 2024. Global primary aluminium demand was up 2
percent year-on-year during the second quarter, driven by a 3 percent increase
in China, supporting overall growth in global primary demand of 3 percent year-
on-year for 2024. Key uncertainties going forward are inflation stickiness,
policy support, Chinese economic growth, the conflicts in Ukraine and the Middle
East, and the geopolitical situation.
Positive revenue drivers continued into the second quarter, supporting solid
results in Bauxite & Alumina and Aluminium Metal. The Platts Alumina Index (PAX)
started the quarter at USD 367 per tonne, gradually increasing to USD 505 per
tonne at the end of the quarter, driven by alumina production curtailments and
disruptions in Australia and India, bringing the World ex-China market into
balance. The three-month aluminium price ended the quarter at USD 2,524 per
tonne.
“We are pleased to see solid results in Bauxite & Alumina as well as Aluminium
Metal. Positive revenue drivers, combined with ongoing improvement initiatives,
including the ongoing fuel switch at Hydro Alunorte, are expected to further
strengthen value creation from upstream activities going forward,” says
Kallevik.
Downstream, demand in the residential building and construction segments in
Europe and North America remains weak, but is expected to improve with lower
interest rates and a positive industrial outlook. Low activity in these markets
continues to challenge aluminium scrap availability and pressures recycling
margins, with several recyclers running on reduced capacity, impacting both
Hydro Extrusions and Metal Markets. The automotive extrusion demand has been
challenged by lower electrical vehicle sales growth, and weak trailer build
rates in the transportation segment adversely affected Hydro Extrusions during
the second quarter. CRU revised down their extrusion demand forecasts for the
second half of 2024, expecting a slower recovery.
Hydro Extrusions has responded with mitigating measures to handle challenging
markets. Current production flexibility and adaptation abilities are utilized to
maneuver weak demand, while cost cutting programs and manning reductions are
used as means to uphold margins. Managing short-term volatility enables
Extrusions to continue positioning for long-term growth with the customers, and
two new OEM contracts were added to the portfolio during the second quarter,
accumulating contracts worth EUR 3.1-3.3 billion since the beginning of 2023.
Hydro Extrusions is positioned to deliver on the 2025 EBITDA target of NOK 8
billion when markets recover, though recent extrusion demand forecasts indicate
a delayed realization.
Recycling margins pressured by weak markets underscore the need to diversify the
portfolio, and strengthen margins and scrap sourcing. During the second quarter,
Hydro decided to invest USD 85 million in a new casting line at the recycler in
Henderson, Kentucky, to supply the U.S. automotive market with high-quality
recycled automotive components. The project introduces HyForge technology to the
U.S., serving the automotive market’s need for high-quality forge stock, and
broadening Hydro’s product portfolio. Further, the Alusort joint venture
completed the HySort installation in the quarter to enable the U.S. plants to
sort and use more post-consumer scrap.
Demand for Hydro’s low-carbon and recycled aluminium, Hydro CIRCAL, has remained
strong despite weak markets. Recyclers, Luce in France and Atessa in Italy, are
upgrading to meet rising European demand, and the bicycle company, Brompton,
introduced wheel rims made from 100 percent post-consumer aluminium scrap during
the quarter. Beyond Europe, greener products are gaining traction in the U.S.,
and the first sale of Hydro CIRCAL was conducted during the second quarter.
These efforts are estimated to strengthen Hydro’s recycling margins and
resilience, and align with the 2030 recycling targets.
“Demand growth for low-carbon products remains strong with Hydro CIRCAL sales
well above target for 2024. This gives confidence to continue to push forward on
strengthening our portfolio to capture long-term positions in the rapidly
growing market for low-carbon products,” says Kallevik.
Delivering low-carbon products creates value for Hydro’s customers at premium
pricing. Leveraging the integrated value chain with traceability from mine to
component, Hydro is attracting strategic partnerships with industry leaders like
the German sports car manufacturer Porsche AG. The agreement signed in Stuttgart
on July 9, opens for Hydro to deliver best-in-class, low-carbon aluminium for
Porsche’s vehicle production in the years to come, and the scope of the
agreement includes both Hydro REDUXA and Hydro CIRCAL. Hydro is well-positioned
to capitalize on greener premiums, with the potential for NOK 2 billion in
earnings uplift by 2030.
“The agreement with Porsche is first of its kind in the aluminium industry and
represents a totally new business model proving the underlying value of Hydro’s
efforts throughout our value chain to pioneer the green aluminium transition,”
says Kallevik.
Securing access to renewable power is crucial for growth in low-carbon
aluminium. Hydro and Macquarie Asset Management launched their renewable energy
partnership on June 24, establishing Hydro Rein as a joint venture where Hydro
owns 50.1 percent and Macquarie 49.9 percent of the company. With the capital
provided by Macquarie, Hydro Rein is expected to be fully funded for its current
projects under construction and development cost for projects in the pipeline in
the coming years, with an ambition that no new equity will be called on from the
owners beyond committed capital.
“We are excited to join forces with Macquarie Asset Management to accelerate the
next chapter of Hydro Reins growth journey. With Hydro and Macquarie Asset
Management’s complimentary capabilities on the ownership side, Hydro Rein is
well equipped to continue pursuing profitable growth - supporting industrial
decarbonization through growing in the Nordics, selected European markets as
well as in Brazil,” says Kallevik.
Results and market development per business area
Adjusted EBITDA for Bauxite & Alumina increased compared to the second quarter
of last year, from NOK 817 million to NOK 1,616 million, mainly driven by higher
alumina sales prices, lower cost of raw materials, and increased sales volume,
partly offset by increased alumina sourcing costs and increased other fixed and
variable costs. PAX started the quarter at USD 367 per tonne, increasing
gradually to USD 505 per mt at the end of the quarter.
Adjusted EBITDA for Energy decreased in the second quarter 2024, from NOK 854
million to NOK 611 million, compared to the same period last year. Lower
production, prices and gain on price area differences were partly offset by the
expiry of a 12-month internal fixed price purchase contract from Aluminium Metal
with a significant loss in the same period last year. Average Nordic power
prices in the second quarter 2024 ended below the prices from the previous
quarter and the same quarter last year. Price area differences between the south
and the north of the Nordic market region increased slightly compared to the
previous quarter, but were significantly lower than the same quarter last year.
The increase compared to the first quarter 2024 was primarily a result of lower
prices in the north due to wind power production, hydrology and decreased
demand.
Adjusted EBITDA for Aluminium Metal decreased in the second quarter 2024,
compared to the second quarter of 2023, from NOK 3,215 million to NOK 2,520
million, mainly due to reduced contribution from power sales, increased alumina
and energy cost, and inflation on fixed cost, partly offset by reduced carbon
cost. Global primary aluminium consumption was up 2 percent compared to the
second quarter of 2023, driven by a 3 percent increase in China. The three-month
aluminium price increased throughout the second quarter of 2024, starting the
quarter at USD 2,337 per tonne and ending at USD 2,524 per tonne.
Adjusted EBITDA for Metal Markets decreased in the second quarter 2024, compared
to the same period last year, from NOK 334 million to NOK 309 million, due to
lower results from recyclers and negative currency effects, largely offset by
strong results from sourcing and trading activities. Lower results from
recyclers are due to reduced sales prices in a weakening market and additional
margin pressure in a tightening scrap market, while Alumetal contributed
positively after the acquisition in third quarter 2023.
Adjusted EBITDA for Extrusions decreased in the second quarter 2024, from NOK
2,013 million to NOK 1,377 million, compared to the same quarter last year,
mainly driven by lower extrusion sales volumes and decreased margins from
recyclers. General inflation pressured fixed and variable costs, partly offset
by cost measures. European extrusion demand is estimated to have decreased 14
percent in the second quarter of 2024, compared to the same quarter last year,
but increasing 5 percent compared to the first quarter partly driven by
seasonality. Automotive extrusion demand has been challenged by lower growth in
sales of electric vehicles. Demand for residential building and construction,
and industrial segments have started to stabilize at relatively weak levels.
Extrusion demand has been relatively better in Southern Europe, while demand in
Germany continues to be weak. North American extrusion demand is estimated to
have decreased 5 percent during the second quarter of 2024, compared to the same
quarter last year, but increasing 1 percent compared to the first quarter. The
transport segment has been particularly weak, driven by lower trailer build
rates.
Other key financials
Compared to the first quarter 2024, Hydro’s adjusted EBITDA increased from NOK
5,411 million to NOK 5,839 million in the second quarter 2024. Higher realized
aluminium and alumina prices combined with higher alumina sales volume were
partly offset by increased energy and fixed costs.
Net income (loss) amounted to NOK 1,421 million in the second quarter of 2024.
Net income (loss) included a NOK 571 million unrealized derivative loss on LME
related contracts, a net foreign exchange gain of NOK 151 million, and a NOK 60
million gain from unrealized derivative power and raw material contracts. The
result also includes the gain on Hydro’s reduced ownership share in Hydro Rein
with NOK 321 million, reversal of a provision with NOK 164 million, a
compensation related to the divested Rolling business with NOK 137 million, and
NOK 56 million in rationalization charges and closure costs.
Hydro’s net debt increased from NOK 13.9 billion to NOK 16.2 billion during the
second quarter of 2024. The net debt increase was mainly driven by a NOK 5.0
billion dividend to shareholders and investments, partly offset by EBITDA
contribution.
Adjusted net debt increased from NOK 22.5 billion to NOK 26.1 billion, largely
due to the increase in net debt of NOK 2.3 billion, coupled with increased
collateral of NOK 0.5 billion and a NOK 0.6 billion increase in other financial
liabilities.
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:
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.
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