First quarter 2010: Results recover on higher aluminium prices and rising demand
Hydro had an underlying result before financial items and tax of NOK 688 million in the first quarter 2010, improving significantly from a loss of NOK 651 million in the fourth quarter of 2009, reflecting increased aluminium prices, reduced costs and higher volumes in a seasonally stronger quarter.
“We have seen rising aluminium prices and a partial demand recovery from previous weak quarters, supported by restocking. But global aluminium stocks remain high, indicating continued production overcapacity,” Hydro’s President and Chief Executive Officer Svein Richard Brandtzæg said.
“The official opening of the Qatalum plant in April was a milestone for an impressive project. At the end of the quarter, 20 percent of the production cells were in operation, and we are on track for full output in the fourth quarter this year. Qatalum will contribute significantly to Hydro’s competitiveness and be an important door-opener to the rapidly growing Asian markets,” Brandtzæg said.
Higher realized aluminium prices contributed to an improvement in underlying results for Hydro’s primary aluminium operations. Underlying results for alumina and raw material operations were substantially higher, lifted by improved results from Alunorte and high margins from Hydro’s commercial alumina activities. Significantly better performance and recaptured trading losses from the prior quarter lifted underlying results for the metal markets business.
Downstream sales were up on restocking and recovering markets. Higher volumes, combined with higher margins and lower costs contributed to a significant improvement in Hydro’s rolled products business. Underlying EBIT for extrusion businesses was relatively unchanged for the quarter, adjusted for the divestment of Automotive Structures in the fourth quarter. Volumes increased for all operating units with the exception of a seasonal decline in building systems shipments. Margins were stable.
“Overall, we expect demand in our main upstream and downstream markets to grow around 12 percent in 2010. But there is challenging terrain ahead of us, and we will maintain a strong cost focus across our businesses to ensure efficient operations and continuous improvements along our value chain,” said Brandtzæg.
Underlying EBIT for Hydro’s energy business increased substantially from the fourth quarter of 2009, mainly due to high spot power prices and high production.
Net cash generated from operating activities amounted to NOK 186 million for the quarter. Investments amounted to NOK 1.8 billion, including about NOK 1.1 billion relating to Qatalum. Qatalum investments are expected to be somewhat lower in the second quarter of 2010. Hydro had a net cash position of NOK 0.5 billion at the end of the first quarter 2010.
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