Mandatory Cuts at Alunorte Mar Norsk Hydro’s Positive Numbers in Q1

Mandatory Cuts at Alunorte Mar Norsk Hydro’s Positive Numbers in Q1
Svein Richard Brandtzæg. Source: Norsk Hydro

Though Norsk Hydro A.S.A. returned higher overall numbers for the first quarter, the mandated capacity cut at Alumina do Norte do Brasil S.A. (Alunorte) meant the firm will likely miss its cost-cutting target for the year.

Hydro reported a first-quarter revenue total of NOK39.970 billion, a 74-percent improvement year-on-year. Earnings before financial items and tax (EBIT) in the quarter totaled NOK3.301 billion, up by 37 percent from last year’s first-quarter total. Underlying EBIT came to NOK3.147 billion, 38 percent above Q1 2017, with primary metal leading the way at NOK823 million, followed by bauxite and alumina (NOK741 million) and extruded solutions (NOK734 million).

Earnings before financial items, tax, depreciation and amortization (EBITDA) in the quarter totaled NOK5.193 billion, up 38 percent year-on-year, while underlying EBITDA came in at NOK5.038 billion, a 39-percent improvement over the previous first quarter. Net income for the quarter was NOK2.076 billion, 13 percent better than last year’s first-quarter number, while underlying net income totaled NOK2.201 billion, a 39-percent gain year-on-year.

On the production front, Hydro brought 2.326 million metric tons of bauxite to the surface in the previous quarter, down by 3 percent from the year prior. The firm refined 1.277 million metric tons of alumina in Q1, a 16-percent drop year-on-year, while primary aluminium production totaled 514 thousand metric tons, essentially level as compared to last year’s first-quarter production. Hydro pointed out that state-mandated capacity shut-downs at Alunorte dented the company’s production in all three areas, noting that the mandatory 50-percent draw-down in production at the refinery necessitated a similar curtailment at its Albras Alumínio Brasileiro S.A. (Albras) smelting operations.

“We maintain the view of a global primary demand outlook of 4-5%, expecting the market moving towards a deficit for primary aluminium in 2018,” said Svein Richard Brandtzæg, Hydro’s President and CEO.

He continued by pointing out that the United States government’s sanctions upon Rusal earlier this month jolted the global trade.

“The US sanctions on Rusal have caused great uncertainty in the world’s aluminium markets and will impact trade flows and availability of metal and raw materials throughout the aluminium value chain. The Brazilian authorities’ embargo on Alunorte adds to the uncertainty in the aluminum industry and has led to 50 percent curtailment of Albras primary plant and 50 percent production at the Paragominas bauxite mine.”

Brandtzæg followed up on the subject with Reuters yesterday, noting that Hydro’s customers are concerned about a steady flow of product, but have been slightly mollified by the United States government’s 4-1/2-month reprieve for Rusal’s customers to comply with sanctions.