Norsk Hydro: Solid upstream results, mixed markets
Norsk Hydro reported solid upstream results but faced mixed markets in Q2 2024. Adjusted EBITDA was NOK 5,839 million, down from NOK 7,098 million in Q2 2023. Key highlights:
- Positive revenue drivers supported upstream results
- Weak demand and low recycling margins impacted downstream
- Hydro Rein joint venture established with Macquarie Asset Management
- Strong demand for Hydro CIRCAL, scaling up recycling
- Partnership with Porsche for low-carbon aluminium supply
The company saw solid performance in Bauxite & Alumina and Aluminium Metal, but faced challenges in Extrusions and Metal Markets due to weak demand in construction and automotive sectors. Hydro is implementing cost-saving measures and maintaining margins to mitigate these challenges.
Norsk Hydro ha riportato risultati solidi upstream ma ha affrontato mercati misti nel secondo trimestre del 2024. L'EBITDA rettificato è stato di 5.839 milioni di NOK, in calo rispetto ai 7.098 milioni di NOK nel secondo trimestre del 2023. Ecco i punti salienti:
- I fattori di crescita dei ricavi hanno supportato i risultati upstream
- La domanda debole e i margini bassi nel riciclo hanno impattato il downstream
- È stata stabilita la joint venture Hydro Rein con Macquarie Asset Management
- Forte domanda per Hydro CIRCAL, in aumento il riciclo
- Partnership con Porsche per la fornitura di alluminio a basse emissioni di carbonio
L'azienda ha registrato una performance solida nel Bauxite & Alumina e nell'Aluminium Metal, ma ha affrontato sfide nelle estrusioni e nei mercati dei metalli a causa della domanda debole nei settori delle costruzioni e dell'automotive. Hydro sta implementando misure di risparmio e mantenendo i margini per mitigare queste sfide.
Norsk Hydro reportó resultados sólidos upstream pero enfrentó mercados mixtos en el segundo trimestre de 2024. El EBITDA ajustado fue de 5,839 millones de NOK, disminuyendo desde los 7,098 millones de NOK en el segundo trimestre de 2023. Principales puntos destacados:
- Los impulsores de ingresos positivos respaldaron los resultados upstream
- La demanda débil y los bajos márgenes de reciclaje afectaron al downstream
- Se estableció la joint venture Hydro Rein con Macquarie Asset Management
- Fuerte demanda por Hydro CIRCAL, aumentando el reciclaje
- Alianza con Porsche para el suministro de aluminio de bajo carbono
La compañía vio un rendimiento sólido en Bauxita & Alúmina y Metal de Aluminio, pero enfrentó desafíos en Extrusiones y Mercados de Metales debido a la débil demanda en los sectores de construcción y automotriz. Hydro está implementando medidas de ahorro de costos y manteniendo márgenes para mitigar estos desafíos.
노르스크 하이드로는 2024년도 2분기에 견고한 업스트림 결과를 보고했으나 혼합된 시장에 직면했습니다. 조정된 EBITDA는 58억 3,900만 NOK으로, 2023년도 2분기의 70억 9,800만 NOK에서 감소했습니다. 주요 하이라이트:
- 긍정적인 수익 동인이 업스트림 결과를 지원함
- 수요 약세와 낮은 재활용 마진이 다운스트림에 영향을 미침
- 매쿼리 자산 관리와 함께 Hydro Rein 합작투자 설립
- Hydro CIRCAL에 대한 강한 수요, 재활용 확대
- 포르쉐와의 저탄소 알루미늄 공급 파트너십
회사는 보크사이트 및 알루미나와 알루미늄 금속에서 견고한 성과를 보였지만, 건설 및 자동차 부문에서의 수요 약세로 인해 압출 및 금속 시장에서 도전에 직면했습니다. 하이드로는 비용 절감 조치를 시행하고 이러한 도전을 완화하기 위해 마진을 유지하고 있습니다.
Norsk Hydro a annoncé des résultats solides en amont, mais a dû faire face à des marchés mixtes au deuxième trimestre 2024. L'EBITDA ajusté s'est élevé à 5.839 millions de NOK, contre 7.098 millions de NOK au deuxième trimestre 2023. Points clés :
- Des moteurs de revenus positifs ont soutenu les résultats en amont
- Une demande faible et des marges de recyclage basses ont eu un impact sur en aval
- Création de la joint-venture Hydro Rein avec Macquarie Asset Management
- Forte demande pour Hydro CIRCAL, augmentation du recyclage
- Partenariat avec Porsche pour l'approvisionnement en aluminium à faibles émissions de carbone
L'entreprise a connu une performance solide dans le Bauxite & Alumina et le Métal d'Aluminium, mais a rencontré des défis dans les Extrusions et les Marchés Métal en raison d'une demande faible dans les secteurs de la construction et de l'automobile. Hydro met en œuvre des mesures d'économie de coûts et maintient les marges pour atténuer ces défis.
Norsk Hydro hat solide upstream Ergebnisse gemeldet, jedoch gemischte Märkte im zweiten Quartal 2024 erlebt. Das bereinigte EBITDA betrug 5.839 Millionen NOK, rückläufig von 7.098 Millionen NOK im zweiten Quartal 2023. Wichtige Highlights:
- Positive Umsatztreiber unterstützten die upstream Ergebnisse
- Schwache Nachfrage und niedrige Recycling-Margen beeinflussten downstream
- Joint Venture Hydro Rein mit Macquarie Asset Management gegründet
- Starke Nachfrage nach Hydro CIRCAL, Recycling wird ausgeweitet
- Partnerschaft mit Porsche zur Lieferung von kohlenstoffarmem Aluminium
Das Unternehmen verzeichnete eine solide Leistung im Bereich Bauxit & Alumina sowie Aluminium-Metall, sah sich jedoch aufgrund schwacher Nachfrage in den Bereichen Bauwesen und Automobilindustrie Herausforderungen in den Extrusionen und Metallmärkten gegenüber. Hydro implementiert Kostensparmaßnahmen und hält die Margen aufrecht, um diese Herausforderungen zu mildern.
- Adjusted EBITDA of NOK 5,839 million, up from NOK 5,411 million in Q1 2024
- Solid results in Bauxite & Alumina and Aluminium Metal segments
- Strong demand for Hydro CIRCAL low-carbon and recycled aluminium products
- Establishment of Hydro Rein joint venture with Macquarie Asset Management
- Strategic partnership with Porsche for low-carbon aluminium supply
- Free cash flow of NOK 2.8 billion
- Adjusted EBITDA down from NOK 7,098 million in Q2 2023
- Lower Extrusions volumes and recycling margins
- Weak demand in residential building and construction segments
- Decreased automotive extrusion demand due to lower electric vehicle sales growth
- Net debt increased from NOK 13.9 billion to NOK 16.2 billion
- Adjusted RoaCE decreased to 4.4% over the last twelve months
Hydro’s adjusted EBITDA for the second quarter of 2024 was NOK 5,839 million, positively influenced by increasing revenue drivers in the quarter. The second quarter adjusted EBITDA was down from NOK 7,098 million for the same quarter 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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