Norsk Hydro: Strong upstream results, building downstream robustness

Rhea-AI Summary

Norsk Hydro reported Q3 2024 adjusted EBITDA of NOK 7,367 million, up from NOK 3,899 million year-over-year, driven by higher aluminium and alumina prices, lower raw material costs, and positive currency effects. The company saw strong upstream results, particularly in Bauxite & Alumina, while downstream markets faced challenges with weak demand and recycling margins in Europe and North America. The three-month aluminium price rose from USD 2,515 to USD 2,612 per tonne during Q3. Hydro's net debt decreased to NOK 14.8 billion, and the company reduced its ownership in Vianode from 30% to 19.9%, resulting in NOK 956 million in impairments.

Positive

• Adjusted EBITDA increased 89% YoY to NOK 7,367 million
• Strong performance in Bauxite & Alumina with EBITDA rising to NOK 3,410 million from NOK 93 million
• Aluminium Metal EBITDA increased to NOK 3,234 million from NOK 1,379 million
• Net debt decreased from NOK 16.2 billion to NOK 14.8 billion
• Free cash flow of NOK 1.7 billion

Negative

• Extrusions EBITDA declined to NOK 879 million from NOK 1,322 million YoY
• Metal Markets EBITDA decreased to NOK 277 million from NOK 568 million
• Energy EBITDA declined to NOK 626 million from NOK 762 million
• NOK 956 million impairment on Vianode investment
• Weak downstream demand, particularly in automotive and construction sectors

Hydro’s adjusted EBITDA for the third quarter of 2024 was NOK 7,367 million, up from NOK 3,899 million in the same quarter last year, positively impacted by higher aluminium and alumina prices, lower raw material costs and positive currency effects. This was partly offset by lower recycling margins, Extrusions volumes and Energy prices resulting in an adjusted RoaCE of 8.5 percent over the last twelve months and free cash flow of NOK 1.7 billion.

• Solid upstream results from increasing alumina and aluminium prices
• 2024 improvement programs on track, Extrusions building robustness in weaker core markets
• Energy executing on renewable ambitions with Illvatn pumped storage project
• Reducing ownership from 30 to 19.9 percent and impairing NOK 956 million investments in Vianode
• Hydro and Mercedes-Benz extend partnership to foster socioeconomic development in Brazilian Amazon

"The positive development in our upstream revenue drivers continued in the third quarter, supporting strong results in our upstream business, countering the overall effects of the challenging downstream market,” says Eivind Kallevik, President & CEO of Hydro.

Positive upstream revenue drivers continued into the third quarter, supporting record results in Bauxite & Alumina. The Platts Alumina Index (PAX) gradually increased to USD 562 per tonne by quarter's end as global alumina supply tightened. Chinese alumina prices also rose due to bauxite sourcing constraints, keeping the market balanced. Alunorte continued the fuel switch project, producing alumina with natural gas during the third quarter, and is expected to be fully implemented by the end of this year. The three-month aluminium price rose from USD 2,515 to USD 2,612 per tonne during the third quarter, supporting solid results in Aluminium Metal.

“The fuel switch at Alunorte exemplifies sustainability and profitability going hand in hand, yielding significant savings in carbon intensity as well as costs. Combined with the higher alumina price driven by the tight alumina market, the investment impacts Bauxite & Alumina’s result positively this quarter,” says Kallevik.

The downstream aluminium market continued to be challenged by weak demand and recycling margins in Europe and North America. Automotive extrusion demand remains weak due to low electrical vehicle sales in Europe, especially in Germany. Building and construction, and industrial demand continues to be moderate with potential 2025 support from lower interest rates. Low activity in these markets limits aluminium scrap supply, squeezing recycling margins and reducing remelt production in both Hydro Extrusions and Metal Markets.

“Hydro is responding with short and long-term actions to strengthen robustness in Extrusions. While responding to the challenging market with firm mitigating actions, we are continuing to invest in the long-term robustness of our operations,” says Kallevik.

Hydro Extrusions is actively navigating challenging markets to address weak demand. By leveraging production flexibility and implementing cost-cutting programs, Extrusions aims to maintain margins. The recent investment in an automated press in Cressona in the U.S., replacing two old presses, exemplifies the commitment in Extrusions to enhance efficiency and productivity. However, achieving the NOK 8 billion EBITDA target for 2025 will require an extrusion market recovery of more than 20 percent volume growth and a recovery of remelt margins in line with historical averages, both in total representing NOK 2-3 billion improved EBITDA.

Weak markets are pressuring recycling margins, and active measures are taken to boost profitability and secure competitive scrap sourcing. Critical to this effort are enhanced capabilities in advanced scrap sorting. In the third quarter, the Alusort joint venture launched commercial operations of HySort in the U.S., enabling plants to process more post-consumer scrap. This expands Hydro's HySort portfolio, to soon five machines in operation, including four across Europe, reinforcing the company's leadership in recycling more post-consumer scrap.

By leveraging a fully integrated, traceable value chain from mine to component, Hydro is attracting strategic partnerships with industry frontrunners like Mercedes-Benz. The collaboration advanced significantly during the third quarter, as both companies committed to a long-term initiative aimed at driving positive change in the Brazilian Amazon. The Corridor program focuses on protecting human rights, generating income for local communities, restoring nature and building low-carbon value chains, underscoring that sustainability in aluminium solutions goes beyond just reducing carbon footprint.

“The agreement with Mercedes-Benz extends our partnership beyond low-carbon product development to create positive social and environmental impact in the state of Pará. Together, we aim to lift sustainability throughout our shared value chain, from mine to end-consumer product,” says Kallevik.

Securing renewable power is key to growth in low-carbon aluminium. Hydro made an investment decision for the Illvatn pumped storage plant in Luster, Norway, aiming to generate 84 GWh of renewable energy annually and improving flexibility in its production system. This will strengthen Hydro Energy’s portfolio, powering industrial production in Norway.

On October 22, Hydro decided to reduce its ownership in the synthetic graphite producer Vianode, based in Norway, from 30 to 19.9 percent. Hydro will step down from the board and no longer provide capital to Vianode to focus on projects supporting Hydro's strategic priorities towards 2030. Impairments of NOK 956 million of investments in Vianode are taken in the third quarter, with NOK 581 million impacting reported EBITDA and shareholder loan in Vianode of NOK 375 million is impacting Finance expense.

Results and market development per business area

Adjusted EBITDA for Bauxite & Alumina increased compared to the third quarter of last year, from NOK 93 million to NOK 3,410 million, mainly driven by higher alumina sales prices, lower cost of raw materials and positive currency effects, partly offset by increased alumina sourcing costs and decreased sales volume. PAX started the quarter at USD 505 per mt, traded down to USD 478 per mt in July, before increasing gradually to USD 562 per mt at the end of the quarter as the World ex-China alumina market continued tightening.

Adjusted EBITDA for Energy in the third quarter decreased compared to the same period last year, from NOK 762 million to NOK 626 million. Lower prices and lower gain on price area differences were partly offset by the expiry of a 12-month internal fixed price purchase contract from Aluminium Metal at a loss in the same period last year. Average Nordic power prices in the third quarter 2024 decreased, both compared to the same quarter last year and the previous quarter. The decrease compared to the second quarter in 2024 was primarily a result of strengthened hydrological balance and seasonally reduced consumption. Price area differences between the south and the north of the Nordic market region decreased compared to the same quarter last year and increased compared to the previous quarter.

Adjusted EBITDA for Aluminium Metal increased in the third quarter of 2024, from NOK 1,379 million to NOK 3,234 million compared to the third quarter of 2023, mainly due to higher all-in metal prices, reduced carbon cost, higher level in CO2 compensation and positive currency effects, partly offset by increased alumina cost and higher fixed cost. Global primary aluminium consumption was up 1.6 percent compared to the third quarter of 2023, driven by a 2.3 percent increase in China. The three-month aluminium price increased throughout the third quarter of 2024, starting the quarter at USD 2,515 per mt and ending at USD 2,612 per mt.

Adjusted EBITDA for Metal Markets decreased in the third quarter compared to the same period last year, from NOK 568 million to NOK 277 million, due to lower results from recyclers and negative currency effects, partly 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.

Extrusions adjusted EBITDA for the third quarter of 2024 decreased compared to the same quarter last year, from NOK 1,322 million to NOK 879 million driven by lower sales volumes and decreased margins from recycling. General inflation pressured fixed and variable costs, partly offset by cost measures. European extrusion demand is estimated to have decreased 7 percent in the third quarter of 2024 compared to the same quarter last year, and 21 percent compared to the second quarter partly driven by seasonality. Automotive extrusion demand continues to be challenged by weak sales of electric vehicles across Europe, particularly in Germany. Demand for building and construction, and industrial segments has remained moderate after summer with no clear signs of improvement over the coming months, although lower interest rates may support demand into 2025. North American extrusion demand is estimated to have decreased 4 percent during the third quarter of 2024 compared to the same quarter last year and 7 percent compared to the second quarter. The transport segment has been particularly weak, driven by lower trailer build rates. Automotive demand is facing headwinds due to weaker sales of electric vehicles. Demand continues to be soft in the building and construction, and industrial segments, however, underlying demand is expected to gradually improve into 2025 driven by lower interest rates.

Other key financials

Compared to the second quarter 2024, Hydro’s adjusted EBITDA increased from NOK 5,839 million to NOK 7,367 million in the third quarter 2024. Higher realized aluminium and alumina prices combined with lower fixed costs were partly offset by lower Extrusions and recycling volume.

Net income (loss) amounted to NOK 1,409 million in the third quarter of 2024. Net income (loss) included a NOK 907 million unrealized derivative loss on LME related contracts and a net foreign exchange gain of NOK 139 million. The result also includes the impairment of the equity accounted battery investment Vianode of NOK 581 million and NOK 129 million in rationalization charges and closure costs. Further, foreign exchange losses of NOK 1,092 and losses on a loan to Vianode of NOK 375 million are adjusted for. The tax effect on these adjustments reflects a standardized tax rate for taxable gains and tax deductible losses.

Hydro’s net debt decreased from NOK 16.2 billion to NOK 14.8 billion during the third quarter of 2024. The net debt decrease was mainly driven by EBITDA contributions, partly offset by investments and other operating cash flows.

Adjusted net debt decreased from NOK 26.1 billion to NOK 25.0 billion, largely due to the decrease in net debt of NOK 1.5 billion, partly offset by increased net pension liabilities of NOK 0.3 billion and increased collateral of NOK 0.2 billion.

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

Attachments

• NHY Presentation Q3 2024
• NHY Report Q3 2024

FAQ

What was Norsk Hydro's (NHYDY) Q3 2024 adjusted EBITDA?

Norsk Hydro's adjusted EBITDA for Q3 2024 was NOK 7,367 million, up from NOK 3,899 million in the same quarter last year.

How much did aluminum prices increase during Q3 2024 for NHYDY?

The three-month aluminium price increased from USD 2,515 to USD 2,612 per tonne during the third quarter of 2024.

What was NHYDY's net debt in Q3 2024?

Hydro's net debt decreased to NOK 14.8 billion from NOK 16.2 billion during the third quarter of 2024.

How much did Norsk Hydro (NHYDY) reduce its ownership in Vianode?

Hydro reduced its ownership in Vianode from 30% to 19.9%, resulting in impairments of NOK 956 million.