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February 20th, 2009
- Reports
Oslo Norway - Norsk Hydro results fall on write-downs and weak aluminum markets
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Hydro's underlying EBIT was NOK 868 million in the fourth quarter, including inventory write-downs of about NOK 700 million. Underlying EBIT amounted to NOK 1,490 million in the third quarter and 1,699 million in the fourth quarter of 2007. Hydro's results for the quarter reflect the ongoing financial crisis, which has led to a dramatic drop in aluminum prices as a result of a sharp fall in global demand.
Underlying EBIT for the full-year 2008 fell to NOK 6,009 million from the solid result of NOK 10,153 million in 2007, as higher raw material costs affecting the entire industry had a substantial impact on Hydro's results in addition to the economic downturn in the fourth quarter.
"Hydro has acted quickly and decisively in response to the unprecedented drop in aluminum markets toward the end of last year," President and CEO Eivind Reiten said. "We have a very demanding year ahead of us, and we will continue to take proactive measures to meet the unprecedented market conditions," he said.
Hydro's joint venture with Qatar Petroleum on the 585,000-tonne Qatalum smelter, in which Hydro owns 50 percent, was about 60 percent complete by the end of the year, on schedule and within budget frame for start-up around year-end 2009 and ramp-up to full production during 2010. Once on stream, Qatalum will be one of the most cost-efficient smelters in the world.
"Improving Hydro's competitive position will be our key focus in 2009," Reiten said. "Progressing Qatalum according to plan will be a top priority, moving Hydro's smelter system down the industry cost curve and ensuring that we emerge as a stronger company when markets normalize."
Hydro has made wide-ranging adjustments in response to the severe drop in aluminium markets, and has announced reductions in its primary aluminium production of 23 percent, representing about 400,000 tonnes per year of high-cost production capacity, which will improve the average cost of Hydro's smelter system. Approximately 140,000 tonnes of the total will be shut down by the end of the first quarter of 2009, with the remainder to be shut down by the end of the second quarter of 2009.
Production of remelted metal at Hydro's casthouses has been cut by 45 percent, or around 500,000 tonnes per year, and alumina production at the part-owned Alpart refinery in Jamaica has been reduced by 50 percent. Hydro has also taken out significant capacity in its downstream operations through shift-reductions and implemented cost-cutting measures throughout the company.
Due to demanding markets and low forward visibility in both the aluminium and financial markets, Hydro's Board of Directors proposes to forgo a dividend payment for 2008. With Hydro's substantial investment program resulting from the Qatalum project and the high cost of raising capital in financial markets, the Board regards it as prudent to conserve the company's cash resources to reduce funding requirements.
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