On Friday, February 13th, the Norwegian aluminium producer Hydro announced that its quarterly core profit exceeded market expectations. It stated that strong aluminium raw material revenues and rising metal prices had offset the impact of the weak downstream market.
The adjusted earnings before interest, taxes, depreciation and amortization rose to 5.59 billion Norwegian kroner (approximately 585.23 million US dollars) during the period from October to December, down from 7.7 billion kroner in the same period of the previous year. According to analysts' forecasts, the market average expected its core profit to be 5.23 billion kroner. The decline in performance was due to the lower price of alumina and the strengthening of the Norwegian krone, but was partially offset by the increase in the sales of primary aluminum and alumina and the decrease in raw material costs. Hydro generated free cash flow of 4.6 billion Norwegian kroner and the adjusted capital return rate (RoACE) for the full year reached 10.2%.
Eivind Kallevik, the president and CEO of Hydro, said: "The strong aluminum metal prices continued to provide support in the fourth quarter, driving the primary aluminum business to achieve near-record profits and offsetting the weakness in the downstream market. This demonstrates the robustness of Hydro's financial situation and the diversification of its business portfolio."
The upstream business segment performed strongly in the fourth quarter. Thanks to the optimization of the refining process and the high availability of equipment, the alumina output of Alunorte exceeded the rated capacity. In the metal aluminum business, the previously reduced production capacity continued to recover, and the quarterly output increased by 2.5% compared to the previous period.
As the EU prepares to impose carbon emission charges on aluminum imports, Hydro has faced a changing situation. This measure may benefit metals with lower emissions, although the increase in global aluminum supply and the decline in production costs indicate that the market will become more balanced.
Obtaining renewable energy remains the key for Hydro to achieve its low-carbon aluminum strategy and maintain its competitiveness. In the fourth quarter, Hydro signed two long-term power purchase agreements with Hafslund, covering the supply of 5.25 terawatt-hours of electricity within the NO3 price range from 2031 to 2040. This range encompasses the Hydro Sunndal and Hydro Høyanger electrolytic aluminum plants. Relying on renewable energy, Hydro's aluminum production in Norway can reduce its carbon footprint by approximately 75% compared to the global average.
