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Norway's aluminum producer Norsk Hydro reported higher than expected earnings on Friday boosted by higher aluminium and alumina prices. $NHYDY results came after both Alcoa and Aluminum Corp of China missed expectations.

 Norsk Hydro

Earnings

Norsk Hydro’s underlying earnings before interest and taxes rose 94 percent year-on-year to NOK 3.555 billion, slightly behind the NOK 3.79 billion crowns analysts expected but this due to one-off costs related to its integration of aluminium firm Sapa. This was up from NOK 2,446 million in the third quarter. Compared to the fourth quarter of 2016 the underlying EBIT increased significantly from NOK 1,829 million to NOK 3,555 million.

For the full year 2017 Hydro's underlying EBIT increased to NOK 11,215 million from NOK 6,425 million for 2016. The increase reflects a higher all-in metal price and alumina sales price, partly offset by increased raw material costs, fixed costs and negative currency effects.

Market Reaction Norsk Hydro ASA (ADR) OTCMKTS: $NHYDY

Feb 16, 4:00 PM EST (NY Close) USD 7.59 +0.24 (+3.27%)

Earnings at Hydro’s two key divisions were above forecast.

The increase mainly reflects a higher realized alumina sales price and all-in metal price, partly offset by increased raw material costs and fixed costs.

  • Bauxite and alumina posted an underlying operating result of 1.9 billion crowns, beating expectations for 1.6 billion,
  • Primary metal earned 1.37 billion crowns, beating expectations for 1.34 billion.

“I am pleased with the strong, full-year and quarterly results, supported by higher aluminium and alumina prices,” CEO Svein Richard Brandtzaeg said in a statement.

Raised Dividend

$NHYDY also surprised by raising raised its 2017 dividend to 1.75 Norwegian crowns ($0.2266) per share, above expectations for 1.48 crowns according to Reuters consensus. For 2017, Hydro's Board of Directors said the raise reflects Hydro's strong operational performance for 2017 and solid financial position.

"This is up from NOK 1.25 per share paid out for 2016, which is still to be considered a floor. The proposed payment represents a 41 percent pay-out ratio of reported net income for the year and demonstrates the company's commitment to provide a competitive cash return to shareholders, also taking into account the volatility in the aluminium industry."

Sapa Takeover

Hydro’s acompleted the acquisition of Orkla’s 50 percent ownership in Sapa that it didn't own on October 2, 2017, giving Hydro full ownership of Sapa. That completed the $3.2 billion deal from July. Sapa’s results for the first nine months are reported as a 50 percent owned joint venture accounted for under the equity method.

Outlook

Hydro reiterated it expected global aluminium demand to rise 4 percent to 5 percent in 2018 and said that the market was expected to be largely balanced.

Cash Position

Hydro's net cash position decreased from NOK 7.7 billion to a net debt position of NOK 4.1 billion at the end of the quarter.

  • Net cash provided by operating activities amounted to NOK 6.4 billion.
  • Net cash used in investment activities, excluding short term investments, amounted to NOK 14.1 billion.

For 2017, Hydro's Board of Directors proposes a dividend of NOK 1.75 per share reflecting Hydro's strong operational performance for 2017 and solid financial position. This is up from NOK 1.25 per share paid out for 2016, which is still to be considered a floor. The proposed payment represents a 41 percent pay-out ratio of reported net income for the year and demonstrates the company's commitment to provide a competitive cash return to shareholders, also taking into account the volatility in the aluminium industry.

Source: Norske Hydro

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