Norsk Hydro: Impairments affect Hydro’s fourth quarter results
21 Diciembre 2023 - 1:00AM
Faced with challenging alumina market conditions and
Australian power price insecurity, Norsk Hydro ASA will report
total impairment losses of approximately NOK 5.9 billion in its
fourth quarter results.
Hydro will write down the value of:
- Goodwill in Bauxite & Alumina (B&A), Brazil
- Property, plant and equipment related to the Alunorte alumina
refinery and Paragominas bauxite mine
- Deferred tax assets in Alunorte
- Property, plants and equipment related to the Tomago aluminium
plant, Australia
The impairments are regarded as adjusting items in Hydro’s
Alternative Performance Measure Adjusted Net Income and will not
reduce the dividend for 2023.
“The bauxite and alumina operations are a key enabler for Hydro
to pioneer the green aluminium transition by significantly reducing
the upstream carbon footprint. In the short and medium term, we see
challenging alumina markets and weak cash flow generation in
B&A coming from market volatility in times of geopolitical
turmoil, impacting the current valuation of the assets,” says
President and CEO Hilde Merete Aasheim.
“Longer term, we expect a higher share of greener earnings in
B&A, as we reduce the carbon emissions from our operations,
while growing our greener product portfolio sold at premium
pricing. These expected earnings are not included in current
valuation for impairment testing purposes, in line with accounting
rules,” says Aasheim.
Bauxite & Alumina
The estimated impairment loss in the B&A segment is
approximately NOK 3.8 billion.
The impaired cash generating unit consists of the Alunorte
alumina refinery, the Paragominas bauxite mine and related
activities. The weaker alumina market with lower margins and higher
fixed costs is expected to remain over a longer period than what
was expected when the unit was tested for impairment at the end of
2022. In the end 2022 test, the value in use was deemed equal to
the unit’s carrying amount.
The impairment will mainly affect the carrying value of goodwill
and property, plant, and equipment. For Alunorte, the impairment is
related to fair value adjustments from Hydro’s acquisition of the
company.
Related deferred tax assets previously recognized have also been
reviewed. Hydro has concluded that the unused tax positions may not
be recoverable for deduction in future results and will therefore
impair tax assets of about NOK 1.4 billion in the fourth
quarter.
Aluminium Metal
The estimated impairment loss in the Aluminium Metal segment is
approximately NOK 0.6 billion.
The impaired cash generating unit is the partly owned Tomago
aluminium plant in Australia, where Hydro owns 12.4 percent, whose
current power price agreement expires in 2028. The value in use is
deemed lower than the carrying amount due to insecurity about
future power price agreements in combination with a weaker
aluminium market.
The impairment will mainly affect the carrying value of
property, plant and equipment.
This is information that Norsk Hydro ASA is obliged to make
public pursuant to the EU Market Abuse Regulation and subject to
the disclosure requirements pursuant to Section 5-12 of the
Norwegian Securities Trading Act.
Investor contact: Elitsa Boyadzhieva +47
91775472Elitsa.Boyadzhieva@hydro.com
Media contact: Halvor Molland +47 92979797
Halvor.Molland@hydro.com
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