NHYDY Norsk Hydro ASA (QX)

Norsk Hydro ASA's underlying earnings before financial items and tax (EBIT) declined to NOK 544 million in the second quarter from NOK 772 million in the first quarter. Seasonally lower power production and prices weighed on underlying results, partly offset by higher all-in metal prices and improved results in Primary Metal.

• Underlying EBIT NOK 544 million
• Higher all-in aluminium and realized alumina prices
• Alunorte production at record-high levels
• Seasonally lower power production and prices
• World outside China primary aluminium demand continues to exceed production
• Signed agreement to take over Søral primary plant

"Aluminium demand continues to exceed production resulting in a tight market, and we see the all-in metal prices at their highest levels since 2012. We are continuing our efforts to improve along the entire value chain, and Qatalum has now achieved a cost position among the 10 best aluminium plants in the world," said President and CEO Svein Richard Brandtzæg.

Underlying EBIT for Bauxite & Alumina remained weak, but improved somewhat compared to first quarter of 2014 influenced by higher realized alumina prices and increased alumina sales volumes. Positive developments were mostly offset by negative currency developments and higher energy costs due to ICMS taxes for the full quarter.

"I am happy to see production at record-high levels above 6 million tons annualized at the Alunorte alumina refinery in Brazil, but regretfully results are still weak. However, our "From B to A" improvement program is on track, and the results should start impacting the bottom-line in the coming quarters," said Brandtzæg.

Underlying EBIT for Primary Metal improved in the second quarter influenced by higher product premiums, partly offset by lower sales volumes and somewhat lower realized aluminium prices.

Metal Markets delivered a lower underlying EBIT compared to the previous quarter mainly due to decreased results from sourcing and trading activities partly offset by higher volumes at remelters.

"It has been an eventful quarter: We signed an agreement to take over the Søral primary plant and its products fit well with Hydro's high premium casthouse strategy. We signed four power contracts, securing parts of our external power sourcing need after 2020. Also, Enova granted Hydro support to build the world's most energy efficient aluminium pilot. This is an important step for Hydro's ambition to become carbon neutral by 2020 and a pillar in our strategy to develop the hydropower-based Norwegian aluminium portfolio," said Brandtzæg.

Underlying EBIT for Rolled Products was stable compared to the first quarter.

Compared to the first quarter of 2014, underlying EBIT for Energy declined mainly due to seasonally lower power production and lower prices in our production areas.

Underlying results for Sapa improved during the quarter, partly influenced by seasonally stronger sales volumes.

Operating cash flow amounted to NOK 1.0 billion for the second quarter including roughly NOK 0.5 billion of dividends from Qatalum. Net cash used for investment activities amounted to NOK 0.7 billion. Dividends paid during the quarter amounted to NOK 1.6 billion. Hydro's net debt position amounted to around NOK 1.9 billion at the end of the second quarter.

Reported earnings before financial items and tax amounted to NOK 620 million in the second quarter. In addition to the factors discussed above, reported EBIT included net unrealized derivative gains and positive metal effects of NOK 154 million in total. Reported earnings also included charges of NOK 87 million (Hydro's share) in Sapa primarily related to rationalization activities.

In the previous quarter reported earnings before financial items and tax amounted to NOK 822 million including net unrealized derivative gains amounting to NOK 170 million in total. Reported earnings also included impairment charges of NOK 33 million related to the divestment of Hydro's casthouse in Hannover and charges of NOK 86 million (Hydro's share) in Sapa primarily related to rationalization activities.

Income from continuing operations amounted to NOK 269 million in the second quarter including a net foreign exchange loss of NOK 101 million. In the previous quarter, income from continuing operations amounted to NOK 462 million including a net foreign exchange gain of NOK 193 million.

Key financial information NOK million, except per share data	Second quarter 2014	First quarter 2014	%change prior quarter	Second quarter 2013	%change prior year quarter	First  half 2014	First  half 2013	Year 2013
Revenue	18 272	18 282	-	16 052	14 %	36 553	32 161	64 877
Earnings before financial items and tax (EBIT)	620	822	(25) %	376	65 %	1 442	1 081	1 663
Items excluded from underlying EBIT	(75)	(50)	(49) %	144	>(100) %	(126)	516	1 063
Underlying EBIT	544	772	(29) %	520	5 %	1 316	1 596	2 725
Underlying EBIT :
Bauxite & Alumina	(269)	(288)	7 %	(244)	(10) %	(557)	(308)	(1 057)
Primary Metal	420	312	35 %	237	77 %	732	602	1 422
Metal Markets	100	141	(30) %	147	(32) %	241	292	594
Rolled Products	177	181	(2) %	183	(3) %	358	334	615
Energy	169	435	(61) %	268	(37) %	603	784	1 653
Other and eliminations	(52)	(8)	>(100) %	(70)	26 %	(61)	(109)	(502)
Underlying EBIT	544	772	(29) %	520	5 %	1 316	1 596	2 725
Underlying EBITDA	1 653	1 861	(11) %	1 674	(1) %	3 514	3 886	7 306
Underlying income (loss) from discontinued operations	-	-	-	112	(100) %	-	163	220
Net income (loss)	269	462	(42) %	(665)	>100 %	730	(402)	(839)
Underlying net income (loss)	318	388	(18) %	427	(26) %	705	1 075	1 610
Earnings per share	0.09	0.19	(53) %	(0.31)	>100 %	0.28	(0.17)	(0.45)
Underlying earnings per share	0.13	0.16	(21) %	0.19	(33) %	0.29	0.49	0.65
Financial data:
Investments	740	546	36 %	652	14 %	1 286	1 729	3 761
Adjusted net interest-bearing debt	(13 551)	(11 230)	(21) %	(11 857)	(14) %	(13 551)	(11 857)	(10 128)
Key Operational information
Alumina production (kmt)	1 526	1  428	7 %	1 248	22 %	2 954	2 609	5 377
Primary aluminium production (kmt)	488	484	1 %	483	1 %	972	961	1 944
Realized aluminium price LME (USD/mt)	1 762	1 749	1 %	1 926	(9) %	1 755	1 986	1 902
Realized aluminium price LME (NOK/mt)	10 660	10 702	-	11 217	(5) %	10 682	11 378	11 160
Realized NOK/USD exchange rate	6.05	6.12	(1) %	5.82	4 %	6.09	5.73	5.87
Metal products sales, total Hydro (kmt)	843	871	(3) %	789	7 %	1 714	1 595	3 164
Rolled Products sales volumes to external market (kmt)	245	243	1 %	245	-	488	482	941
Power production (GWh)	2 248	2 964	(24) %	2 090	8 %	5 212	4 993	10 243

Investor contactContact Pål KildemoCellular +47 97096711E-mail Pal.Kildemo@hydro.com

Press contactContact Halvor MollandCellular +47 92979797E-mail Halvor.Molland@hydro.com

Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management's plans, objectives and strategies for Hydro, such as planned expansions, investments 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, as well as (i) statements preceded by "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar statements.

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 aluminium business; 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. Hydro disclaims any obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

Q2 Report http://hugin.info/106/R/1832530/636150.pdf Q2 Presentation http://hugin.info/106/R/1832530/636151.pdf

HUG#1832530