Hydro Q2 Earnings: Yes, We Can!

The worlds second largest aluminium producer, Norsk Hydro, beats estimates with its Q2 results, due to higher prices and increased sale. But CEO Svein Richard Brandtzæg warns that the second quarter may be the peak of this years earnings season.

“Full output at Qatalum and closing of the takeover of Vale’s aluminium business are expected in the fourth quarter. Combined, these moves will strengthen Hydro in all parts of the value chain

Svein Richard Brantzæg

“The solid results are attributable to higher sales volumes, combined with firm margins and tight cost control in a seasonally strong quarter. This quarter confirms Hydro as a strong market performer,” Hydro’s President and Chief Executive Officer Svein Richard Brandtzæg says in a market statement.

Hydro had underlying earnings before financial items and tax of NOK 1,110 million in the second quarter, rising from NOK 688 million in the first quarter.

Consensus estimates was 995 million, according to TDN Finans.

Svein Richard Brandtzæg

Higher realized aluminium prices, continued improvements in alumina operations and higher downstream sales lifted underlying results for the quarter.

Underlying results for Primary Metal improved during the quarter compared to the first quarter, due to higher realized aluminium prices.

Hydro’s alumina and raw materials business showed improved underlying results, mainly due to the Alunorte alumina refinery which posted higher sales volumes as a result of more stable production. Variable costs increased for Hydro’s smelter operations during the quarter.

“Full output at Qatalum and closing of the takeover of Vale’s aluminium business are expected in the fourth quarter. Combined, these moves will strengthen Hydro in all parts of the value chain and make us an even more robust player in an industry poised for growth,” Brandtzæg says.

Key figures:

Click to enlarge

Expects Decline In Prices

However, at the investors presentation the Hydro-boss said that the Q2 earnings may turn out to be the best quarterly report this year.

Brandtzæg notes that it expected lower realized alumina prices to a lower price on the London Metal Exchange (LME), and higher raw material costs due to a temporal lag in the calculation of bauxite, which is partly linked to LME prices.

In addition, expected a decline in the performance of the commercial alumina operations in the second half of 2010 compared to the first half. The decrease is due to expectation of lower margins.

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At the Oslo Stock Exchange, the Hydro shares jumped almost 1% after the report was published, but fell back after Mr.Brandtzæg’s conference with the investors.

NHY is up 0,14%  at the moment, while the Oslo Stock Exchange Benchmark Index is up 0,24%.

Here’s a copy of Hydro’s Q2 report.

Here’s Mr. Brandtzæg’s presentation material.

Related by the Econotwist:

Hydro Issue Risk Warning In Vale Takeover Deal

Norsk Hydro To Take Over Vale S.A’s Aluminium Businesses

Hydro Trash Estimates

Global Bonus Noise

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