Hydro grows earnings as working capital holds back cash flow
Hydro increased third-quarter adjusted EBITDA, a measure excluding financing costs, taxes, depreciation and amortization, to 9.089 billion Norwegian kroner. Stronger metal prices and improved recycling and extrusion operations supported the result. Higher working capital requirements and prepayments constrained cash generation. The company reduced its annual capital spending outlook while increasing its working capital forecast. Its Alunorte refinery returned to regular operations after gas supply disruption.
Economics & Markets··Evening
Metal operations lift quarterly earnings
Norwegian aluminium producer Hydro delivered third-quarter adjusted EBITDA of 9.089 billion Norwegian kroner, against 5.996 billion kroner a year earlier. EBITDA measures earnings before financing costs, taxes, depreciation and amortization. Management linked the improvement to stronger metal prices and better recycling and extrusion earnings; this adjusted measure differs from net profit.[1], [2]
Aluminium Metal’s adjusted earnings reached 7.031 billion kroner, compared with 2.732 billion kroner previously. Extrusions rose to 1.189 billion kroner from 1.107 billion kroner. The same quarterly disclosure showed contrasting results elsewhere: Bauxite and Alumina fell to 283 million kroner from 1.290 billion kroner, while Energy declined to 411 million kroner from 828 million kroner.[1]
Working capital absorbs cash
Hydro generated free cash flow of 1.4 billion kroner during the quarter. Higher metal prices increased the money tied up in operations, and prepayments also raised working capital requirements. The group recorded net income of 5.263 billion kroner. Adjusted earnings per share increased to 2.30 kroner, against 1 krone in the corresponding quarter.[1]
Net debt stood at 15.4 billion kroner at the quarter’s close, down from 16.3 billion kroner at the preceding quarter-end. On Hydro’s adjusted basis, debt decreased to 21.9 billion kroner from 22.8 billion kroner. Its twelve-month return on average capital employed was 12.5 per cent. Metal Markets’ adjusted earnings fell to 125 million kroner from 154 million kroner.[1]
Investment outlook falls as the refinery resumes
Management lowered its annual capital spending forecast to 12.5 billion kroner, having previously projected 13.5 billion kroner. It simultaneously raised the working capital outlook to 32 billion kroner from 30 billion kroner. Quarterly adjusted EBITDA also exceeded the second quarter’s 8.923 billion kroner, although cash requirements increased alongside the rise in metal prices.[1]
The Alunorte alumina refinery resumed normal operations after disrupted gas supplies temporarily affected production. Hydro secured alternative liquefied natural gas to sustain operations. Hydro said higher energy and anode costs and a stronger Norwegian krone weighed on performance.[1]
