Norsk Hydro ASA (ADR)(OTCMKTS:NHYDY) Posts Weak Numbers In 3Q2015


Norsk Hydro ASA (ADR) (OTCMKTS:NHYDY) bounced above the previous two days’ high yesterday and closed at the end of the day with a gain of 1.79%. The volume of the day surged to 4.5 million, several times higher than the daily average of 479,000, taking the weekly volume to a new high in the last 5 years. The stock has been trading very close to a long term supply area, as evident from the chart attached. The struggle here is natural but the result of the price action here will be the determinant of the trend with long term implications.


Norsk Hydro ASA (ADR)(OTCMKTS:NHYDY) underlying earnings before tax and financial items dropped to NOK 2,215 million in 3Q2015 from NOK 2,667 million in 2Q2015. Weaker aluminium prices weighed on overall performance, while strong rolled items sales and robust bauxite production added to earnings in the quarter.

The highlights

Norsk Hydro reported strong downstream progress in seasonally weak third quarter. The global primary demand outlook for aluminium stands close to 4%. The company signed letter of intent to increase MRN ownership to 45%. Underlying EBIT for Alumina and Bauxite increased versus the second quarter 2015 mainly due to increased production at Alunorte and Paragominas and a weaker Brazilian Real. It was partly offset by declining index and LME-linked alumina prices.

The expert view  

Svein Richard Brandtzaeg, the CEO of Norsk Hydro, said that bauxite production touched record-levels this quarter, highlighting the continued improvement measures made over in recent years in Paragominas. The company continues to strengthen bauxite businesses, and have finalized a Letter of Intent with Vale for the probable acquisition of its 40% stake in the Brazilian bauxite producer firm MRN. The encouraging bauxite production, combined with currency effects, gave a traditionally low implied alumina price for the quarter.

The details

Primary Metal underlying EBIT dropped in the third quarter 2015 due to lower aluminium prices and realized premiums, partly offset by a strong dollar and marginally higher sales volumes. Also, the underlying EBIT for Metal segment improved in 3Q2015 led by improved results from trading and sourcing activities in addition to positive inventory and currency valuation effects.

This was in large offset by poor results from re-melt businesses due to lower margins in Europe. Underlying EBIT for Rolled Products improved over the second quarter of 2015 led by higher shipments and lower operating cost. Rheinwek smelter contributions were adversely affected due to lower metal prices.

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