Profit drop for Hydro | Finansavisen

– Despite the fact that weaker market conditions affect the results, we see signs of positive development in the macroeconomic picture and income drivers towards the end of the year. Hydro is well positioned to capitalize on an expected increase in demand for aluminum products, says CEO Hilde Merete Aasheim.

Hydro’s adjusted operating profit before depreciation and amortization (EBITDA) was NOK 5.4 billion in the first quarter of 2024, down from NOK 7.5 billion in the same quarter last year. Lower sales prices for aluminium, volumes in Extrusions and recycling margins, in addition to higher fixed costs, affected the result negatively.

This was partially offset by lower raw material costs. This produced an adjusted return on capital employed (RoaCE) of 5.6 per cent over the past twelve months.

In advance, an adjusted EBITDA of NOK 5.5 billion was expected, according to estimates obtained by Hydro.

5 percent growth

In the report, Hydro writes that the economic outlook improved during the first quarter, which lowers the risk of recession. The central banks are also now reassessing interest rate cuts against the background of lower inflation.

“Demand for primary aluminum outside China slowed, being 2 percent lower than last year, while Chinese demand remained strong in the renewable energy and electric vehicle (EV) markets, contributing to overall growth in global primary aluminum demand of 5 percent compared to the previous year,” it says.

But demand in the residential construction and industrial segment was still low in the quarter, particularly in Europe.

“The weak market conditions in the building and construction sector continue to put pressure on product premiums for press studs. Less construction and demolition of old buildings also leads to less access to scrap. Combined with increasing exports of scrap to Asia, this contributes to high prices for scrap metal, which puts pressure on recycling margins both in Metal Markets and in Hydro Extrusions,” writes Hydro.

Reduced electric car production

Despite continued growth in demand for electric and hybrid cars, forecasts have been adjusted downwards as a result of subsidy cuts in Germany and increased competition from China.

“Reduced electric car production in Europe has had a negative effect on Hydro Extrusions in the first quarter, which is exposed to the electric car segment. The transportation segment in North America has experienced a decline due to lower production of trucks,” the report states.

Hydro also states that the improvement programs are proceeding as planned.

“With the help of ongoing improvement programs and commercial measures, Hydro continues to strengthen its position, and is still on track to deliver further improvements of NOK 8.5 billion by 2030,” the company states.