Norsk Hydro tops Q2 profit view as higher prices offset Qatar hit

Hydro benefited from elevated aluminium prices and regional premiums caused by Middle East supply disruptions during the second quarter, although reduced output at its Qatalum joint venture limited the windfall.

Its adjusted earnings before interest, taxes, depreciation and amortisation rose 15% from a year ago to 8.92-billion Norwegian crowns ($927-million) in the April to June quarter, while analysts polled by the company had expected 8.22-billion crowns on average.

The improvement was led by Hydro’s Aluminium Metal business, where adjusted earnings before interest, taxes, depreciation and amortisation (ebitda) more than doubled to 6.42-billion crowns.

Higher realised metal prices and lower alumina costs more than offset an 8% decline in sales volumes, increased energy and carbon costs and a stronger Norwegian crown, it said.

At Qatalum, however, the smelter operated at around 60% of capacity owing to the Middle East crisis, while Hydro’s share of its adjusted Ebitda fell to 316-million crowns from 922-million a year earlier.

Hydro stopped purchasing metal from Qatalum during the quarter, after its marketing and offtake agreement with the venture ended. Hydro said it was in talks with its partner on how Qatalum’s metal should be marketed and sold going forward.

Aluminium prices reached a four-year high in June as regional supply risks intensified, while physical premiums strengthened in Europe and North America.

The disruption also widened margins for recycled aluminium, lifting earnings from Hydro’s recycling operations to above 900-million crowns, despite little improvement in underlying demand.

Hydro said primary aluminium consumption outside China fell from a year ago.

The Energy division’s earnings also more than halved due to lower hydropower production and unfavourable regional price differences, it added.