Q3: operating dynamics continue to weaken; there are no quick fixes

Besides the weak Q3 results, Norsk’s profitability also missed the street’s expectations. There was considerable pressure in Primary Metal and Bauxite & Alumina – both being key divisions. Fortunately, the dynamics in the other divisions weren’t that bad. Also, with the focus on green initiatives remaining intact, the firm is headed in the right direction. The only issue for now is the uncertainty surrounding the rebound in aluminium pricing, despite Norsk’s ownership of and investment in high-d

Aluminium market pain – an opportunity for Norsk Hydro(?)

The pricing correction for aluminium has been quite harsh over the last couple of months. While this is also true for other key base metals (ex. copper), it seems that the white metal’s greener virtues and diverse application in both consumer and industrial sectors could become pivotal differentiators for a gradual and/or meaningful pricing rebound. The more competent aluminium firms, especially well-integrated ones like Norsk Hydro seem best-positioned to capitalise this opportunity – even if t

Soft Q2 results, but firm-wise competency is intact

Amidst the weakening pricing dynamics, Norsk Hydro reported soft Q2 results. The results were however better than the street’s expectations. Division-wise, there were varying positives across all key areas. Besides valuable dominance across the value chain, the impact of various improvement measures was evident. While the macro situation remains uncertain, the likes of Norsk still remain a sorted metals proposition, especially in the context of growing European supply insecurities.

Q1 23 witnessed further normalisation; waiting for a better entry point

Alhough Norsk Hydro’s Q1 ‘operating’ results came in slightly ahead of the street’s expectations, the stock was down c.3% on the day of the results release. There was further normalisation (albeit not worrisome) in the lynchpin Primary Metal and Energy divisions, the dynamics were mixed in other divisions and a medium-term group-level (margin) normalisation remains an unchanged reality. While Norsk is a unique European metals proxy, with well-targeted growth investment and improvement initiative

Q3 results beat, despite various challenges

Amidst weakening/volatile commodity markets, Norsk managed to report Q3 results that comfortably surpassed the market’s and AV’s expectations. Besides limiting any major output outages, the benefits of being well-integrated clearly came to the firm’s rescue. While some moderation in the operating performance may be sustained in the coming quarters, severe sector-wide supply challenges imply that Norsk can continue to outperform in challenging markets. Hence, our positive recommendation is reiter

Strong Q2 + surprising ‘extraordinary’ shareholder rewards

Norsk Hydro reported another strong quarterly performance. The gains in Primary Metal and Extruded Solutions were glaring. While other divisions also had a good run, some were (partly) restrained by cost and/or production challenges. Interestingly, management unveiled a NOK5bn extraordinary shareholder reward programme. Overall, Norsk remains one of our top mining bets, with various virtues supporting the near-to-long-term investment case. However, any prolonged/severe economic woes in Europe (a

Excellent Q1; time to capitalise on the markets’ nervousness?

Norsk Hydro reported impressive Q1 results. While the improvements (like Q4 21) remained broad-based, the impact of ‘severe’ cost headwinds was evident. Even though market (pricing) dynamics could remain favourable for the remainder of the year, investor sentiment is likely to be driven by GDP growth and inflation concerns. Nevertheless, the firm remains an attractive long-term proxy for Europe’s green ambitions and, hence, the sell-off over the last one month and possibly more in the coming we

Exceptional results and rewards, but cautious outlook

Norsk Hydro reported exceptional results. Besides sizeable gains in Primary Metal and related divisions, the Energy division’s euphoria contributed to ‘record’ results and rewards. While the brewing market dynamics suggest that the firm remains well-positioned to leverage supply-side disruptions, the risk of cost challenges has become a key concern, which also reflects in management’s cautious outlook. Overall, while Norsk remains attractive vis-à-vis most miners – thanks to the cushion rendered

‘Record’ Q3; well-positioned to withstand near-term cost headwinds

Thanks to material (aluminium) price tailwinds and healthy market demand (across most divisions), Norsk Hydro reported ‘record’ Q3 results. The performance was led by Primary Metal and was well-complemented by other divisions (excluding Metal Markets). While cost escalation (especially for energy) is a key near-term challenge for the industry, the Norwegian giant is well-covered via material internal generation of renewable energy. Hence, our positive stock recommendation is reiterated.

Exceptional Q2 warrants another upgrade

On the back of supportive markets, Norsk Hydro reported impressive Q2 results. All divisions, ex. B&A, contributed in varying degrees and helped limit the impact of cost headwinds. With aluminium being better positioned vis-à-vis other base metals, Norsk’s recovery momentum should sustain and, hence, our positive recommendation is reiterated.

A promising start to 2021

Performance recovery momentum at Norsk Hydro has been maintained. This has been a function of both improving markets across the value chain and effective internal measures. The good part is that all key divisions posted impressive gains and this momentum is likely to be maintained. Add on top Norsk’s sustainability + integration focus/edge, the stock remains an attractive bet.

Finally, there’s a decision on Rolled Products

The Rolled Products division is being sold to KPS Capital Partners for an EV consideration of €1.4bn. While the price is much below our estimates, an exit was perhaps management’s last resort. Nevertheless, this outcome paves the way for faster earnings improvement and, hence, supports the scenario of healthier dividends.

Sustained turnaround prompts dividend growth ambitions

Barring some initial bottlenecks, COVID-19 failed to derail Norsk’s 2020 operational recovery. More importantly, this rebound was led by key divisions – accounting for >75% of the group’s capital employed. While the 2020 dividend was flat vs. 2019, the new dividend policy is a reflection of the group planning to reward (patient) shareholders, once incremental cash flows start kicking-in. Besides promising aluminium market fundamentals, Norsk’s investment case is further strengthened by its green

Several potential triggers during 2021

Hydro will report its Q4 results on 12 February and we now expect an underlying EBIT of NOK 1,364m (1,245) vs consensus at NOK 1,385m. We have raised our 2021/22 estimates by 37%/30% on the back of a firmer LME price, to some extent offset by a stronger NOK. We see several potential triggers during 2021, mainly related to Hydro’s renewable growth initiatives. We stick to Buy and lift our target price to NOK 45 (35) following our earnings revision.

2020 CMD focused on profitability, sustainability and opportunity

Norsk Hydro has unveiled a long-term roadmap wherein, besides targeting further profit improvements, the group reiterated its sustainability plans and, more importantly, upped the ante for the pursual of green business opportunities. These are valuable virtues, especially given Norsk’s disproportionate business exposure to the developed markets, unlike many peers – which are highly China-dependent.

Jubilee Metals - Operational Update Q3 FY2024

Jubilee today reports its Q3 and third quarter operational results from its expanding operations in Zambia (copper) and South Africa (chrome and PGM). South Africa is on a growth trajectory with record chrome production of 409kt in the quarter (Q2 FY2024 381kt) and a monthly record in March of 145kt and production YTD of 1.13Mt (0.94Mt). Jubilee is well underway to its annual target capacity of 2,1Mt/yr especially with the new 300kt/yr chrome plant at Thutse expected to be operational in August

Trinity Exploration and Production - Reserves Reduction but Solid Core Business

Trinity has announced a c28% reduction to its 2P reserves following a YE23 review. Despite the decrease in the Company’s 2P reserves, Trinity’s core business remains robust, with a reserves/production ratio of >12.5 years at YE23. Whilst there is significant potential for growth within the current portfolio, this will be difficult to unlock from the current balance sheet and we believe further financing will be required. We update our target price to 76p (from 202p), a c85% premium to the curren

Morning Note – 16 April 2024

Valeura Energy (TSX: VLE): Three exploration wells deliver three discoveries

• The Nong Yao-13 exploration well in the new Nong Yao D area that was targeting multiple zones has encountered >30 feet of new oil play across several new shallow intervals which have not been produced elsewhere on the concession. These reservoirs are believed to be recurring across the Nong Yao D area. • The drilling result confirms that oil has successfully migrated into this area of the block (a factor that was seen to be a risk in the Nong Yao D area) and open the opportunity for further a

I3 Energy (I3E LN) - Canada royalty assets sale

I3 has announced the sale of the majority of its royalty interests in Canada, for US$24.8m cash. This allows the company to fully repay amounts drawn on its debt facility and create a working capital surplus, giving I3 significant additional funding flexibility going forward

NextSource Materials - Initiation

NextSource is uniquely positioned to build a leading vertically integrated position, ex China, in the supply of Lithium-ion battery anode material which is essential for the Energy Transition. The company is commissioning phase 1 of its world-class Molo graphite mine in Madagascar and is in the final permitting process for its first Battery Anode Facility (BAF) to be located in Mauritius. The company is backed by Vision Blue, established by Sir Mick Davis, former CEO of Xstrata. On our calculat

Morning Note – 15 April 2024

DEC FY23 Results Update

DEC reported FY23 results which were in line with expectations and announced the acquisition of joint venture assets from Oaktree along with an updated capital allocation framework.

Oil & Gas - Cavendish sector note

Chariot, Energean, Touchstone Exploration, Longboat Energy, Hartshead Resources, BP, Helix Exploration, PetroTal, Pantheon Resources, Caspian Sunrise, Petrofac, DNO ASA, Valeura Energy, Aker BP, Var Energi Source: FactSet, weekly change 08/04/24-12/04/24 Oil rose as Israel braced for a possible attack from Iran, a development that would threaten major disruptions in a region that accounts for a third of the world’s crude output. An assault is expected to come as soon as the next 48 hours, which

Union Jack Oil (UJO LN) - Wressle update

Union Jack has released an update on its Wressle asset, reporting maturing production from Wressle-1, alongside progress for significant further development activities on the field going forward.

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

PROGRESSIVE: Pharos Energy: Delivering on operations and balance sheet

Pharos Energy reported FY23 results on 27 March. Group net production of 6,508 boepd (FY22: 7,166 boepd) was in line with guidance, assisted by successful development drilling in Vietnam and exploration successes in Egypt. Pharos’s strong cash generation resulted in a stronger balance sheet, with net debt reduced to US$6.6m (from US$28.9m at the end of 2022) and cash balances totalling US$32.6m. This left the group free to return more cash to shareholders, including a 10% increase in dividends,

Union Jack Oil+ (UJO, House Stock at 23p) - Wressle update

Hunting (HTG LN) - Q1 2024 trading update

Hunting has released its Q1 trading statement, reporting a strong period for OCTG and Subsea, steady growth in Advanced Manufacturing, and a softening in Perforating Systems.

Union Jack Oil* (UJO LN) - Wressle update and dividend plans

Union Jack announced an operational update on its onshore UK Wressle field and confirmed plans to announce the payment of a cash dividend to shareholders along with the FY23 results in May. Wressle continues to deliver material revenues to the Company, generating positive cash flow and providing it with sufficient cash resources to fund shareholder returns and invest in new development projects.