Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on NORSK HYDRO ASA. We currently have 6 research reports from 1 professional analysts.
|17Mar17 06:59||GNW||Norsk Hydro annual reporting 2016: Making the world lighter|
|03Mar17 07:00||GNW||Norsk Hydro: Yara to acquire power grid operator and quay facility at Herøya|
|09Feb17 06:01||GNW||Norsk Hydro: Key information relating to the cash dividend to be paid by Norsk Hydro ASA|
|09Feb17 05:59||GNW||Norsk Hydro: Fourth quarter 2016: Higher alumina and aluminium prices lift results|
|17Jan17 12:00||GNW||Norsk Hydro: Hydro's financial calendar 2017|
|12Jan17 06:00||GNW||Norsk Hydro: LoI and MoU for possible use of natural gas at Hydro Alunorte in Brazil|
|10Jan17 14:12||GNW||Norsk Hydro: Invitation - Hydro`s fourth quarter results 2016|
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NORSK HYDRO ASA
NORSK HYDRO ASA
Decent Q3 results, although Bauxite & Alumina’s recovery was still missing
26 Oct 16
Norsk Hydro’s Q3 16 results (especially profitability) came in ahead of consensus estimates. Although, the performance at the operating profit level was still behind AV’s estimates. The Bauxite & Alumina (B&A) division again failed to deliver to potential, despite the ramp-up to record output levels. Sales came in at NOK20.2bn (-6.6% yoy; -1.1% qoq) as healthy volumes across divisions (except for Rolled Products) were well supported by moderating aluminium price headwinds. Although alumina prices (average $234/t; -20% yoy; -7% qoq) remained under the weather. Adjusted EBIT came in at NOK1.2bn (-42% yoy; -5.7% qoq), translating into an operating margin of 6.1%. With the exception of: 1/ Energy (EBIT up 49% yoy to NOK285m), where the Norwegian energy prices are finally staging some recovery; and 2/ Metals Markets (EBIT up 56% qoq to NOK117m), which benefited from less severe currency and inventory effects, and improved sourcing and trading activities. – all other divisions witnessed profitability correction in the range of 12-76%. Apart from the impact of seasonally weaker Q3 sales, receding forex gains and abysmally weak alumina prices have continued to be Norsk’s pain points since the beginning of 2016. In fact, the impact of forex and alumina was pronounced in the B&A division – where EBIT plummeted from NOK628m in Q3 15 to NOK174m in Q2 16 and further down to NOK153m in Q3 16. Thankfully, a sizeable portion of the divisional disappointments were yet again compensated by the extremely strong contribution of equity-accounted investments (primarily from Sapa – Norsk’s extrusion JV). Equity-accounted investments’ ytd share of net income – NOK749m – has already materially surpassed NOK512m of profit generated in 2015. Moreover, the group has held on to its H1 16 forex gains (on USD liabilities in Brazil and euro liabilities in Norway) – resulting in hefty ytd forex gains of NOK2.3bn. Attributable net income came in at NOK1.1bn vs. a loss of NOK1.3bn in Q3 15 and a profit of NOK1.9bn in Q2 16 (wherein both Q3 15 and Q2 16 were impacted by extreme forex effects). While reported OCFs plummeted (-48% yoy; -38% qoq) to NOK2.3bn, capital spend remained aggressive at NOK1.6bn (+36% yoy; +20% qoq), resulting in the group’s net cash shrinking from NOK2.2bn (at end Q2) to NOK1bn (at end Q3). Management has sold forward 50% of its Q4 16 primary aluminium output at a price of $1,600/t. Moreover, 55% of the premia impacting the Q4 volumes has been booked at $315/t.
Bottom-line remains healthy, while Bauxite & Alumina continues to underperform
22 Jul 16
Norsk Hydro’s Q2 16 results were above consensus estimates, with the net income (similar to Q1) materially exceeding the Street’s expectations. While average aluminium (-14% yoy) and alumina (-25%) prices remained weak, the market recovery since early 2016 rendered some sequential relief (aluminium +3% qoq; alumina +14% qoq). Sales came in at NOK20.4bn (-9.1% yoy; +1.3% qoq), with healthy volumes across segments. While the NOK remained weak (-7.5% yoy) vs. the USD, sequentially the currency (+4%) has gained traction. Adjusted EBIT came in at NOK1.3bn (-46% yoy; -2.7% qoq). While the yoy weakness was anticipated (as 2015 benefited from extreme forex gains), the qoq performance was mixed. Unlike Q1, Primary Metal’s profitability galloped 95% to NOK692m with pricing and volume benefits being further supported by lower carbon costs and seasonally lower fixed costs. Additionally, there were benefits of NOK125m associated with insurance refunds and tax reversals, which had a negative NOK150m impact in Q1. Other segments suffered in varying degrees, with Bauxite & Alumina (B&A) continuing to be a major disappointment. This segment’s EBIT came in at NOK174m (-7.9% qoq) as a recovery in the BRL (+6% qoq vs. NOK) prevented profitability from inching closer to 2015 levels. Another inhibiting factor was the maintenance shutdown impact at Paragominas. The Metal Markets division suffered (EBIT down 55% qoq to NOK75m) on account of currency headwinds (and inventory revaluation losses), while Energy (EBIT down 24% qoq to NOK301m) sagged due to seasonal effects. In extrusion products, SAPA (Norsk’s equity-accounted investment) posted strong profitability (EBIT up 86% yoy; 48% qoq to NOK270m) on the back of strong market fundamentals, a healthy contribution from value-added products and the success of the performance improvement programme. The operating disappointments were mostly compensated via Norsk’s natural currency hedge on USD liabilities in Brazil and euro liabilities in Norway. With both BRL and NOK continuing to recover in 2016, Norsk again recognised NOK904m of currency gains in Q2 after already realising NOK1bn of gains in Q1. As a consequence, net income came in at NOK2.1bn (+0.6% yoy; -13% qoq). Unlike Q1, when OCFs turned negative due to NOK1.8bn of working capital investments, Q2 OCFs came in at NOK3.7bn – partly aided by NOK1bn of working capital release. Moreover, the group reinstated its net cash position – NOK2.2bn (at Q2-end) – despite the quarter also witnessing full-year dividend payments. Management has painted a relatively bleak Q3 outlook on the back of seasonal vagaries and pricing uncertainty.
Despite weakening operating profits, the bottom-line sprung a surprise
28 Apr 16
Norsk’s Q1 results were largely in line with consensus estimates (but materially behind AV’s estimates) – with only net income materially exceeding the Street’s expectations. Weakening market fundamentals (aluminium and alumina prices were down 21% yoy and 27%, respectively, while realised premium plunged 53%) took a toll on Norsk’s operating performance. Sales came in at NOK20.1bn (-14% yoy) as some of the pricing impact was partly offset by the 14% weaker NOK vs. the USD. Sequentially, the top-line impact (-1.2%) was mitigated by higher aluminium (+4%) and energy (+10%) volumes. The profitability correction was more severe – with adjusted EBIT plummeting 55% (and 22% qoq) to NOK1.5bn. Contrary to AV’s expectations, the EBIT of Primary Metal (down 80% yoy and 38% qoq), and Bauxite and Alumina (B&A; down 76% and 64% qoq) – Norsk’s key performance drivers over the past couple of quarters – came under massive pressure. While the Primary Metal’s impact was further compounded by c.NOK150m of ICMS taxes on historical surplus power sales in Brazil, B&A volumes too tapered after reaching record levels in Q4 15. Even the benefit from alumina cash costs being reduced to record lows of $183/t (down 19%) – aided by weaker producer currencies and cost efficiencies – was dwarfed in the current environment. Overall, the group achieved NOK300m of cost savings (out of NOK1.1bn being targeted in 2016) and NOK200m of forex gains in Q1 16. The bottom-line result – net attributable profit of NOK2.3bn vs. NOK2bn for FY2015 – was in sharp contrast with the operating results. This outperformance was aided by a net foreign exchange gain of NOK1bn (primarily on USD debt in Brazil) vs. a loss of NOK1.6bn in Q1 15. Norsk also booked a one-time NOK700m benefit on a tax case (pertaining to a deduction of losses on refinancing of loans to subsidiaries) it won, although its cash impact is expected in Q2. Management guides for a NOK350m gain in Q2 on the sale of the Herøya Industripark. Reported OCFs were dismal – outflow of NOK242m – as the impact on profitability was amplified by huge working capital investments of NOK1.8bn in Q1 16. As a result, net debt increased to NOK1.5bn vs. NOK614m at end-2015. Still, leverage is far from being a concern.
Record full-year profitability; bauxite and alumina finally generate returns
29 Feb 16
Unlike the world’s largest miners, which are struggling to survive in the current environment, Norsk Hydro with its single commodity focus (aluminium) achieved strong 2015 results. Even though the profit improvement momentum weakened through the year, the overall performance has been impressive. *NOK tailwinds knocked-off market headwinds (except for Q4)* Sales: Q4 – NOK20.4bn (-5.9% yoy; -5.6% qoq); 2015 – NOK88bn (+13%; in line with AV estimates) Despite sizeable support from a weaker NOK (vs. USD; -26% yoy), and record alumina and bauxite production, Q4 were sales were pulled down by lower all-in aluminium (-28%) and alumina prices (-19%). For the full-year though, forex and volume benefits were strong enough to more than offset the weaker aluminium market fundamentals. *Highest operating profit since 2008* Adjusted EBIT: Q4 – NOK1.7bn (-41%; -19% qoq); 2015 – NOK9.1bn (+73%; 1.5% ahead of AV estimates) Similar to the top-line, Q4 profitability too was hit by lower prices along with sequentially receding forex gains, with the most severe impact in the Primary Metal segment – EBIT down 65% yoy (and 22% qoq). This happened despite good cost controls continuing – especially in alumina, where cash costs were down 18% yoy and 14% qoq. For the full year, presence of the group’s backward-integrated assets (bauxite and alumina) in Brazil resulted in sizeable BRL tailwinds, in addition to the NOK benefits. The group also managed NOK800m of cost efficiencies across businesses. Unlike the NOK2.3bn of forex losses in Q4 14 (primarily in USD-denominated debt held in Brazil) and NOK3.2bn in Q3 15, Q4 15 did not witness any sizeable losses as the Brazilian debt was paid-off to a great extent. Although, NOK841m of one-off charges (o/w NOK434m was a loss on divestment of a rolling mill) resulted in a net attributable profit of NOK478m in Q4 15 vs. a loss of NOK370m in Q4 14 and loss of NOK1.3bn in Q3 15. While the full-year net profit came in at NOK2bn in 2015 vs. NOK797m in 2014. *Cash flows supported investments and deleveraging* Operating improvements in 2015 were well complemented by NOK1.6bn of working capital release, resulting in a 1.4x surge in reported OCFs of NOK14.4bn. In sharp contrast with mining peers, while Norsk’s capex surged 60%, its net debt was reduced 30% to NOK1.3bn. Even 2016 capex is guided to increase 40% to NOK8.1bn. Although, citing an uncertain market outlook, the annual dividend was kept flat at NOK1 per share. After achieving NOK4.5bn of cost efficiencies over 2011-15, management now targets NOK2.9bn of improvements through 2019. In H1 16, the group expects to book a gain of NOK350m on the sale of Herøya Industrial Park.
Mixed forex impact
23 Oct 15
At a time when the aluminium price ($1,450/t at present) has again slumped to multi-year lows (and premia are coming-off their highs), Norsk Hydro still managed to deliver improvements (primarily in bauxite and alumina) in Q3 15. However, hefty debt-related forex losses were a setback. Sales – NOK21.6bn (+10% yoy; -3.8% qoq) A materially weak NOK vs. USD (-31%) was strong enough to more than offset the impact of lower aluminium prices (-12%), market premia (-37%) and energy prices. Moreover, overall production levels were healthy, with aluminium, bauxite and energy output up by 7%, 20% and 31%, respectively. The weakening sequential performance does, however, reflect the impact of dwindling aluminium market fundamentals and subsiding forex benefits (NOK was down 6% qoq). Adjusted EBIT – NOK2.1bn (+75%; -12% qoq) In addition to the top-line factors, record weakness in the BRL (down 15% vs. NOK) and lower aluminium (-11%) and alumina (-14%) cash costs helped the group to achieve strong yoy operating results. The benefit was starkly visible in Norsk’s bauxite and alumina business, where operating assets are entirely located in Brazil. The sequential correction could have been more acute had the group not realised NOK800m of forex benefits. Disappointingly, unrealised currency losses of NOK3.2bn (vs. a loss of NOK1bn in Q3 14 and a gain of NOK346m in Q2 15), primarily on USD-denominated debt in Brazil, completely overshadowed the EBIT growth, thereby culminating in an attributable net loss of NOK1.3bn vs. a profit of NOK589m and NOK1.9bn in Q3 14 and Q2 15, respectively. Nevertheless, higher operating profits and a NOK2.1bn decline in working capital requirements resulted in a 2.8x increase in reported OCFs to NOK4.4bn. Consequently, the group’s already comfortable leverage position has eased further – transforming from a net debt position of NOK1.9bn at the end of 2014 to a net cash position of NOK1.5bn at the end of Q3 15. In October 2015, Norsk has signed a binding agreement to sell its aluminium rolling mill in Italy, although the terms are not disclosed as yet. Management expects to incur an operating loss of NOK410–510m on this deal with a targeted closure date by the end of Q4 15.
Highest quarterly bottom-line since 2011
22 Jul 15
Riding high on forex benefits, Norsk Hydro yet again reported strong (ahead of consensus) Q2 15 results. Sales – NOK22.4bn (+23% yoy; -3.7% qoq) A depreciating NOK (-30% yoy) was strong enough to offset the impact of weakening aluminium price trends, and lower alumina and power output. On a sequential basis, however, currency tailwinds dissipated (flat qoq) and lower realised aluminium price (-5%) and premia (down 17% to $509/t – though still on the higher side) resulted in a decline. Adjusted EBIT – NOK2.4bn (+4.7x; -19% qoq) While a depreciating NOK (vs. USD) has been supportive for top-line growth, a weakening BRL (vs. NOK, -6% yoy) along with more cost efficiencies (11% lower alumina cash costs and 8% lower for aluminium) have helped earnings improvement to continue – though weakening market fundamentals triggered the sequential correction. In addition, an unrealised (and unanticipated) currency gain of NOK346m (unlike a loss over the last few quarters – loss of NOK1.6bn in Q1 15) on USD-denominated debt in Brazil contributed to a stronger bottom-line. Net profit of NOK2.1bn (vs. NOK269m in Q2 14 and NOK1.1bn in Q1 15) is the highest the group has seen since May 2011 – at the peak of the aluminium pricing cycle. Strong profitability along with a benefit of other adjustments of NOK1.2bn (details undisclosed) resulted in a staggering improvement in OCFs – NOK4.5bn vs. NOK1.2bn in Q2 14 and NOK1.1bn in Q1 15.
Strong trading leads to upgrades
22 Mar 17
On the back of today’s positive trading update and slightly upgraded profit forecasts for FY2017, FY2018 and FY2019 we have reviewed our DCF analysis. This has led to an increased DCF valuation per share of 1500p (from 1200p) which we have made our new target price (from 1200p). Both TFP and JC Paper have contributed to the upgrades shown in the table below as have favourable currency movements. With the potential for further upgrades due to capitalising 3DP costs to come we maintain our Add recommendation.
Bang to rights
21 Mar 17
Tullow unexpectedly announced a US$750m rights issue on Friday at a 45.2% discount to the previous close. While this step confirms our investment thesis, the scale of the discount and the timing look like a slap in the face for investors and/or indicative of a weaker financial position than we are modelling. We publish revised estimates to reflect the impact of the issue and cut our Target Price to 215p per share (from 245p). We maintain our Hold recommendation.
Panmure Morning Note 22-03-2017
22 Mar 17
Acacia Mining and Endeavour Mining confirmed merger talks have now ended with Endeavour claiming an inability to “create adequate value for Endeavour shareholders”, most likely, we believe, given the disappointing ruling from the Tanzanian government on copper-gold concentrate sales. We were positive on the merger and believed a credible London listed Pan-African producer capable of challenging Randgold, would have been established. We make no change to our Hold recommendation today, and expect the shares to be marked lower in early trade.
South Disouq spuds
20 Mar 17
SDX Energy announced this morning that it has spudded the South Disouq (SD-1X) well in Egypt, targeting gas and oil across a number of intervals. This is a high impact event for SDX Energy, as current company 2P reserves of 4.7mmboe (post acquisition) would be dwarfed by success at South Disouq (we model a 65mmboe field of which SDX holds 55% WI), which could be developed quickly due to existing pipeline infrastructure passing through the block. Our valuation for South Disouq is 6.8p/share, although on success we would expect notable de-risking. Our core NAV is 42p with a full NAV (including South Disouq) of 57p/share. The well is due to take 30-45 days, so we would expect a result in mid late April.
GMP FirstEnergy ― UK Energy morning research package
17 Mar 17
Pacific Exploration & Production1,6 (PEN CN); BUY, C$72.00: 4Q16 results and improving outlook | Serinus Energy (SEN CN)1, 3; Speculative Buy, C$0.65: FY16 results | IGas Energy (IGAS LN) (not covered): Final terms of a previously announced proposed capital restructuring | Tullow Oil (TLW LN): HOLD, £3.10: Right Issue at a discount & CNOOC exercises pre-emption rights in Uganda