22 April
Oslo,
Dow Jones

OSLO (Dow Jones)-Norsk Hydro ASA (NHY.OS) Tuesday reported an 80% fall in net profit for the first quarter of 2007, reflecting weaker realized aluminum prices and negative currency effects, and said it expects to see high London Metals Exchange, or LME, prices throughout 2008.

On an underlying basis, analysts were upbeat about the figures, saying they were in line or slightly above forecasts in some units.

The Norwegian aluminum company said net profit attributable to equity holders in the period declined to 1.10 billion Norwegian kroner ($219.6 million) from a pro forma figure of NOK5.49 billion a year earlier, which excludes Hydro’s old oil and gas portfolio.

Norsk Hydro completed the sale of its oil and gas assets Oct. 1 2007 to then Statoil ASA (STO), now StatoilHydro ASA.

A Dow Jones Newswires poll of four analysts had pointed to a NOK1.95 billion consensus estimate for the period.

Closely watched underlying income from continuing operations was at NOK1.44 billion for the first quarter of 2008, compared with NOK1.40 billion in the year-ago period.

Hydro said solid operational performance in all business areas, combined with higher sales volumes and margins for Hydro’s downstream business lifted results, but added that weaker realized aluminum prices in Norwegian kroner had a negative impact.

DnB NOR Market’s analyst Gudmund Halle Isfeldt said the results overall were inline with expectations on an underlying basis, with the aluminum metal flat with views, while aluminum products and energy both performed slightly above view.

The good performance in metals "could be because they’re producing from an inventory where they bought aluminum at slightly lower prices than today, and the energy business was also above on higher (realized) prices," Isfeldt said.

He said he will retain his target price of NOK85, which was recently revised up on DnB NOR’s increased aluminum price forecasts of $3,000 a ton for 2008–2009 and $2,750 longer term.

Earnings per share for the first quarter was at NOK0.90 from NOK4.50 a year ago, while revenue fell to NOK21.53 billion versus NOK25.66 billion in the same quarter of 2007.

In its outlook, Hydro said it expects aluminum production disruptions to cut supply by around 600,000 metric tons in 2008.

"Continued cost pressures on primary production relating to higher energy and raw material prices, together with…a potential tighter market balance in 2009 and continued weak U.S. dollar are expected to support high LME price levels throughout 2008," it said.

Forecasted total demand growth for primary aluminum in 2008 is 8-9%, driven by strong Chinese growth, Hydro said.

Norsk Hydro shares closed at NOK73.20 Monday. The share has recovered from sharp losses at the beginning of 2008 when it plunged to below NOK56 amid turbulent global financial markets and related heavy losses on the Oslo stock exchange.