Strong results for Hydro in 2004

Oslo (2005-02-15): 

 

	Fourth quarter			Year
	2004	2004	2003	2004	2004	2003
Million, except per share data	NOK	EUR 2)	NOK	NOK	EUR 2)	NOK
Operating revenues	39,049	4,744	34,205	155,425	18,883	133,761
Operating income	6,234	757	6,366	31,847	3,868	21,625
Non-consolidated investees	89	11	133	628	76	620
Financial income (expense), net	900	110	358	136	17	154
Other income (loss), net	59	7	489	169	21	(1,253)
Income from continuing operations before tax and minority interest	7,282	885	7,346	32,780	3,982	21,146
Income tax expense	(3,723)	(453)	(4,363)	(21,197)	(2,575)	(12,922)
Minority interest	79	10	8	(106)	(13)	151
Income from continuing operations	3,638	442	2,991	11,477	1,394	8,375
Income from discontinued operations	-	-	774	1,083	132	2,312
Income before cumulative effect of change in accounting principle	3,638	442	3,765	12,560	1,526	10,687
Cumulative effect of change in accounting principle	-	-	-	-	-	281
Net income	3,638	442	3,765	12,560	1,526	10,968
Basic and diluted earnings per share from continuing operations (in NOK and Euro) 1) 3)	14.40	1.75	11.60	45.10	5.48	32.50
Basic and diluted earnings per share before change in accounting principle (in NOK and Euro) 3)	14.40	1.75	14.70	49.40	6.00	41.50
Financial data
Investments - million	6 322	768	4 800	19 464	2 365	17 712
Adjusted net interest-bearing debt/equity 4)	0.11	0.11	0.38	0.11	0.11	0.38
1) Earnings per share from continuing operations before cumulative effect of change in accounting principle, basic and diluted.
2) Presentation in Euro is a convenience translation based on the exchange rate at 31 Desember 2004, which was 8.2307.
3) Basic earnings per share are computed using the weighted average number of ordinary shares outstanding. There were no diluting elements.
4) Adjusted net interest-bearing debt divided by shareholders' equity plus minority interest, adjusted for unfunded pension obligation (after tax) and present value of future obligations on operating leases

Hydro's income from continuing operations in 2004 was NOK 11,477 million (NOK 45.10 per share), compared with NOK 8,375 million (NOK 32.50 per share) for 2003.

On 24 March 2004, Hydro's agri business was transferred to Yara International ASA in a demerger transaction. Results of the transferred operations relating to periods prior to the demerger are reported under "Income from discontinued operations". The following discussion excludes those activities.

 

Strong operating results reflected exceptionally high oil prices on top of an 8 percent increase in oil and gas production for 2004. Volume increases made possible by expanded aluminium production capacity together with strengthening metal prices also contributed to the results. However, the substantial decline in the US dollar weakened the competitiveness of the Company's European aluminium operations. Increasing energy prices, combined with the decline of the US dollar, led to a write down of Hydro's German smelters by approximately NOK 1.5 billion after tax in December of 2004. 

Income from continuing operations for the fourth quarter of 2004 amounted to NOK 3,638 million (NOK 14.40 per share) compared with NOK 2,991 million (NOK 11.60 per share) in the fourth quarter of 2003. Operating income for the fourth quarter was NOK 6,234 million compared to NOK 6,366 million in the fourth quarter of 2003. 

 

The Board proposes to the Annual General Assembly of shareholders a dividend of NOK 20.00 per share for 2004 compared with NOK 11.00 per share for 2003.

 

"As a result of good market conditions and significant operational improvements throughout 2004,  Hydro enters the company's 100th. year with a solid financial position. Important highlights  for 2004  include the demerger of the agri business, ambitious business development in our remaining core business areas and the implementation of necessary restructuring in the aluminium activities. Value creation  has been strong, and it is a great pleasure to  announce an extraordinary high dividend for our shareholders in our centennial year," said President and CEO , Eivind Reiten.

 

"The expansion of the aluminium plant in Sunndal in Norway has been completed and the Ormen Lange development is on track and on budget. I am proud to see that Hydro's organization is recognized  for good project management and reliable project execution. Our intention is to make the development of a world class aluminium metal plant in Qatar our next large project," says Reiten. 

 

"Hydro is well positioned for continued profitable growth. Priorities going forward will include adding new oil and gas resources to our portfolio, continued improvements of our operations in aluminium to improve our competitive position and continuous research and innovation to add value throughout all our business activity," said President and CEO, Eivind Reiten.   ¨

Operating results for Oil & Energy reflected continued high oil prices during the quarter. The averaged realized oil price was US dollar 41.8 per barrel in the fourth quarter of 2004, an increase of 44 percent compared to the fourth quarter of the previous year. Measured in Norwegian kroner, the average realized price increased 31 percent for the quarter. For the year as a whole, oil and gas production reached record levels averaging 572,000 barrels of oil equivalents (boe) per day, compared with 530,000 boe per day in 2003. Oil and gas production declined slightly for the quarter averaging 591,000 boe per day during the fourth quarter compared to 596,000 boe per day in the fourth quarter of the previous year .

 

Unscheduled shutdowns of the partner operated fields Snorre and Vigdis on the Norwegian Continental Shelf  (NCS) and the Terra Nova field in Canada resulted in a total production loss of approximately 20,000 boe per day for the quarter. Operating income for Energy and Oil Marketing increased in the fourth quarter primarily as a result of unrealized gains relating to the valuation of gas purchase and sales contracts for future delivery. Operating income for Energy and Oil Marketing for the whole of 2004 was relatively unchanged from the previous year. Development activities relating to the Ormen Lange gas field are proceeding according to plan and the project was 20 percent complete at the end of 2004. Aluminium incurred an operating loss of NOK 1,951 million for the quarter as a result of the write down relating to the Company's primary aluminium plants in Germany. An amount of NOK 2,042 million was included in operating income relating to the write down while NOK 268 million was included in results for non-consolidated investees. The operating loss for the quarter also included NOK 500 million of costs relating to manning reductions in Norway. .

 

Aluminium operating results were positively influenced by volume increases combined with strengthening aluminium prices. Hydro's average realized aluminium prices increased to US dollar 1,691 per tonne in the fourth quarter, roughly 14 percent compared to the fourth quarter of 2003. However, measured in Norwegian kroner, realized prices increased by about six percent. For 2004 as a whole, Hydro realized average aluminium prices of US dollar 1,638 per tonne compared to US dollar 1,440 per tonne in the previous year. Average realized aluminium prices measured in Norwegian kroner increased 9.5 percent for the year as a whole. Upstream volumes increased mainly as a result of new capacity and improved capacity utilization.  Progress continued on the implementation of the Aluimprover cost-reduction program. The program is expected to be completed in the first quarter of 2005 and result in annual cost reductions of NOK 350 million - 400 million. The total estimated cost of the program has been reduced by NOK 200 million to NOK 600 million. In December, Hydro signed a "Heads of Agreement" with Qatar Petroleum to evaluate the development of one of the world's largest aluminium plants in Qatar.  

 

Cash flow from operations in 2004 was NOK 27.7 billion, compared to NOK 22.8 billion in 2003.

 

Investments amounted to NOK 19.5 billion for the whole of 2004. Around half of the amount invested related to oil and gas operations. The amount contains certain items that have no cash effect in the near term. The most significant of these include NOK 1,275 million relating to the consolidation of the aluminium producer Slovalco and NOK 922 million relating to future assets retirement obligations for oil and gas installations.  

 

The provision for current and deferred taxes for 2004 was NOK 21,197 million, approximately 65 percent of pre-tax income. In the fourth quarter of 2004, Norwegian tax legislation was amended to eliminate tax on the sale of shares in companies registered within countries in the European Economic Area. As a result, Hydro has reversed deferred tax liabilities relating to such share holdings amounting to approximately NOK 900 million, reducing the average tax rate by around 2.5 percentage points for 2004.

 

NOK million	Operating income (loss)	Non-cons. inv., Interest & selected fin.items	Other income	Depreciation and amortization	Adjusted EBITDA
Hydro Oil & Energy	8,621	12	59	2,891	11,583
Hydro Aluminium	(1,951)	91	-	3,377	1,517
Other Activities	(91)	109	-	146	164
Corporate and Eliminations	(345)	289	-	3	(53)
Total	6,234	501	59	6,417	13,211

NOK million	Operating income (loss)	Non-cons. inv., Interest & selected fin.items	Other income	Depreciation and amortization	Adjusted EBITDA
Hydro Oil & Energy	31,144	157	59	10,418	41,778
Hydro Aluminium	1,805	505	-	6,346	8,656
Other Activities	312	408	110	533	1,363
Corporate and Eliminations	(1,414)	721	-	13	(680)
Total	31,847	1,791	169	17,310	51,117

Oil prices are expected to remain high for the coming months. Price developments underlying future valuations of gas and power contracts are expected to remain volatile. Snorre and Vigdis on the NCS and the Terra Nova field in Canada have resumed production and are expected to contribute to the Company's production target for 2005 of 575,000 boe per day. Exploration activities will increase in the coming months.

In the beginning of February 2005, primary aluminium (three-month LME) was trading at roughly US dollar 1,800 per tonne. Total Western world shipments for 2004 are estimated at 22 million tonnes. Growth rates of 3.5-4 percent are expected in 2005. Western world production is expected to increase by about 700,000 tonnes in the coming year, while Chinese exports of primary aluminum are expected to slow. Continued moderate volume growth is expected in the European downstream markets. Margins for standardized products are expected to remain under pressure while margins for specialized products are expected to remain relatively firm. Costs relating to the Aluimprover project are expected to impact the first quarter of 2005 by approximately NOK 170 million.

 

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Certain statements in this press release are or may constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not in the nature of historical facts may be deemed to be forward-looking statements and may contain identifying words such as "believes", "anticipates", "plans", "expects" and similar expressions. These forward looking statements are based on Hydro's current expectations, assumptions, estimates and projections about the company and the industries in which it engages in business. All forward-looking statements involve risks and uncertainties. For a detailed description of factors that could cause Hydro's actual results to differ materially from those expressed in or implied by such statements, please refer to its annual report on Form 20-F for the year-ended December 31, 2003 and subsequent filings on Form 6-K with the U.S. Securities and Exchange Commission. With respect to each non-GAAP financial measure Hydro uses in connection with its financial reporting and other public communications, Hydro provides a presentation of what Hydro believes to be the most directly comparable GAAP financial measure and a reconciliation between the non-GAAP and GAAP measures.  This information can be found in Hydro's earnings press releases, quarterly reports and other written communications, all of which have been posted to Hydro's website (http://www.hydro.com/).

 

Contact Telephone Cellular E-mail

Idar Eikrem (+47) 22 53 32 73 (+47) 95 02 83 63 Idar.Eikrem@hydro.com

Tor Steinum (+47) 22 53 27 31 (+47) 95 08 39 33 Tor.Steinum@hydro.com

Cecilie Ditlev-Simonsen (+47) 22 53 20 97 (+47) 41 55 92 50 Cecilie.Ditlev-Simonsen@hydro.com

 

Norsk Hydro ASA
Drammensveien 264
N-0240 Oslo
Norway
Telephone: (+47) 22 53 81 00
Fax: (+47) 22 53 27 25
www.hydro.com