Third quarter 2002: "Unsatisfactory"
Norsk Hydro's net income for the third quarter 2002 was NOK 513 million (NOK 2.00 per share), compared to NOK 1,333 million (NOK 5.20 per share) for the corresponding period of the prior year. The third quarter operating income was NOK 3,945 million, compared to NOK 4,741 million in the same period last year.
09:00The weaker result is largely explained by high exploration costs in the period. Exploration costs in the third quarter amounted to NOK 1.3 billion, compared with NOK 295 million in the same period last year, just over NOK 1.1 billion of which were connected to international activity.
Earnings in all business areas were negatively impacted by a weaker US dollar and a stronger Norwegian krone. High oil prices and increased production bolstered the result, but foreign exchange effects give lower oil and gas prices measured in Norwegian krone. Agri maintains good earnings despite continued low fertilizer prices, while Aluminium's results are negatively influenced by weaker markets.
After three quarters, Hydro's net income is NOK 5,485 million (21.30 per share), compared to NOK 6,748 million (26.10 per share) for the corresponding period of last year.
"All in all unsatisfactory"
"All in all the results we present for the third quarter are unsatisfactory," says President and CEO Eivind Reiten.
"We are pleased to report higher oil and gas production, but the results of our international exploration activities are disappointing. The result is affected by the weak market for all areas of our aluminium activities. The integration and improvement program in Aluminium is proceeding in line with our plans, and will be further reinforced so that earnings can withstand difficult market conditions. The positive development in Agri continued with particularly strong growth outside Europe during this quarter. I am also pleased that we recovered our strong financial position in a short time after the purchase of VAW and SDFI interests.
"We expect oil and gas production to show a continued positive development. Developments in the markets for our industrial products, especially within aluminium, are, however uncertain," says Reiten.
Oil and Energy
Operating income for Oil and Energy in the third quarter was NOK 3,170 million compared to NOK 4,622 million in the same period last year.
Hydro's production of oil and gas in the third quarter averaged 452,000 barrels of oil equivalents (boe) per day, 30,000 barrels higher than last year. Production in the fourth quarter is expected to attain roughly 500,000 boe per day, and Hydro has adjusted its forecast average production for 2002 to 470,000 boe per day
Operating income for Aluminium in the third quarter was NOK 412 million, affected by weak markets for processed products and continued lower metal prices this quarter.
Operating income for Agri in the third quarter was NOK 436 million, compared to NOK 207 million in the same period last year. The result has been negatively influenced by continued low international fertilizer prices, while further reductions in fixed costs and greater sales volumes outside Europe have made a positive contribution.
"Unusually high tax rate"
The provision for current and deferred taxes for the third quarter amounted to NOK 2,701 million, approximately 85 percent of pre-tax income. The unusually high rate of taxation is due to the combination of major international exploration costs and high marginal tax on earnings from the Norwegian continental shelf that represents a considerable portion of Hydro's pre-tax income.