Third quarter 2003: "Satisfactory"
Hydro's net income was NOK 2,397 million in the third quarter this year, compared with NOK 513 million in the same period last year. Key factors are a strong result from Oil and Energy, challenging markets offset by a fast pace of improvement work in Aluminium and a solid result from Agri.
Net income per share was NOK 9.30 in the third quarter, compared with NOK 2 in the year before.
Hydro's operating income in the third quarter was NOK 5,730 million, an increase of 45 percent in relation to the same period last year. The improvement is mainly due to higher oil and gas production, and lower oil and gas exploration costs.
At the end of the first three quarters, but before new accounting principles are applied, the total net income was NOK 6,922 million, compared to NOK 5,485 million in the equivalent period last year.
The result per share for the three quarters amounted to NOK 26.80, compared to NOK 21.30 in the same period the year before.
"Strong production growth and good cost control"
"It is particularly pleasing to note that Hydro's good results in Oil and Energy are based on strong production growth and good cost control, as well as high oil and gas prices," says President and CEO Eivind Reiten.
"The start-up of the Grane and Fram Vest fields on schedule and well below budget demonstrates our ability to manage large, complex development projects. The organization's success in maintaining a high level of production has contributed to an upward adjustment of the estimate for this year's oil and gas production from 510,000 to 520,000 barrels oil equivalents per day.
"The aluminium results remain weak, but the continued high pace of our improvement programs is very positive. Our decision to participate in the further expansion of the alumina refinery, Alunorte, in Brazil represents another step to secure a competitive source of raw materials for our aluminium operations," says Reiten.
"Developments in the fertilizer markets are good, and Agri stands as a competitive and well-run fertilizer company as it prepares to spin off as a separate listed company," adds Reiten.
Increased production of oil and gas
Hydro's production of oil and gas averaged 489,000 barrels oil equivalents per day in the third quarter, an increase of eight percent in relation to the corresponding period last year.
Oil prices remained at the same level as in the third quarter last year in terms of Norwegian kroner, whereas the price of natural gas was 17 percent higher.
Hydro forecasts considerably higher production in the fourth quarter. Average production for this year will be approximately 520,000 barrels oil equivalents per day, and 560,000 barrels oil equivalents per day in the fourth quarter.
Exploration costs of NOK 303 million were charged to expenses in the third quarter.
Hydro signed an agreement on the sale of its share in the oil refinery Scanraff in Sweden in the third quarter. The agreement is expected to be concluded in the fourth quarter after approval by the authorities and result in a gain on disposal of NOK 600 million.
The Aluminium improvement plan is on schedule
Aluminium's operating income in the third quarter was somewhat higher than in the equivalent period last year. The markets for semi-finished products remains weak, but metal prices in terms of the dollar are somewhat higher. Prices measured in Norwegian kroner, however, are slightly lower.
Hydro Aluminium's cost improvement programs continue and are on target, according to Hydro's quarterly report.
Improved fertilizer markets for Agri
Most of the fertilizer markets have improved, but this has been partly counteracted by higher energy prices that increase raw material costs. Sales volumes are stable, when adjusted for the effects of disposals since the equivalent period last year.
The board's decision in the second quarter to prepare for a separate listing of the Hydro Agri operation has been followed up by extensive work to establish the best possible decision basis for selecting the type of transaction and the practical implementation. External advisors have been engaged in this process, which is on schedule, and aims for Hydro Agri to be listed as a separate company during the course of the first half of 2004.
Tax rate 66 percent in the third quarter
At the end of the first three quarters of the year, the provision for taxes is NOK 9,301 million, which is equivalent to 58 percent of the pre-tax result. The tax provision has been strongly influenced by amendments to the Norwegian tax regulations relating to the future costs of removing oil and gas installations from the Norwegian continental shelf. The tax provison for the third quarter also includes a positive non-recurring effect of NOK 139 million in connection with a tax case in Norway.
Adjusted for these effects, the tax expense amounted to 65 percent of pre-tax income at the end of the first three quarters, and 66 percent for the third quarter of 2003.
Divestments for NOK 9 billion so far
Investments in the third quarter of 2003 were NOK 4,680 million, around half of which were investments in the oil and gas operation.
Cash flow from operations at the end the first three quarters of the year was NOK 23.2 million (NOK 19.8 million). The increase in relation to last year is mainly due to higher earnings.
Hydro aims to sell operations for NOK 10 billion during the course of 2002 and 2003. So far disposals have been completed or agreed for around NOK 9 billion.