Hydro pares down value of its extrusion business unit

Norway-based Hydro has reported what it calls underlying earnings before interest and taxes (EBIT) of  $103.6 million in the second quarter of 2020, an 8.5 percent increase compared with $95.5 million in earnings for the same quarter in 2019. However, that figure does not include the impact of a $163 million “impairment charge” made to the company’s aluminum extrusion business unit.

The firm cites the ramp-up of its Alunorte alumina refinery in Brazil, plus reduced costs there, as having “contributed positively to the second-quarter results.” The firm adds, “These positive elements were partly offset by reduced realized alumina and aluminum prices in addition to reduced downstream volumes.”

Norsk produces hydro energy in Norway and primary aluminum there and in Brazil and operates scrap-fed aluminum extrusion plants in Europe and other parts of the world.

The global fall in demand and government-imposed restrictions directly affected some operations at Hydro, the firm says. “Extruded Solutions, Rolled Products and recycling facilities were impacted the most, with capacity utilization starting to improve toward the end of the quarter. Extruded Solutions and Rolled Products are operating at reduced capacity utilization. Metal Markets recycling facilities were operating under a combination of full curtailments or reduced capacity utilization during the quarter, but were largely back to normal operations by the end of the quarter.”

Extruded Solutions experienced “an impairment” or loss of 1.5 billion Norwegian krone ($163.7 million) in the second quarter, according to Hydro. The firm cited “weaker growth expectations in key market segments driven by the negative macroeconomic effects of COVID-19.”

“We are maneuvering through a very demanding period, and I’m pleased by our ability to protect people and operations, keeping the wheels turning while preserving cash,” says President and CEO Hilde Merete Aasheim. “At the same time, we are positioning the company for the future.”

She continues, “We aim to strengthen Hydro’s position as a leading sustainable industrial company, through our low-carbon aluminum, represented by Hydro Circal and Hydro Reduxa. We will also aim to grow and diversify our portfolio where Hydro’s capabilities match the megatrends, such as recycling, renewable energy and batteries.”

The company earlier in 2020 referred to recycled-content Circal aluminum as “currently one of Hydro’s fastest-growing segments.” Reduxa is what Hydro calls primary aluminum it makes that it considers to be low-carbon.