The aluminum producer is writing down values in Brazil and Australia.
Hilde M. Aasheim, Hydro’s CEO. Photo: Kamran Jebreili / APPPublished:
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“Challenging market conditions for alumina and uncertainty related to Australian power prices” mean that Hydro will report total write-downs of around NOK 5.9 billion in the result for the fourth quarter. The company writes that in a stock exchange announcement Thursday.
Hydro will write down values within the aluminum and bauxite operations in Brazil and Australia.
The write-downs relate, among other things, to an alumina refinery and a bauxite mine in Brazil, and an aluminum plant in Australia.
– In the short and medium term, we see challenging alumina markets and weak cash flow generation in B&A. It comes from market volatility in times of geopolitical unrest, and affects the current valuation of the assets, says CEO Hilde Merete Aasheim in the message.
Here, Hydro makes the write-downs
- Goodwill i Bauxite & Alumina (B&A), Brasil
- Buildings, machinery and equipment in the Alunorte alumina refinery and the Paragominas bauxite mine
- Deferred tax benefit in Alunorte
- Buildings, machinery and equipment related to the Tomago aluminum plant, Australia
Sea view
I believe in a weaker market longer
The majority of write-downs relate to Brazil.
NOK 3.8 billion of the estimated losses are directly linked to the aluminum and bauxite operations in the country. NOK 1.4 billion in write-downs is linked to the costing of a deferred tax benefit, due to greater uncertainty as to whether this will be able to be used as a deduction in the future.
Regarding operations in Brazil, Hydro writes that “weaker alumina market, with lower margins and higher fixed costs, is expected to last for a longer period than was assumed when the unit was tested for possible impairment at the end of 2022”.
Aluminaraffineriet Alunorte ligger in Barcarena nord in Brazil. Photo: RICARDO MORAES / Reuters
In Australia, it is “the uncertainty linked to future electricity price agreements in combination with a weaker aluminum market” that is behind the write-downs. The estimated loss is approximately NOK 0.6 billion.
Today’s electricity price agreement for the aluminum plant, in which Hydro has a 12.4 per cent stake, expires in 2028.
The company emphasizes that it will not reduce the dividend for 2023, as “the write-downs are considered an adjustment item in Hydro’s alternative profit target, adjusted profit”.
– In the longer term, we expect an increasing share of earnings from greener products in B&A, as we reduce the carbon emissions from our operations while at the same time strengthening our greener product portfolio and being able to sell our products at a premium. These expected revenues are not included in the valuation for impairment testing, in line with the accounting rules, says Aasheim.
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2023-12-21 07:00:44
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