Norsk Hydro: Third quarter 2022 - Well positioned in challenging markets

Oslo, NORWAY


Hydro's adjusted EBITDA for the third quarter of 2022 was NOK 9,721 million,
compared with NOK 7,219 million for the same quarter last year, resulting in a
12-month rolling Adjusted RoaCE of 27 percent. Higher all-in metal and alumina
prices, CO2 compensation and positive currency effects contributed positively to
earnings, but were partly offset by higher fixed and raw material costs
upstream.

  * Company wide response to challenging markets, improvement program on track
  * Continued strong results in Aluminium Metal, Metal Markets and Extrusions
  * Revised CO2 compensation scheme in Norway
  * Executing on 2025 strategy, higher sales of greener aluminium products
  * NOK 1.45 per share extra dividend distributed and NOK 2 billion share
    buyback program initiated

"Hydro is delivering strong financial results, while continuing to make good
progress on our strategic agenda. This, combined with our long-term stable
access to raw materials and energy, forms a solid foundation to maneuver in a
more volatile economic environment," says Hilde Merete Aasheim, President and
CEO of Hydro.

Health and safety is Hydro's top priority for both employees and the communities
where Hydro operates. An injury free environment is the ultimate goal and Hydro
is continuously working to avoid incidents. In 2022, Hydro has been steadily
improving overall safety performance, reducing total recordable incidents by 20
percent since the end of 2021.

The war in Ukraine, high energy prices, and concerns around inflation and
increasing interest rates continue to add uncertainty and impact growth
forecasts for 2022 and 2023. External sources have downgraded estimated global
economic growth in 2022 to around 2 percent and various key markets are
reporting their highest inflation rates for the past 20 years.  In the extrusion
market, the demand for the industrial, and the building and construction
segments have weakened into the third quarter, while growth in automotive demand
is improving slightly as supply chain issues are easing. The renewable energy
sector is also driving demand for aluminium.

"Executing on our improvement program is essential to ensure robustness across
our value chain as we face a more unpredictable market environment. We have
continued these efforts at full pace this quarter and estimate to deliver on our
2022 target of NOK 7 billion," says Aasheim.

The three-month aluminium price decreased during the third quarter of 2022, as
fears of recession, weak global demand in combination with strong production and
export growth in China, led to pressure on prices.
Uncertainty remains for some high cost aluminium production facilities as high
global energy prices are weakening demand and putting pressure on smelter
margins. As a result, a number of producers in Europe and the US have curtailed
parts of their production, resulting in around 50 percent of European
continental aluminium industry currently being curtailed. For 2022, external
sources are estimating a global deficit of primary aluminium between 0.4 million
mt and 0.7 million mt.

In the third quarter, Nordic power prices increased further to a new record
during the quarter due to continued weak hydrology and exposure to record high
continental power prices. In Southwestern Norway (NO2), the reservoirs were only
53 percent full at the end of September, 30 percentage points below the normal
level. Hydrology in NO2 improved in early October, but reservoir levels are
still below normal. The Norwegian transmission system operator, Statnett, still
maintains that securing energy in Southern Norway may be a concern during the
winter.  Continental power prices have increased primarily due to higher gas
prices following concerns about energy security for the winter.

In these volatile markets, Hydro continues to address challenges and mitigate
risks, while also positioning the company according to the Hydro 2025 strategy.
Hydro has a strong starting point, with competitive long-term energy contracts
for the majority of the aluminum smelters, and strategic integrated margin
aluminium hedges for around 20-25 percent of the portfolio in 2023 and 2024.
Amid current challenging markets, Hydro has responded by adjusting capacity to
the market demand, and continues its efforts to ensure robustness by focusing on
reducing costs and improving operational excellence. Hydro's 2025 improvement
program is estimated to deliver on its 2022 target of NOK 7.0 billion, and new
improvement initiatives are being identified across the portfolio.

In response to reduced market demand for aluminium billets in Europe, Hydro
started a partial curtailment of the Norwegian aluminium smelters, Hydro Husnes
and Hydro Karmøy, by 110,000 - 130,000 tonnes of primary aluminium in the third
quarter. The curtailment will lead to a reduction in power consumption amounting
to a total of around 170-200 MW once curtailment is in full effect, expected by
end of 2022.

In response to adverse framework conditions and high electricity prices, Hydro
also decided to close primary production at its majority owned Slovalco
aluminium facility in Slovakia during the third quarter. The casthouse in
Slovalco continues its recycling operation, serving customers in the region with
75,000 tonnes of recycled aluminium annually.

"While responding to the short-term issues, we are also dedicated to executing
on our long-term strategic ambitions. This quarter we have progressed our target
of doubling recycling of post-consumer scrap in addition to maturing of new
renewable energy projects," says Aasheim.

While addressing short-term challenges, Hydro has also made progress on the
strategy during the quarter, both strengthening its position in low-carbon
aluminium and growing in new energy areas. Greener aluminium with a lower carbon
footprint is a key enabler for the green transition, and in the third quarter,
Hydro continued to see higher demand for Hydro CIRCAL and Hydro REDUXA. In the
quarter, 2022 sales were 45 percent higher year on year, supporting Hydro's
ambition to double sales of greener products by 2025. Extrusions remains a key
growth area in Hydro's 2025 strategy, and in the third quarter, Hydro made the
decision to invest in 12,000 tonnes of additional capacity at its extrusions
plant in Rackwitz, Germany.

Progress was also made on greenfield recycling projects in the quarter,
supporting the strategic ambition to double recycling of post-consumer scrap by
2025. In the US, Hydro Extrusions decided to invest NOK 500 million to expand
recycling capabilities at its Cressona plant in Pennsylvania, including remelt
and extrusion billet casting. The project is expected to be fully operational in
late 2024, and will expand Cressona's casting capacity by more than 50,000
tonnes.  In Europe, construction started for the new aluminium recycling plant
in Szekesfehervar, Hungary. The new facility will have an annual capacity of
90,000 tonnes and is expected to start production in the first quarter of 2024.

In the second quarter 2022, Hydro announced a tender offer for 100 percent of
the shares of the Polish recycler Alumetal S.A.  On October 6, 2022, the
European Commission decided to open a Phase II review of the proposed
acquisition of Alumetal S. A. Hydro remains committed to the transaction and
will continue to work closely with the Commission over the coming months on the
Phase II review.

Hydro also continues to mature and develop business opportunities in the new
energy areas. Hydro Rein continues to develop renewable projects in Brazil to
supply Hydro's bauxite and alumina operations with renewable power. Given the
uncertain capital markets, alternatives to an initial public offering are being
considered to raise the capital required for further growth.

In the battery area, Hydro's acquisition of 30 percent of the shares in the
sustainable battery materials company, Vianode, closed in the third quarter.
Shortly after, Vianode announced an investment of NOK 2 billion in a battery
materials plant at Herøya, Norway, targeting production of anode graphite for
about 20,000 electric vehicles (EVs) per year by 2024.

Hydro's sustainability ambitions are key drivers for future competitive
positioning. An important enabler to meet the climate ambition to cut own carbon
emissions by 30 percent by 2030 and become net zero in terms of Scope 1 and 2
carbon emission by 2050 or earlier, is the decarbonization of the Brazilian
alumina refinery Alunorte. The Alunorte fuel switch project to replace heavy
fuel oil with natural gas is progressing according to plan and is expected to be
finalized by the second half of 2023. In addition to lowering the carbon
emissions, the fuel switch project will deliver a significant reduction in raw
material costs at current market prices.

Hydro's social ambition to improve the lives and livelihoods where the company
operates is progressing. In the third quarter, Hydro Alunorte completed
construction and handed over The School of Work and Production of Pará to the
municipality of Barcarena. The school will have a capacity of approximately
1,000 students, contributing to education and qualification of the workforce in
the communities surrounding Barcarena.

On September 28, as part of the national budget, the Norwegian government
proposed an additional resource rent tax and a new high price contribution on
hydropower and wind power. The proposed increase in the resource rent tax on
hydropower from 37 to 45 percent would apply to Hydro's equity power production
and, if enacted, be applicable for the full year 2022. The increase implies an
additional resource rent tax for Hydro of approximately NOK 250 - 300 million
for 2022. Hydro's understanding is that other proposed changes in taxation of
power production would have limited effect on Hydro.

The CO2 compensation scheme for 2023 was also included in the national budget
and applies to Hydro on compensation for both purchased power and equity power
volumes used in Hydro's production of aluminium. For the budget year 2023, the
government has introduced a floor of NOK 200 per ton CO2. CO2 compensation for
2022 is expected to amount to around NOK 2.2 - 2.3 billion, paid retroactively
during 2023. In comparison, a CO2 compensation for 2021 of around NOK 1.7
billion is expected to be distributed in 2022.

Hydro's Board of Directors proposed to pay an additional shareholder
distribution for 2021, consisting of an additional cash dividend of NOK 3
billion, corresponding to NOK 1.45 per share, and initiation of a share buyback
program of up to NOK 2 billion. The proposal was approved in the Extraordinary
General Meeting on September 20, 2022, and the cash dividend was paid on
September 30, 2022.

The share buyback program was initiated on September 23, 2022, and covers
purchase of up to 100,000,000 shares with a maximum value of NOK 2,000 million,
inclusive of the proportional redemption of shares owned by the Norwegian State.
As of October 21, 2022, Hydro has purchased 3,318,000 own shares and owns a
total of 19,770,403 shares, corresponding to 0.96 percent of Hydro's share
capital.

Key financials

Compared to the second quarter, Hydro's adjusted EBITDA decreased from NOK
11,594 million to NOK 9,721 million in the third quarter 2022. Lower realized
all-in metal and alumina prices and seasonally lower sales volumes downstream
were partly offset by CO2 compensation and positive currency effects.

Adjusted EBITDA for the first nine months of 2022, increased compared to the
same period last year. Higher realized all-in metal and alumina prices, record
high results in Extrusions, and positive currency effects were partly offset by
higher fixed and raw material costs upstream.

Net income from continuing operations amounted to NOK 6,676 million in the third
quarter. In addition to the factors described above, net income from continuing
operations included a net foreign exchange gain of NOK 572 million, a NOK 1,243
million unrealized loss on power and raw material contracts, and a NOK 1,241
million unrealized gain on LME related contracts.

Hydro's net debt increased from NOK 1.7 billion to NOK 3.1 billion at the end of
the quarter. Net cash provided by operating activities of NOK 6 billion included
a decrease of NOK 0.6 billion in collateral requirements. Net cash used in
investment activities, excluding short term investments, amounted to NOK 3.4
billion.

Adjusted net debt increased from NOK 6.3 billion to NOK 7.8 billion, largely
driven by an increase in net debt position and decrease in pension assets,
partly offset by a decrease in collateral requirements. The collateral
requirements amounted to NOK 1.2 billion at the end of the quarter, mainly
relating to strategic and operational hedging positions.

Cautionary note
Certain statements included in this announcement contain forward-looking
information, including, without limitation, information relating to (a)
forecasts, projections and estimates, (b) statements of Hydro management
concerning plans, objectives and strategies, such as planned expansions,
investments, divestments, curtailments or other projects, (c) targeted
production volumes and costs, capacities or rates, start-up costs, cost
reductions and profit objectives, (d) various expectations about future
developments in Hydro's markets, particularly prices, supply and demand and
competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk
management, and (i) qualified statements such as "expected", "scheduled",
"targeted", "planned", "proposed", "intended" or similar.

Although we believe that the expectations reflected in such forward-looking
statements are reasonable, these forward-looking statements are based on a
number of assumptions and forecasts that, by their nature, involve risk and
uncertainty. Various factors could cause our actual results to differ materially
from those projected in a forward-looking statement or affect the extent to
which a particular projection is realized. Factors that could cause these
differences include, but are not limited to: our continued ability to reposition
and restructure our upstream and downstream businesses; changes in availability
and cost of energy and raw materials; global supply and demand for aluminium and
aluminium products; world economic growth, including rates of inflation and
industrial production; changes in the relative value of currencies and the value
of commodity contracts; trends in Hydro's key markets and competition; and
legislative, regulatory and political factors.

No assurance can be given that such expectations will prove to have been
correct. Hydro disclaims any obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

This information is subject to the disclosure requirements pursuant to Section
5-12 the Norwegian Securities Trading Act

Investor contact:
Line Haugetraa
+4741406376
Line.Haugetraa@hydro.com

Media contact:
Halvor Molland
+47 92979797
Halvor.Molland@hydro.com

Attachments



Attachments

Q3 2022 Investor presentation Q3 2022 Report