Norsk Hydro's net income after tax in the third quarter was NOK 1,333 million, a decline of NOK 2,563 million in compared with the third quarter of 2000, and weaker than the results in the two first quarters of the current year. Approximately half of this decline was caused by lower gains on sale of activities compared to third quarter last year. Oil activities on the Norwegian continental shelf accounted for nearly the entire operating income in the third quarter. Tax for the quarter represented therefore 76 per cent of pre-tax income.
Operating income was NOK 4,741 million, a decline from NOK 7,462 million in the third quarter of 2000. The weaker result is largely due to the 18 per cent reduction in the average oil price when measured in Norwegian kroner. In addition, there have been negative impacts on earnings of NOK 340 million, resulting from a loss on option programs in the aluminium market, and of NOK 261 million representing costs in connection with the write-down of the Porsgrunn magnesium plant.
Earnings per share were NOK 5.20 in the third quarter compared with NOK 14.90 in the same quarter last year, and NOK 26.10 so far this year, down from NOK 34.80 in 2000. The results in both 2000 and 2001 were influenced by earnings arising from the divestment of activities. When adjustments are made for this, earnings per share in the third quarter amount to NOK 3.60 (2000: NOK .80) and NOK 24.00 (2000: NOK 28.30) for the first three quarters.
Cash flow remains at a high level with EBITDA ( earnings before interest, tax, depreciation and amortization) in the quarter at NOK 9,131 million. Developments in the underlying operations of the company's three core areas have been mainly positive, once market conditions are taken into consideration.
- We have, in the course of the third quarter, seen weaker trends in our most important markets, further intensified by the uncertainty that has arisen following the terrorist attacks in the US. To meet the turbulence and uncertainty that have unsettled the international economy, we are carrying out continuous adjustments to capacity and costs throughout Hydro's entire operation. Our efforts here are extremely vigorous. The termination of magnesium production in Porsgrunn, which Hydro's Board has proposed to the Corporate Assembly, is, however, a consequence of permanent structural changes in the magnesium market after Chinese producers, in the course of just a few years, have captured almost 40% of the market, resulting in a steep decline in prices, states President and CEO, Eivind Reiten.
Production developments in the Oil and Energy area have been positive and important steps have been taken internationally. Hydro's role as technical assistant and its 30 per cent stake in the attractive Block 34 off Angola have now been formalized, while an agreement was signed with Conoco in the third quarter for the takeover of a 25 per cent stake in 55 licenses in the Gulf of Mexico. Light Metals, the area most adversely affected by weaker market conditions, has implemented necessary adjustments, particularly in the downstream sector. The area is now taking extensive measures to further reduce costs and increase the efficiency of the organization. Hydro Agri has more than achieved its "Agri Turnaround" goals, and has by
virtue of this program created a strong platform as the leading global plant nutrition company.
- We now have considerable latitude for action, having experienced two years of positive market conditions and extremely high oil prices. We have achieved a much stronger financial position, greater cost efficiency and improved market positions. With considerable cash reserves and a historically low debt ratio, we are well equipped to meet aggressively the challenges and opportunities we now see ahead. However, this latitude for action will in no way lead to reducing our targeted return on investment. It is our clear ambition to keep ahead and do what is necessary to improve profitability and develop the company, even in what may prove to be difficult times, states Eivind Reiten.
The full press release with tables is available on the following link:
