| Third quarter | 01.01-30.09 | Year | ||||||
| 2006 | 2006 | 2005 | 2006 | 2006 | 2005 | 2005 | ||
| Million, except per share data | NOK | EUR1) | NOK | NOK | EUR1) | NOK | NOK | |
| Operating revenues | 50,961 | 6,189 | 44,612 | 157,813 | 19,166 | 128,883 | 174,201 | |
| Operating income | 15,288 | 1,857 | 12,973 | 47,795 | 5,805 | 35,982 | 46,432 | |
| Non-consolidated investees | 228 | 28 | 236 | 916 | 111 | 696 | 619 | |
| Financial income (expense), net | (740) | (90) | 157 | 938 | 114 | (1,311) | (1,890) | |
| Other income (loss), net | - | - | - | - | - | 233 | 990 | |
| Income before tax and minority interest | 14,776 | 1,794 | 13,367 | 49,650 | 6,030 | 35,600 | 46,152 | |
| Income tax expense | (9,787) | (1,189) | (9,182) | (33,358) | (4,051) | (23,895) | (30,317) | |
| Minority interest | (185) | (22) | (2) | (224) | (27) | (252) | (118) | |
| Income before cumulative effect of change in accounting principles | 4,804 | 583 | 4,183 | 16,068 | 1,951 | 11,453 | 15,716 | |
| Cumulative effect of change in accounting principles | - | - | - | - | - | - | (78) | |
| Net income | 4,804 | 583 | 4,183 | 16,068 | 1,951 | 11,453 | 15,638 | |
| Basic and diluted earnings per share before change in accounting principles (in NOK and Euro) 2) 4) | 3.90 | 0.47 | 3.30 | 12.90 | 1.57 | 9.10 | 12.50 | |
| Basic and diluted earnings per share (in NOK and Euro) 2) 4) | 3.90 | 0.47 | 3.30 | 12.90 | 1.57 | 9.10 | 12.50 | |
| Financial data | ||||||||
| Investments - million | 7,955 | 966 | 4,185 | 17,200 | 2,089 | 12,208 | 41,110 | |
| Adjusted net interest-bearing debt/equity 3) | 0.11 | 0.11 | 0.04 | 0.11 | 0.11 | 0.04 | 0.31 | |
| Debt/equity ratio | 0.23 | 0.23 | 0.27 | 0.23 | 0.23 | 0.27 | 0.28 | |
| 1) Presentation in Euro is a convenience translation based on the exchange rate at 30 September 2006, which was 8.2340. | ||||||||
| 2) Basic earnings per share were computed using the weighted average number of ordinary shares outstanding. There were no diluting elements. | ||||||||
| 3) Adjusted net interest-bearing debt divided by shareholders' equity plus minority interest, adjusted for unfunded pension obligation (after tax) and present value of future obligations on operating leases. | ||||||||
| 4) Previously reported earnings per share and total number of outstanding shares have been adjusted to reflect the 5-for-1 stock split effective 10 May 2006. | ||||||||
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All comparative figures are for the corresponding period in 2005 unless otherwise stated. | ||||||||
Hydro's net income for the third quarter of 2006 was NOK 4,804 million (NOK 3.90 per share), up from NOK 4,183 million (NOK 3.30 per share) in the third quarter of 2005. Net income for the first nine months of 2006 amounted to NOK 16,068 million (NOK 12.90 per share), compared with NOK 11,453 million (NOK 9.10 per share) for the first nine months of 2005.
Operating income for the third quarter of 2006 amounted to NOK 15,288 million, compared with NOK 12,973 million in the third quarter of 2005. The improved earnings were mainly driven by continued high oil and gas prices together with higher aluminium prices. Operating income amounted to NOK 47,795 million for the first nine months of 2006, compared with NOK 35,982 million for the first nine months of 2005, an increase of 33 percent.
Net cash provided by operating activities was NOK 41.8 billion for the nine months ended 30 September 2006, compared with NOK 25.4 billion for the first nine months of 2005.
"We continue to benefit from strong market conditions, but high commodity prices are driving cost levels in both of our industries. Continued firm cost control is a top priority," says President and Chief Executive Officer Eivind Reiten.
"The completion of the Langeled pipeline was an important milestone in the third quarter, not only because it allows for increased gas exports to the United Kingdom but also because Ormen Lange and Langeled demonstrate our world-class competence, technology and project execution abilities. Based on these capabilities, we will create new business opportunities in Norway as well as internationally," Reiten said.
Operating income for Oil & Energy amounted to NOK 13,311 million for the quarter. Hydro realized an average oil price of US dollar 66.6 per barrel in the third quarter of 2006, an increase of 10 percent compared with the third quarter of 2005, and a decrease of 2 percent compared with the second quarter of 2006. Measured in Norwegian kroner, Hydro's realized oil price amounted to NOK 421 per barrel, an increase of 8 percent, compared with the third quarter of 2005 and a slight decrease compared with the second quarter of 2006. Realized gas prices increased 27 percent to NOK 1.73 per standard cubic meter (Sm3) in the third quarter of 2006, compared with the third quarter of 2005, but decreased 3 percent compared with the second quarter of 2006. Oil and gas production averaged 548,000 barrels of oil equivalents (boe) per day during the third quarter of 2006, an increase of 7,000 boe per day compared with the third quarter of 2005, and an increase of 11,000 boe per day compared with the second quarter of 2006. For the first nine months of the year, average oil and gas production increased to 565,000 boe per day, compared with 554,000 boe per day in the first nine months of 2005.
At the end of September, the Ormen Lange/Langeled project was 87 percent complete, in line with the schedule and within budget. Gas exports through the southern part of Langeled, which connects Sleipner on the Norwegian Continental Shelf (NCS) with Easington in England, began 1 October 2006 as planned. Extensive exploration activity continued during the third quarter of 2006. Hydro participated in a total of five new discoveries in the US Gulf of Mexico (GoM), Angola, Libya, and Canada.
Operating income for Hydro's total aluminium activities amounted to NOK 1,657 million for the third quarter of 2006, compared with NOK 842 million in the third quarter of 2005. The improved result primarily reflected continued high aluminium prices.
Operating income for Aluminium Metal amounted to NOK 1,854 million for the quarter, a substantial increase from NOK 447 million in the third quarter of 2005. Increased aluminium prices continued to have a positive impact on operating results. Hydro's realized aluminium price amounted to US dollar 2,462 per metric ton (mt) in the third quarter of 2006, an increase of 39 percent compared with the third quarter of 2005 and 4 percent higher than the second quarter of 2006. Measured in Norwegian kroner, the realized aluminium price increased by 35 percent, compared with the third quarter of 2005. Hydro's primary aluminium production, including production from partly owned companies, amounted to 449,000 mt in the third quarter, declining about 3 percent compared with the third quarter of 2005. Reduced production due to the plant closures in Norway and Germany were partly offset by increased production from the Alouette expansion in Canada.
Aluminium Products incurred an operating loss amounting to NOK 192 million for the quarter, compared with operating income of NOK 371 million in the third quarter of 2005. Hydro's European extrusion operations delivered a strong performance for the quarter with a substantial increase in volumes. Volumes developed positively for all other business sectors as well. However, significant unrealized losses on the ongoing LME operational hedge program amounting to NOK 286 million together with higher energy costs, negative metal effects of NOK 73 million and rationalization and impairment costs amounting to NOK 78 million, had a substantial negative impact on the overall results for the quarter. Overall margin developments were negative, despite positive developments in the Extrusion sector, reflecting continued challenging market conditions and strong competition, particularly within the automotive sector.
Income tax expense for the first nine months of 2006 amounted to NOK 33,358 million, compared with NOK 23,895 million for the first nine months of 2005, representing 67 percent of income before tax for both periods.
Investments amounted to NOK 8.0 billion for the quarter. Roughly 89 percent of the amount invested was related to oil and gas operations.
Third quarter 2006
| NOK million | Operating income (loss) |
Non-cons. inv., Interest & selected fin.items |
Other income |
Depreciation and amortization |
Adjusted EBITDA | |
| Oil & Energy | 13,311 | 77 | - | 3,314 | 16,702 | |
| Aluminium Metal | 1,854 | 442 | - | 410 | 2,706 | |
| Aluminium Products | (192) | (222) | - | 721 | 308 | |
| Other activities | 235 | 76 | - | 113 | 423 | |
| Corporate and eliminations | 80 | 295 | - | 2 | 376 | |
| Total | 15,288 | 667 | - | 4,560 | 20,515 | |
01.01-30.09.2006
| NOK million | Operating income (loss) |
Non-cons. inv., Interest & selected fin.items |
Other income |
Depreciation and amortization |
Adjusted EBITDA | |
| Oil & Energy | 40,606 | 284 | - | 9,535 | 50,424 | |
| Aluminium Metal | 5,513 | 1,015 | - | 1,253 | 7,781 | |
| Aluminium Products | 560 | (171) | - | 1,724 | 2,113 | |
| Other activities | 570 | 194 | - | 331 | 1,095 | |
| Corporate and eliminations | 546 | 664 | - | (3) | 1,207 | |
| Total | 47,795 | 1,986 | - | 12,840 | 62,621 | |
Oil & Energy
Oil prices are expected to remain at a high level for the remainder of 2006. Hydro has further revised its production estimate for 2006 from 585,000 boe per day to 570,000 boe per day. About two-thirds of the reduction relates to production from Hydro's Norwegian portfolio, mainly resulting from delayed production build-up from the Kristin field and lower than expected gas production from the Kvitebjørn and Troll fields. Lower than expected production from Hydro's international portfolio, mainly related to the Terra Nova field in Canada and fields in the GoM, also contributed to the revised estimate. Exploration activity is expected to remain high throughout 2006.
Oil prices are expected to remain at a high level for the remainder of 2006. Hydro has further revised its production estimate for 2006 from 585,000 boe per day to 570,000 boe per day. About two-thirds of the reduction relates to production from Hydro's Norwegian portfolio, mainly resulting from delayed production build-up from the Kristin field and lower than expected gas production from the Kvitebjørn and Troll fields. Lower than expected production from Hydro's international portfolio, mainly related to the Terra Nova field in Canada and fields in the GoM, also contributed to the revised estimate. Exploration activity is expected to remain high throughout 2006.
Aluminium
The general economic outlook for the fourth quarter of 2006 remains positive, but there are signs of slowing growth in the United States. Global consumption and production of primary aluminium are each expected to increase in 2006 by approximately 5 and 6 percent, respectively. The market for primary metal is expected to remain fairly balanced with a slight shift toward surplus in 2007. The main uncertainties continue to relate to developments in China and in alumina and energy prices.
The general economic outlook for the fourth quarter of 2006 remains positive, but there are signs of slowing growth in the United States. Global consumption and production of primary aluminium are each expected to increase in 2006 by approximately 5 and 6 percent, respectively. The market for primary metal is expected to remain fairly balanced with a slight shift toward surplus in 2007. The main uncertainties continue to relate to developments in China and in alumina and energy prices.
Market volume developments are expected to remain positive but with reduced growth within the rolled products and extrusion sectors, reflecting expected developments in overall industrial production.
During 2006 the global magnesium market has continued to weaken from an already poor level in 2005. Competition from Chinese magnesium producers has resulted in an oversupply of magnesium on the world market, driving prices down. Hydro sees limited potential for an improvement in this market and will take further measures to reduce its exposure in this area. Closure of the magnesium plant in Becancour, Canada is under consideration.
*****
Certain statements contained in this announcement constitute "forward-looking information" within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. In order to utilize the "safe harbors" within these provisions, Hydro is providing the following cautionary statement.
Certain statements included within this announcement contain (and oral communications made by or on behalf of Hydro may contain) forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management's plans, objectives and strategies for Hydro, such as planned expansions, investments, drilling activity 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, as well as (i) statements preceded by "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar statements.
Although Hydro believes 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 Hydro's 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, world economic growth and other economic indicators, including rates of inflation and industrial production, trends in Hydro's key markets, and global oil and gas and aluminium supply and demand conditions. For a detailed description of factors that could cause Hydro's results to differ materially from those expressed or implied by such statements, please refer to the risk factors specified under "Risk, Regulation and Other Information - Risk Factors" on page 92 of Hydro's Annual Report and Form 20-F 2005 and subsequent filings on Form 6-K with the US Securities and Exchange Commission.
Certain statements contained in this announcement constitute "forward-looking information" within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. In order to utilize the "safe harbors" within these provisions, Hydro is providing the following cautionary statement.
Certain statements included within this announcement contain (and oral communications made by or on behalf of Hydro may contain) forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management's plans, objectives and strategies for Hydro, such as planned expansions, investments, drilling activity 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, as well as (i) statements preceded by "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar statements.
Although Hydro believes 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 Hydro's 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, world economic growth and other economic indicators, including rates of inflation and industrial production, trends in Hydro's key markets, and global oil and gas and aluminium supply and demand conditions. For a detailed description of factors that could cause Hydro's results to differ materially from those expressed or implied by such statements, please refer to the risk factors specified under "Risk, Regulation and Other Information - Risk Factors" on page 92 of Hydro's Annual Report and Form 20-F 2005 and subsequent filings on Form 6-K with the US Securities and Exchange Commission.
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.
Contact Telephone Cellular |
Investor contact Idar Eikrem +47 22533273 +47 95028363 Idar.Eikrem@hydro.com |
Press contact Tor Steinum +47 22532731 +47 95083933 Tor.Steinum@hydro.com |
Press contact Cecilie Ditlev-Simonsen +47 22532097 +47 41559250 Cecilie.Ditlev-Simonsen@hydro.com |
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