Hydro’s upstream aluminium business, with a 100% hike in adjusted EBITDA, offsets poor performance in downstream sector

On Tuesday, July 23, Norsk Hydro ASA, a Norwegian aluminium and renewable energy company, headquartered in Oslo, posted its second quarter results for 2024, revealing a 7 per cent sequential increase in revenue to NOK 50,944 million versus NOK 47,545 million in Q1. However, on a year-on-year basis, the company's revenue decreased by 5 per cent from NOK 53,630 million.

Hydro's total revenue in H1 2024 was NOK 98,490 million, down by 3.6 per cent from NOK 102,164 million in H1 2023.

Hydro's Adjusted EBITDA also saw a year-on-year decline in Q2 2024, standing at NOK 5,839 million, down by 18 per cent from NOK 7,098 million. Sequentially, it rose 8 per cent from NOK 5,411 million.

The year-on-year decline in Q2 adjusted EBITDA also led to a reduced EBITDA for H1 to NOK 11,250 million versus NOK 14,623 million a year ago. Hydro's annual revenue and adjusted EBITDA downfall in H1 2024 could be attributed to lower extrusion volumes, narrower recycling margins, decreased energy spot sales, and higher fixed costs, partially offset by higher alumina prices and lower raw material costs.

The only business area where Hydro's adjusted EBITDA grew in Q2 2024 was bauxite and alumina, amounting to NOK 1,616 million, up 100 per cent Q-o-Q from NOK 804 million and 98 per cent higher Y-o-Y from NOK 817 million.

In all other sectors, such as energy, primary metal, and extrusion, adjusted EBITDA decreased unanimously. In the energy sector, Hydro's EBITDA plunged by 47 per cent Q-o-Q and decreased by 28 per cent Y-o-Y to NOK 611 million. In primary metal and aluminium extrusions, EBITDA fell 22 per cent and 32 per cent annually to NOK 2,520 million and NOK 1,377 million, respectively.

Thus, Hydro's positive revenue driver in Q2 2024 was the upstream aluminium sector. Downstream aluminium demand in the residential building and construction sector was weak. Low activities in those end-user sectors made aluminium scrap availability scarce, leaving many recyclers short on capacity.

However, demand for Hydro's low-carbon and recycled aluminium, Hydro CIRCAL, was strong despite weak markets.

Eivind Kallevik, President & CEO of Hydro, said: "The positive development in our key revenue drivers from the first quarter continued into the second quarter, supporting solid results in our upstream businesses. We are mitigating the challenges of a weak downstream market by executing cost-saving measures and maintaining extrusion margins."

Kallevik added, "We are pleased to see solid results in Bauxite & Alumina as well as Aluminium Metal. Positive revenue drivers, combined with ongoing improvement initiatives, including the ongoing fuel switch at Hydro Alunorte, are expected to further strengthen value creation from upstream activities going forward."