Hydro reported an adjusted EBITDA of NOK 5,839 million for the second quarter of 2024, a decrease from NOK 7,098 million in the same period last year. This decline was primarily due to lower volumes in Extrusions, reduced recycling margins, diminished Energy spot sales, and increased fixed costs. However, these challenges were partially mitigated by higher alumina prices and lower raw material costs, resulting in an adjusted RoaCE of 4.4% over the last twelve months and a free cash flow of NOK 2.8 billion.
Strong Upstream Results and Downstream Challenges
The positive trend in key revenue drivers from the first quarter continued into the second quarter, bolstering upstream results. The Platts Alumina Index (PAX) rose from USD 367 to USD 505 per tonne, driven by production disruptions in Australia and India, which helped balance the market outside China. Consequently, Bauxite & Alumina and Aluminium Metal segments reported solid performances.
Hydro faced weak demand and low recycling margins downstream, particularly in the residential building and construction sectors in Europe and North America. This led to reduced aluminium scrap availability and pressured recycling margins, impacting both Hydro Extrusions and Metal Markets. Despite these challenges, Hydro implemented cost-saving measures and maintained extrusion margins. Additionally, Hydro Extrusions added two new OEM contracts during the quarter, contributing to a total contract value of EUR 3.1-3.3 billion since early 2023.
Industrial Decarbonization Efforts
Hydro continued its focus on industrial decarbonization, establishing the Hydro Rein joint venture with Macquarie Asset Management. This partnership aims to support industrial decarbonization through renewable energy projects, particularly in the Nordics, selected European markets, and Brazil.
Demand for Hydro’s low-carbon and recycled aluminium, Hydro CIRCAL, remained robust. Investments were made in upgrading facilities in France and Italy to meet rising demand, and the first sale of Hydro CIRCAL in the U.S. was recorded. Additionally, Hydro signed an agreement with Porsche to supply low-carbon aluminium for vehicle production, highlighting the strategic shift towards greener products.
Safety and Economic Outlook
On July 9, a contractor tragically passed away at Hydro’s Albras joint venture in Brazil, underscoring the importance of safety in all operations.
Economic forecasts stabilized at low levels, with global primary aluminium demand rising by 2% year-on-year, driven by a 3% increase in China. However, uncertainties such as inflation, policy support, and geopolitical tensions remain significant factors affecting future performance.
In summary, while Hydro’s Q2 2024 results showcased strong upstream performance supported by positive revenue drivers, the company faced challenges in downstream markets. Through strategic initiatives and partnerships, Hydro aims to navigate these challenges and capitalize on the growing demand for low-carbon aluminium products.
More information: Second quarter 2024 Investor presentation
