Norsk Hydro Reports 18% Drop in Q2 Profit Amid Lower Volumes and Margins
Norwegian aluminium producer Norsk Hydro reported an 18% decline in second-quarter core profit to 5.84 billion Norwegian crowns ($533.09 million), impacted by lower volumes and margins despite higher alumina prices. The adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the quarter ended June 30 fell short of the average analyst forecast of 6.15 billion crowns.
Norsk Hydro's bauxite and alumina division delivered stronger results due to increased alumina prices and sales volumes. However, the energy segment experienced a decline in earnings owing to reduced production and lower prices. The company faced weakened demand in Europe's residential construction sector, a shortage of aluminium scrap, and a slowdown in automotive extrusion linked to electric vehicle (EV) production.
Aluminium prices have dropped this year as China increased its production to nearly a decade high. Nevertheless, lower inflation and better prospects for global economic growth are expected to benefit European producers. Norsk Hydro has been affected by the termination of EV subsidies in Germany as part of a 2024 budget deal, which led to a downturn in the company's European aluminium volumes.
"We are mitigating the challenges of a weak downstream market by executing cost-saving measures and maintaining extrusion margins," said recently appointed CEO Eivind Kallevik in a statement.
Aluminium prices had surged in 2021 and early 2022 to around $3,500 per ton as the global economy rebounded from the pandemic, but have since fallen due to waning demand.
