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Aluminium maker Hydro warns of rising costs after record Q1 profit

Published 03/05/2022, 06:06
Updated 03/05/2022, 09:16
© Reuters. A production line under construction at a casting house in the Norsk Hydro aluminium plant in Karmoey, Norway April 26, 2019. REUTERS/Gwladys Fouche/Files

© Reuters. A production line under construction at a casting house in the Norsk Hydro aluminium plant in Karmoey, Norway April 26, 2019. REUTERS/Gwladys Fouche/Files

OSLO (Reuters) -Norwegian aluminium maker Norsk Hydro reported on Tuesday record quarterly profits that beat expectations, but also warned of rising costs ahead due to inflation and logistics disruptions, hitting its shares.

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) more than doubled to 11.2 billion crowns ($1.19 billion) in the January-March quarter from 5.2 billion a year ago. Analysts on average had expected 10.6 billion.

"The Russian invasion of Ukraine, continued global supply-chain shortages, high energy prices, and concerns around inflation continue to add uncertainty," Hydro said in a statement.

The company's shares were down 4.6% at 0756 GMT, underperforming a 0.3% drop in Norway's benchmark stock index, but are still up 6.8% year-to-date.

"While we believe that strong results are a clear positive, the evolution of underlying cost inflation and cash flow is likely to be seen as a cautious development by the market," Citi analysts wrote in a note to clients.

First-quarter revenue rose 46% year-on-year to 46.6 billion crowns, below the 49.0 billion average forecast of 13 analysts in a poll compiled by the company.

Hydro's Metal unit, which produces primary aluminium and is the company's biggest profit centre, will see rising raw materials costs in the second quarter, as will the bauxite and alumina division, the company said.

Hydro Metals Markets, a major recycling and trading unit, meanwhile expects to see volatile conditions in the second quarter, while the group's electricity-producing unit will see lower output amid a lack of rain at hydroelectric reservoirs.

Aluminium prices on the London Metal Exchange rose sharply in the first quarter, hitting record highs above $4,000 a tonne, but have since fallen to end April at just over $3,000.

© Reuters. A production line under construction at a casting house in the Norsk Hydro aluminium plant in Karmoey, Norway April 26, 2019. REUTERS/Gwladys Fouche/Files

Global demand for the lightweight metal is still expected to exceed production for a second consecutive year, Hydro said, which could lead to a fall in global aluminium inventories.

($1 = 9.4207 Norwegian crowns)

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