Norsk Hydro ASA, Europe’s third-largest aluminum maker, fell the most in 11 months in Oslo trading on concern weak aluminum prices will continue to weigh on earnings.
Shares in the Oslo-based company fell as much as 6.6 percent, the most since November 2011, and were down 4 percent at 25.83 kroner as of 3:26 p.m. in the Norwegian capital.
The company today reported a net loss of 277 million kroner ($49 million) in the third quarter, compared with a profit of 997 million kroner a year earlier, citing falling prices. Sales fell to 19 billion kroner from 23.8 billion kroner.
“Management are guiding people down for next year’s numbers,” Neil Sampat, an analyst at Nomura International Plc, said by phone from London. “Implicit within consensus estimates for next year is a fairly material rebound in the aluminum price and if you were to mark to market for spot aluminum prices you’d be a lot lower than 2013 consensus Ebitda.”
Hydro, a rival to United Co. Rusal and Rio Tinto Alcan Inc., is cutting costs and capacity in response to falling prices. Aluminum for delivery in three months on the London Metal Exchange averaged $1,950 a metric ton in the third quarter, 20 percent less than a year earlier.
“Right now we don’t expect any support from the market,” Chief Executive Officer Svein Richard Brandtzaeg said in a presentation in Oslo. “There is a high degree of uncertainty in the macroeconomic environment” as economic difficulties in Europe, slow growth in the U.S. and a “question mark” over growth in Asia influence the aluminum industry, he said.
The bauxite and alumina operation had an underlying earnings before interest and taxes loss of 386 million kroner, compared with a 302 million kroner profit a year earlier.
“It is a tough situation in this market with low LME prices and very high raw material costs,” Brandtzaeg said.
The company, which reported a net foreign-exchange gain of 283 million kroner, sold forward about 80 percent of its aluminum output in the fourth quarter at about $1,925 a ton, it said. Hydro cut its cash cost per ton of aluminum production by $200 from last year, Brandtzaeg told analysts today.
Hydro, Alcoa Inc., Rio Tinto and closely held Zeeland Aluminum have cut 1.21 million tons of output since mid-2011, according to data compiled by Bloomberg. Alcoa, the largest U.S. producer, on Oct. 9 reduced its forecast for global demand growth 1 percentage point to 6 percent on a slower China.
Hydro’s aluminum production in the quarter declined 7 percent to 484,000 tons from 522,000 tons a year earlier, according to the statement. Output of alumina, the raw material to produce aluminum, also fell 7 percent to 1.44 million tons, it said. Norsk Hydro last year bought alumina and bauxite assets from Vale SA to secure a century’s supply of the raw materials.
Global aluminum production in the quarter rose 2 percent to 11.95 million tons, while the consumption increased 3 percent to 11.97 million tons, according to the statement. Excluding China output declined 4 percent to 6.43 million tons, while use increased 1 percent to 6.54 million tons, Hydro said.