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Norsk Hydro Posts Loss on Aluminum Slump, Writedown

Thursday, Feb 19, 2009
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Feb. 18 (Bloomberg) -- Norsk Hydro ASA, the world’s fifth- largest aluminum producer, posted a 6.02 billion-krone ($859 million) fourth-quarter loss on slumping prices and an inventory writedown and scrapped its dividend to conserve cash. The loss exceeded the 4.8 billion kroner predicted by DnB Nor Bank ASA and Pareto Securities ASA. Year-earlier net income was 438 million kroner, the Oslo-based company said today in a statement. Sales declined 1.3 percent to 21.4 billion kroner. Plunging demand is spurring aluminum producers to reduce output and payrolls. Hydro said Jan. 28 it would cut spending by 30 percent this year and lower the value of inventories and assets by 3.5 billion kroner after demand from makers of autos and machinery fell. Car sales were the weakest since 1981 in the U.S. last month and also slowed across Europe, Russia and China. “Hydro has acted quickly and decisively in response to the unprecedented drop in aluminum markets toward the end of last year,” Chief Executive Officer Eivind Reiten said in the statement. Inventories of the metal are approaching levels unseen since the Berlin Wall fell, he said separately at a presentation in London. Aluminum prices probably will stay low in the “medium term,” the company said in the statement. It also cited “limited forward visibility” and “significant uncertainty regarding developments.” Packaging, Aerospace Hydro closed unchanged at 26 kroner in Oslo trading after fluctuating between gains and losses. The stock has declined 6.5 percent this year, trimming the company’s market value to 32.4 billion kroner, after plunging 64 percent in 2008. The average price of so-called primary aluminum for three- month delivery on the London Metal Exchange was $1,885 a metric ton in the fourth quarter, 25 percent lower than a year earlier. The metal is used in industries from packaging to aerospace. Hydro said Jan. 16 it would lower production of primary aluminum by 170,000 tons a year, or 10 percent of capacity, by the end of the current quarter. The company has also cut output at its plant in southern Norway by 50 percent and said Feb. 11 that a German smelter would be mothballed unless operating conditions improved. The company’s fourth-quarter per-share loss was 4.99 kroner, compared with a year-earlier profit of 0.36 krone.

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