Norsk Hydro Q4 profit slumps, sees tough 2009

OSLO, Feb 18 (Reuters) - Norwegian aluminium producer Norsk Hydro saw fourth-quarter earnings plummet as it slashed the value of stock following a "dramatic" fall in prices and steeled itself for more gloom in 2009. The company said on Wednesday it was raising new funds and cutting capital spending, and did not rule out further production cuts as the global economic slump continued to crimp demand for aluminium and other basic materials. Underlying earnings before interest and tax fell to 868 million crowns ($124 million) in the three months to December from 1.70 billion in the same quarter a year earlier. The result, which included 700 million crowns in writedowns, was far lower than the consensus of 1.48 billion crowns from a Reuters poll of 11 analysts, whose forecasts ranged from 468 million to 2.26 billion. Aluminium prices have been on a downward trajectory for months as the slump savaging the auto and construction industries - two of the major markets for the metal - has intensified. Three-month aluminium on the London Metal Exchange traded at $1,320 per tonne at 1100 GMT, having fallen from $2,446 at end-September to $1,497 at end-December. Hydro said year-end prices were "lower than the cash costs of a substantial portion of global smelter production." "Demand within main aluminium market segments is expected to remain depressed, a situation that could continue throughout the entire year," it said, adding that the timing of the recovery was uncertain. Chief Executive Eivind Reiten told a news conference 2009 would will be very difficult, though once the turnaround came it could be unusually rapid. New financing for the company, the level of which would depend on future income, might come via a bond issue, he said. Hydro shares, beaten back last year as the global economic crisis unfolded, fell 2.5 percent to 25.35 crowns by 1109 GMT, valuing the company at about $4.5 billion, while the DJ Stoxx basic resources index <.SXPP> was down 2 percent. 'TERRIFYING' OUTLOOK First-half results for the aluminium metal operations would be "significantly" lower than a year ago, and primary metal production would fall in the first quarter by about 10 percent from the fourth quarter, the company said. Danske Bank analyst Nils Ove Kjerstad said the result was in line with expectations when adjusted for the writedown. "But the outlook clearly confirms the picture we've seen lately, with ever more capacity cuts from various players ... It confirms a pretty terrifying outlook for the coming year." Norsk Hydro, which along with its peers has announced output cuts in response to weakening demand, said further curtailments may be needed, though it did not say where or when or by how much. Hydro is already cutting 23 percent of primary aluminium output, or about 400,000 tonnes per year of high-cost capacity, by the end of second quarter. Production of remelted metal at Hydro's casthouses has been cut by 45 percent, or around 500,000 tonnes per year, and alumina output at its part-owned Alpart refinery in Jamaica by half. Norsk Hydro said it expected "significant" cost reductions this year as it shuts or idles production at high-cost units. It would propose no dividend for 2008 and would cut capital expenditure, excluding a big Qatar smelter project, by 40 percent from last year's 6 billion crowns. Hydro said the Qatar project was 60 percent complete by the end of 2008 and on schedule for start-up towards the end of 2009 and ramp-up to full production in 2010.