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Norsk Hydro raises cost-cutting target, sees higher dividend

Tuesday, Dec 14, 2021
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   Norwegian aluminium maker Norsk Hydro (NHY.OL) has raised its cost-cutting targets for the coming years and plans to pay a bigger dividend for 2021 following a jump in earnings, the company said on Monday.

  Global demand for the lightweight metal is expected to exceed production for a second consecutive year in 2022 and not return to an oversupply until 2025, Hydro said.
  "I am pleased with the strong operational and financial performance during 2021. We kept the wheels turning during the pandemic and our organization has lifted profitability across all our business areas," Hydro Chief Executive Officer Hilde Merete Aasheim said.
  The price of aluminium rose to the highest level since 2008 in October on strong demand and output cuts due to an energy crisis and flooding in top producer China, and while Bejing has since intervened to cool off the thermal coal market, prices are still up more than 30% since the start of 2021.
  In October, Hydro reported a record profit for the July-September quarter even as input costs rose.
  It now aims to cut costs by 8.5 billion Norwegian crowns ($950.75 million) for the years between 2019 and 2025, up from the previous goal of 7.4 billion crowns.
  The board plans to distribute between 70% and 80% of the adjusted net income for 2021 to shareholders, as a combination of ordinary dividends and either extraordinary dividends or a combination of extraordinary dividends and share buybacks.
  The company's ordinary dividend policy is to pay out a minimum of 50% of adjusted net income during a multi-year business cycle.
  Hydro said it now aims to achieve net-zero carbon emissions by 2050 or earlier, setting out to use a higher share of renewable energy in its smelters, cast houses and recyclers.
  It is also developing carbon capture and storage solutions that can be retrofitted into aluminium plants, and increase post-consumer scrap recycling, it said.
  These ambitions means Hydro will increase capital expenditure to 11 billion crowns next year and to 10 billion for the years 2023-25, from 7 billion in 2021, planning investments in batteries and recycling but not in new smelters, especially not given the built-up Chinese smelter capacity, Aasheim said.
  "It would not be right to invest in technology to have carbon in the process," she said, adding Hydro would instead focus on decarbonising its existing processes, develop new technology and focus on recycling.

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