Norsk Hydro ASA (NHYDY.PK) Q1 2012 Earnings Call April 30, 2012 2:30 AM ET Executives Svein Brandtzaeg – President & CEO Jørgen Arentz Rostrup – CFO Presentation Operator
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If we take a look at different market segments and compare with the fourth quarter last year we had the improvement of 7% in total with the sales in all products and exclusion. In all products very good development in several market segments, especially in general engineering where we saw a destocking in the previous quarter that has now ended, good development in Litho and Foil. In Extrusion we had good development in Europe in the U.S. South America market and also in position to bring birth in building system then the development is reflecting the very weak situation in Southern Europe. This is a high margin market and influence of course the top result in extrusion.In total we saw 6% improvement in Rolled products and 10% improvement in the quarter in Extruded products. If we then compare with the first quarter last year, it is a reduction of 6% and there we saw in different market segments in Rolled products significant weaker demand compared to the previous year in several areas except Can and Litho. In Extrusion we saw in fact positive development in Americas which is very much the situation in North America which is now picking up demand and which goes in the positive direction while we are still struggling as I mentioned in the building system market. There are two factors that we should be in mind here, first of all that the first half year, last year and especially the first quarter was very strong. The first quarter last year was more than a seasonal strong quarter. It was also a rebound effect in that quarter and this last half year in 2011 was very weak half year, weaker than the normal seasonal variation. In 2012 we expect that we have a more normal situation in the second half.
If we look at aluminum prices, we've seen development from around $2,000 to around $2,140 in the end of the quarter, average $2,216. If you look at realized prices, which was the aluminum prices that was done in the three to four months' time tag, we realized $2,155 per ton as average price or the market price in the first quarter. In the fourth quarter last year we realized $2,439.00 per ton as the price.If you look at the general price level here, this is not at adequate I would say. The price level is too low to give adequate return for aluminum in this day. So we are now doing what we can influence on our self. We've got improvement programs. I will come back to that later in my presentation. If we look at the supply demand balance, we see improvements since the weak fourth quarter last time. At the same time there has been curtailments. In total there are about 1 million tons of capacity that has been announced to be curtailed. So that is a reason for bit lower production in the quarter. So it is a bit tight to balance this quarter than the previous quarter but it is still overproduction in the aluminum industry today. So we expect that the growth will continue during the year and create a tighter balance in the end of the year but the high production still creates an issue with regard to buildup of inventories. If you look at different regions, we expect this year that Europe will have zero growth, 5% in the U.S. and 4% in other markets outside China. There are questions about the growth in China but we maintain 9% growth in China this year. We have previously communicated 3% to 5% growth outside China. We are now estimating that growth is closer to 3% and the global growth including China, we estimate to be close to 5%. There are of course uncertainties with regard to this number but we are now a bit more conservative with regard to the growth in the areas outside China therefore we will communicate expected 3% in 2012. Read the rest of this transcript for free on seekingalpha.com