Norway’s Hydro NHY.OL, a prominent global aluminium producer, expressed confidence on Wednesday that market conditions would strengthen later this year, following a larger-than-expected decline in the group’s core profits during the first quarter, attributed to weak demand and margins.
The company reported a 28% year-on-year decrease in adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) to 5.41 billion crowns ($497.8 million), falling short of analysts’ average forecast of 5.54 billion crowns in a company-compiled poll.
Hydro noted a 2% year-on-year decline in primary aluminium volumes outside China in January-March, primarily due to subdued demand from residential and industrial construction, particularly in Europe. The region also experienced a decrease in electric car output, contributing to the decline.
Outgoing CEO Hilde Merete Aasheim stated, “Despite weaker markets impacting results, the macroeconomic indicators as well as revenue drivers are showing signs of improvement towards year end.” She highlighted lower inflation, improved prospects for global economic growth, robust demand from China, and new sanctions on Russian aluminium as factors expected to bolster Hydro.
Aasheim also mentioned the potential influence of peak interest rates on consumer sentiment regarding vehicle purchases and construction activities. However, she cautioned about the impact of Germany’s plan to discontinue electric vehicle subsidies later this year and the financial constraints faced by European countries due to their support for Ukraine.
Despite the challenging outlook, Hydro remains optimistic about improved market conditions and the potential for a recovery.