Norsk Hydro Q2 2026 Earnings Call Transcript

Norsk Hydro (OTC: NHYDY ) released second-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

9 billion NOK and free cash flow of 4 billion NOK, driven by robust operational performance and higher metal prices. The company highlighted the agreement to restart Slovalko, a significant step for European industry, and secured a long-term renewable power agreement with Eviny, bolstering its competitive position. Norsk Hydro expects continued strong demand for low-carbon and recycled aluminium products, maintaining growth in recycling and strengthening partnerships with companies like Mercedes-Benz and Nexans.

Operationally, the company achieved all-time high production levels in its Norwegian casthouses and maintained stable production despite geopolitical and market volatility. Management emphasized the importance of safety and operational excellence, alongside strategic initiatives aimed at decarbonization and technology advancement. Full Transcript OPERATOR Good morning and welcome to Norsk Hydro's second quarter 2026 presentation and Q&A. We will shortly begin with a presentation by President and CEO Eivind Kallevik, followed by a financial update from CFO Trond Olaf Christophersen.

We will then finish off with a Q&A session. Please note that if you would like to ask questions during the Q&A, you can do so at any time by typing your question into the box on your screen. When we get to the Q&A, I will then ask your questions on your behalf directly to Eivind and Trond Olaf, and with that I turn the word over to you, Eivind. Eivind Kallevik, CEO Thank you, Erik, and good morning from me as well.

I am pleased to present a strong set of results for the second quarter supported by excellent operational performance across the company. Overall this is a solid quarter, but at the same time the ongoing situation in the Middle East continues to impact the totality and affects the broader picture. As always, we begin with what matters most: safety. Safe operations and a safe working environment are the foundation for everything else that we report today, because without them none of our other results would matter.

Keeping our people safe remains my highest priority and the highest priority for the entire management team. And wherever I travel across Heathrow, one thing stands out: our people genuinely care about looking after each other. That commitment is one of our greatest strengths and I am pleased to report that both our HRIS and TRRS remain at historically low levels. The challenge now is really to avoid complacency because strong performance should never lead to lower vigilance.

Instead, we must continue learning, improving and moving steadily towards our ultimate ambition of zero injuries. Because every serious incident has consequences that go far beyond the individual involved. It affects colleagues, teams and the wider organization and it consumes enormous amount of time and energy that should otherwise be spent on improving our business, because when we operate safely we can focus our efforts on performance, productivity and creating value rather than managing crises. Now with that, let's have a look at the highlights for the second quarter.

The second quarter was characterized by continued strong operational performance across our business areas as well as good progress on our strategic agenda. 9 billion, while free cash flow was a solid 4 billion. 9%, above our target of 10% over the cycle. Our upstream business delivered solid performance and production remains stable across most of the value chain, despite the volatile operating environment that we have.

Our Norwegian casthouses delivered an all-time-high production supported by operational performance at a very high level. 9 billion during this quarter. From a market perspective, the realized all-in metal prices were 14% higher than in the first quarter, continuing to support earnings beyond the strong operational performance. Another important milestone this quarter is the agreement that will enable the restart of Slovalko.

Now this is an important step, both for Norsk Hydro, but also for European industry more broadly. It demonstrates that with the right framework conditions, industrial capacity can return to Europe. We also continue to strengthen our renewable power position, securing a further 5 TWh through the new long-term agreement with Eviny. Access to competitive renewable energy remains one of Norsk Hydro's greatest competitive advantages.

Strengthening that position is essential to support continued strong operational as well as financial performance for the future. So, all taken together, I am pleased with both operational execution and the progress we are making on our strategic priorities. 9% over the last 12 months, above the target we have of 10% over this cycle. Back in 2022, we curtailed production at our joint venture plant Slovalko because the framework conditions simply did not support competitive aluminium production.

Unsustainable power prices and a lack of compensation for indirect carbon costs made continued operations impossible. Since then, we worked closely with the Slovak government to establish a framework that changes that. So earlier this month we reached an agreement combining long-term access to competitive power with more competitive framework conditions. Pending final approval by the EU, this agreement will enable the restart of the first 75,000 tonnes of production since the curtailment.

I believe this is important well beyond Slovakia. It demonstrates that Europe's competitiveness challenges are not inevitable. They are solvable when policymakers are willing to strike the right balance between ambitious climate policy and industrial competitiveness. European industry has enormous strengths and, with the right framework conditions in place, there is every reason to believe that Europe can continue to thrive and compete globally despite the many pessimistic predictions.

And the Slovalko case illustrates this well. Predictable policy, competitive energy and a level playing field make a real difference because without them, Europe risks becoming increasingly dependent on imported strategic materials. But with them we can rebuild industrial capacity, strengthen resilience and compete globally. At Norsk Hydro, Slovalko is another example of how we are strengthening our integrated aluminium platform while contributing to greater European resilience and security of supply.

It is an important milestone and one that we are incredibly happy to have reached. Now let's have a look at a few highlights from our commercial agenda. Throughout this quarter we have continued to strengthen Norsk Hydro's commercial position both by building demand and enthusiasm for aluminium and by securing new long-term offtake agreements. We have showcased the potential of aluminium through projects such as the Altdo installation at 3 Days of Design in Copenhagen and the new aluminium bridge in Bergen here in Norway.

These projects demonstrate what low-carbon and recycled aluminium can enable and help inspire future demand. And on the back of that, we continue to convert our position into larger commercial opportunities for low-carbon and recycled products. And I will return to this in just a moment. Operationally, we continue to execute well across the business.

Our Norwegian smelters operated at near full capacity following the ramp-up of previously curtailed capacity, increasing production by 6% compared to the same period last year. Total sales from the smelters reached all-time highs, both in Q1 as well as in Q2. Across our operations, our teams continue to deliver strong performance while maintaining relentless focus on safety, operational excellence and continuous improvements. And finally, we continue to strengthen one of Norsk Hydro's greatest competitive advantages, which is access to renewable power.

5 TWh of renewable power annually between 2031 and 2040, or 5 terawatt hours over the life of the contract. And this builds on the agreements we announced earlier this year with Statkraft and Alpiq. Altogether, we have now secured around 85% of the power need for our Norwegian smelter portfolio through the 30s. Long-term access to competitive renewable power is fundamental to Norsk Hydro's competitiveness, our low-carbon product offering and our future growth ambitions.

While we are now in a much stronger position for the next decade, we will continue to pursue additional power-sourcing opportunities to further strengthen our long-term competitive position. So, returning to the larger commercial opportunities that I mentioned before. The public discourse on decarbonisation may be overshadowed at times by heightened geopolitical tensions, but commercially the momentum continues. We still see strong demand for low-carbon and recycled products as well as a willingness among our customers to pay the associated premiums.

In the automotive sector, we continue to develop our long-standing partnerships with Mercedes-Benz. Mercedes-Benz is one of our most demanding customers, not least when it comes to sustainability. Their focus on decarbonizing their value chain continues and we will soon be announcing some very exciting news about the next steps in our collaboration. We've also signed a new five-year agreement with power cable producer Nexans to supply approximately 85,000 tons of low-carbon aluminium wire rod between 2026 and 2030.

The aluminium wire rod will be produced at Calm and used in power cables for Europe's electricity grid, including medium-voltage grids, overhead transmission lines as well as subsea infrastructure. Now, as Europe expands and modernizes its electricity networks, reliable access to critical materials is becoming increasingly important. This agreement then combines predictable long-term supply with low-carbon aluminum, supporting both Europe's decarbonisation and its energy security. Both partnerships illustrate how we are working with leading customers to translate our low-carbon position into concrete commercial opportunities and long-term customer relationships.

Now then, let's have a quick look at the alumina market. The alumina price started the quarter at $313 per tonne and remained stable at this low level throughout the quarter. As we discussed in Q1, the smelter curtailments in the Middle East have increased the global oversupply in the alumina market. Adding to this, the Chinese market was also supplied in the second quarter, although we saw some refinery disruptions both in China and in Indonesia, reducing the oversupply somewhat.

The PAX alumina price closely reflected the Chinese import parity price, with Chinese refineries then enjoying relatively low raw material costs. The result was an average alumina price in second quarter of $308 per tonne compared to $307 per tonne in the first quarter of the year. Towards the end of the quarter alumina prices increased to $330 per tonne and this is by most assumed to be driven by a more optimistic view of the Middle East restarts and smelter ramp-ups. 6 million tons long in 2026 compared to the 3 million tonnes we showed in Q1.

We move on to the aluminium market. The factors impacting the alumina market have also continued to impact the aluminium market this quarter. As we discussed in Q1, the Middle East curtailments have made the market significantly undersupplied and this pushed prices up. The three-month aluminum price started the quarter at just above $3,500 per tonne and peaked at $3,750 in early June.

As we move towards the end of the quarter, expectations for the global supply balance shifted somewhat. External analysis now indicates a global deficit in 2026 of just under 1 million tonnes compared to the more than 2 million tonnes that was expected in Q1. The revised balance reflects higher supply expectations while demand continues to grow year on year. Most of the additional supply is expected to come from Indonesia and from China.

We still believe that the 45 million tonne annual production cap in China will remain. However, production is currently running at a somewhat higher rate to address parts of the supply gap created by the Middle East curtailments. The increased supply outlook led to a sharp downward correction in prices towards the end of the quarter, with aluminium price closing at $3,085 at the end of the quarter. However, thanks to the strong price development through mid-June, the quarterly average price still increased from $3,188 in Q1 to $3,519 in the second quarter.

Product premiums were more stable, though the European standard ingot duty-paid premiums started the quarter at $587 per tonne and ended at $557. The quarterly average was $582 compared to $391 in Q1. The US Midwest premium declined somewhat from $2,523 at the start of the quarter to $2,396 at the end. The average premium in the second quarter was $2,518 compared to $2,292 in the first quarter.

Then finally, let's have a look at the downstream market where demand remains flattish at relatively low levels. In Europe the market was marginally positive in the second quarter. I would say that one bright spot was automotive where demand increased on growth in EV production. Other segments remained flat.

North America also saw flat growth in second quarter, recovering somewhat from the decline that we saw in the first quarter. Here the strongest growth came from the electrical segment supported by the data center investments. Now looking ahead, both markets are estimated to see slight growth for the full year in Q3. In North America we expect to see the fastest growth compensating for the somewhat weaker start to the year compared to Europe.

And with that let me give the word to Trond Olaf for the financial update. Trond Olaf Christophersen, EVP & CFO Thank you, Eivind, and good morning and welcome from my side as well. We will start with the financial highlights for the quarter, and all numbers will be presented in Norwegian kroner comparing year over year. 5 billion for Q2.

This was driven by higher all-in metal prices. 6 billion. 1 billion. 6 billion.

In addition to the adjusting items to EBITDA, there were around 300 million in adjusting items impacting EBIT related to impairments. 4 billion. Net financial expense for Q2 was 600 million, mainly driven by interest and financial expenses of 600 million. Interest and finance income of 300 million and unrealized foreign exchange losses of 300 million netted each other out.

The income tax expense was 2 billion in Q2, impacted by strong earnings before tax, so the reported tax rate for Q2 was 25% overall. 6 billion with a reported net income of 6 billion. 4 billion, which is the sum of the EBIT adjusting items plus the net foreign exchange loss of 300 million and an income tax effect of 700 million. 1 billion in Q1.

68 NOK per share in Q2 2025. Free cash flow ended at 4 billion for the quarter, supported by the strong adjusted EBITDA. 8 billion, as the strong cash flow was offset by the annual dividend payment in May. 5 billion remains.

9 billion, and the key drivers were higher all-in aluminium prices and improved downstream results. This was partly offset by lower energy production, higher fixed costs, stronger NOK versus the US dollar, and negative results in commercial activities. 6 billion, while alumina price development was neutral. Upstream volume development had a net negative impact of 300 million from lower sales volumes in Aluminium Metal, mainly due to Qatalum curtailments.

This was partly offset by higher sales in Bauxite & Alumina. Raw material costs decreased by 70 million, mainly due to lower energy costs in Bauxite & Alumina and Extrusions. This was partly offset by higher energy and carbon prices in Aluminium Metal. Metal Extrusions had a positive development from increased sales volumes of about 200 million.

Recycling results from Metal Markets and Extrusions contributed positively with 300 million, partly offset by lower margins in Extrusions by 250 million. Furthermore, we saw a net negative impact of 300 million, mainly driven by lower production and less net spot sales. In the Energy business area, fixed costs increased in Q2 with an impact of 300 million.