Norsk Hydro: Write-Down of Book Value of German Primary Aluminium Plants
December 14 2004 - 10:24AM
PR Newswire (US)
Norsk Hydro: Write-Down of Book Value of German Primary Aluminium
Plants OSLO, Norway, Dec. 14 /PRNewswire-FirstCall/ -- Hydro will
write down the book value of its German primary aluminium plants by
approximately NOK 1.5 billion after tax due to weakened
competitiveness caused by the strengthened EUR versus USD, and
increasing energy costs. The write-down will be charged to the
fourth quarter results this year, and will have no cash effect. The
strengthening of the Euro versus US dollars puts European aluminium
producers at a cost disadvantage in the global aluminium market.
The current power contracts for Hydro's German primary aluminium
plants expire end of 2005. Current power prices in Germany are
significantly higher than in 2002, when these plants were acquired.
Hydro then anticipated a significant increase in future power
costs. However, based on the ongoing negotiations for renewal of
the contracts, Hydro now expects an even higher increase than in
2002. Based on this situation the expected future cash flows from
the German primary aluminium plants, based in Euro, are not
sufficient to support the present book value of these assets. The
assumptions used for the calculations are for the coming four years
based on the forward curve for both the aluminium price and the
USD/EUR currency ratio. For the longer term an aluminium price of
USD 1,500 and a USD/EUR ratio of 1.14 are used. The power price
assumptions reflect the current market level and outlook for the
longer term. The final write-down amount will be included in the
fourth quarter 2004 results, and is expected to represent a charge
to operating income of approximately NOK 2.4 billion. As a
consequence of the write down, the applicable deferred taxes will
be reduced by approximately NOK 0.9 billion. Hydro has two
fully-owned and one part-owned primary aluminium plants in Germany.
Hydro Aluminium Neuss, with a production of 221,000 tonnes in 2003,
is a key supplier of metal to Hydro's major rolled products units
in Norf and Grevenbroich, and with operating costs on level with
other European primary aluminium plants. Hydro Aluminium Stade had
a production of 69,000 tonnes in 2003. Hydro also owns 33 percent
of Hamburger Aluminium-Werk, where Hydro's share of the production
volume in 2003 was 43,000 tonnes. The write-down applies to all
three assets. After the write-down, the remaining book value is
approximately NOK 900 million. Hydro will continue to evaluate the
future competitive position of its German primary aluminium plants.
The acquisition of the German aluminium company VAW in 2002 gave
Hydro a solid platform for further development of the company as
one of the world's leading aluminium suppliers, with a value
creation potential among the best in the industry. The acquisition
contributed to broadening Hydro Aluminium's geographical reach, and
strengthened the company's positions in several important market
segments. A rapid and efficient integration process resulted in
cost reductions better than targeted. This has made an important
contribution to the performance improvements for Hydro Aluminium
over the last couple of years. Hydro is a Fortune 500 energy and
aluminium supplier operating in more than 40 countries. The company
is a leading offshore producer of oil and gas, the world's
third-largest aluminium supplier and a leader in the development of
renewable energy sources. Hydro's 36,000 employees create value by
strengthening the viability of the customers and communities we
serve. Certain statements in this press release are or may
constitute "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements that
are not in the nature of historical facts may be deemed to be
forward-looking statements and may contain identifying words such
as "believes," "anticipates," "plans," "expects" and similar
expressions. These forward looking statements are based on Hydro's
current expectations, assumptions, estimates and projections about
the company and the industries in which it engages in business. All
forward-looking statements involve risks and uncertainties. For a
detailed description of factors that could cause Hydro's actual
results to differ materially from those expressed in or implied by
such statements, please refer to its annual report on Form 20-F for
the year-ended December 31, 2003 and subsequent filings on Form 6-K
with the U.S. Securities and Exchange Commission. With respect to
each non-GAAP financial measure Hydro uses in connection with its
financial reporting and other public communications, Hydro provides
a presentation of what Hydro believes to be the most directly
comparable GAAP financial measure and a reconciliation between the
non-GAAP and GAAP measures. This information can be found in
Hydro's earnings press releases, quarterly reports and other
written communications, all of which have been posted to Hydro's
website (http://www.hydro.com/). Contact Idar Eikrem Thomas Knutzen
Telephone (+47) 22 53 32 73 +47 22539115 Cellular (+47) 95 02 83 63
+47 90612359 E-mail DATASOURCE: Norsk Hydro CONTACT: Idar Eikrem,
+47-22-53-32-73, Cellular, +47-95-02-83-63, , or Thomas Knutzen,
+47-22539115, Cellular, +47-90612359, , both of Norsk Hydro Web
site: http://www.hydro.com/
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