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Norway's Norsk Hydro earnings jump despite Brazil scandal

By AFP
media Hydro Norsk has apologised for a discharge of untreated water into a river in Brazil SCANPIX-FILES/AFP/File

A surge in aluminium prices helped Norwegian metals and energy giant Norsk Hydro to rising profits, figures released on Wednesday showed, though an environmental scandal in Brazil threatens to dull its shiny outlook.

The company's net profit jumped 19 percent for the first quarter to nearly 2.1 billion Norwegian kroner ($265 million, 217 million euros), as sales surged 75 percent year-on-year to nearly 40 billion kroner.

Operating profits, or earnings before interest and taxes, rose 38 percent year-on-year to 3.15 billion kroner, but shrank 11 percent from the last quarter of 2017.

The steep decline follows a scandal that erupted after Norsk Hydro was accused of contaminating a river in Brazil with bauxite residue.

The company has said it found no evidence of such a spill, but has apologised for discharging untreated rainwater into the Para River.

Investors reacted coolly to the earnings report, pulling Norsk Hydro's share price down by 1.1 percent in early Wednesday trading. It later recovered some of that ground to trade down 0.3 percent in the afternoon.

Brazilian authorities slapped Norsk Hydro with two fines of 10 million reais (2.5 million euros, around $3 million) each and ordered the giant to halve its production at Alunorte, the world's largest aluminium plant, and also suspend the use of the river basin.

As a result, Norsk Hydro's earnings before interest and tax for its bauxite and alumina activity plunged 60 percent from the last quarter, to 741 million kroner.

As alumina is the main component of aluminium, the drop threatens to put a strain on the whole of Norsk Hydro's supply chain.

- 'Great uncertainty' -

Norsk Hydro is currently in talks with the Brazilian authorities but it does not know when it will be allowed to operate at full capacity at the Alunorte plant again.

The saving grace for the Norwegian company in the first quarter was a surge in aluminium prices.

The jump was then consolidated after the United States slapped Russian metals giant Rusal with sanctions earlier this month.

But global prices are now beginning to dip once again, after the US Treasury on Monday said it would lift its sanctions on Rusal if tycoon Oleg Deripaska gives up control of the company.

"The US sanctions on Rusal have caused great uncertainty in the world's aluminium markets and will impact trade flows and availability of metal and raw materials throughout the aluminium value chain," CEO Svein Richard Brandtzaeg said in a statement from Hydro Norsk Wednesday.

"The Brazilian authorities' embargo on Alunorte adds to the uncertainty in the aluminium industry," he added.

 
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