Focus for the future

Transcription

1 N O R S K H Y D R O T H I R D Q U A R T E R Focus for the future

2 NORSK HYDRO OIL AND GAS LIGHT METALS AGRICULTURE PETROCHEMICALS OTHER ACTIVITIES Exploration and Production Norway 1) Exploration and Production International 1) Aluminium Metal Production Aluminium Extrusion Plant Nutrition Gas and Chemicals Petrochemicals Industrial Insurance Hydro Seafood Energy Aluminium Rolled Products 2) KFK Pronova Oil Marketing Automotive Structures 2) Magnesium 2) 1) Reported as one segment for financial reporting 2) Reported as Other Light Metals for financial reporting Norsk Hydro prepares its financial statements in accordance with the generally accepted accounting principles in Norway and the United States. The comments of the company s Board of Directors concerning developments in the operations of industry segments are applicable to both sets of accounting principles, unless otherwise stated. The differences in net income under Norwegian accounting principles and USGAAP are not material. Preliminary finincial results 2000: 12 February 2001 The results will be released at 0930 hours CET. The company reserves the right to revise these dates. Hydro on the Internet Hydro's web site on the Internet provides information about the company and its activities, financial status and annual reports. The information is updated on a regular basis, offering news, press releases, results and presentations. Visit us at Norsk Hydro ASA, Bygdøy Allé 2, N-0240 Oslo, Norway Telephone: Fax: corporate@hydro.com 2 Norsk Hydro second quarter 2000

3 Consolidated results (US GAAP) 2,139 6,729 7,032 7,462 Operating income 21,223 5, Non-consolidated investees (435) (983) (1,006) (733) Net financial expense (2,722) (820) ,413 Other income 1,552 1,303 Income before taxes and 2,034 5,912 6,394 8,288 minority interest 20,594 5,799 (1,376) (3,470) (3,589) (4,372) Income tax expense (11,431) (3,122) 634 2,451 2,775 3,896 Net income 9,122 2, Earnings per share Norsk Hydro's net income for the first three quarters of 2000 was NOK 9,122 million (USD 1,048.1 million), or NOK (USD 4.01) per share, compared with NOK 2,603 million (USD million), or NOK (USD 1.41) per share, in the same period last year. EBITDA for the first three quarters of this year was NOK 33,732 million (USD 3,876 million), which was an increase of NOK 19,102 million versus the corresponding period in The increase in the third quarter was NOK 6,597 million. Operating income for the first three quarters of 2000 was NOK 21,223 million (USD 2,366 million), which was an improvement of NOK 16,220 million compared with the same period last year while the improvement in the third quarter was NOK 5,323 million. The substantial improvement was primarily the result of a significantly higher crude oil price and increased oil production in addition to higher margins and business volumes in Light Metals and Energy. Plant Nutrition also showed positive results as a result of cost reductions and higher margins. Hydro's net income for the third quarter of 2000 was NOK 3,896 million (USD million), or NOK (USD 1.66) per share, a six-fold improvement compared to the same period in The third quarter income was positively impacted by the sale of Hydro's interests in Dyno ASA and Sapa Autoplastics AB, as well as the sale of Saga Petroleum UK, all included in "Other Income". Collectively, these transactions provided Hydro a net profit of about NOK 1,600 million, which corresponds to NOK 6.10 per share. Earnings for non-consolidated investees in the first three quarters of 2000 increased by 73% to NOK 541 million compared with the same period last year. For the third quarter earnings increased by 17% to NOK 146 million compared with the same period last year. The growth was attributed to better earnings for companies within both Light Metals and Agriculture. Cash flow from operations in the first three quarters of 2000 was NOK 22.6 billion, an increase of 12.1 billion. The growth was primarily due to improved earnings. Hydro's investments in the first three quarters of 2000 totaled NOK 10.9 billion. About 53% of this was within the oil and gas operations. 3

4 HYDRO OIL AND ENERGY EBITDA 3,594 6,406 7,041 7,388 Exploration and Production 20,835 7, Energy 1, Oil Marketing (2) Eliminations (1) 9 4,075 6,982 7,697 7,976 Total Hydro Oil and Energy 22,655 8,265 Operating Income 1,501 4,230 4,863 5,258 Exploration and Production 14,351 3, Energy 1, Oil Marketing (1) 1 Eliminations ,893 4,720 5,417 5,766 Total Hydro Oil and Energy 15,903 4,062 3rd qtr 1st qtr 2nd qtr 3rd qtr Oil and gas production (thousands boe/d) Oil price (USD/bbl) Oil price (NOK/bbl) Gas Price (NOK) Exploration expense (NOK million) Exploration and Production EBITDA for Exploration and Production in the first three quarters of 2000 was NOK 20,835 million, which was nearly three-fold higher than in the same period last year. Operating income was more than four-fold higher than in the first three quarters of The favorable change was mainly attributed to significantly higher oil and gas prices, together with an approximate 30% increase in oil and gas production stemming primarily from the acquisition of Saga Petroleum. Operating income in the third quarter of 2000 compared to the corresponding period of 1999 improved more than threefold. The increase was primarily due to higher prices, while production was 3% lower than in the same period last year. Hydro's oil and gas production in the third quarter 2000 averaged 367,000 barrels of oil equivalents per day, which was 3% lower than average production in the third quarter of The drop in production due to the sale of Saga Petroleum UK in August was about 22,000 barrels per day during the third quarter. Production has been lower than expected because of less gas extraction, as well as longer maintenance shut-down periods, and later than anticipated production build-up at Oseberg Sør. The average price of crude oil in the third quarter of 2000 was USD 30.0 per barrel, compared with USD 20.1 per barrel in the corresponding period of Stated in Norwegian kroner, the oil price was 70% higher. Average realized gas prices were also about 70% above prices in the third quarter of last year. Earnings were impacted by NOK 437 million in exploration costs during the third quarter, compared to NOK 423 million in the corresponding period last year. In Angola, Hydro was offered an interest of 30% in the deep water licence Block 34. The Angolan state oil company, Sonangol, will act as licence operator with Hydro as technical assistant. 4

5 Energy EBITDA and operating income for Energy in the first three quarters of 2000 were NOK 1,550 million and NOK 1,448 million, respectively. EBITDA and operating income each showed an increase of about 70% versus the first three quarters of last year, excluding one-time adjustments of NOK 123 million connected to the closure of a project in Ireland. The third quarter of this year showed a 42% improvement compared with the same period last year. High refinery margins contributed to an improvement in operating income by NOK 321 million within oil trading and refining activities in the first nine months of 2000 and an improvement of NOK 66 million in the third quarter this year, compared with corresponding periods in Income for the third quarter included a NOK 71 million loss in crude oil trading. Earnings from gas activities in Continental Europe were improved by NOK 52 million compared to the third quarter of last year. This arose from increased activity and improved margins. Electricity production in the third quarter of 2000 was 16% higher than in the same period last year, however market prices were comparatively lower, which resulted in about the same income for the third quarter this year compared with Oil Marketing EBITDA and operating income for Oil Marketing in the third quarter of 2000 were NOK 98 million and NOK 45 million, respectively. The corresponding figures in 1999 were NOK 144 million and NOK 65 million. Reduced earnings were attributed to lower realized margins, mainly due to high oil prices during the period. Hydro's share of net income in the retail marketing company, Hydro Texaco, in the first three quarters of this year was NOK 68 million, a reduction of NOK 16 million compared with the same period last year. HYDRO LIGHT METALS EBITDA 3rd qtr 1st qtr 2nd qtr 3rd qtr NOK million ,342 1,085 1,066 Aluminium Metal Products 3,493 1, Aluminium Extrusion 1, Other Light Metals (14) (14) 1 (1) Eliminations (14) (31) 1,065 1,803 1,659 1,566 Total Hydro Light Metals 5,028 2,687 Operating Income (Loss) 526 1, Aluminium Metal Products 2, Aluminium Extrusion (11) Other Light Metals (13) (13) - (1) Eliminations (14) (31) 738 1,286 1, Total Hydro Light Metals 3,310 1,492 Aluminium Metal Products EBITDA for Aluminium Metal Products for the first nine months of 2000 was NOK 3,493 million, an increase of NOK 2,165 million compared with the same period last year. EBITDA in the third quarter this year increased by NOK 5

6 371 million. Operating income in the first nine months of this year was NOK 2,723 million, of which NOK 837 million was recorded in the third quarter. The improvement in the first nine months and in the third quarter of 2000 was primarily due to higher realized metal prices, a higher USD exchange rate, continued good results within metal trading activities, and slightly increased sales volumes. The average realized aluminium price for the third quarter was USD 1,502 per tonne against USD 1,430 per tonne in the corresponding period last year. The average realized aluminium price for the first nine months was USD 1,519 per tonne against USD 1,357 per tonne in the corresponding period last year. At the end of the third quarter, Hydro had contracts in place for about 80% of this year's remaining production at a price of approximately USD 1,540 per tonne. Changes in the LME price can result in significant fluctuations due to markedto-market adjustments of the sales contracts. Earnings for metal trading activities in the first nine months of 2000 were high and substantially above the level realized in the corresponding period of A large part of the positive result can be attributed to exceptionally good earnings from alumina trading tied to high activity levels and high prices. Earnings in the third quarter of this year were at about the same level as the second quarter, including a one-time effect within alumina trading where NOK 60 million was realized in connection with the settlement of a long-term contract. Earnings from the trading activities are expected to decrease in the fourth quarter and in 2001, due to an anticipated lower activity level and weaker market for alumina. Hydro's trading volume in the U.S. will be negatively impacted from the fourth quarter 2000 due to the interim reduction in production capacity of about 50,000 tonnes in annual output by the tolling agreement partner, Goldendale Aluminium Company. The reason for the reduction is due to high power prices in the Pacific Northwest region of the U.S. Aluminium Extrusion EBITDA for Aluminium Extrusion in the first nine months of this year increased by 29% to NOK 1,013 million while EBITDA for the third quarter was NOK 310 million, an increase of 19% compared to the same period in Operating income was NOK 548 million in the first three quarters of 2000 and NOK 170 million in the third quarter. The improvement in the first nine months was largely due to higher volumes, while margins remained unchanged versus comparable periods last year. Extrusion Europe showed strong earnings in the first three quarters of 2000, while earnings in the third quarter were about the same as last year. Growth in new orders in the third quarter showed some reduction, however the activity level remains high. Heat Transfer, the business unit that produces automotive components, has continued to experience performance setbacks compared with last year, mainly due to pressure on margins in Europe and the start-up of a new U.S. production unit for welded pipe. Building Systems in Europe has continued to show steady progress. The integration of Wells Aluminium, the U.S. company purchased in the first quarter, is going according to plan, but it has suffered a negative earnings impact due to a generally weaker market, especially within the truck sector. Other Light Metals EBITDA and operating income for Aluminium Rolled Products in the first nine months of 2000 were both lower than in the same period of last year. Earnings in the third quarter were adversely impacted by lower production and higher costs at the Holmestrand rolling mill, stemming from irregular operations after a maintenance shutdown this summer. The rolling mills have an adequate order situation. The market for coated products shows continued strong growth, but margins are under pressure. Automotive Structures in the first three quarters and third quarter of this year showed a significantly improved EBITDA compared with last year. Though experiencing underlying improvements, the largest contribution to a stronger EBITDA was a profit of NOK 72 million in the third quarter from the sale of Hydro's 40% interest in Sapa Autoplastics AB. The operating income for the first nine months of 2000 was negative, but better than the same period last year. Magnesium had a weaker EBITDA and operating income in the first three quarters and third quarter of 2000 versus the same periods last year. Sales volumes were higher, but realized margins were lower, mostly due to lower market prices. Demand for magnesium is strong, yet increased export from China more than offsets demand growth and contributes to considerable price pressure. 6

7 HYDRO AGRI EBITDA (171) Plant Nutrition 2, Gas and Chemicals KFK (15) (10) Eliminations 33 (11) 150 1,041 1, Total Hydro Agri 3,163 1,450 Operating Income (Loss) (603) Plant Nutrition 800 (629) Gas and Chemicals (8) 9 57 KFK (16) (10) Eliminations 33 (12) (441) Total Hydro Agri 1,207 (224) Plant Nutrition EBITDA for Plant Nutrition in the first nine months of 2000 showed an improvement of NOK 1,578 million, an increase from NOK 566 million to NOK 2,144 million. Operating income was NOK 800 million for the first three quarters of 2000 versus an operating loss of NOK 629 million for the same period in EBITDA for the first nine months was affected by non-recurring charges of NOK 417 million compared to NOK 367 million in 1999, while corresponding figures for the third quarter this year were NOK 67 million versus NOK 198 million in The underlying improvement in EBITDA year to date was NOK 1,628 million. Non-recurring items this year comprised approximately NOK 300 million due to the closure of plants and about NOK 200 million in costs associated with additional workforce reductions. The reversal of provisional losses tied to an ammonia contract provided a positive effect of approximately NOK 100 million. EBITDA in the third quarter of 2000 was NOK 516 million, an increase of NOK 687 million compared to the corresponding period last year, while operating income rose by NOK 668 million to NOK 65 million. The improvement in performance for third quarter was due to a combination of cost-reduction initiatives and favorable market effects. Of the total NOK 687 million posted for improvements in the third quarter, approximately NOK 345 million resulted from cost-savings, NOK 130 million from lower non-recurring items, and the remaining NOK 212 million from improved margins. The margin was negatively impacted by higher energy costs that were about NOK 200 million higher than the third quarter of Fixed costs in the first three quarters of 2000 were reduced by approximately NOK 845 million compared with the same period last year. Since 1998, accumulated savings in fixed costs in Plant Nutrition activities have totaled NOK 1.3 billion and NOK 450 million in variable costs. The work to achieve further cost reductions in Plant Nutrition activities are in line with the targets of the Agenda 99 improvement program and on schedule in relation to the goals set by the Hydro Agri Turnaround program. Plant Nutrition has reduced its workforce by about 2,000 people since January The international fertilizer markets showed consistent positive development through the third quarter. Urea prices were 30% higher at the end of the quarter compared with the beginning of this year. European prices for nitrogen fertilizer increased significantly in relation to European exchange rates, yet when converted to the US dollar, nitrogen fertilizer prices have not kept up with urea price increases. As a result, the nitrogen profit margin in Europe, compared to urea, continues to be low. The positive development in European prices continued through the third quarter after a low starting point for the new fertilizer season. Because of normal seasonal swings, the price effect from the second to the third quarter had a negative impact on European deliveries. New contracts for the fourth quarter are at significantly higher price levels than in the third quarter. 7

8 On 6 July, Hydro acquired 58% of the shares in Adubos Trevo S.A., a Brazilian fertilizer company with production capacity of 1.7 million tonnes. The company is expected to bring economies of scale to Hydro's fertilizer activities in Latin America. Gas and Chemicals EBITDA for Gas and Chemicals in the first nine months of 2000 showed an increase of 18%, while the operating income increased 25% in relation to The favorable change was primarily due to write-downs of NOK 61 million in the third quarter last year. A strong rise in the price of ammonia and natural gas together with reduced prices for technical nitrates have collectively put pressure on profit margins for nitrogen-based products. This has largely been offset by significant cost reductions. A/S Korn- og Foderstof Kompagniet KFK KFK achieved an EBITDA of NOK 395 million for the first three quarters of 2000, approximately the same amount as in the same period last year. The EBITDA this year was positively impacted by the sale of the animal feed operation for NOK 89 million. In the third quarter, EBITDA was NOK 151 million compared with NOK 206 million in the period last year. The operating income was NOK 58 million for the first nine months and NOK 57 million in the third quarter of KFK's fish feed activities revealed weaker earnings despite a volume increase of 19% in relation to last year, when it realized especially good profit margins. The competitive situation in the Danish feed and grain market has, together with increasing energy prices, contributed to a declining profit margin. Petrochemicals EBITDA Operating income (loss) 453 (93) EBITDA and operating income for Petrochemicals in the first nine months of 2000 were NOK 730 million and NOK 453 million, respectively. In 1999, the EBITDA included a pre-tax gain of NOK 383 million on the sale of Mabo AS and Hydro Coatings. Excluding these gains, the underlying improvement in EBITDA was about NOK 550 million. The progress was mainly due to a 65% increase in the price of S-PVC compared to last year. However, this was slightly offset by increased material costs for natural gas liquids and purchased ethylene. Prices for caustic soda weakened by 11% compared to the first nine months of last year. In the third quarter, EBITDA and operating income were NOK 282 million and NOK 190 million, respectively. Third quarter 1999 includes a pre-tax gain from the sale of Hydro Coatings of NOK 234 million. The underlying improvement excluding this gain was approximately NOK 100 million compares with the third quarter 1999 and is primarily due to higher prices for S-PVC. The price of S-PVC leveled out toward the end of the third quarter this year. Further price pressure during the the last quarter of 2000 is expected. 8

9 Other activities EBITDA 623 1, Operating income Other activities include Hydro Seafood, Pronova, Hydro Technology and Projects, and the casualty insurance company, Industriforsikring. Hydro has reached an agreement to sell Hydro Seafood. The transaction has been approved by the Norwegian and Irish authorities but is still awaiting approval by the British authorities. Finance Net interest expense 1, (295) Net foreign exchange loss (gain) 1,079 (254) (52) Net (gain) loss on securities 55 (161) Other, net , Net financial expense 2, NOK/USD exchange rate 1) ) As of the end of the period. Net financial expense in the first nine months of 2000 was NOK 2,722 million, compared to NOK 820 million of last year. In the first nine months of the current year net financial items were affected by a currency loss of NOK 1,079 million, mainly as a result of a higher USD exchange rate. In the third quarter of 2000, net financial expense was NOK 733 million compared with NOK 435 million in the previous year. The net financial expense for the third quarter of 2000 included a net currency loss of NOK 432 million compared with a currency gain of NOK 295 million in the previous year. Net financial expense in the third quarter of 1999 included NOK 303 million related to losses on Saga's price hedging program. Capitalized interest on plant under construction totaled NOK 530 million in the first nine months of this year, compared with NOK 654 million in the previous year. Capitalized interest was NOK 194 million in the third quarter of 2000 and NOK 290 million in the same period of last year. Net interest bearing debt of NOK 30.9 billion declined by NOK 12.1 billion since the end of As of 30 September, 2000, Hydro's debt/equity ratio, calculated as long-term debt divided by equity plus minority interest, was Adjusted for any excess cash and cash equivalents over a normal level, the debt/equity ratio was at Hydro s target of 0.5; Hydro's target. Thus, the adjusted ratio is at the same level as it was before the Saga acquisition. Taxes The provision for current and deferred taxes in the first nine months of 2000 was NOK 11,431 million, equivalent to 56% of pre-tax income, primarily current tax. The corresponding figure for the same period of last year was NOK 3,122 million equivalent to 54% of pre-tax income. The tax percentage was influenced by the gains recorded as "Other income" which were taxed at a lower rate. Excluding the effects of these gains, the tax percentage would have been approximately 61%. The increase in the effective tax rate was due to increased earnings from oil activities compared to the same period last year. Oslo, 16 October 2000 The Board of Directors 9

10 Income statements Third quarter Year NOK million, except per share data Operating revenues 34,646 25, ,577 73, ,433 Depreciation, depletion and amortization 2,844 3,202 9,299 7,121 10,494 Other operating costs 24,340 19,755 75,055 61,622 84,204 Operating income 7,462 2,139 21,223 5,003 7,735 Equity in net income of non-consolidated investees Financial expense, net (733) (435) (2,722) (820) (1,551) Other income 1, ,552 1,303 1,350 Income before taxes and minority interest 8,288 2,034 20,594 5,799 7,873 Income tax expense (4,372) (1,376) (11,431) (3,122) (4,337) Minority interest (20) (24) (41) (44) (90) Income before cumulative effect of change in accounting principle 3, ,122 2,633 3,446 Cumulative effect of change in accounting principle (30) (30) Net income 3, ,122 2,603 3,416 Earnings per share before change in accounting principle Earnings per share Average number of outstanding shares 261,948, ,165, ,791, ,876, ,045,270 All figures are based on generally accepted accounting principles in the United States (US GAAP), unless otherwise stated. Hydro s accounting policies are included in the 1999 Annual Report. Interim figures are unaudited. Quarterly results NOK million except per share data * 1st qtr 2nd qtr 3rd qtr 1st qtr 2nd qtr 3rd qtr 4th qtr Operating revenues 34,392 36,539 34,646 24,163 24,487 25,096 28,687 Operating income 6,729 7,032 7,462 1,114 1,750 2,139 2,732 Net income 2,451 2,775 3, , Earnings per share USD million except per share data * 1st qtr 2nd qtr 3rd qtr 1st qtr 2nd qtr 3rd qtr 4th qtr Operating revenues 4, , , , , , ,629.8 Operating income Net income Earnings per share * Amounts have been converted to USD for convenience using the average exchange rate (NOK/USD) in effect during the quarters as follows:

11 Balance sheets NOK million, except per share data Assets Current assets Cash and cash equivalents 19,121 4,315 7,435 Other liquid assets 2,437 2,376 2,535 Receivables 37,193 31,579 32,398 Inventories 18,131 15,201 16,327 Total current assets 76,882 53,471 58,695 Non-current assets Property, plant and equipment, less accumulated depreciation, depletion and amortization 96, , ,498 Other assets 18,018 16,130 16,226 Total non-current assets 114, , ,724 Total assets 191, , ,419 Liabilities and Shareholders Equity Current liabilities Bank loans and other interest bearing short-term debt 6,470 5,338 7,361 Current portion of long-term debt 766 1, Other current liabilities 34,650 25,591 28,725 Total current liabilities 41,886 32,856 36,993 Long-term liabilities Long-term debt 42,802 43,496 42,228 Deferred tax liabilities 30,699 29,373 30,357 Other long-term liabilities 7,389 7,033 7,021 Total long-term liabilities 80,890 79,902 79,606 Minority shareholders interest in consolidated subsidiaries 1,467 1,227 1,323 Shareholders equity 67,351 58,806 59,497 Total liabilities and shareholders equity 191, , ,419 Shareholders equity per share Total number of outstanding shares 261,948, ,914, ,705,562 11

12 STATEMENTS OF CASH FLOWS Year NOK million Operating activities: Net income 9,122 2,603 3,416 Adjustments: Depreciation, depletion and amortization 9,299 7,121 10,494 Other adjustments 4, Net cash provided by operating activities 22,614 10,481 14,744 Investing activities: Purchases of property, plant and equipment (8,122) (9,804) (13,029) Saga Petroleum ASA - (3,629) 719 Purchases of other long-term investments (3,691) (421) (907) Net sales (purchases) of short-term investments (52) Proceeds from sales of property, plant and equipment 1,178 1,504 1,956 Proceeds from sales of other long-term investments 8,019 2,673 2,863 Net cash used in investing activities (2,668) (9,666) (8,366) Financing activities: Loan proceeds 1,034 18,004 21,707 Principal repayments (7,720) (14,097) (19,626) Ordinary shares purchased - (874) (1,599) Ordinary shares issued 40-3 Dividends paid (2,094) (1,718) (1,718) Net cash provided by (used in) financing activities (8,740) 1,315 (1,233) Foreign currency effects on cash flows Net increase in cash and cash equivalents 11,686 2,379 5,499 Cash and cash equivalents at beginning of period 7,435 1,936 1,936 Cash and cash equivalents at end of period 19,121 4,315 7,435 12

13 EBITDA* and reconciliation to income before taxes and minority interest The transition to the new steering model, Value-Based Management, has moved Hydro's focus to cash flow-based indicators, before and after taxes. EBITDA, defined as income (loss) before tax, interest expense, depreciation, amortization, writedowns and certain other financial items, is an approximation of cash flow from operations before tax. It is being used as a measure to assess performance in Hydro's operational areas and business segments. Accordingly, EBITDA is a measure that includes results from non-consolidated investee companies and gains and losses on sales of activities classified as "Other Income (Loss)" in the income statement. It excludes depreciation, writedowns and amortization, as well as amortization of goodwill in non-consolidated investee companies. EBITDA should not be construed as an alternative to operating income and income before taxes as an indicator of the company's operations in accordance with generally accepted accounting principles. Nor is EBITDA an alternative to cash flow from operating activities in accordance with generally accepted accounting principles. Hydro's definition of EBITDA can differ from that of other companies. Hydro has also introduced cash return on gross investment (CROGI) as an annual rate of return measure. CROGI is defined as gross cash flow after taxes, divided by gross investment 1). Gross cash flow is defined as EBITDA less taxes, while gross investment is defined as total assets plus accumulated depreciation, amortization and writedowns, less shortterm interest-free debt 2). The EBITDA figures by core business area are presented in the table below, in addition to the reconciliation from EBITDA to income before taxes and minority interest EBITDA Year 4,075 6,982 7,697 7,976 Hydro Oil and Energy 22,655 8,265 13,579 1,065 1,803 1,659 1,566 Hydro Light Metals 5,028 2,687 3, ,041 1, Hydro Agri 3,163 1,450 1, ,999 Other 2,886 2,228 3,464 5,790 10,349 10,996 12,387 Total 33,732 14,630 21,944 3,202 3,173 3,282 2,844 - Depreciation 9,299 7,121 10, Write-down Amortization of goodwill of non-consolidated investees Interest expense 2,496 1,766 2,566 (295) Net foreign exchange loss (gain) 1,079 (254) Other financial items ,034 5,912 6,394 8,288 Income before tax and minority interest 20,594 5,799 7,873 EBITDA information by segment in each of the core business areas, as well as an explanation of the financial performance of each segment, is included in the presentation of the business areas. *EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization. 1) Deferred tax assets are not included in gross investment. 2) Deferred taxes and taxes payable are not deducted from gross investment. 13

14 INDIVIDUAL INDUSTRY SEGMENTS Operating revenues Third quarter Year NOK million Exploration and Production 8,789 5,269 25,212 10,389 17,406 Energy 11,201 4,614 29,458 11,695 18,102 Oil Marketing 1, ,855 1,796 2,652 Eliminations (8,267) (3,151) (20,775) (7,575) (12,068) Hydro Oil and Energy 12,743 7,408 36,750 16,305 26,092 Aluminium Metal Products 5,760 4,412 17,985 12,570 17,281 Aluminium Extrusion 3,823 2,854 11,791 8,950 12,081 Other Light Metals 1,873 1,733 6,271 5,772 7,716 Eliminations (1,586) (1,229) (4,898) (3,651) (4,857) Hydro Light Metals 9,870 7,770 31,149 23,641 32,221 Plant Nutrition 7,614 5,713 24,605 20,687 26,799 Gas and Chemicals 1,169 1,178 3,557 3,495 4,718 KFK 2,832 2,477 7,884 7,349 9,756 Eliminations (465) (412) (1,461) (1,297) (1,615) Hydro Agri 11,150 8,956 34,585 30,234 39,658 Petrochemicals 1,543 1,362 4,613 3,773 5,346 Other Activities ,096 2,982 3,847 Segments 36,213 26, ,193 76, ,164 Corporate ,911 2,969 3,959 Eliminations (2,532) (2,166) (7,527) (6,158) (8,690) Total 34,646 25, ,577 73, ,433 External revenues Third quarter Year NOK million Exploration and Production 1,286 2,544 6,568 3,935 6,996 Energy 9,187 3,483 23,902 8,741 13,865 Oil Marketing 1, ,849 1,794 2,648 Hydro Oil and Energy 11,491 6,702 33,319 14,470 23,509 Aluminium Metal Products 4,177 3,160 13,069 8,845 12,072 Aluminium Extrusion 3,821 2,839 11,785 8,881 11,974 Other Light Metals 1,804 1,671 6,018 5,582 7,442 Hydro Light Metals 9,802 7,670 30,872 23,308 31,488 Plant Nutrition 7,113 5,121 23,048 19,174 24,776 Gas and Chemicals 1,119 1,130 3,408 3,330 4,521 KFK 2,761 2,412 7,725 7,214 9,558 Hydro Agri 10,993 8,663 34,181 29,718 38,855 Petrochemicals 1,531 1,329 4,582 3,670 5,221 Other Activities ,350 2,132 2,793 Segments 34,534 24, ,304 73, ,866 Corporate Total 34,646 25, ,577 73, ,433 14

15 Internal revenues Third quarter Year NOK million Exploration and Production 7,503 2,725 18,644 6,454 10,410 Energy 2,014 1,131 5,556 2,954 4,237 Oil Marketing Eliminations (8,267) (3,151) (20,775) (7,575) (12,068) Hydro Oil and Energy 1, ,431 1,835 2,583 Aluminium Metal Products 1,583 1,252 4,916 3,725 5,209 Aluminium Extrusion Other Light Metals Eliminations (1,586) (1,229) (4,898) (3,651) (4,857) Hydro Light Metals Plant Nutrition ,557 1,513 2,023 Gas and Chemicals KFK Eliminations (465) (412) (1,461) (1,297) (1,615) Hydro Agri Petrochemicals Other Activities ,054 Segments 1,679 1,337 4,889 3,637 5,298 Corporate ,638 2,521 3,392 Eliminations (2,532) (2,166) (7,527) (6,158) (8,690) Total Operating income (loss) Third quarter Year NOK million Exploration and Production 5,258 1,501 14,351 3,216 5,840 Energy , Oil Marketing Eliminations Hydro Oil and Energy 5,766 1,893 15,903 4,062 6,962 Aluminium Metal Products , ,357 Aluminium Extrusion Other Light Metals (11) Eliminations (1) (13) (14) (31) (43) Hydro Light Metals ,310 1,492 2,179 Plant Nutrition 65 (603) 800 (629) (2,239) Gas and Chemicals KFK Eliminations (10) (16) 33 (12) (14) Hydro Agri 221 (441) 1,207 (224) (1,671) Petrochemicals (93) 113 Other Activities Segments 7,338 2,269 21,270 5,367 7,829 Corporate 127 (119) (37) (350) (101) Eliminations (3) (11) (10) (14) 7 Total 7,462 2,139 21,223 5,003 7,735 15

16 EBITDA Third quarter Year NOK million Exploration and Production 7,388 3,594 20,835 7,036 11,971 Energy , ,148 Oil Marketing Eliminations (2) 1 (1) 9 9 Hydro Oil and Energy 7,976 4,075 22,655 8,265 13,579 Aluminium Metal Products 1, ,493 1,328 2,016 Aluminium Extrusion , ,071 Other Light Metals Eliminations (1) (14) (14) (31) (44) Hydro Light Metals 1,566 1,065 5,028 2,687 3,760 Plant Nutrition 516 (171) 2, (119) Gas and Chemicals KFK Eliminations (10) (15) 33 (11) (15) Hydro Agri ,163 1,450 1,141 Petrochemicals Other Activities ,564 2,029 Segments 10,960 5,791 32,199 14,529 21,364 Corporate 1, , Eliminations 27 (10) (54) (5) 14 Total 12,387 5,790 33,732 14,630 21,944 Depreciation, depletion and amortization Third quarter Year NOK million Exploration and Production 1,763 2,155 6,035 3,868 6,072 Energy Oil Marketing Hydro Oil and Energy 1,826 2,219 6,213 4,159 6,426 Aluminium Metal Products Aluminium Extrusion Other Light Metals Hydro Light Metals ,223 1,100 1,504 Plant Nutrition ,246 Gas and Chemicals KFK Hydro Agri ,358 1,320 1,853 Petrochemicals Other Activities Segments 2,814 3,173 9,212 7,034 10,370 Corporate Eliminations - (2) (3) (3) (5) Total 2,844 3,202 9,299 7,121 10,494 16

17 Additions property, plant & equipment and intangible assets First Second Third quarter quarter quarter NOK million Exploration and Production 1,909 1,904 1,938 5,751 Energy Oil Marketing Hydro Oil and Energy 1,936 1,955 1,977 5,868 Aluminium Metal Products ,056 Aluminium Extrusion 1, ,699 Other Light Metals Hydro Light Metals 2, ,119 Plant Nutrion Gas and Chemicals KFK Hydro Agri ,146 Petrochemicals Other Activitites Segments 4,494 2,838 3,459 10,791 Corporate Sum 4,530 2,875 3,511 10,916 17

18 Operating income - EBIT 1) - EBITDA 2) Third quarter 2000 NOK million Operating Non-cons. Interest Selected Other Depr. income investees income financial income EBIT and EBITDA items Amort. Exploration and Production 5,258 1 (23) ,625 1,763 7,388 Energy (2) Oil Marketing (1) Eliminations (3) (2) Hydro Oil and Energy 5, (19) ,152 1,824 7,976 Aluminium Metal Products (10) ,066 Aluminium Extrusion (1) Other Light Metals (11) (5) Eliminations (1) (1) - (1) Hydro Light Metals (11) 72 1, ,566 Plant Nutrition (1) Gas and Chemicals KFK Eliminations (10) (10) - (10) Hydro Agri Petrochemicals 190 (2) Other Activities Segments 7, ,132 2,828 10,960 Corporate , ,400 Eliminations (3) (1) (1) 27 Total 7, ,413 9,528 2,859 12,387 Operating income - EBIT 1) - EBITDA 2) NOK million Operating Non-cons. Interest Selected Other Depr. income investees income financial income EBIT and EBITDA items Amort. Exploration and Production 14, ,800 6,035 20,835 Energy 1, , ,550 Oil Marketing (1) Eliminations (1) (1) Hydro Oil and Energy 15, ,442 6,213 22,655 Aluminium Metal Products 2, , ,493 Aluminium Extrusion (1) ,013 Other Light Metals (5) Eliminations (14) (14) - (14) Hydro Light Metals 3, ,759 1,269 5,028 Plant Nutrition , ,144 Gas and Chemicals KFK Eliminations Hydro Agri 1, ,798 1,365 3,163 Petrochemicals 453 (7) Other Activities (19) Segments 21, ,933 9,266 32,199 Corporate (37) , ,587 Eliminations (10) (1) - (40) - (51) (3) (54) Total 21, , ,552 24,379 9,353 33,732 1) EBIT: Earning Before Interest and Tax. 2) EBITDA: Earning Before Interest, Tax, Depreciation and Amortization. 18

19 SAGA TRANSACTION On 10 June, 1999, Hydro and Statoil jointly commenced a joint voluntary offer under Norwegian law to acquire all of the outstanding ordinary shares of Saga other than those shares held by U.S. Persons (as defined in Regulation S under the Securities Act of 1933). The consideration offered consisted of one Hydro share for each three Saga shares with an additional cash payment in NOK in an amount which ensured that the aggregate consideration per Saga share had a value of NOK 135. All of Saga s ordinary shares were acquired representing a total value of NOK 20.2 billion. An agreement between Hydro and Statoil required the transfer of interests in certain of Saga s oil and gas production licenses with a total market value of NOK 8.4 billion to Statoil with effect from 1 July, The consideration received in exchange for such interests consisted of Statoil s shares in Saga together with a cash payment of NOK 4.5 billion, which was paid in December Hydro s acquisition of the Saga ordinary shares, amounting to NOK 16.2 billion, was financed by a share issue of NOK 11.6 billion and a cash payment of NOK 4.6 billion. The acquisition resulted in a total excess value for Hydro of NOK 12.6 billion and this was allocated to oil and gas production licenses to be depreciated by the unit of production method. The excess value could be adjusted when a final decision is taken by the Norwegian authorities regarding Saga s tax position. Saga s activities were consolidated in Hydro s accounts with effect from 1 July, Unaudited Pro Forma Combined Financial Information The following unaudited pro forma combined financial information combines Hydro s and Saga s results for the nine months ended 30 September, 1999 giving effect to the transaction as if it had occurred on 1 January, The pro forma information is presented according to the purchase method of accounting. The accounting policies of Hydro and Saga are substantially comparable, and consequently, no adjustments to the unaudited pro forma financial information were made to conform the accounting policies of the combining companies. The information presented below should be read in conjunction with the other related Saga transaction information presented in this report. Unaudited Pro Forma Combined Financial Information For the Nine Months Ended 30 September, September, 1999 Pro Forma in NOK millions, except per share data Combined (3) Operating revenues (1) 76,177 Operating income (2) 4,041 Income before cumulative effect of change in accounting principle 1,601 Net income 1,571 Earnings per share Before cumulative effect of change in accounting principle 6.00 Cumulative effect of change in accounting principle (0.10) Earnings per share 5.90 Average number of outstanding shares 266,114,302 The unaudited pro forma combined financial information for the nine months ended 30 September, 1999 is prepared using the same methodology as in the Offer to Purchase dated 10 June, Saga s historical net income for the nine months ended 30 September, 1999 includes NOK 1,001 million in losses on price hedging contracts. Amortization of excess value of PP&E of NOK 1,489 million is included in operating income. (1) Certain of Saga income statement amounts have been reclassified to conform with the financial statement presentation of Hydro. (2) According to the Hydro-Statoil Agreement, certain of Saga s oil and gas production licenses were transferred to Statoil. Operating income reflects the estimated revenues and expenses for the nine months ended 30 September, 1999, after production licenses have been transferred to Statoil. (3) Reflects the adjustments to revalue the assets and liabilities of Saga to fair value. The total consideration has been allocated to the assets and liabilities of Saga based on management s best estimates. The figures reflect the adjustments for the amortization of excess value of PP&E and income tax expense for the nine months ended 30 September,