Norsk Hydro First quarter 1999

Transcription

1 Norsk Hydro First quarter 1999

2 Norsk Hydro First quarter 1999 Consolidated results (US GAAP) th qtr NOK million 1st qtr 1st qtr 760 Operating income 1,114 2, Non-consolidated investees (328) Net financial expense (114) (384) Other income Income before tax 1,258 1, Income tax (expense) benefit (520) (924) 463 Net income 709 1, Earnings per share Norsk Hydro's financial results in the first quarter were influenced by considerable price pressure on most of Hydro's main products. Net income was NOK 709 million (USD 92.4 million), or NOK 3.10 per share (USD 0.40). This was a decrease of 30% compared to the first quarter of Operating income of NOK 1,114 million (USD million) was 51% below that in the same period of last year. information start Earnings for non-consolidated investees were NOK 109 million in the first quarter, compared to NOK 43 million last year. Earnings in the first quarter of 1998 were affected by a charge of NOK 104 million related to Hydro's share of the loss reported by Dyno in the fourth quarter of Hydro Texaco improved, while the affiliates within Hydro Agri International showed a decline in operating income caused by low fertilizer prices. Net financial expense was NOK 270 million lower than last year. The reduction was primarily due to a lower net foreign exchange loss and to a somewhat higher capitalized interest.

3 Norsk Hydro First quarter 1999 Other income in the first quarter of NOK 149 million reflected a gain on the sale of the plastic pipe systems activities of Mabo AS. Hydro's investments in the first quarter totaled NOK 3 billion, which was 27% percent above that in the same period of the previous year. Investments for 1999 as a whole are expected to be approximately NOK 12 billion. EXPLORATION AND PRODUCTION th qtr NOK million 1st qtr 1st qtr 307 Operating income 714 1, Exploration expense Oil and gas production (thousands boe/d) Oil price (USD/bbl) Oil price (NOK/bbl) Operating income for Exploration and Production was NOK 714 million in the first quarter of 1999, a decline of 29% compared to last year. The decrease was principally due to lower crude oil prices. information start The average crude oil price in the first quarter was USD per barrel, which was 18% lower than in the same quarter of last year. The decrease stated in Norwegian kroner was 17%. Average natural gas prices were 22% below those in the first quarter of last year. Hydro's oil and gas production in the first quarter was at the same level as last year. The Norwegian authorities have decided to reduce planned Norwegian oil production by 200,000 barrels per day, starting 1 April, However, due to changes in Hydro's production pattern, it is probable that the group s 1999 production will be slightly higher than last year.

4 Norsk Hydro First quarter 1999 Expenses related to the operation of fields and transport installations were somewhat lower than in the same period last year. This was due to a decline in field costs, reduced purchases of natural gas for injection purposes and slightly lower depreciation. Exploration expense was NOK 187 million in the first quarter, compared to NOK 196 million in the first quarter of last year. Lower exploration costs on the Norwegian continental shelf were offset by increased activity in Canada and Angola. A new discovery was made offshore Canada's east coast in the Hebron area, in which Hydro has a 10% interest. REFINING AND MARKETING th qtr NOK million 1st qtr 1st qtr (9) Operating income (loss) 82 9 Operating income for Refining and Marketing was NOK 82 million, compared with NOK 9 million last year. The improvement during the first quarter of 1999 was mainly due to increasing crude oil prices. information start Earnings from the international trade of crude oil, liquefied natural gas and refined oil products were better than earnings in the first quarter of last year. The improvement was affected by the increase in oil prices through the sale of inventory with low historical cost. Lower upgrading margins weakened Hydro's refining margin. The company's share of Hydro Texaco's earnings rose substantially in the first quarter of The favorable change was a result of improved profitability in the retail marketing of fuel and heating oil products in Norway and Denmark.

5 Norsk Hydro First quarter 1999 HYDRO ENERGY th qtr NOK million 1st qtr 1st qtr 120 Operating income Operating income for Hydro Energy was NOK 130 million, which was 34% below last year s earnings. The decline was due to a writedown of NOK 74 million related to Hydro's involvement in a project in Ireland to produce peat-based briquettes for heating. Hydro's electricity production in the first quarter increased 10% to 2.8 TWh. However, realized electricity prices were somewhat lower than prices in the corresponding period of last year. HYDRO AGRI EUROPE th qtr NOK million 1st qtr 1st qtr (670) Operating income (loss) (16) 249 information start Hydro Agri Europe had an operating loss of NOK 16 million in the first quarter of 1999, compared to an operating income of NOK 249 million last year. The reduction was caused by more difficult market conditions with lower demand, as well as by weaker nitrogen fertilizer prices. Lower oil prices reduced gas costs for the production of ammonia. This year's results also included a charge of NOK 75 million related to workforce reductions that will occur following the shutdown of a phosphoric acid plant in Rotterdam. Total fertilizer deliveries to Western Europe continue to be below deliveries in the corresponding period of the previous fertilizer season. Overall consumption in the 1998/99 fertilizer season is expected to be about 5% lower than the prior season, due in part to an increase in set-aside acreage in the EU.

6 Norsk Hydro First quarter 1999 Nitrogen fertilizer prices in Western Europe in the first quarter were 5-10% lower than in the same period of last year, while complex fertilizer prices have been more stable. Fixed production costs stated in local currencies decreased compared to the first quarter of However, these savings were offset by the weakening in the value of the Norwegian krone. Costs related to the implementation of new integrated information systems remained high in the first quarter of 1999, but are expected to begin decreasing in the second quarter. HYDRO AGRI INTERNATIONAL th qtr NOK million 1st qtr 1st qtr 30 Operating income (loss) (63) 36 Hydro Agri International reported an operating loss of NOK 63 million in the first quarter of 1999, compared to an operating income of NOK 36 million in the same period last year. First quarter results were impacted by losses, both realized and expected for the remainder of 1999, of NOK 71 million related to long-term fixed-price contracts for the purchase of ammonia from Hydro s partly owned ammonia plant in Trinidad. Low ammonia prices, combined with weak operating regularity, also led to a decrease in earnings for Hydro s wholly owned ammonia plant in Trinidad. information start Fertilizer sales volumes in the first quarter were comparable to those in the same period of last year, with higher sales in North America offset by reduced sales in Latin America. Although fertilizer trading operations had a positive result, earnings were below last year's figure. Non-consolidated investees added to net income of NOK 40 million, compared to NOK 90 million in the first quarter of last year. The reduction reflected lower prices for nitrogen-based products.

7 Norsk Hydro First quarter 1999 Nitrogen fertilizer prices were extremely low throughout the first quarter. Strong growth in exports following the devaluations in Russia and Ukraine, as well as China's continued ban on imports are expected to result in low urea prices. For phosphate-based fertilizers there is a better market balance, providing relatively stable prices. INDUSTRIAL CHEMICALS th qtr NOK million 1st qtr 1st qtr 77 Operating income Earnings for Industrial Chemicals rose by 26% compared to last year. Hydro Chemicals showed improvement, reflecting better margins and lower costs. Higher costs for Hydrogas offset its 7% growth in sales and caused a decline in earnings. The increase in costs was partly due to a change in Hydrogas' supply system, which resulted from additional maintenance work and start-up costs in new markets. information start

8 Norsk Hydro First quarter 1999 A/S KORN- OG FODERSTOF KOMPAGNIET KFK th qtr NOK million 1st qtr 1st qtr 274 Operating income (loss) (32) (9) KFK, the Danish feedstuff producer, had an operating loss of NOK 32 million in the first quarter, which was NOK 23 million higher than last year's loss. The decline reflected a slight weakening within grain trading. Earnings in the fourth quarter of 1998 were favorably impacted by one-time effects totaling NOK 306 million, associated with an insurance settlement and a change in KFK's accounting principle for depreciation. HYDRO ALUMINIUM METAL PRODUCTS th qtr NOK million 1st qtr 1st qtr 434 Operating income information start Operating income for Hydro Aluminium Metal Products decreased by 72% compared to the first quarter of last year. The decline was mainly attributable to lower realized prices, which fell by nearly 15% from last year. Metal production was unchanged. Aluminium prices on the London Metal Exchange (LME) continued to weaken in the first quarter to an average of about USD 1,200 per tonne compared to USD 1,500 per tonne in the same period last year. As a result of the time-lag in pricing to customers, realized prices in the first quarter of 1999 were slightly above USD 1,300 per tonne. In 1999, Hydro has also contracted the majority of its production through a hedging program and other LME contracts.

9 Norsk Hydro First quarter 1999 This price hedging program had no impact on the first quarter results. For the remainder of 1999, 75% of production has been contracted at an average price of about USD 1,350 per tonne. Realized prices for the second quarter of this year are expected to be somewhat below this level. Earnings for metal trading activities were somewhat below earnings in the corresponding period of last year and substantially lower than in the fourth quarter of HYDRO ALUMINIUM EXTRUSION th qtr NOK million 1st qtr 1st qtr 140 Operating income Operating income for Hydro Aluminium Extrusion was on the same level as last year. Sales volumes and the inflow of new orders continue to grow. Extrusion Europe showed stable earnings while the business unit, Building Systems, was negatively impacted by the weak market in Germany. This weakening was partly compensated by progress in southern Europe. Heat Transfer recorded substantial improvement following its earnings setback in information start

10 Norsk Hydro First quarter 1999 PETROCHEMICALS th qtr NOK million 1st qtr 1st qtr (4) Operating income (loss) (69) 123 Petrochemicals had an operating loss of NOK 69 million in the first quarter of 1999, compared to an operating income of NOK 123 million in the same period of the previous year. The worsening was principally due to a decline of about 32% in S-PVC prices compared to last year. The effect of this decrease was partly offset by a 17% increase in S-PVC production. Caustic soda prices weakened slightly during the quarter. OTHER ACTIVITIES th qtr NOK million 1st qtr 1st qtr 55 Operating income information start Other activities include Hydro Aluminium Rolled Products, Hydro Raufoss Automotive, Hydro Magnesium, Hydro Seafood, Pronova, Hydro Technology and Projects, and the casualty insurance company, Industriforsikring. Operating income for Hydro Aluminium Rolled Products in the first quarter was comparable to earnings in the same period of last year. Hydro Raufoss Automotive continued to record negative earnings mainly due to high development costs and volume that was lower than expected.

11 Norsk Hydro First quarter 1999 Hydro Magnesium showed good improvement in earnings. Market conditions for magnesium remain favorably affected by strong growth within automotive applications. Hydro's production in the first quarter was 18% above production in the same period of last year. Hydro Seafood's salmon farming operation progressed and had positive earnings in the first quarter of The Scottish activities continued to operate at a loss in the first quarter of This was considerably less than in the last two quarters of 1998, when the activities suffered significant losses because of the outbreak of a serious salmon disease. FINANCE information start th qtr NOK million 1st qtr 1st qtr 286 Net interest expense Net foreign exchange loss 210 (108) Net gain on securities (179) (165) 22 Other, net Net financial expense NOK/USD exchange rate 1) ) As of the end of the period. Net financial expense in the first quarter amounted to NOK 114 million compared to NOK 384 million in the same period of last year. The reduction compared to last year was primarily due to a lower net foreign exchange loss and to a somewhat higher capitalized interest. Capitalized interest on plant under construction totaled NOK 182 million in the first quarter of 1999 against NOK 118 million in the previous year. Several large investments within Exploration and Production reaching completion accounted for the increase.

12 Norsk Hydro First quarter 1999 As part of its financing for investments, Norsk Hydro ASA issued long-term debt in January 1999 worth NOK 7.1 billion in the US and the UK. The US issue totaled USD 575 million split in two issues: USD 300 million 10-year notes at 6.36%, and USD 275 million 30-year debentures at 7.15%. In the UK, the notes payable of GBP 225 million at 6.50% are due after 22 years. Cash provided by operations was NOK 2.7 billion in the first quarter of 1999, compared to NOK 1.7 billion in the first quarter of The increase was due to net working capital being unchanged in the quarter while it increased substantially during the same period of last year. TAXES The provision for current and deferred taxes in the first quarter of 1999 was NOK 520 million, equivalent to 41% of pre-tax income. The corresponding figure for the first quarter of 1998 was NOK 924 million, equivalent to 48% of pre-tax income. The lower effective tax rate in the first quarter of 1999 was affected by the recognition of tax benefits related to previous years' losses in parts of Hydro's overseas operations. The effective tax rate for the year as a whole is estimated to be approximately 50% assuming that the oil price remains unchanged from the present level. information start Oslo, 22 April 1999 The Board of Directors

13 Norsk Hydro First quarter 1999 INCOME STATEMENTS First quarter Year NOK million except per share data Operating revenues 24,163 25,760 97,468 Depreciation, depletion and amortization 1,984 1,969 7,508 Other operating costs 21,065 21,520 84,130 Operating income 1,114 2,271 5,830 Equity in net income of non-consolidated investees Financial expense, net (114) (384) (409) Other income 149 Income before taxes and minority interest 1,258 1,930 5,831 Income tax expense (520) (924) (1,979) Minority interest 1 2 (98) Income before cumulative effect of change in accounting principle 739 1,008 3,754 Cumulative effect of change in accounting principle (30) Net income 709 1,008 3,754 Earnings per share before change in accounting principle Earnings per share information start Comments 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 1998 Annual Report. Interim figures are unaudited. Earnings and shareholders equity per share have been calculated based on the average number of outstanding shares of 229,072,674. Hydro has in the first quarter of 1999 implemented SOP (Statement of Position) 98-5 from the AICPA (American Institute of Certified Public Accountants) requiring all start-up costs to be expensed as incurred. Previously capitalized costs have been expensed in the first quarter this year.

14 Norsk Hydro First quarter 1999 BALANCE SHEETS NOK million except per share data ASSETS Current assets Cash and cash equivalents 8,327 5,043 1,936 Other liquid assets 2,252 3,095 2,493 Receivables 26,636 26,020 25,388 Inventories 14,237 13,847 15,494 Total current assets 51,452 48,005 45,311 Non-current assets Property, plant and equipment, less accumulated depreciation, depletion and amortization 63,813 58,775 63,632 Other assets 15,293 14,703 15,080 Total non-current assets 79,106 73,478 78,712 Total assets 130, , ,023 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Bank loans and other interest bearing short-term debt 4,492 5,508 5,150 Current portion of long-term debt 2,000 1,746 1,587 Other current liabilities 20,022 20,586 19,890 Total current liabilities 26,514 27,840 26,627 information start Long-term liabilities Long-term debt 30,286 22,246 24,105 Deferred tax liabilities 18,949 18,038 18,423 Other long-term liabilities 5,240 4,930 5,311 Total long-term liabilities 54,475 45,214 47,839 Minority shareholders interest in consolidated subsidiaries 1,225 1,220 1,266 Shareholders equity 48,344 47,209 48,291 Total liabilities and shareholders equity 130, , ,023 Shareholders equity per share

15 Norsk Hydro First quarter 1999 STATEMENTS OF CASH FLOWS First quarter Year NOK million Operating activities: Net income 709 1,008 3,754 Adjustments: Depreciation, depletion and amortization 1,984 1,969 7,508 Other adjustments (1,242) (2,762) Net cash provided by operating activities 2,693 1,735 8,500 Investing activities: Purchases of property, plant and equipment (2,846) (2,194) (12,321) Purchases of long-term investments (42) (118) (1,550) Net sales (purchases) of short-term investments 14 (9) (16) Proceeds from sales of property, plant and equipment Proceeds from sales of other long-term investments ,001 Net cash used in investing activities (1,874) (2,204) (11,612) information start Financing activities: Loan proceeds 9,377 4,285 7,614 Principal repayments (3,890) (1,256) (3,579) Dividends paid (1,718) Net cash provided by financing activities 5,487 3,029 2,317 Foreign currency effects on cash flows Net increase (decrease) in cash and cash equivalents 6,391 2,605 (502) Cash and cash equivalents at beginning of period 1,936 2,438 2,438 Cash and cash equivalents at end of period 8,327 5,043 1,936

16 Norsk Hydro First quarter 1999 INDIVIDUAL INDUSTRY SEGMENTS Operating revenues First quarter Year NOK million Exploration and Production 2,426 2,970 10,637 Refining and Marketing 2,624 3,382 11,101 Hydro Energy ,068 Hydro Agri Europe 5,639 6,117 18,632 Hydro Agri International 3,178 3,341 14,856 Industrial Chemicals 1,161 1,134 4,716 KFK 2,129 2,302 10,143 Hydro Aluminium Metal Products 4,134 4,689 18,235 Hydro Aluminium Extrusion 3,040 3,048 12,088 Petrochemicals 1,208 1,550 6,028 Other Activities 3,181 2,947 11,630 Corporate ,346 Eliminations (6,438) (7,375) (28,012) Total 24,163 25,760 97,468 information start

17 Norsk Hydro First quarter 1999 External revenues First quarter Year NOK million Exploration and Production ,612 Refining and Marketing 2,542 3,233 10,609 Hydro Energy ,372 Hydro Agri Europe 4,480 4,951 13,898 Hydro Agri International 2,733 2,814 12,595 Industrial Chemicals 1,101 1,085 4,457 KFK 2,097 2,258 9,877 Hydro Aluminium Metal Products 2,857 3,037 12,375 Hydro Aluminium Extrusion 3,015 3,015 11,944 Petrochemicals 1,176 1,516 5,851 Other Activities 2,748 2,572 10,238 Corporate Total 24,163 25,760 97,468 information start Internal revenues First quarter Year NOK million Exploration and Production 1,587 2,219 7,025 Refining and Marketing Hydro Energy ,696 Hydro Agri Europe 1,159 1,166 4,734 Hydro Agri International ,261 Industrial Chemicals KFK Hydro Aluminium Metal Products 1,277 1,652 5,860 Hydro Aluminium Extrusion Petrochemicals Other Activities ,392 Corporate ,706 Eliminations (6,438) (7,375) (28,012) Total

18 Norsk Hydro First quarter 1999 Operating income (loss) First quarter Year NOK million Exploration and Production 714 1,006 2,565 Refining and Marketing Hydro Energy Hydro Agri Europe (16) 249 (725) Hydro Agri International (63) Industrial Chemicals KFK (32) (9) 375 Hydro Aluminium Metal Products ,854 Hydro Aluminium Extrusion Petrochemicals (69) Other Activities Corporate (80) (54) (236) Eliminations (9) (32) 38 Total 1,114 2,271 5,830 information start Depreciation, depletion and amortization First quarter Year NOK million Exploration and Production ,505 Refining and Marketing Energy Hydro Agri Europe ,132 Hydro Agri International Industrial Chemicals KFK (1) Hydro Aluminium Metal Products Hydro Aluminium Extrusion Petrochemicals Other Activities Corporate Eliminations (1) (1) (6) Total 1,984 1,969 7,508

19 Norsk Hydro First quarter 1999 QUARTERLY RESULTS NOK million except per share data * 1st qtr 1st qtr 2nd qtr 3rd qtr 4th qtr Operating revenues 24,163 25,760 25,362 22,172 24,174 Operating income 1,114 2,271 1, Net income 709 1,008 1, Earnings per share USD million except per share data * 1st qtr 1st qtr 2nd qtr 3rd qtr 4th qtr Operating revenues 3, , , , ,223.1 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: information start

20 Norsk Hydro First quarter 1999 EFFECT OF IMPLEMENTATION OF NEW NORWEGIAN ACCOUNTING ACT Norway has adopted a new accounting law, effective 1 January, For Norsk Hydro, this will remove most of the differences that have existed between the financial statements according to Norwegian and US accounting principles. See Note 27 on pages in the 1998 Annual Report. The table below shows the effect of the new accounting law on shareholders' equity. The calculations are based on preliminary estimates. Amounts in NOK million N GAAP Shareholders' equity as of ,532 Other liquid assets 298 Prepaid expenses and other current assets 602 Property, plant and equipment - capitalized costs 7,999 Unrealized gains - current and long-term 184 Deferred tax assets and liabilities - current and long-term (6,113) N GAAP Shareholders' equity as of ,502 For Hydro, the main differences between Norwegian and US accounting principles following the implementation of the new accounting law in Norway are associated with derivative commodity contracts, unrealized gains and losses related to available-for-sale securities, and the treatment of dividends. information start Derivative commodity contracts: In N GAAP, unrealized gains and losses on commodity futures and option contracts are netted within each portfolio, while net unrealized gains are deferred as other short-term liabilities. This includes contracts that are not considered as hedges. In US GAAP, gains and losses are reflected in operating income. Unrealized gains and losses related to available-for-sale securities: In N GAAP, available-for-sale securities are carried at the lower of aggregate historical cost or market value. In US GAAP, available-for-sale securities are valued according to their fair value with the net unrealized holding gains and losses, net of tax effect, recorded in other comprehensive income, with no effect on net income.

21 Norsk Hydro First quarter 1999 Dividends payable: For N GAAP, dividends proposed at the end of the year which will be declared and paid in the following year are recorded as a reduction to equity and as debt. For US GAAP, equity is reduced when dividends are declared. In the first quarter of 1999, income before taxes and minority interest according to Norwegian accounting principles was NOK 1,200 million. This was NOK 58 million lower than net income before taxes and minority interest according to US GAAP. The difference was related to derivative commodity contracts. information start

22 2 VWTXDUWHU Strong price pressure on main products Price increase for crude oil toward end of quarter Weak market for fertilizer Agenda 99 on track

23 3 1HWLQFRPH By quarter NOK million * 1997* Accumulated 6,204 5,205 3, *) After effect of changes in tax law 4th qtr. 1996: NOK 776 million and 4th qtr. 1997: NOK 106 million

24 4 &RQVROLGDWHGLQFRPHVWDWHPHQWV NOK million 1st quarter st quarter 1998 Operating revenue 24,163 25,760 Operating income 1,114 2,271 Transfer back Equity in net income of non-consolidated investees Financial income (expense) Other income (expense) Income before taxes and min. interest Tax Minority interest Accounting changes 109 (114) 149 1,258 (520) 1 (30) 43 (384) - 1,930 (924) 2 - Net income 709 1,008 Earnings per share - NOK

25 5 2SHUDWLQJLQFRPH By quarter NOK million Accumulated 9,653 10,702 5,830 1,114

26 6 2SHUDWLQJLQFRPH By business segment NOK million Exploration and Production Refining and Marketing Hydro Energy Hydro Agri Europe Hydro Agri International Industrial Chemicals KFK Hydro Aluminium Metal Products Hydro Aluminium Extrusion Petrochemicals Other Activities 1st quarter (16) (63) 97 (32) (69) 87 1st quarter , (9) Corporate Eliminations (80) (9) Total 1,114 2,271 (54) (32)

27 7 9DULDQFHDQDO\VLVJURXS Operating income 1st quarter st quarter 1998 NOK million 1,114 2,271 Variance (1,157) Transfer back - Lower prices, Exploration and Production - Margin - Volume - Fixed costs - Other (530) (500) (60) (60) (10)

28 8 2LODQG(QHUJ\ Crude oil price increase in March Government-mandated production cut produces lower growth in oil production Initiatives for reduced unit costs Oil find in Hebron area offshore Canada Progress for Hydro Texaco Writedown of Energy project in Ireland

29 9 ([SORUDWLRQDQG3URGXFWLRQ Operating income NOK million Transfer back * Accumulated 5,213 6,363 2, *) Frigg-area: Impairment and other losses NOK 400 million in 3rd qtr and NOK 600 million in 4th qtr. 1996

30 10 9DULDQFHDQDO\VLV([SORUDWLRQDQG3URGXFWLRQ Operating income 1st quarter st quarter 1998 NOK million 714 1,006 Variance (292) Transfer back - Price - Volume - Field costs - Depreciation - Other (530) (20)

31 11 2SHUDWLQJFRVWVSHUEDUUHORLOHTXLYDOHQWV NOK/barrel oe Exploration/other Field and production costs 40 Depreciation and abandonment Transfer back * 1996* * 1st q. 99 Net operating costs Transportation cost *) Excl. impairment Frigg area in 1995 and 1996 and write-down Sincor in 1998.

32 12 3ULFHGHYHORSPHQW²FUXGHRLO Average per quarter USD/bbl 25 NOK/bbl Transfer back st q. 99 USD/bbl NOK/bbl 80 1st quarter 1999: 86.4 NOK/bbl 11.3 USD/bbl

33 13 3HWUROHXPSURGXFWLRQ Own reserves, per quarter 1,000 barrels oe per day Per year: st q Gas Oil

34 14 3URGXFWLRQ3URILOH Oil and gas Barrel o.e. per day Under development Under evaluation* Illustration shows a decrease of about 5% from Hydro's evaluation in February In production e 2002e Transfer back Main reason for the decrease is the government's decision on further reductions in oil production on the Norwegian continental shelf by 100,000 barrels per day from April *) Fields under evaluation: Vale, Tune, Oseberg Vestflanken and Sigyn (Norway)

35 15 5HILQLQJDQG0DUNHWLQJ Operating income NOK million Transfer back Accumulated

36 16 +\GUR(QHUJ\ Operating income NOK million Transfer back (100) (200) Accumulated

37 17 $JULFXOWXUH Low demand in Europe Low international fertilizer prices Loss on ammonia contract in Trinidad in 1999 Continued good results for Industrial Chemicals

38 18 +\GUR$JUL(XURSH Operating income NOK million (200) Transfer back (400) (600) (800) Accumulated (725) (16)

39 19 9DULDQFHDQDO\VLV+\GUR$JUL(XURSH Operating income NOK million st q. 99 vs. 1st q. 98 (16) 249 1st q. 99 vs. 4th q. 98 (16) (670) Variance (265) 654 Transfer back - Margin - Volume - Fixed costs - Other (60) (100) (10) (95) (50) (50)

40 20 7RWDOLQGXVWU\GHOLYHULHVRIQLWURJHQ Fertilizer season to date**, core western European markets Index 105 Average 94/95-97/98* Transfer back /95 95/96 96/97 97/98 98/99 * Average 94/95-97/98 corresponds to appox. 75% of total seasonal deliveries in this period. ** July - March

41 21 3ULFHGHYHORSPHQW²'$3DQGXUHD USD/tonne DAP Bulk FOB US Gulf 200 Transfer back UREA Bulk FOB Arab Gulf st q. 99 Sources: Green Markets, British Sulphur and Fertecon

42 22 (XURSHDQIHUWLOL]HUSULFHV GBP/tonne 150 AN United Kingdom Bagged ex warehouse FRF/tonne AN France Bulk delivered wholesalers March March 99 DEM/tonne 300 CAN Germany Bulk delivered wholesalers FRF/tonne NPK France Bulk delivered wholesalers Transfer back March March 99 Sources: British Sulphur and Fertecon

43 23 +\GUR$JUL,QWHUQDWLRQDO Operating income NOK million Transfer back (50) (100) Accumulated (63)

44 24 9DULDQFHDQDO\VLV+\GUR$JUL,QWHUQDWLRQDO Operating income 1st quarter st quarter 1998 NOK million (63) 36 Variance (99) Transfer back - Margin - Volume - Fixed costs - Other (80) (15) (10) 5

45 25 /LJKW0HWDOV Low aluminium prices in the quarter, but price increase in March and April 75% of remaining 1999 production has been contracted Stable income and good order intake for extrusion plants High production of magnesium

46 26 +\GUR$OXPLQLXP0HWDO3URGXFWV Operating income NOK million Transfer back (100) Accumulated 635 1,197 1,

47 27 9DULDQFHDQDO\VLV+\GUR$OXPLQLXP0HWDO3URGXFWV Operating income 1st quarter st quarter 1998 NOK million Variance (341) Transfer back - Margin - Volume - Fixed costs - Trading - Price hedging (300) 5 (30) (10) (10)

48 28 $OXPLQLXPSULFHDQGVWRFNV 3-month LME price and total primary inventories in days of consumption USD per tonnes LME price Stock days Stock days st q. 99 Stocks at end of 1st quarter 1999 are 45 days

49 29 +\GUR$OXPLQLXP([WUXVLRQ Operating income NOK million Transfer back Accumulated

50 30 9DULDQFHDQDO\VLV+\GUR$OXPLQLXP([WUXVLRQ Operating income 1st quarter st quarter 1998 NOK million Variance 6 - Margin - Volume - Fixed costs (70) Transfer back

51 31 2UGHULQWDNH Hydro Aluminium Extrusion Index (1st quarter 1996=100) Transfer back

52 32 3HWURFKHPLFDOV Loss after considerable price decline NOK 149 million gain on sale of Mabo

53 3HWURFKHPLFDOV Operating income 33 NOK million Transfer back 0 (50) (100) Accumulated (69)

54 34 9DULDQFHDQDO\VLV3HWURFKHPLFDOV Operating income 1st quarter st quarter 1998 NOK million (69) 123 Variance (192) Transfer back - Margin - Volume - Other (230) 30 10

55 35 3ULFHGHYHORSPHQW²39& S-PVC (pipe grade) CIF, Northwest Europe DEM/kg 2,00 1,50 1,00 0,50 Transfer back 0, March 99 Source: Platt s

56 37 $JHQGD Improve financial performance Consentration on core business Short term measures to reach long term goals: Cost cutting Reduce manning Reduce investments Disposals and alliances Revise strategy for Hydro's long term development Improvement program Effects on operating income NOK 1.0 billion in 1999 NOK 1.5 billion in 2000/2001 NOK 2.5 billion Volume Other 20% 20% 60% Cost

57 38 'HSUHFLDWLRQ Per division NOK million Exploration and Production Refining and Marketing Hydro Energy Hydro Agri Europe Hydro Agri International Industrial Chemicals KFK Hydro Aluminium Metal Products Hydro Aluminium Extrusion Petrochemicals Other Activities 1st quarter st quarter Corporate Eliminations Total 1,984 1, (1) 27 (1)

58 39 1HWILQDQFLDOH[SHQVH NOK million 1st qtr st qtr Interest (income) expense Capitalized interest 440 (181) 418 (118) Net interest expense Transfer back Foreign exchange (gain) loss Dividends paid Net (gain) loss on securities Other - (12) (179) (13) (165) 52 Net financial (income) expense

59 40 (TXLW\LQQHWLQFRPHRIQRQFRQVROLGDWHGLQYHVWHHV Operating income NOK million 1st quarter st quarter 1998 Refining and Marketing Hydro Energy Hydro Agri International Hydro Aluminium Metal Products Corporate Other (4) (77) 6 Transfer back Total

60 41 &RQVROLGDWHGEDODQFHVKHHWV NOK million Cash and cash equivalents Other liquid assets Receivables and inventories Non-current assets 8,327 2,252 40,873 79,106 5,043 3,095 39,867 73,478 1,936 2,493 40,882 78,712 Total assets 130, , ,023 Short-term interest bearing debt Other short-term liabilities Long-term interest bearing debt Deferred tax liabilities Other long-term liabilities Minority interest Shareholders' equity 6,492 20,022 30,286 18,949 5,240 1,225 48,344 7,254 20,586 22,246 18,038 4,930 1,220 47,209 6,737 19,890 24,105 18,423 5,311 1,266 48,291 Total liabilities and shareholders' equity 130, , ,023 Shareholders' equity per share, NOK

61 42 /RQJWHUPGHEWVKDUHKROGHUVHTXLW\ 0,70 0, ,50 0, * 0,30 0,20 0,10 0, Long-term debt divided by shareholders` equity plus minority interest * Corrected for liquidity increase in 1st quarter connected to borrowing

62 43 1HWLQWHUHVWEHDULQJGHEW NOK million Interest bearing debt less cash and cash equivalents

63 44 3URGXFWLRQSHUILHOG 1st quarter Daily average bbls/day Daily average bbls/day Hydro's share Hydro's production 1st qtr Field 1st qtr st qtr Percent Bbls/day Transfer back Oil (incl. NGL/cond.) Oseberg Gullfaks Ekofisk Snorre* Brage Troll Oil Njord Vigdis Norne Other fields 431, , , , , ,000 23,000 86,000 64, , , , ,000 69, ,000 52,000 91, , ,350 31,770 18,827 17,573 15,492 15,552 11,790 7,644 9,963 30,139 Total oil 213,100 Gas 70,900 Total production 284,000 * Hydro's share was changed from 8.27 percent. Hydro's lifting share was percent 1st quarter of 1999.

64 45 ([SORUDWLRQDFWLYLW\DQGFRVWV NOK million Expensed share Transfer back /96 2/96 3/96 4/96 1/97 2/97 3/97 4/97 1/98 2/98 3/98 4/98 1/99 Capitalized share Activity Previously capitalized wells expensed Repayment

65 46 /LIWLQJFRVWVSHUEDUUHO Exploration and Production, Hydro's portfolio NOK per boe st q. 99

66 47 23(&FXWEDFNSODQ Opec production excluding Iraq Mill. bbls per day Quota Riyadh pact Amsterdam plan Den Haag plan J 97 F M A M J J A S O N D J 98 F M A M J J A S O N D J 99 F M A Crude oil, excl. NGL. Source: IEA and S&A

67 48 *OREDORLOVWRFNV Usable commercial stocks of crude and products Days of forward consumption Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan 1996 Excludes FSU and China Excludes strategic / non-commercial stocks Source: EIG "Oil Market Intelligence"

68 49 9DULDQFHDQDO\VLV5HILQLQJDQG0DUNHWLQJ Operating income 1st quarter st quarter 1998 NOK million Variance Transfer back - Margin - Volume - Other 80 5 (15)

69 50 9DULDQFHDQDO\VLV+\GUR(QHUJ\ Operating income 1st quarter st quarter 1998 NOK million Variance (67) Transfer back - Margin - Volume - Other 30 (20) (80)

70 1RUVN+\GUR²VWTXDUWHU 51 1LWURJHQFRQVXPSWLRQDQGLPSRUWV Western Europe Transfer back Mill. tonnes Import 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99e as % of consumtion 13% 20% 19% 21% 22% 24% 23% 21% 21% 21% Consumption Imports from central Europe and FSU Imports from rest of the world

71 52 $PPRQLDSULFH Western Europe C&F USD/tonne Transfer back March 99 Sources: Green Markets, British Sulphur and Fertecon

72 53.RUQRJ)RGHUVWRI.RPSDJQLHW Operating income NOK million Transfer back (50) * 1999 Accumulated (10) (32) *) Includes change in depreciation method 4th quarter 1998, NOK 240 million

73 54 9DULDQFHDQDO\VLV.RUQRJ)RGHUVWRI.RPSDJQLHW Operating income 1st quarter st quarter 1998 NOK million (32) (9) Variance (23) Transfer back - Margin - Volume - Other 20 (25) (15)

74 55,QGXVWULDO&KHPLFDOV Operating income NOK million Transfer back Accumulated

75 56 9DULDQFHDQDO\VLV,QGXVWULDO&KHPLFDOV Operating income 1st quarter st quarter 1998 NOK million Variance Transfer back - Volume - Fixed costs - Other 30 (30) 20

76 57 3ULFHGHYHORSPHQW²SULPDU\DOXPLQLXP 3-month LME price, monthly average USD/tonne Transfer back March 99

77 58 3ULFHGHYHORSPHQW²PDJQHVLXP Pure and alloy Index (1st qtr = 100) Pure Alloy 100 Transfer back st q. 99

78 59 3ULFHGHYHORSPHQW²9&0 Spot prices FOB Northwest Europe for export to Asia USD/tonne March 99 Source: ICIS

79 60 3ULFHGHYHORSPHQW²FDXVWLFVRGD Contract prices Northwest Europe DEM/tonne Transfer back March 99 Source: Harriman

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