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Norsk Hydro Net Climbs 70% on Higher Output, Prices

Norsk Hydro ASA, Norway's second- largest company, said first-quarter profit surged 70 percent as it produced more oil, gas and aluminum and got higher prices for some of its products.

Norsk Hydro ASA, Norway's second- largest company, said first-quarter profit surged 70 percent as it produced more oil, gas and aluminum and got higher prices for some of its products.

Net income climbed to 4.22 billion kroner ($616 million) from 2.48 billion kroner a year earlier, Norsk Hydro said in a statement handed out at its Oslo office. Sales at Norway's second- largest oil producer and the world's No. 3 publicly traded aluminum company rose 11 percent to 39.6 billion kroner.

``These are knock-out results, they beat the expectations for every unit,'' said David Thomas, an analyst at Commerzbank Securities in London. ``Added to that, Hydro's much more positive on the outlook for aluminum.'' He rates the stock ``equal- weight.''

Norsk Hydro spun off its fertilizer unit in March to focus on oil and aluminum production. The company, which is seeking foreign deposits to make up for slumping oil reserves at home, benefited from prices that surged 11 percent for natural gas and 8 percent for aluminum in the quarter.

Shares in Norsk Hydro fell 0.5 krone, or 0.1 percent, to 408.5 kroner as of 11:32 a.m. in Oslo. That compares with a 2 percent drop for Oslo's OBX benchmark stock index.

Excluding earnings from the fertilizer business, net income doubled to 3.14 billion kroner, or 12.30 kroner a share, from 1.57 billion kroner, or 6.10 kroner, a year earlier, Norsk Hydro said.

Operating profit, including fertilizer earnings, rose 55 percent to 9.28 billion kroner, as Hydro boosted output of oil, gas and aluminum.

Oil Output

The company said it pumped an average 615,000 barrels of oil equivalents a day in the period, up from 552,000 barrels a day in the year-earlier quarter, because of production from new fields such as Grane, Fram Vest and Mikkel on the Norwegian continental shelf. Hydro also raised its output from foreign fields by about 15 percent compared with a year earlier.

Production in the third quarter will drop by about 20,000 barrels a day from a full-year target of 560,000 barrels a day because of maintenance at some fields. Natural-gas output will also be lower in the second and third quarters, compared with the first, because of seasonal variations in demand, Hydro said.

The company gained from natural-gas prices that rose to 1.10 kroner per standard cubic meter, up from 0.99 krone a year earlier. Oil prices were little changed at $31.6 a barrel in the period, Hydro said.

Operating profit at Hydro's oil and energy unit rose 27 percent to 7.8 billion kroner from the year-earlier period. The aluminum unit's operating profit jumped to 1.63 billion kroner from 653 million kroner, bolstered by increased production and sales.


Hydro produced 384,000 metric tons of primary aluminum in the quarter, up 12 percent from a year before. It received $1,528 dollars a metric ton for its aluminum on the London Metal Exchange, up from $1,410 a ton a year earlier.

``The aluminum markets are improving,'' Chief Executive Eivind Reiten said in the statement. ``Production and sale of aluminum and downstream products'' is increasing, he added.

Hydro makes aluminum sheets used in soda cans and frames for cars such as Bayerische Motoren Werke AG's Z8 model and Ford Motor Co.'s Aston Martin Vanquish. The company bought E.ON AG's VAW aluminum business in 2002.

Job Cuts

Last week, Hydro said it will eliminate as many as 800 full- time positions, or 25 percent of the workforce, at its Norwegian smelters to save as much as 400 million kroner annually. The reorganization will be finished by April next year and follows the completion of a plan to trim 2.5 billion kroner in costs annually at Hydro's European metals unit.

``They've delivered on cost-improvement programs,'' Commerzbank's Thomas said. ``They're seeing volumes up and margins widening'' in the light-metals business.

Aluminum producers such as Alcoa Inc., the world's biggest, have been shedding jobs to slash costs after prices fell by about a quarter from January 2000 through April last year on higher supply from China and lower demand. Prices have since surged as a global economic rebound boosted consumption.

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