Norsk Hydro ASA, a leading company in the aluminium industry, has announced a substantial impairment in its fourth quarter financial results, totaling approximately NOK 5.9 billion (US$660 million). This decision comes in response to a combination of challenging market conditions in the alumina sector and uncertainties surrounding power prices in Australia.
The company will write down the value of several key assets, including goodwill in its Bauxite & Alumina (B&A) operations in Brazil, property, plant, and equipment related to the Alunorte alumina refinery and Paragominas bauxite mine, deferred tax assets in Alunorte, and assets related to the Tomago aluminium plant in Australia. These impairments are seen as adjusting items in Hydro’s Alternative Performance Measure Adjusted Net Income and will not impact the dividend for 2023.
Hydro’s President and CEO Hilde Merete Aasheim commented in a press release.
“The bauxite and alumina operations are a key enabler for Hydro to pioneer the green aluminium transition by significantly reducing the upstream carbon footprint. In the short and medium term, we see challenging alumina markets and weak cash flow generation in B&A coming from market volatility in times of geopolitical turmoil, impacting the current valuation of the assets.”
Aasheim further stated, “Longer term, we expect a higher share of greener earnings in B&A, as we reduce the carbon emissions from our operations, while growing our greener product portfolio sold at premium pricing. These expected earnings are not included in current valuation for impairment testing purposes, in line with accounting rules.”
The Bauxite & Alumina segment faces an estimated impairment loss of around NOK 3.8 billion (US$425 million). This impairment primarily affects the carrying value of goodwill and property, plant, and equipment for Alunorte, stemming from fair value adjustments during Hydro’s acquisition of the company. Additionally, Hydro plans to impair tax assets of about NOK 1.4 billion (US$156 million) due to the unlikely recovery of unused tax positions.
In the Aluminium Metal segment, the estimated impairment loss is about NOK 0.6 billion (US$67 million). This impairment is related to the partly owned Tomago aluminium plant in Australia, of which Hydro owns 12.4 percent. The plant’s current power price agreement is set to expire in 2028, and the insecurity regarding future power price agreements, coupled with a weaker aluminium market, has led to this decision.
