Norsk Hydro's New CEO Takes the Helm Pledging Deeper Cost Cuts
(Bloomberg) -- Norsk Hydro ASA needs to extend its cost cutting after a production halt in Brazil erased the benefits of previous cuts, according to its new chief executive officer.
“We’ve been heavily affected by the Brazil situation,” Hilde Merete Aasheim, who started as CEO on Wednesday, said in an interview in Oslo. “The effect of the improvement programs was erased to zero because the volumes fell significantly. We will reestablish the improvement programs, but also accelerate and see what more we can do.”
The Norwegian aluminum producer has struggled in the past year to restart its Alunorte plant amid claims of environmental damages after flooding. A federal judge in Brazil is expected to give a final approval to restart the refinery, but the timing remains uncertain, according to Aasheim.
The yearlong disruption at the world’s largest alumina plant has hurt earnings and weighed on Hydro’s shares, which have dropped about 40 percent since Feb. 28, 2018, when a regional court in Brazil ordered the Alunorte alumina refinery to cut production by 50 percent.
“We must lift company earnings,” Aasheim said on Wednesday. “They’re too weak. They’re weak in the whole aluminum industry, but that can’t be an excuse for us not taking action on our earnings.”
The company’s woes were compounded when it suffered a cyber attack in March, crippling production for several days. The estimated financial impact of the attack was as much as 450 million kroner ($51 million) in the first quarter.
Rolled products, which includes materials for cans, cars and buildings, is one area that Aasheim sees with room for improvement after a long period of weak earnings.
“We will look at the whole business area and explore the possibilities to make it better,” she said. “Earnings have been low, projects haven’t delivered fully -- we need to do a full review of our position and how we can improve earnings.”
Einar Glomnes, former head of global joint ventures in the primary metal division, has be moved to head the rolled products operation, while Pal Kildemo, head of finance in Primary Metal, will become the chief financial officer from August 15, replacing Eivind Kallevik.
The changes come as the aluminum industry is facing what may be its slowest year of demand growth in at least a decade, according to revised forecasts by producers including Hydro and United Co. Rusal. The aluminum market will remain under pressure in the first half amid trade talks between China and the U.S., with the auto industry likely to be particularly hard hit, Rusal said in its first-quarter report.
With aluminum at the London Metal Exchange down 30 percent from a high in April 2018, Hydro is competing in an industry that is facing headwinds.
“We must do something with that. We must create a momentum for change and improvement,” Aasheim said.
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