Hydro Annual Report 2011b

Indicative price and currency sensitivities +10% 1)
NOK million EBIT
Financial
items
Income
before tax
Net
income
Net income
attributable
to majority
shareholders
LME 2 800 - 2 800 2 150 1 900
USD 2 300 (550) 1 750 1 200 1 100
BRL (850) 750 (100) (75) (50)
EUR (150) (1 150) (1 300) (900) (900)
1) Assumptions: Annual sensitivities based on expected business volumes for 2012,
LME USD 2,200, NOK/USD 5.70, NOK/BRL 3.35 and NOK/EUR 7.70. Aluminium price sensitivity is
net of aluminium price indexed costs and excluding unrealized effects related to operational hedging.
Currency sensitivities relating to financial items includes effects from intercompany positions.
riSk review
Index
107
04:
Risk review
Risk factors p.108
Market and commercial risk p.112
Legal proceedings p.113
Quick overview
Hydro faces many risks and uncertainties within its worldwide
business operations and the global marketplace. We are exposed to
changing economic and market conditions and price volatility can
have a significant impact on Hydro’s reported and operating results.
Repositioning and restructuring activities are important in determining
the viability of our future aluminium operations.
Our primary smelting operations are highly dependent on securing
substantial amounts of energy at competitive prices. We are exposed
to increasingly onerous legislation on CO 2 emissions that impact
Hydro directly, relating to aluminium production, and indirectly, through
higher power prices.
Risk management in Hydro is based on the principle that risk
evaluation is an integral part of all business activities. Hydro’s main
strategy for mitigating risk related to volatility in cash flow is to
maintain a solid financial position and strong credit worthiness. Hydro
is also taking proactive measures to reduce credit risk, improve its
financial position and further adjust the cost of its smelter operations.