Hydro Annual Report 2011b

F24
FINANCIAL STATEMENTS
Note 7 - Operating and geographic segment information
Bauxite & Alumina activities includes bauxite mining activities, production of alumina and related commercial activities,
primarily the sale of alumina.
Primary Metal includes primary aluminium production, remelting and casting activities. The main products are comprised of
extrusion ingots, foundry alloys and sheet ingot.
Metal Markets includes all sales activities relating to products from our primary metal plants and operational responsibility for
Hydro's stand-alone remelters as well as physical and financial metal trading activities.
Rolled Products includes Hydro's rolling mills. The main products are comprised of aluminium foil, strip, sheet, and
lithographic plate for application in such sectors as packaging, automotive and transport industries, as well as for offset printing
plates.
Extruded Products includes Hydro's extrusion-based businesses. The main products are aluminium extrusion and semifabricated
products for the building and construction, transportation and engineered products industrial sectors.
Energy includes operating and commercial responsibility for Hydro's power stations in Norway and energy sourcing for
Hydro's world-wide aluminium operations.
Other consist of Hydro's investments in the Solar Industry, its captive insurance company Industriforsikring, Hydro's industry
parks, internal service providers and certain other activities.
Hydro's segment structure was changed as of February 28, 2011. The financial information in this report is restated to reflect
the current segment structure.
Operating segment information
Hydro uses two measures of segment results, Earnings before financial items and tax - EBIT and EBITDA. EBIT is consistent
with the same measure for the group, considering the principles for measuring certain intersegment transactions and contracts
described below. Hydro defines EBITDA as Income (loss) before tax, financial income and expense, depreciation, amortization
and write-downs, including amortization and impairment of excess values in equity accounted investments. Hydro's definition
of EBITDA may be different from other companies.
Because Hydro manages long-term debt and taxes on a Group basis, Net income is presented only for the Group as a whole.
Intersegment sales and transfers reflect arm's length prices as if sold or transferred to third parties at the time of inception of the
internal contract, which may cover several years. Transfers of businesses or assets within or between Hydro's segments are
reported without recognizing gains or losses. Results of activities not considered part of Hydro's main operations as well as
unallocated revenues, expenses, liabilities and assets are reported together with Other under the caption Other and
eliminations.
The accounting policies used for segment reporting reflect those used for the Group with the following exceptions: Internal
commodity contracts may meet the definition of a financial instrument in IAS 39 or contain embedded derivatives that are
required to be bifurcated and valued at fair value under IAS 39. However, Hydro considers these contracts as sourcing of raw
materials or sale of own production, and accounts for such contracts as executory contracts. Certain other internal contracts
may contain lease arrangements that qualify as a capital lease. However, the segment reporting reflects the responsibility
allocated by Hydro's management for those assets. Costs related to certain pension schemes covering more than one segment
are allocated to the operating segments based either on the premium charged or the estimated service cost. Any difference
between these charges and pension expenses measured in accordance with IFRS, as well as pension assets and liabilities are
included in Other and eliminations.
The following tables include information about Hydro's operating segments.