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Norsk Hydro core profit better than expected despite cyber attack

Production line under construction at a casting house in the Norsk Hydro aluminium plant in Karmoey

By Terje Solsvik and Gwladys Fouche

OSLO (Reuters) - Norsk Hydro reported an 82% fall in first-quarter underlying profit on Wednesday as the Norwegian aluminium producer grappled with a curb on its output in Brazil and the impact of a cyber attack.

The cost of the cyber attack amounted to between 300 million crowns and 350 million crowns in the first quarter, down from a previous company estimate of up to 450 million Norwegian crowns ($52 million) given on April 30.

Still, the fallout from the attack would be felt in the second quarter to the tune of an additional 200 million crowns to 250 million crowns of costs.

Hydro shares were up 3.2% at 0940 GMT, among the top performers of the Oslo benchmark index, a much needed boost after falling some 20% year-to-date.

New CEO Hilde Merete Aasheim, who took up the role last month, said a wider turnaround of the company was vital.

"We are not delivering decent returns ... This goes beyond the problems in Brazil or the cyber attack," she said during an earnings presentation on Wednesday, referring to production issues at its Alunorte alumina refinery in Brazil.

The operating result fell to 559 million Norwegian crowns ($64.3 million) from 3.15 billion crowns a year ago, while analysts in a Reuters poll on average had expected a profit of 123 million crowns.

The earnings report, originally scheduled for release on April 30, had been postponed by five weeks as Hydro struggled to restore systems for reporting, billing and invoicing after hackers penetrated its servers.


Stronger performances across all the firm's downstream divisions, which turn aluminium into components, helped offset weakness in its primary metal division, which produces aluminium, Credit Suisse said in a research note.

"Q1'2019 was expected to be a difficult quarter due to the cyber-attack," JP Morgan said in a note to clients.

The company's IT recovery plan was progressing as scheduled, and will include a strengthening of its cyber security, it added.

Hydro declined to say how much its cyber attack insurance would amount to, but said payments could start appearing in results in the third quarter.

On her first day in the job on May 8, Aasheim announced initiatives to boost profitability and a review of its Rolled Products unit, which makes large aluminium sheets for the automotive and construction industries, following 15 months of production outages.

On Wednesday, Aasheim said boosting cash generation would be a priority and fresh improvement targets would be unveiled on Sept. 24.

"We have not developed profitability in the whole organisation," she said.

She added that rising uncertainty due to the trade war between the United States and China was an added problem.

"We see trade wars, this is influencing the whole global economy and aluminium is closely connected," she said.

($1 = 8.6894 Norwegian crowns)

(Editing by Jason Neely and Keith Weir)