Inflation forces Norsk Hydro to raise capital expenditures and cut spending

On December 15, 2022, while distributing dividend Norsk Hydro, the Norwegian aluminium maker, stated that it would slash more costs and raise its capital expenditure (Capex) in 2023.

On the plus side, Hydro anticipated rising industrial demand for aluminium produced with fewer emissions and reduced carbon impact.

Hydro said, "The Company aimed to reduce its annual costs by 3.5 billion crowns ($358.7 million) to a total of 11 billion crowns by 2027, up from its previous target of 8.5 billion crowns between 2019 and 2025."

Hilde Merete Aasheim, the Chief Executive Officer, said, "Cost cuts are coming from thousands of initiatives throughout the business to improve productivity and cut fixed costs."

The group expected capital expenditure of 13.5 billion crowns in 2023, including a 2.1 billion carry-over from 2022 and 1.7 billion in currency and inflation effects, having forecast 11 billion in CAPEX for 2022 a year ago.

The board of directors of Norsk Hydro proposes to pay 50–70 per cent of 2022 adjusted net income to shareholders in the form of dividends and share buybacks, down from 2021's 80 per cent cash dividend, reducing returns to shareholders.

According to Hydro, expanding sales of low-carbon aluminium to industrial clients and establishing a facility to recover electric vehicle batteries are two areas of growth for the firm.

Like other industrial businesses in Europe, the Norwegian manufacturer has struggled with rising prices. Production at its Slovalco plant in Slovakia was shut down permanently in September as part of its effort to reduce European output.

Hydro predicted that demand for low-carbon aluminium would grow by 20% per year until 2030, compared to 3% for all aluminium, as customers ranging from automakers to construction companies and packaging firms sought to reduce CO2 emissions.