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Norsk Hydro: A Decent Quarter, Future Looks Brighter

May 04, 2020 10:26 AM ETNorsk Hydro ASA (NHYDY), NHYKF2 Comments


  • Norsk Hydro remains the largest holding in the Basic Materials segment in my portfolio.
  • This holding has, unfortunately, taken quite a beating as a result of the coronavirus and has only recently started to recover somewhat.
  • I consider the company likely to outperform over the longer run - but due to uncertainty regarding the company dividend and short term, I recommend bullishness with care.

There are a few types of companies that are essentially "immune" from worry for me. Larger, dominating grocers are one of them - hence why I own a significant amount in them across virtually all invested geographies. Utilities that are well-managed and well-capitalized are another.

A third is Norwegian, state-owned companies - or in part state-owned corporations. Most of my larger Norwegian investments fall into this category, as the Norwegian state is a very active shareholder in most of the significant corporations in our neighboring country.

Norsk Hydro (OTCQX:NHYDY) is one. Usually, owning a metal producer such as this is tied to significant cyclicality, market uncertainty, and other factors that usually make it quite the ride in times of chaos. We've seen some of that here - but for me, the involvement and knowing just how Norsk Hydro is structured provides me with the certainty needed to go forward here.

That's why, rather than pause and not invest further in the company, I've continued to slowly trickle down dividends and capital investments into Norsk Hydro at the same pace as with some other very significant NA holdings.

Let's look at 1Q20, the latest quarter that's been released.

Bildresultat för Norsk Hydro investor

Norsk Hydro - How has the company been doing?

I believe that the company's own presentation slide says it all quite well.

(Source: Norsk Hydro 1Q20 Presentation)

In the previous presentation, we focused on some of the headwinds that the company is facing, including the Alunorte curtailment, raw material risks, and so forth. It didn't look pretty, and coronavirus has, in fact, made this even less pretty than it was a few months back.

The core of the quarter can be said to be as follows:

  • Significant FX, raw material, and volume tailwinds.
  • Exceeding expectations in terms of EBIT.
  • Company cost initiatives and

This article was written by

Wolf Report profile picture

Wolf Report is a senior analyst and private portfolio manager with over 10 years generating value ideas in European and North American markets.

He is a contributing author for the investing group iREIT on Alpha where in addition to the U.S. market, he covers the markets of Scandinavia, Germany, France, UK, Italy, Spain, Portugal and Eastern Europe in search of reasonably valued stock ideas. Learn more.

Analyst’s Disclosure: I am/we are long NUE, NHYDY, NHYKF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

While this article may sound like financial advice, please observe that the author is not a CFA or in any way licensed to give financial advice. It may be structured as such, but it is not financial advice. Investors are required and expected to do their own due diligence and research prior to any investment. I own the European/Scandinavian tickers (not the ADRs) of all European/Scandinavian companies listed in my articles.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (2)

T'pee profile picture
Thank you so much @wolf report for helping me rebalance/increase exposure of my portfolio to some of these gems.
fhfhfhfh profile picture
Thank you for the update. I started a decent sized position the last time you wrote about Norsk Hydro. I'm hoping to average down even more in the coming months.
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