Norsk Hydro As Ord

Good morning and welcome to Hydro's second quarter 2026 presentation and Q&A. We will shortly begin with a presentation by President and CEO Eivind Kallevik, followed by a financial update from CFO Trond Olaf Christophersen. We will then finish off with a Q&A session. Please note that if you would like to ask questions during the Q&A, you can do so at any time, and you do it by typing your question into the box on your screen. When we get to the Q&A, I will then ask your questions on your behalf directly to Eivind and Trond Olaf. And with that, I turn the word over to you, Eivind.

Thank you, Erik, and good morning from me as well. I am pleased to present the strong set of results for the second quarter, supported by excellent operational performance across the company. Overall, this is a solid quarter. But at the same time, the ongoing situation in the Middle East continues to impact the totality and affects the broader picture. As always, we begin with what matters most – safety. Safe operations and a safe working environment are the foundation for everything else that we report today. Because without them, none of our other results would matter. Keeping our people safe remains my highest priority and the highest priority for the entire management team. And wherever I travel across Hydro, one thing stands out. Our people genuinely care about looking after each other. That commitment is one of our greatest strengths. And I am pleased to report that both our HRIS and TRIS remain at historically low levels. The challenge now is really to avoid complacency, because strong performance should never lead to lower vigilance. Instead, we must continue learning, improving and moving steadily towards our ultimate ambition of zero injuries. Because every serious incident has consequences that go far beyond the individual involved. It affects colleagues, teams and the wider organization, and it consumes enormous amount of time and energy that should otherwise be spent on improving our business. Because when we operate safely, we can focus our efforts on performance, productivity and creating value rather than managing crisis. Now with that, let's have a look at the highlights for the second quarter. The second quarter was characterized by continued strong operational performance across our business areas, as well as good progress on our strategic agenda. The adjusted EBITDA for the quarter came in at 8.9 billion, while free cash flow was a solid 4 billion Norwegian kroner. Adjusted ROCE came in at 10.9%, above our target of 10% over the cycle. Our upstream business delivered solid performance and production remained stable across most of the value chain, despite the volatile operating environment that we have. Our Norwegian cost houses delivered an all-time high production, supported by operational performance at a very high level. Also happy to see that recycling results also strengthened, with an adjusted EBITDA reaching NOK 0.9 billion during this quarter. From a market perspective, the realized all-in metal prices were 14% higher than in the first quarter, continuing to support earnings. Beyond the strong operational performance, another important milestone this quarter is the agreement that will enable the restart of Slobalko. Now, this is an important step both for Hydro, but also for European industry more broadly. It demonstrates that with the right framework conditions, industrial capacity can return to Europe. We also continue to strengthen our renewable power position, securing a further 5 TWh through the new long-term agreement with Aveni. Access to competitive renewable energy remains one of Hydro's greatest competitive advantages. And strengthening that position is essential to support continued strong operational as well as financial performance for the future. So all taken together, I am pleased with both operational execution and the progress we are making on our strategic priorities. As I said, we also continue to deliver solid returns with an adjusted ROCHA of 10.9% over the last 12 months, above the target we have of 10% over this cycle. Back in 2022, we curtailed production at our joint venture plant Slovalko because the framework conditions simply did not support competitive aluminium production. Unsustainable power prices and a lack of compensation for indirect carbon costs made continued operations impossible. Since then, we have worked closely with the Slovak government to establish a framework that changes that. So earlier this month, we reached an agreement combining long-term access to competitive power within more competitive framework conditions. Pending final approval by the EU, this agreement will enable the restart of the first 75,000 tons of production since the containment. And I believe this is important well beyond Slovakia. It demonstrates that Europe's competitiveness challenges are not inevitable. They are solvable when policymakers are willing to strike the right balance between ambitious climate policy and industrial competitiveness. And European industry has enormous strengths. And with the right framework conditions in place, there is every reason to believe that Europe can continue to thrive and compete globally despite the many pessimistic predictions. And the Slovakia case illustrates this well. Predictable policy, competitive energy and a level playing field make a real difference. Because without them, Europe risks becoming increasingly dependent on imported strategic materials. But with them, we can rebuild industrial capacity, strengthen resilience and compete globally. And for Hydro, Slovalco is another example of how we are strengthening our integrated aluminium platform while contributing to a greater European resilience and security of supply. It is an important milestone and one that we are incredibly happy to have reached. Now let's have a look at a few highlights from our commercial agenda. Throughout this quarter we have continued to strengthen Hydro's commercial position both by building demand and enthusiasm for aluminium and by securing new long-term off-take agreements. We have showcased the potential of aluminium through projects such as the Aalto installation at three days of design in Copenhagen and the new aluminium bridge in Bergen here in Norway. These projects demonstrate what low carbon and recycled aluminium can enable and help inspire future demand. And on the back of that, we continue to convert our position into larger commercial opportunities for low carbon and recycled products. And I will return to this in just a moment. Operationally, we continue to execute well across the business. Our Norwegian smelters operated at near full capacity following the ramp up of previously curtailed capacity, increasing production by 6% compared to the same period last year. Total sales from the smelters reached all-time high both in Q1 as well as in Q2. Across our operations, our teams continue to deliver strong performance while maintaining relentless focus on safety, operational excellence and continuous improvements. And finally, we continue to strengthen one of Hydro's greatest competitive advantages, which is access to renewable power. This quarter, we signed another long-term power purchase agreement, this time with Ebony, securing 0.5 TWh of renewable power annual between 2031 and 2040, or 5 TWh if you like, over the life of the contract. This builds on the agreements we announced earlier this year with Statkaft and Alpique. Altogether, we have now secured around 85% of the power need for our Norwegian smelter portfolio through the 30s. Long-term access to competitive renewable power is fundamental to Hydro's competitiveness, our low-carbon product offering, and our future growth ambitions. While we are now in a much stronger position for the next decade, we will continue to pursue additional power sourcing opportunities to further strengthen our long-term competitive position. So returning to the larger commercial opportunities that I mentioned before. The public discourse on decarbonization in nature may be overshadowed at the time by heightened geopolitical tensions. But commercially, the momentum continues. We still see strong demand for low-carbon and recycled products, as well as a willingness among our customers to pay the associated premiums. In the automotive sector, we continue to develop our long-standing partnerships with Mercedes-Benz. Mercedes-Benz is one of our most demanding customers, not at least when it comes to sustainability. Their focus on decarbonizing their value chain continues, and we will soon be announcing some very exciting news about the next steps in our collaboration. We've also signed a new five-year agreement with power cable producer Nexans to supply approximately 85,000 tons of low-carbon aluminium wire rod between 26 and 2030. The aluminium wire rod will be produced at Kame and used in power cables for Europe's electricity grid, including medium voltage grids, overhead transmission lines, as well as subsea infrastructure. Now, as Europe expands and modernizes its electricity networks, reliable access to critical materials is becoming increasingly important. This agreement then combines predictable long-term supply with low-carbon aluminum, supporting both Europe's decarbonization and its energy security. Both partnerships illustrate how we are working with leading customers to translate our low-carbon position into concrete commercial opportunities and long-term customer relationships. Now then, let's have a quick look at the alumina market. The alumina price started the quarter at $313 per ton and remained stable at this low level throughout the quarter. As we discussed in Q1, the smelter curtailments in the Middle East have increased the global oversupply in the alumina market. Adding to this, the Chinese market was also supplied in the second quarter, although we saw some refinery disruptions, both in China and in Indonesia, reducing the oversupply somewhat. The Pox alumina price closely reflected the Chinese import parity price, with Chinese refineries then enjoying relatively low raw material costs. The result was an average alumina price in second quarter of $308 per ton, compared to $307 per ton in the first quarter of the year. Towards the end of the quarter, alumina prices increased to $330 per ton, and this is by most assumed to be driven by a more optimistic view of the Middle East restarts and smelter ramp-ups in Indonesia. The estimated global balance is now 1.6 million tonnes long in 2026 compared to the 3 million tonnes we showed in Q1. We move on to the aluminium market. The factors impacting the alumina market have also continued to impact the aluminium market this quarter. As we discussed in Q1, the Middle East curtailments have made the market significantly undersupplied and this pushed prices up. The three-month aluminum price started the quarter at just above $3,500 per ton and peaked at $3,750 in early June. As we moved towards the end of the quarter, expectations for the global supply balance shifted somewhat. External analysis now indicates a global deficit in 2026 of just under 1 million tons compared to the more than 2 million tons that was expected in first quarter. The revised balance reflects higher supply expectations while demand continues to grow year on year. Most of the additional supply is expected to come from Indonesia and from China. We still believe that the 45 million ton annual production cap in China will remain. However, production is currently running at a somewhat higher rate to address parts of the supply gap created by the Middle East curtailments. The increased supply outlook led to a sharp downward correction in prices towards the end of the quarter, with aluminium price closing at $3,085 at the end of the quarter. However, thanks to the strong price development through mid-June, the quarterly average price still increased from $3,188 in Q1 to $3,519 in the second quarter. Product premiums were more stable though. The European Standard Ingo Duty Paid Premium started the quarter at $587 per ton and ended at $557. The quarterly average was $582 compared to $391 in Q1. The US Midwest premium declined somewhat from $2,523 at the start of the quarter to $2,396 at the end. The average premium in the second quarter was $2,518 compared to $2,292 in the first quarter. Then finally, let's have a look at the downstream market where demand remains flattish at relatively low levels. In Europe, the market was marginally positive in the second quarter. I would say that one bright spot was automotive, where demand increased on growth on EV production. Other segments remained flat. North America also saw flat growth in the second quarter, recovering somewhat from the decline that we saw in the first quarter. Here, the strongest growth came from the electrical segment, supported by the data center investments. Now looking ahead, both markets are estimated to see slight growth for the full year. In Q3 North America, we expect to see the fastest growth, compensating for the somewhat weaker start to the year compared to Europe. And with that, let me give the word to Trond Olaf for the financial update.

Thank you, Eivind, and good morning, and welcome from my side as well. We will start with the financial highlights for the quarter, and all numbers will be presented in Norwegian kronor. Comparing year over year, revenues increased by around 6% to 56.5 billion for Q2. This was driven by higher all-in metal prices. For Q2, we delivered an adjusted EBITDA of 8.9 billion and a reported EBITDA of 11.6 billion. Adjusting items for the quarter was around 2.7 billion, and it was mainly related to unrealized derivative gains on LME-related contracts of 3.1 billion. The adjusted EBIT for Q2 was 6.3 billion, with a reported EBIT of 8.6 billion. In addition to the adjusting items to EBITDA, there was around 300 million in adjusting items impacting EBIT related to impairments. The difference between the adjusted and the reported EBIT was therefore 2.4 billion. Net financial expense for Q2 was 600 million, and this was mainly driven by interest and financial expenses of 600 million. Interest and finance income of 300 million and unrealized foreign exchange losses of 300 million netted each other out. The income tax expense was 2 billion in Q2, impacted by strong earnings before tax. So the reported tax rate for Q2 was 25%. Overall, this resulted in an adjusted net income of 4.6 billion, with a reported net income of 6 billion. The total adjusting items to net income was 1.4 billion, which is the sum of the EBIT adjusting items plus the net foreign exchange loss of 300 million and an income tax effect of 700 million. Adjusted net income was up from 3.6 billion in the same quarter last year and up from 4.1 billion in Q1. Consequently, adjusted earnings per share was 2.21 NOK per share for Q2 26, up from 1.68 NOK per share in Q2 2025. Free cash flow ended at 4 billion for the quarter, supported by the strong adjusted EBITDA. Adjusted net debt was 22.8 billion, as the strong cash flow was offset by the annual dividend payment in May. Finally, I would also like to add on the financial highlights for Q2, that the full year CapEx guiding for 2026, around 13.5 billion remains. Then moving to more details on the results and when looking at the results Q2 compared to Q1 adjusted EBITDA increased from 8.7 billion to 8.9 billion and the key drivers were higher all-in aluminium prices and improved downstream results. This was partly offset by lower energy production, higher fixed costs, stronger NOC versus the US dollar, and negative results in commercial activities in metal markets. Realized all-in aluminium prices and premiums contributed positively with around 2.6 billion, while alumina price development was neutral. Upstream volume development had a net negative impact of 300 million from lower sales volumes in aluminium metal, mainly due to catalume curtailments. This was partly offset by higher sales in bauxite and alumina. Raw material costs decreased by 70 million, mainly due to lower energy costs in bauxite and alumina and extrusions. This was partly offset by higher energy and carbon prices in aluminium metal. Extrusions had positive development from increased sales volumes of about 200 million. Recycling results from metal markets and extrusions contributed positively with 300 million, partly offset by lower margins in extrusions by 250 million. Furthermore, we saw a net negative impact over 300 million, mainly driven by lower production and less net spot sales in the energy business area. Fixed costs increased in Q2 with an impact of 300 million. This was mainly explained by seasonally high fixed costs of 250 million in bauxite and alumina. We also saw a negative 400 million in currency effects, mainly driven by the stronger NOC compared to the US dollar. In the other category, there was a negative effect quarter over quarter of 1.3 billion. And the largest effect was negative results in the commercial activities in metal markets. Eliminations of internal profits also turned from positive in Q1 to neutral in Q2, giving a negative delta. Then moving to the debt side, and moving on the debt development through the quarter, net debt increased by 3.4 billion, from 12.9 to 16.3 billion from Q1 to Q2. We delivered a very strong free cash flow of 4 billion in Q2, driven by an adjusted EBITDA of 8.9 billion. Net operating capital remained stable through the quarter as CO2 compensation received was offset by higher sales revenues and pre-summer inventory build. Other operating cash flow of negative 2.4 billion, mainly comprised of income tax and interest payments on debt. We saw net investments of 2.6 billion in Q2, reflecting normal investment activity level according to plan. Ordinary dividend of 3 NOK per share was distributed to our shareholders in May, in total 5.9 billion. Other changes to net debt of 1.5 billion mainly comprise of FX effects and new lease obligations during the quarter. In total, this gives a net debt position at Q2 of 16.3 billion. Moving on to adjustments to net debt, we saw a decline in hedging collateral, an order by 2.6 billion. This was due to lower prices and volumetric position at the quarter end. Our net positive pension positions decreased by 300 million due to lower interest rates in Norway. Other liabilities remained stable during Q2. All elements considered, we ended up at an adjusted net debt position at the end of Q2 of 22.8 billion. Moving then to the business areas and starting with the bauxite and alumina. In bauxite and alumina, adjusted EBITDA came in at 550 million in Q2, down from 1.5 billion in the same quarter last year. The main negative drivers were lower alumina prices and unfavorable currency effects. These effects were partly offset by lower LNG prices and lower raw material costs. Compared to Q1, EBITDA declined from 750 million to 550 million. The result was down due to unfavorable currency effects and lower alumina prices, partly offset by lower LNG price. For Q3, we expect higher alumina production and sales. We estimate that the fully loaded raw material costs, fixed costs and energy costs to be flat. Moving then to aluminium metal. In aluminium metal, adjusted EBITDA increased year over year from 2.4 billion in Q2 last year to 6.4 billion this quarter. The result was driven by higher all-in metal prices and lower alumina costs. This was partly offset by negative currency effects reflecting the weaker US dollar against the Norwegian crawler. Compared to Q1, adjusted EBITDA increased by 1.4 billion, and the key drivers were higher all-in metal prices, including realized premiums. This was partly offset by somewhat lower sales volumes, linked to the disruptions in the Middle East and unfavorable currency development. This brings me then to the outlook for the next quarter. For Q3, Aluminum Metal has booked 62% of the primary production at US$3,361 per metric ton. This includes the effect or strategic hedging program. Aluminum Metal has also booked 54% of the premiums affecting Q3 at US$783 per ton. We expect realized premiums to end up in the range of US$660 to US$710 per ton. On the cost side, carbon costs are expected to increase 50 to 150 million. Energy costs are also expected to increase by 50 to 150 million, driven by coal and LME links in some of the power contracts. And finally, fixed costs are expected to decrease by 100 to 200 million after a seasonally higher level in Q2. Then to the next segment, metal markets. And for metal markets, the adjusted EBITDA decreased from 280 million in Q2 2025 to 32 million in Q2 2026. The sourcing and trading activities had a negative result of 250 million this quarter, and the recycling business delivered 290 million in positive results. Excluding currency and inventory valuation effects, the results for Q2 was negative 170 million, down from positive 310 million in the same quarter last year. Excluding the currency and inventory valuation effects, metal markets reported a negative result of 170 million in Q2 26, compared to 310 million in the same quarter last year. Compared to Q1, adjusted EBITDA for metal markets came down from 540 million in Q1 to 32 million in Q2. The main driver was the lower results from the sourcing and trading, offset by improved recycling results. Recycling continues to improve in both the US and in Europe, delivering adjusted EBITDA of 290 million in the quarter. As we also highlighted last quarter, margins remain particularly strong in the US, where product premiums have increased faster than scrap metal input cost. Then to the outlook for Q3. And for Q3, we expect strong results in recycling to continue. We expect normalizing results from sourcing and trading activities. And as always, we emphasize the inherent volatility of trading and currency fluctuations in the metal market segment. Then to extrusions, and in extrusions, the adjusted EBITDA increased year over year, from 1.2 billion to 1.5 billion in Q2 this year, driven by the strong recycling margins, in particular in the US. Compared to Q1, adjusted EBITDA improved from 1.3 billion to 1.5 billion in Q2. Again, the main driver was improved recycling margins, but also seasonally higher volumes. Despite the seasonal increase, volume development was a bit weaker than we expected due to the ongoing restructuring efforts, especially in Extrusion Europe. The restructuring and associated volume transfers had a negative impact on the cost level as well in the quark. And finally, negative currency translation effects also impacted the results. For Q3 then, and for extrusions, we should underline that we always compare the coming quarter to the same quarter last year due to the strong seasonality. Looking at Q3, we expect high sales volumes. The current strong recycling margins in the US and Europe are expected to continue also into Q3, and overall margins for the business area are stable. In Q3 2025, we had an extraordinary metal effect from increased Midwest premium of 420 million. The Q3 metal effect will depend on the Midwest premium development during the fall. Should the current FX rate continue through the Q3, there will also be a negative currency translation effect in the extrusion results. And then moving to the final business area, energy. In energy, adjusted EBITDA came in at 500 million in Q2, down from 1.1 billion in the same quarter last year. The main driver was the dry hydrology, leading to lower production and lower spot sales, and also price area loss compared to the price area gain we had last year. Compared to Q1 this year, the adjusted EBITDA fell from 790 million in Q1 to 500 million in Q2. The main driver was seasonally lower production. The price area loss was somewhat lower than in the previous quarter at 170 million negative in Q2 compared to 190 million negative in Q1. Looking then into Q3, as always, we should be aware of the weather-driven inherent price and volume uncertainty in energy. Hydrology remains the key driver of Nordic power prices, and we continue to see a weak hydrological balance in the southern part of Norway compared to historical levels. Finally, at the current outlook, we expect that the loss from price-area differences should improve in Q3 compared to Q2. And this ends the business area presentation. And with that, I end the financial update and give the word back to Eivind.

Thank you, Trond Olaf. Then to wrap up today's session, I'll briefly summarize our priorities. Our number one priority remains the safety, health, and well-being of our employees. Strong results are really only meaningful when everyone returns home safely and we remain fully committed to our ambition of zero injuries. Now, against the backdrop of continued geopolitical turbulence and volatile markets, maintaining operational excellence and delivering reliably for our customers remain key priorities. This quarter demonstrated the strength of our integrated value chain with record high cast-off production in Norway and stable production across most of our operations. We also continue to strengthen the competitiveness of our portfolio across both primary aluminum and the recycling business. The framework agreement to restart Slovakia is an important milestone for European primary aluminium production, while our recycling business delivered another strong quarter. Together with continued progress on renewable power sourcing, these are important steps in strengthening Hydro's long-term competitive position. At the same time, we do remain focused on executing our decarbonisation and technology roadmap. Our new agreement with Nexons and continued collaboration with Mercedes-Benz demonstrate how we are translating our low-carbon position into long-term commercial opportunities with leading customers. Overall, I am pleased with how we balanced strong operational financial performance with a disciplined execution in a quarter characterized by significant market volatility. We remain firmly on track to deliver on our 2030 strategy as well. So with that, thank you so much for your attention, and then over to you, Erik.

Thank you, Eivind, and thank you, Trond Olaf. We will then commence the Q&A session. And again, as a reminder, if you do have questions, please type them into the box on your screen, and then I will read your questions to Eivind and Trond Olaf. It looks like we have a few questions already, so we can get started. First one is from Liam. On Katalum, can you discuss your expectations for volumes and the ramp up to full capacity over the next six to 12 months?

Thanks Liam. I think our primary focus at the moment is to keep safe and stable operations given the volatile situation that we have in the Gulf at the moment. So our base case now is that we will continue to run around 60% and then when the situation stabilizes we will come back in and or normalizes we will come back and update you in terms of ramp up schedule.

Then we have a second one from Magnus Enseb. Ansjo Valko, what aluminium price, roughly, do you need for this restart to exceed the return requirements?

So we don't really guide on price specifically. What we can say is that it's relatively well placed on the cost curve, low on the third quartile or just north of the second quartile, if you like. So it's going to be a reasonably well placed matter going forward.

One more from Liam. On recycling, are spot spreads continuing to widen in Q3 or is the drop in premiums putting some downwards pressure? And how do you expect recycling annualized EBITDA to trend in Q3 and Q4?

Hi, Liam. Yes, so we don't really give an outlook for the fall year and for the coming quarters, but as I said during the presentation, we expect the strong recycling results to continue also in Q3, as we have seen in Q2.

And then we have a few questions from Ahmed. I think I will do one by one. So this is Ankat Aloum. First question, aluminum sourcing strategy. Can you provide an update on that?

So Kataluma has been continuing to source alumina in the period that we have behind us, and they will continue to source in the same way. As you will understand, it is a challenge situation at the moment to get raw materials in. They have established what seems to be a solid sourcing strategy. Parts of it comes in big bags onshore. So they're doing a good job locally in Katar.

And the second part of the question is the current operating rate and ability to sell aluminium.

Yes, so I've been commenting on the current operating rate. So we are operating around 60%, as we said. When it comes to sales, we have quite limited sales out of the Middle East in this quarter. And again, I mean, the volatility makes that it's very difficult to predict how this will evolve.

Then the third part of the question was on the expected timeline for ramp-up but that you have answered so we can go to the fourth which is the implications of the cancellation of the distribution agreement.

So, as we have said, it's quite limited impact financially from that situation in the quarter. The biggest effect around Kattelum and the whole Middle East situation is on the curtailment and, of course, in the price environment. When it comes to further sales, that is a discussion we're having. So we will come back on that when we are concluded on how this will go going forward.

And the final part of the question was your 2027 outlook for aluminium and alumina prices.

I guess the boring answer to that is that we don't really guide on prices as such. We're simple supply-demand people. For aluminium, as we said, we expect undersupply in 2026, which should lead to reasonably good prices for the rest of the year on the metal side, and then on the alumina side, somewhat oversupply. And then we'll come back to 2027 later on in the year.

Then from Alain, will there be any restart cost associated with the restart and what are the conditions that are needed for a full restart of the facility?

So we expect capital around 400 million for the restart in addition to some operating capital that will come in. So not too significant, but I think it's also important in the same sentence to say that we still stay within the totality of the capital guidance for the year. So we will see how to cover that 400 million within the CapEx guidance. Whether or not we will, or at what time we will restart the remaining part of the plant or the 100,000 tons in addition, we will come back to. That's also a part of the plant that needs a little bit more refurbishment than the first 75,000 tons that we do. So let's come back to that in due time.

And then as a follow-up on that one from Hans-Erik, do you believe you will be able to restart the last 100,000 tons later on?

Hans-Erik, we are able to, but first and foremost, we would like to do the restart in a safe and sound manner of the first 75,000 tons. And then if we see the opportunity for the remaining 100,000 tons, we will come back to that at the latest stage.

We have one more from Ahmed on Katalum. I think you have answered already. Are you able to sell the 60% production at Katalum?

So as I said, we have quite limited sales out of Katalum this quarter. And I mean, you all follow the situation in the list and the limitations of shipments through the straits. So that definitely impacts the ability to get net load.

And then from Markus, on B&A, are you able to quantify the positive effect from lower LNG prices? Also, should we expect continued positive effects from improved bauxite quality in the Q3?

So, on the R&D price effect, we give a sensitivity on that in the package, and I don't have the sensitivity on the top of my head, but you will find the sensitivity there, and it's linked to the development of the tender prices. So, based on the realized tender price this quarter, and your expectation for the coming quarter, you can find the effect Thank you very much. Thank you. and they are realizing quite a lot of improvements of that. So for the full year we expect to continue to realize improvements when it comes to bauxite quality and we see that both in terms of the cost for the bauxite but also in terms of lower costs in the refinery because of better bauxite quality coming into the refinery. So this is a very exciting improvement project that bauxite is running.

Two questions from Matt. Number one, aluminium markets have been more resilient than expected. How would you describe the physical market in Europe? Are you seeing or expecting to see tightness in any particular downstream products?

So typically when we think about the physical market, I think we need to look at the two different price components. One is Alchemy, which is a globally set price, and also partly financially driven. There we've seen a larger decline in in LME price during the quarter. Fourthly, I think when we think about the physical market, it's to look at the regional premiums. And here we see a much less change in price during the quarter, indicating that the physical market remains strong. And it remains strong both when you look at the foundry alloys, or if you look at the extrusion ingots, or if you look at the sheet ingots. Book premiums are still very strong in this area.

And the second part of this question, has the Middle East conflict led to market share gains for your downstream business, particularly in Europe? Are customers looking to diversify supply away from the region?

So first to your last part of the question, I mean, it's a general trend, I would say, both in the US market and European market, that customers are looking for more local suppliers due to the overall uncertainty of overseas shipments. So that is supporting our operations when it comes specifically to Europe. Yes, we have been able to produce more and sell more to the market, both from the Norwegian smelter system, but also from our recyclers in Europe in this quarter. And as Eivind commented on in the beginning of the presentation, we have all-time high cost-ass production from the Norwegian smelter system, and that is partly then driven by the market opportunities in the current situation.

Another question from Jonas on Hydro Energy. Energy's adjusted EBITDA in the first half of 2026 decreased by 50%. This was mainly due to lower production and loss on price area differences compared to a gain in the same period last year, somewhat offset by improved commercial results. Can you elaborate on this?

The main driver behind the energy results is the hydrological situation in Norway. We have seen a very large shift from a hydrological surplus last year. Thank you very much. And the consequence for us is that we have less water to produce, so it affects total production. But since energy is selling most of the production to aluminium and metal, they also have less energy to sell in the stock market, so that is also impacting the financials. The other effect that is also affected by hydrology is the area price differences in Norway. We do not have a perfect fit between where we have deliveries of people. In the Nordics and also our production compared to the consumption at the smelters. So when you have differences between the price areas, we will also either realise a gain on the price area differences or a loss. And last year and the last years, I would say, we have really realised significant gains, while this year we have realised losses. So those are the main drivers behind the change in the annual results. Again, it's mostly weather-driven volatility and nothing about the underlying performance.

And then one more from Liam on cost inflation. Costs appear very contained with limited inflation in Q3 compared to Q2. Are there any major lags we should consider that could lead to higher costs later in the year? Or do you see raw material and energy costs as relatively stable?

I mean, we only, again, give a guiding on the coming quarter. And the outlook for the next quarter is that we see quite a flattish development when it comes to costs. And then we always have some seasonality when it comes to fixed costs. So that trend continues also this year. But that is for the time being. We do not see any significant cost inflation overall for the company. But there are pluses and minuses in the total portfolio.

We have a final question from Ahmed on Kotalum again. How far are you from reaching the maximum aluminum storage capacity since you are not able to sell the production?

We're still okay from a storage capacity perspective. Of course, it's getting fuller and fuller day by day, but hopefully we will also start to see some sales going forward from Kotalum also in the future. But we're still okay from a storage perspective.

And then we got a follow-up question from Jonas on energy. You expect losses on price area differences to decrease in the next quarter. Why?

Well, again, this is an outlook based on the current realized prices. So, of course, we do not know, but based on what we see of the different prices, stock prices in the different price areas in the Nordics, that is our expectation that the losses will improve or much lower losses in the coming quarter compared to Q2.

And then we have one from Tem A. Can you please quantify alumina oversupply? I guess that could be referring to the market oversupply we talked about.

Yes, we got it on 1.6. Something like that, in that range. I can't remember the number, but in that range.

Good. And that seems to have been the last question, at least on my screen. So then I think we'll wrap it up here. Thank you all so much for all the questions. If you have further questions, please don't hesitate to reach out to us in investor relations. So thank you and have a good day.