Overview
Shares of Norsk Hydro ASA moved lower on Monday following analyst reviews that emphasized continued softness in the company’s downstream businesses. Two brokerages - RBC Capital Markets and Kepler Cheuvreux - published revisions to their views and models, citing ongoing margin pressure in extrusion operations even as upstream segments show relative strength.
Brokerage actions and headline changes
RBC lowered its rating on the stock, moving from an "outperform" to a "sector perform" designation and trimming its price target to NOK80 from NOK82. The firm pointed to another quarter of negative EBITDA in Extrusions Europe and year-over-year margin deterioration across all extrusion segments as drivers of the downgrade. RBC said this deterioration required further downward adjustments to extrusion forecasts and that it now expects the recovery to progress more slowly in the second half of the year.
Kepler Cheuvreux characterized Hydro’s fourth-quarter results as "share-price neutral," saying the company reported largely in-line results and that the brokerage made only modest forecast adjustments. Kepler increased its alumina price assumptions for 2025 and 2026 by 1% each and raised its electricity cost assumption for 2025 by 1%. Despite those tweaks, Kepler left its 2026e group EBIT/loss unchanged at NOK4 billion, a number it noted is 7% below consensus.
Specific model revisions from RBC
- RBC trimmed fiscal 2026-2028 extrusion estimates, cutting adjusted extrusion EBITDA by 7% and lowering extrusion net asset value by 11%.
- Across its broader model, RBC applied a 2% reduction to adjusted EBITDA, a 5% cut to earnings per share, a 10% downgrade to free cash flow and a 4% reduction to overall NAV for the FY26-FY28 period.
RBC cited several operational pressures on the extrusion division including tight scrap availability, negative billet-over-ingot spreads and elevated alumina and energy costs.
How brokerages view the company split
Both brokerages emphasized the divergence between Hydro’s upstream and downstream performance. While upstream operations have been stronger, downstream - notably extrusions - remains weak. RBC said that even with Q1 premiums guided above expectations, extrusion underperformance still outweighs those benefits. Kepler also pointed to cost pressures and limited near-term catalysts, describing its small adjustments to price and cost assumptions as leaving overall expectations broadly steady.
Market context cited in the notes
Analysts noted that aluminium markets remain tight, with prices at $1.45 per pound and supply disruptions including the planned closure of Mozal. RBC said these market conditions have benefited the company but no longer offset the negative impact from downstream operations. The brokerage also noted that the stock has rallied more than 30% over the past six months, a move it believes already reflects gains from tight aluminium markets and Hydro’s low-carbon positioning. At the time of the report, Hydro shares were quoted at NOK85.82, above both RBC’s new and previous price targets.
Risks highlighted by analysts
Both RBC and Kepler flagged potential risks. One specific risk noted is possible changes to U.S. tariffs that could unwind NOK700 million of metal effects in 2025, with the final impact uncertain. RBC said the slower-than-expected downstream recovery combined with recent share-price gains makes the stock appear more fairly valued, which informed its downgrade. Kepler maintained a neutral stance overall, making only modest changes to its estimates aside from the cost and price assumptions mentioned earlier.
Implications for investors and sectors
Analysts’ actions suggest investors should weigh the contrast between Hydro’s upstream strength and lingering downstream challenges when assessing valuation and near-term cash flow. The adjustments affect expectations for extrusion profitability, free cash flow and NAV over the FY26-FY28 period, and speak to pressures across aluminium processing, energy inputs and scrap supply within industrial and metals sectors.
Note: This article presents analyst revisions and market context as reported by the brokerages. It does not introduce additional forecasts or estimates beyond those issued by RBC Capital Markets and Kepler Cheuvreux.