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Sapa deal positions Hydro for future European business

Keywords: Tags  Norsk Hydro ASA, Orkla ASA, joint company, Sapa, aluminum extrusion, European market, emergingmarkets, extruded aluminum tubes welded aluminum tubes

LONDON — Norsk Hydro ASA’s tie-up with Norway’s Orkla ASA—which linked its extruded products business with the downstream operations of Orkla’s Sapa Group subsidiary—leaves the company in a strong position for when European markets recover, chief financial officer Jørgen Rostrup told AMM sister publication Metal Bulletin.

The deal, which is expected to close in the first half of this year, will see the formation of a new company named Sapa that will include Sapa’s aluminum profiles and building system units, as well as extruded and welded tubes.

Hydro chief executive officer Svein Richard Brandtzæg, who will chair the new company, said that it would create a platform for future growth in emerging markets. But it will also better position Norway-based Hydro in the European market, Rostrup said.

"The Orkla deal is not a way to look away from Europe; it is a way of handling Europe," he said. "It is a good way of ensuring we have a lead role in the European extrusion business in the future."

Rostrup conceded that the European market is weak compared with other regions, and that growth prospects are also limited, but said that the size and maturity of the market mean that it is still a vital one for Hydro.

"In many respects, Europe is such an important market—there is its size, its maturity and how advanced it is in terms of applications," he said. "The issue is the limited growth prospects and need for constant restructuring. But we know all about restructuring, and it will lead to a very strong position for when the (European) market turns around."

Rostrup spoke as Hydro presented its full-year 2012 results, his last appearance as Hydro chief financial officer before leaving the company to pursue other opportunities. His replacement is Eivind Kallevik, former head of finance in Hydro’s bauxite/alumina business.

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