* Q4 underlying profit down 85 pct
* Brazil restrictions hit profit
* Timing on resuming full Alunorte output uncertain
* Macroeconomic uncertainty could sap 2019 demand (Adds share price, analyst comment)
By Terje Solsvik and Gwladys Fouche
OSLO, Feb 7 (Reuters) - Norwegian metals producer Norsk Hydro warned it would miss its 2019 savings targets after falling far short of fourth-quarter earnings forecasts due to restricted output in Brazil, sending shares down 8 percent to their lowest in two years.
Higher costs also impacted underlying operating profit, which fell 85 percent to 534 million Norwegian crowns ($62.48 million) versus the 1.45 billion crowns expected by analysts in a Reuters poll.
“Our results are reflecting the challenging situation we face in Brazil and higher raw material costs,” Chief Executive Svein Richard Brandtzaeg said in a statement.
Norsk Hydro shares were down 8.2 percent to 35.2 Norwegian crowns at 0851 GMT, the lowest level since October 2016.
Despite making some progress it said it remained uncertain on when its Alunorte alumina facility in Brazil, the world’s largest, might return to full output.
It has been operating at half capacity following a spill of untreated water in February.
Last month, the Brazilian state of Para lifted its restrictions, but full production at Alunorte can only resume once a federal court follows suit.
The company also said in January that it aimed to resume full production at the plant within weeks or months, though the process remained unclear.
Alunorte is a key supplier to Hydro’s metal smelters.
“We continue to seek a common agreed solution, so operations can be resumed,” the company said. “The timing of a full resumption of operations remains uncertain.”
The restrictions in Brazil along with higher raw material costs hurt profits during the quarter, the company said, adding it would not meet cost-cut targets in 2019 after missing a savings goal of 500 million crowns for 2018.
Analysts cited the situation in Brazil as reason for the weaker-than-expected results, though some predicted the facility could win approval to re-start in the first half of 2019.
“We forecast Hydro will receive approval to re-start in Q2’19,” JPMorgan Cazenove, which has a neutral rating on the stock, said in a research note. “A prolonged embargo will have negative impact on earnings, cash flow and sentiment.”
The company’s board proposed a dividend of 1.25 crowns per share for 2018, down from 1.75 crowns for 2017 and short of the 1.58 crowns expected by analysts on average.
It also forecast a lack of supply in the global aluminium market but said an uncertain economic outlook could sap demand in the coming year.
“For 2019, we expect the global primary aluminium market to be in deficit, although increasing macro uncertainty could lead to softening demand growth,” Brandtzaeg said. (Writing by Michael Kahn; editing by Jason Neely and David Evans)