OSLO: Aluminium maker Norsk Hydro will cut more costs and raise its capital expenditure next year, while distributing a smaller portion of its earnings as dividend, it said on Thursday, as it contends with rising inflation.

The company also predicted booming demand for lower-carbon aluminium, produced with fewer emissions, as industrial customers seek to reduce their CO2 footprint.

Hydro said it planned to increase annual cost-cuts by a further 3.5 billion crowns ($358.7 million) to a total of 11 billion crowns by 2027, compared to its previous target of cutting by an accumulated 8.5 billion crowns between 2019 and 2025.

Cost cuts are coming from “thousands of initiatives” throughout the business to improve productivity and cut fixed costs, Chief Executive Hilde Merete Aasheim told a capital markets day.

The group expects capital expenditure of 13.5 billion crowns in 2023, including a 2.1 billion carry-over from 2022 and 1.7 billion in currency and inflation effects, having forecast 11 billion in capex for 2022 a year ago.

It is also reducing returns to shareholders, with the company’s board proposing to distribute 50-70% of its 2022 adjusted net income to shareholders in the form of dividends and share buy-backs, compared to the 80% cash dividend for 2021.

Shares in Hydro were down 0.9% at 1229 GMT, lagging a 0.2% rise in the Oslo benchmark index.