Hydro's underlying earnings before interest and tax rose to 949 million Norwegian crowns ($104.32 million) in the April-June period, from 875 million crowns a year earlier, exceeding the 594 million crowns expected by analysts in a poll published by the company.

"Although results are being negatively impacted by the Covid-19 induced market effects, we are seeing positive contributions from cost improvement initiatives across the portfolio," the company said in a statement.

The company's Alunorte plant, which achieved record low production costs for the quarter, was on target to reach name-plate capacity by the end of 2020, it added.

Norsk Hydro also said some countries, especially China, were showing sings of recovery towards the end of the second quarter.

While its Bauxite & Alumina, Primary Metal and Energy divisions were operating as normal in the quarter, the Extruded Solutions and Rolled Products divisions were still working at reduced capacity due to the fall in demand.

Reflecting weaker growth expectations in key market segments, Extruded Solutions recognized an impairment of 1.5 billion crowns.

Demand for aluminium, used by industries ranging from construction and packaging to cars and airplanes, had been expected to soften even before the coronavirus pandemic hit the global economy.

Global primary aluminium consumption was down 9% in the second quarter from a year earlier, and was expected to be weak for the rest of the year, leading to a surplus of 3-4.7 million tonnes, Norsk Hydro said.

In April, the surplus was predicted to be between 1.5 million and 5 million tonnes.

($1 = 9.0974 Norwegian crowns)

(Reporting by Nerijus Adomaitis; Editing by Muralikumar Anantharaman and Vinay Dwivedi)