OSLO (AFP) - Norwegian aluminium producer Norsk Hydro on Tuesday said it was back in the green in the first quarter, largely topping analysts' expectations, but warned of continued production overcapacity.

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From January to March, the company posted a net profit of 869 million Norwegian kroner (110.7 million euros, 147.4 million dollars), against a loss of 347 million kroner last year.

The results largely beat expectations, with analysts polled by Down Jones Newswires on averaged predicting a net profit of 175.2 million kroner.

The company's shares soared on the news, and at 1340 GMT were up 1.70 percent on an Oslo Stock Exchange down 0.78 percent.

"We have seen rising aluminium prices and a partial demand recovery from previous weak quarters, supported by restocking," said chief executive Svein Richard Brandtzaeg.

The company's underlying earnings before interest and taxes (EBIT) reached 688 million kroner compared to a loss of 493 million in the first quarter of 2009, while its sales were up 11 percent to 18.1 billion kroner.

For all of 2010, the Norwegian company said it expected a 12 percent rise in demand.

"But global aluminium stocks remain high, indicating continued production overcapacity," Brandtzaeg warned.

"There is challenging terrain ahead of us, and we will maintain a strong cost focus across our businesses to ensure efficient operations and continuous improvements along our value chain," he added.