Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (October 2014)
106 slides from Norsk Hydro Asa's investor presentation, October 2014
Slide 1: Investor presentation October 2014
Investor presentation October 2014 2014
Slide 2: Table of contents / Cautionary note
Table of contents Third quarter results 2014 3 Cautionary note Certain statements included within this announcement contain forward- looking information, including, without limitation, those relating to (a) Market 34 forecasts, projections and estimates, (b) statements of management’s plans, objecti
Slide 3: Q3 2014
Q3 2014 (3)
Slide 4: Q3 highlights
Q3 highlights • Underlying EBIT NOK 1,490 million • Higher realized all-in* metal and alumina prices • Lower operating costs at Alunorte • Expected 3-4 percent demand growth in 2014 for primary aluminum World ex-China • World ex-China primary aluminium demand continues to exceed production * LME alu
Slide 5: Mixed macro picture
Mixed macro picture Recent signals of uncertainty • Weak industrial production in August, especially in Germany Eurozone • Low growth and inflation, but so far no quantitative easing measures from the ECB • Aluminium demand weakening • Solid growth momentum, positive consumer and business sentiment
Slide 6: Physical market deficit continues World ex-China
Physical market deficit continues World ex-China Demand and production (quarterly annualized) Production less demand, (quarterly annualized)* 1 000 mt primary aluminium 1 000 mt primary aluminium 30 000 4 000 3 500 3 000 2 500 25 000 2 000 1 500 1 000 20 000 500 0 ( 500) (1 000) 15 000 (1 500) Jan-0
Slide 7: Standard ingot premiums rise to record levels
Standard ingot premiums rise to record levels Regional standard ingot premiums • Standard ingot premiums continue to USD/mt 600 rise in all regions through Q3 500 • US and EU (duty-paid) premiums up to ~500 USD/mt 400 • Value-added premiums at record-high 300 levels 200 100 0 Jan-08 May-09 Sep-10 Ja
Slide 8: Premiums supported by increasing primary metal deficits
Premiums largely supported by increasing primary metal deficits in North America and Europe Mid-west premium and NA primary market balance European DP premium and primary market balance Market balance Ingot premium Market balance Ingot premium (1000 mt) (USD/mt) (1000 mt) (USD/mt) ( 600) 500 (1 000)
Slide 9: All-in standard ingot price continues to rise
All-in standard ingot price continues to rise USD/mt • 3-month LME price ranged between 2 900 1 850 and 2 100 USD/mt during Q3 2 700 2 500 • End of period LME decrease partly offset 2 300 by strengthening USD 2 100 • Realized LME price for Q3 1 906 USD/mt 1 900 1 700 Primary aluminium LME* USD/mt NO
Slide 10: Reduction in reported inventories World ex-China
Reduction in reported inventories World ex-China World ex-China reported primary aluminium inventories 1 000 mt Days 8 000 120 7 000 100 6 000 80 5 000 4 000 60 3 000 40 2 000 20 1 000 0 0 Q1 00 Q3 02 Q1 05 Q3 07 Q1 10 Q3 12 Q3 14 IAI Other LME World ex. China inventory days Source: CRU/Hydro (10)
Slide 11: LME to implement warehouse rules
LME to implement warehouse rules Total stock levels, Detroit and Vlissingen • UK Court of Appeal upheld LME’s Million mt Queue days appeal against High Court Judgment 800 • LME planning to introduce warehousing 2,2 750 reforms first quarter 2015 2,0 700 • Reform targets warehouses with queues over 5
Slide 12: Chinese bauxite costs continue to rise
Chinese bauxite costs continue to rise Average Chinese import price and Value in use USD/mt 80 • Increased price for bauxite imports to Average Chinese import price 75 Value in use China 70 • Uncertainty around possibility to obtain 65 export licenses for those with plans to 60 build Indonesian alum
Slide 13: Increasing alumina prices in tightening market
Increasing alumina prices in tightening market Platts alumina index (PAX) USD/mt Percent 450 20% • Average price 322 USD/mt, up 19% 6 USD/mt from Q2 400 18% • Positive development through quarter, 17% with alumina prices ending the quarter 350 at 355 USD/mt 16% − Highest level since October 2011 300
Slide 14: China: Bauxite imports increased
China: Bauxite imports increased Exports of semis and fabricated have risen Annualized aluminium equivalents*, million mt YTD 2011 2012 2013 2014** • Bauxite and alumina 25 − Significant drop in bauxite imports since January China import 20 amid Indonesian export ban, but higher volumes in 15 Q3 tha
Slide 15: Lower implied alumina cost
Lower implied alumina cost • “From B to A” improvement program Implied alumina cost and margin, USD/mt 1) progressing according to plan 475 − Target NOK 1 billion by end-2015, of which 13 425 NOK 600 million by end-2014 11 − USD 11 per mt implied alumina cost 263 reduction from second quarter 258 35
Slide 16: Increased EBITDA margin in Primary Metal
Increased EBITDA margin in Primary Metal Implied primary cost and margin, USD/mt 1) • Implied cost continuing downward trend ‒ Improvement efforts 475 300 425 ‒ Positive exchange rate development 400 450 ‒ Increasing premiums 1 775 1 500 1 350 • EBITDA margin3) ~630 USD/mt in Q3 2014 • USD 180 JV pr
Slide 17: Stable shipments in Rolled Products
Stable shipments in Rolled Products Rolled Products sales by segment Q3 2014 vs. Q2 2014 Q3 2014 vs. Q3 2013 Packaging & Litho, Auto & Heat General engineering Total Rolled Packaging & Litho, Auto & Heat General engineering Total Rolled Building exchanger Products Building exchanger Products 17% 5%
Slide 18: Strong North American demand for extruded products
Strong North American demand for extruded products, weaker in Europe • Demand increased compared to same quarter last year − 7% in North America − 1% in Europe • Global demand for precision tubing continues − Supported by automotive sector (18)
Slide 19: Energy: Lower inflow, higher prices
Energy: Lower inflow, higher prices Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 700 100 90 600 80 500 70 400 60 50 300 40 200 30 MIN NO2 (2002-2013) 2013 20 MAX NO2 (2002-2013) 100 2013 2014 10 2014 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 4
Slide 20: High-level quarterly result development
High-level quarterly result development NOK billion 0.2 (0.3) 1.2 (0.2) 1.5 0.7 0.1 0.5 Underlying EBIT Underlying EBIT Energy volume LME and Raw materials and Other margins and Eliminations and Underlying EBIT Q3 2013 Q2 2014 and price premiums fixed costs volumes other Q3 2014 Figures for 2013 thr
Slide 21: Key financials
Key financials First 9 months First 9 months NOK million Q3 2014 Q2 2014 Q3 2013 2014 2013 Revenue 19 698 18 272 16 145 56 251 48 306 Underlying EBIT 1 490 544 658 2 806 2 254 Items excluded from underlying EBIT 447 75 (62) 573 (577) Reported EBIT 1 937 620 596 3 379 1 677 Financial income (expense)
Slide 22: Items excluded from underlying EBIT
Items excluded from underlying EBIT First 9 months First 9 months NOK million Q3 2014 Q2 2014 Q3 2013 2014 2013 Underlying EBIT 1 490 544 658 2 806 2 254 Unrealized effects on power and raw material contracts 54 (40) (7) 189 (121) Unrealized derivative effects on LME related contracts 220 136 34 351
Slide 23: Bauxite & Alumina
Bauxite & Alumina Q3 Q2 Q3 Key figures 2014 2014 2013 Alumina production, kmt 1 478 1 526 1 316 Total alumina sales, kmt 1 922 2 071 1 879 Realized alumina price, USD/mt 287 276 267 Implied alumina cost, USD/mt 252 263 263 Bauxite production, kmt 2 287 2 370 1 513 Underlying EBITDA, NOK million 417
Slide 24: Primary Metal
Primary Metal Q3 Q2 Q3 Key figures 2014 2014 2013 Primary aluminium production, kmt 487 488 491 Total sales, kmt 542 559 540 Realized LME price, USD/mt 1 906 1 762 1 822 Realized LME price, NOK/mt 11 909 10 660 10 938 Implied primary cost USD/mt 1 275 1 375 1 450 Underlying EBITDA, NOK million 1 651
Slide 25: Higher realized all-in metal price drives Qatalum earnings
Higher realized all-in metal price drives Qatalum earnings Q3 Q3 Key figures – Qatalum (50%) 2014 Q2 2014 2013 Revenue, NOK million 1 207 1 095 1 074 Underlying EBITDA, NOK million 446 370 331 Underlying EBIT, NOK million 231 158 78 Underlying Net income (loss), 189 111 31 NOK million Primary alumin
Slide 26: Metal Markets
Metal Markets Q3 Q2 Q3 Key figures 2014 2014 2013 Remelt production, kmt 128 141 127 Metal products sales, kmt* 671 700 668 Underlying EBITDA, NOK million 192 120 149 Underlying EBIT excl currency and inventory 136 122 73 valuation effects, NOK million Underlying EBIT, NOK million 171 100 111 Underl
Slide 27: Rolled Products
Rolled Products Q3 Q2 Q3 Key figures 2014 2014 2013 External sales volumes, kmt 244 245 234 Underlying EBITDA, NOK million 417 350 351 Underlying EBIT, NOK million 243 177 181 Underlying EBIT NOK million 615 601 Q3 results • Seasonally lower operating costs 243 • Increased margin pressure 183 181 18
Slide 28: Energy
Energy Q3 Q2 Q3 Key figures 2014 2014 2013 Power production, GWh 2 170 2 248 2 838 Net spot sales, GWh 873 1 028 1 673 Southwest Norway spot price (NO2), 247 168 267 NOK/MWh Underlying EBITDA, NOK million 275 209 523 Underlying EBIT, NOK million 234 169 485 Underlying EBIT Q3 results NOK million • R
Slide 29: Sapa joint venture
Sapa joint venture Key figures – Sapa (50%) Q3 2014 Q2 2014 Q1 2014 • Strong US development more than offset by seasonally lower sales 5 802 5 772 5 673 Revenue, NOK million volumes in Europe Underlying EBITDA, NOK million 246 321 220 • Share of underlying net income reduced by NOK 76 million from Q
Slide 30: Other and Eliminations
Other and Eliminations Q3 Q2 Q3 Other and Eliminations 2014 2014 2013 Sapa JV 55 131 10 Other (128) (176) (90) Eliminations (276) (8) (7) Other and Eliminations (349) (52) (87) (30)
Slide 31: Net cash/(debt) development Q3 2014
Net cash/(debt) development Q3 2014 NOK billion Net cash flow from operations NOK (1.1) billion 2.6 (0.9) (1.9) (0.5) (2.1) (0.9) (0.5) Net debt Q2 2014 Underlying EBITDA Operating Capital Other adjustments Investments Currency Net debt Q3 2014 (31)
Slide 32: Adjusted net debt development Q3 2014
Adjusted net debt development Q3 2014 Sep 30, Jun 30. Mar 31, NOK billion 2014 2014 2014 Cash and cash equivalents 6.0 6.6 6.5 Short-term investments 1.7 1.8 3.1 Short-term debt (5.0) (6.1) (6.3) Long-term debt (4.8) (4.1) (3.9) Net cash/(debt) (2.1) (1.9) (0.6) Net pension liability at fair value,
Slide 33: Priorities
Priorities • Lift bauxite and alumina production • Deliver on improvement programs • Continue active margin management in tight market
Slide 34: Market
(34) QQ) HYDRO
Slide 35: Aluminium is part of the solution
Aluminium is part of the solution Demand for semis Share of semis consumption Million mt 2013– 70 million mt Global trends 120 4-6% Consumer durables annual growth 5% 100 Electrical 13% Packaging 8% 55 80 Foil stock 8% Machinery 44 & equipment 10% Other 5% 60 30 40 Transport 25% Construction 25% Cap
Slide 36: Global FRP consumption growth of 6%, driven by transport
Global FRP consumption growth of 6%, driven by transport Global - CAGR 2013-2017 10% 13% Transport 10% 11% Electrical 7% 4% Construction 6% 52% 9% Total 6% Machinery & Equipment 5% Transport Consumer durables/others 5% Construction Electrical Machinery & Equipment Packaging 4% Packaging Consumer dur
Slide 37: Aluminium is the metal of the future
Aluminium is the metal of the future Should be produced with the lowest carbon footprint Rising aluminium demand Properties give wide range of applications 80 000 + 74% 70 000 60 000 + 66% Lightweight – 1/3 density of steel 50 000 Recyclable – 5% of original energy consumption + 36% Corrosion resist
Slide 38: Infinite ideas in aluminium
Infinite ideas in aluminium More and more sectors “discover” new areas for aluminium applications Lightweight, non-corrosive Zero-emission electrical car ferry in 100% aluminium Floating aluminium bridge with a submerged offshore applications for light-weighting. In operation from 2015 floating tunn
Slide 39: Aluminium offers lightweight, heavy impact
Aluminium offers lightweight, heavy impact The answer is simple – lighter cars are more fuel efficient • Tightening fuel economy regulations Land Rover Sport Land Rover Sport 2010 2014 drive increased aluminium demand 3,100 kg 2,200 kg • For each 10% reduction in vehicle weight, car manufacturers ac
Slide 40: Automotive drive demand for aluminium
Automotive drive demand for aluminium 40 years of uninterrupted growth – accelerating from 2015 to 2025 Aluminium content – pounds per light vehicle 600 DUCKER 500 WORLDWIDE In 2015, aluminium penetration will reach the critical mass for 400 an explosive period of growth from 2015 to 2025 In 2025, l
Slide 41: Aluminium – a perfect fit for next-generation automotive
Aluminium – a perfect fit for next-generation automotive Aluminium vs. high-strength steel in automotive applications Better Hang-on parts • Aluminium has higher specific energy absorption compared to steel Safer • Maximum performance with lowest possible mass within stiffness, crash performance and
Slide 42: Increased bauxite imports into China
Increased bauxite imports into China Currently affected by Indonesia export ban Annualized aluminium equivalents*, million mt 2006 2007 2008 2009 2010 2011 2012 2013 2014** 20 to China Import 15 10 5 from China 0 Export ( 5) Bauxite Alumina Scrap Primary aluminium Fabricated Semis Net aluminium impo
Slide 43: Large and concentrated bauxite resources
Large and concentrated bauxite resources with many challenges to overcome for future developments Billion mt Guinea 41.0 China 4.1 2.9 India Jamaica 6.2 3.0 1.1 0.5 1.0 Venezuela Vietnam 1.8 0.3 4.7 Indonesia 0.5 2.0 2.0 Brazil 8.7 Australia 2.5 9.5 5.6 Atlantic Pacific Big-league (Top- 3) Total bau
Slide 44: Alumina market is consolidating
Alumina market is consolidating Net long equity alumina position, million tonnes Alcoa 4.3 Alcoa/AWAC 9.2 Vale 3.0 Rio Tinto Alcan* 2.8 Glencore 2.4 BHP Billiton 2.7 BHP Billiton 1.9 Hydro 2.0 Kaiser 1.0 Hindalco 0.2 Alcan 0.8 Glencore/Century 0.0 Sual 0.7 Vedanta (1.1) Rio Tinto 0.5 UC Rusal (1.2)
Slide 45: Commodity prices drive industry costs
Commodity prices drive industry costs Fuel oil A1 (USD/mt) Steam coal (USD/mt) Petroleum coke FOB USG (USD/mt) 750 180 600 600 150 500 120 400 450 90 300 300 60 200 150 30 100 0 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 201
Slide 46: Business overview
Business overview (46)
Slide 47: Hydro - Group
Hydro - Group (47)
Slide 48: Hydro: a resource rich global aluminium company
Hydro: a resource rich global aluminium company • Based in Norway, involved Hydro underlying EBIT quarterly, NOK million in activities in more than 50 (2 555) 3 551 5 982 1 297 2 725 2 806 countries 2 200 • 13 000 employees 1 700 • Operating revenues 1 200 − 2012: NOK 64 billion − 2013: NOK 65 billi
Slide 49: Strong positions across aluminium value chain
Strong positions across aluminium value chain Raw materials Primary aluminium production, Aluminium in products processing and energy marketing and recycling Bauxite Rolled Sapa JV (50%) Energy Primary Metal Metal Markets & Alumina Products • Bauxite capacity • Long-term power supply • 2.4 million t
Slide 50: Hydro - a first tier aluminium company
Hydro - a first tier aluminium company Equity production in 2013 in aluminium equivalents excl. China, thousand mt 9 000 Alumina Aluminium 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 Alcoa/AWAC Rio Tinto Alcan* UC Rusal BHP Billiton Norsk Hydro Glencore/Century Hindalco Vedanta Emirates Global
Slide 51: Hydro's path towards global leadership
Hydro’s path towards global leadership Curtailing 26% of USD 300 Climb From B to A JV-program primary metal capacity program 2009 2010 2011 2012 2013 Starting up Acquiring bauxite Establishing Qatalum and alumina assets Sapa JV (51)
Slide 52: Strategy for further value creation
Strategy for further value creation Bauxite & Alumina Primary Metal Energy Mid- and downstream • Improvement efforts and • Reposition • Increase value of energy • Adjust capacity and cost cost reduction • Keep solid cash flow in business base to market • Commercialize current assets • Develop curren
Slide 53: Hydro
Attractive Improvement Hydro positions throughout the culture and technological Financial strength value chain leadership (53)
Slide 54: Safe and responsible operations is a top priority
Safe and responsible operations is a top priority TRI Rate 10.3 7.0 6.0 5.4 4.0 4.1 3.9 3.7 3.8 3.4 3.4 3.2 2.9 2002 2004 2006 2008 2010 2012 YTD 2014 (54)
Slide 55: Hydro aims to be climate neutral
Hydro aims to be climate neutral Emissions User-phase benefits Recycling (55)
Slide 56: Aluminium for a resource-efficient, low-carbon society
Aluminium for a resource-efficient, low-carbon society Electrolysis Meeting Circular technology pilot consumer needs economy Developing the world’s most Developing alloys for resource Recycling R&D to improve energy efficient electrolysis efficient cars, buildings and resource efficiency and avoid c
Slide 57: Bauxite & Alumina
Bauxite & Alumina (57)
Slide 58: High-quality asset portfolio
High-quality asset portfolio MRN Paragominas Alunorte CAP alumina bauxite mine bauxite mine alumina refinery refinery project • 5% ownership • Full financial exposure, increase • 92% ownership • 81% ownership • Volume off-take agreement for ownership to 100% by 2016 • World’s largest alumina refiner
Slide 59: Strengthening the competitiveness of Bauxite & Alumina
Strengthening the competitiveness of Bauxite & Alumina From B to A Alunorte • Increase productivity and rightsize organization • Stabilize performance at nameplate capacity • Improve logistics efficiency Paragominas • Increase productivity and rightsize organization • New methods to support producti
Slide 60: Paragominas – One of the world's largest bauxite mines
Paragominas – One of the world’s largest bauxite mines • 2013 production: 7.6 million mt • Target to deliver production increases and stabilize • Possible expansion: up to 15 million mt • Current reserve life: 30 years − ~300 million mt − Long-life resource (60)
Slide 61: Bauxite operational mining costs in Paragominas
Bauxite operational mining costs in Paragominas • Energy cost - Power and fuel Paragominas bauxite mining costs 2013 • Labor cost 10% − Influenced by Brazilian wage level 15% − Productivity improvements 11% • Maintenance and consumables − Influenced by Brazilian inflation 23% • Large fixed cost base
Slide 62: Alunorte – World's largest alumina refinery
Alunorte – World’s largest alumina refinery • 2013 production: 5.4 million mt • Targeting stable production above 6 million tonnes • World-class conversion cost position • Modern technology • Bauxite supplied from Paragominas and MRN (62)
Slide 63: Favorable integrated alumina cash cost position
Favorable integrated alumina cash cost position • Implied alumina cash cost position 2013 Implied alumina cash cost position 2013 − USD 260 per mt − Alunorte, Paragominas and sourced alumina 4% • Bauxite 17% − Internal bauxite from Paragominas at cost, sourced bauxite from MRN 33% • Energy − First-q
Slide 64: External alumina sourcing
External alumina sourcing • 2.0 million mt of external alumina sourcing in 2013 • Long term off-take agreement with Rio Tinto − 900 000 mt annually from Yarwun • Short- and medium term contracts − To balance and optimize position geographically − Various pricing mechanisms − Older contracts linked t
Slide 65: Alumina pricing shifting from LME-link to market fundamentals
Alumina pricing shifting from LME-link to market fundamentals 100% • Future pricing should reflect fundamentals of bauxite and alumina value chain • New norm for the industry − Index pricing and short to medium-term contracts − Getting wider acceptance in the market • Hydro’s commercial strategy − M
Slide 66: Primary Metal
Primary Metal (66) QW) HYDRO
Slide 67: World-wide production network
World-wide production network Primary aluminium annual production capacity 47% Norway, 925 000 tonnes • Sunndal (100%) : 390 000 tonnes • Årdal (100%): 190 000 tonnes 6% • Karmøy (100%): 190 000 tonnes Canada, 120 000 tonnes • Høyanger (100%): 65 000 tonnes • Alouette (20%): 120 000 tonnes • Søral (
Slide 68: Delivering on ambitious USD 300 improvement program
Delivering on ambitious USD 300 improvement program Total annual improvement effect of NOK ~1.5 billion Improvement categories Improvements in USD per mt* Operational improvements 300 • Improved current efficiency • Reduced power consumption • Reduced anode consumption 250 Fixed cost reductions and
Slide 69: Primary Metal joint ventures improvement program
Primary Metal joint ventures improvement program USD 180 per mt improvements by end-2016, corresponding to NOK 1.2billion Improvement categories Improvements in USD per mt* 180 160 Fixed cost reductions and lean operations 140 120 100 USD 180 per mt Operational improvements 80 • Improved current eff
Slide 70: Improvement drive yields results in primary production
Improvement drive yields results in primary production Underlying EBITDA per mt in USD for respective primary aluminium divisions 1H 2011 1H 2012 1H 2013 1H 2014 700 700 700 700 500 500 500 500 300 300 300 300 100 100 100 100 -100 -100 -100 -100 Hydro Peers All figures based on public accounting dat
Slide 71: Develop technology to fulfill ambitions
Develop technology to fulfill ambitions HAL 300 HAL4e R&D portfolio • Operating for several years in • Benchmark technology • HAL4e optimization – to be Sunndal – process parameters and ready for next project environment • HAL Ultra – future vision • Ramping up in Qatar • 30 months of operations in
Slide 72: Metal Markets
Metal Markets (72)
Slide 73: Preferred partner in casthouse products
Preferred partner in casthouse products • Capitalizing on value-added casthouse products portfolio Extrusion ingot • Extensive multi-sourcing system 1.3 million mt including fully- and part-owned primary casthouses and stand- alone remelters Foundry alloys 0.4 million mt • Flexible sourcing system e
Slide 74: Metal Markets earnings drivers
Metal Markets earnings drivers • Remelters Underlying EBIT excluding currency effects and − Revenue impact – volume and product ingot stock valuation effect, NOK million premiums above LME 250 − Cost impact − Scrap and standard ingot premiums 200 above LME − Raw material mix 150 − Freight cost – pro
Slide 75: Rolled Products
Rolled Products (75) AY HYDRO
Slide 76: No. 1 flat rolled products producer in Europe
No. 1 flat rolled products producer in Europe External sales in tonnages 2013 • World leader in high-end products foil and litho Foil 12% − Alunorf (JV 50%) – world’s largest rolling mill Litho 19% − Grevenbroich plant – world’s largest finishing mill Can • Strategy of high-grading product portfolio
Slide 77: Attractive market position and customers
Attractive market position and customers More than 50% of products with global reach Our products Our customers Our position Litho World market leader Global reach Foil Can Leading position in Europe Auto Regional Leading position in Europe reach GE/ Building (77)
Slide 78: Hydro inside
Hydro inside Hydro supplies premium European carmakers with aluminium “Lightweight construction is a core element of Jaguar’s DNA and Jaguar is at the cutting-edge of aluminium technology in the automotive industry” BMW 7 series Peugeot 308 “Audi believes aluminium still offers abundant potential, e
Slide 79: Rolled Products earnings drivers
Rolled Products earnings drivers Underlying EBIT per tonne, NOK 1 400 • Contract structure 1 200 − Margin business based on conversion price − LME element passed on to customers 1 000 − Range from spot contracts to multi-year 800 contracts 600 • High share of fixed costs - volume 400 sensitive 200 •
Slide 80: Sapa joint venture
Sapa joint venture (80)
Slide 81: Global leader in extruded products established
Global leader in extruded products established • Sapa, 50/50 joint venture, between Hydro and Orkla • Positioned for restructuring and value creation • Established September 1, 2013 • Hydro has agreed to supply the new company with extrusion billets, ~400 000 mt per year at market prices (81)
Slide 82: Sapa – global leader in extruded products
Sapa – global leader in extruded products Heavyweight company – lightweight material External sales of 1,365,921 tonnes (2013)* Precision Building Tubing 7% Systems 6% Extrusions Asia 2% Extrusions Europe • 50/50 joint venture between Hydro and Orkla, 46% established September 1, 2013, with 23,000 e
Slide 83: Energy
Energy (83)
Slide 84: Power production increased to 10 TWh
Power production increased to 10 TWh Power production capacity (TWh), per region and reversion year Telemark • Power producing assets and ongoing projects Normal 3.1 0.5 − Maintain cost control in operations and projects production 2044- − Holsbru and Vasstøl power plants into operation in No revers
Slide 85: Hydro's energy map
Hydro’s energy map Energy consumption in alumina refineries, smelters and rolling mills Europe Power 16.7 TWh North America Natural gas 3.3 TWh Power 1.7 TWh Middle East Power 4.6 TWh South America Power 4.6 TWh Australia/Asia Coal 5.3 TWh Power 1.0 TWh Fuel oil 7.3 TWh Based on Hydro’s equity produ
Slide 86: Reversion regime secures Hydro's values
Reversion regime secures Hydro’s values • Pursue value enhancement strategy − Develop and enhance value of power assets − Power assets remain an integrated part of aluminium production in Norway − Power and smelter portfolio will be reviewed concurrently − Participate in restructuring of power secto
Slide 87: Energy earnings drivers
Energy earnings drivers Underlying EBIT* and spot price • Production and market prices strongly linked NOK million NOK/MWh to hydrological conditions 2000 500 1500 400 • Relatively stable annual EBIT contribution 300 − Large quarterly variations due to volatile spot sales 1000 200 and spot prices 50
Slide 88: Hydro's value proposition
Hydro’s value proposition • Improve relative industry position • Capitalize on raw material positions • Maintain financial strength and flexibility • Ensure competitive shareholder return (88)
Slide 89: Additional information
Additional information (89)
Slide 90: Shareholder and financial policy
Shareholder and financial policy • Hydro aims to give its shareholders competitive returns compared to alternative investments in peers • Maintained dividend policy − Ordinary dividend: 30% of net income over the cycle − Average ordinary pay-out ratio 2009-2013 is ~90% − Share buybacks and extraordi
Slide 91: Hedging policy
Hedging policy • Bauxite & Alumina, Primary Metal − Remain primarily exposed to LME prices − Operational LME hedging − One-month forward sales − Currency exposure, mainly USD, NOK and BRL − Policy of maintaining long-term debt in USD − BRL hedged for 2014 • Metal Markets, Rolled Products − Operation
Slide 92: Capital allocation mainly upstream
Capital allocation mainly upstream NOK billion Debt-financed investments Qatalum • Sustaining capex NOK ~3.5 billion Investments Qatalum 10.2 Growth capex annually Sustaining capex • Minor growth projects planned for 2014 • ~85% of sustaining capital to be 6.2 allocated upstream in 2014 4.6 1 • Depr
Slide 93: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10%* Currency sensitivities +10%* NOK NOK Income million EBIT million EBIT Financial items before tax Aluminium 2 750 USD 2 275 (1 075) 1 200 Oil (200) BRL (875) 705 (170) Pet coke (200) EUR (155) (1 000) (1 155) • Annual sensitivities ba
Slide 94: Items excluded from underlying results - 2014
Items excluded from underlying results - 2014 NOK million (+=loss/()=gain) Q1 2014 Q2 2014 Q3 2014 Unrealized derivative effects on LME related contracts Bauxite & Alumina (4) (1) (2) Total impact Bauxite & Alumina (4) (1) (2) Unrealized derivative effects on LME related contracts Primary Metal (12)
Slide 95: Items excluded from underlying results - 2013
Items excluded from underlying results - 2013 NOK million (+=loss/()=gain) Q1 2013 Q2 2013 Q3 2013 Q4 2013 2013 Unrealized derivative effects on LME related contracts Bauxite & Alumina 13 (3) - 3 12 Legal settlements Bauxite & Alumina - - - 109 109 Total impact Bauxite & Alumina 13 (3) - 112 121 Unr
Slide 96: Operating segment information
Operating segment information Underlying EBIT NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Year 2012 Year 2013 Bauxite & Alumina (144) (188) (386) (73) (63) (244) (370) (379) (288) (269) (26) (791) (1 057) Primary Metal 36 245 (4) 58 364 237 337
Slide 97: Operating segment information
Operating segment information EBIT NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Year 2012 Year 2013 Bauxite & Alumina (136) (199) (387) (62) (76) (241) (370) (491) (284) (269) (23) (783) (1 178) Primary Metal (91) (1 227) (48) 112 19 122 338 377
Slide 98: Operating segment information
Operating segment information Total revenue NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Year 2012 Year 2013 Bauxite & Alumina 3 195 3 573 3 032 3 465 3 304 3 147 3 354 3 546 3 511 3 828 3 737 13 265 13 350 Primary Metal 7 458 7 578 6 169 5 485
Slide 99: Operating segment information
Operating segment information Internal revenue NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Year 2012 Year 2013 Bauxite & Alumina 1 241 1 356 1 111 1 098 1 322 1 253 1 277 1 375 1 304 1 424 1 480 4 806 5 226 Primary Metal 6 331 6 341 5 097 4 442
Slide 100: Operating segment information
Operating segment information Depreciation, amortization and impairment NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Year 2012 Year 2013 Bauxite & Alumina 475 439 428 409 429 448 417 424 410 431 442 1 750 1 718 Primary Metal 542 1 645 482 356 47
Slide 101: Income statements
Income statements First 9 months First 9 months NOK million Q3 2014 Q2 2014 Q3 2013 2014 2013 Year 2013 Revenue 19 698 18 272 16 145 56 251 48 306 64 877 Share of the profit (loss) in equity accounted investments 287 122 (54) 450 (90) (240) Other income, net 145 147 248 424 698 801 Total revenue and
Slide 102: Balance sheets
Balance sheets NOK million Sep 30 2014 Jun 30 2014 Mar 31 2014 Dec 31 2013 Sep 30 2013 Cash and cash equivalents 6 045 6 617 6 476 8 412 8 397 Short-term investments 1 745 1 765 3 081 2 480 1 433 Accounts receivable 11 280 10 835 11 116 9 539 10 769 Inventories 10 334 10 213 9 599 10 070 9 758 Other
Slide 103: Operational data
Operational data Bauxite & Alumina Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Year2012 Year2013 Alumina production (kmt) 1 464 1 491 1 441 1 397 1 361 1 248 1 316 1 452 1 428 1 526 1 478 5 792 5 377 Sourced alumina (kmt) 324 332 399 335 476 427 711 395 55
Slide 104: Operational data
Operational data Metal Markets Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Year2012 Year2013 Remelt production (1 000 mt) 152 142 136 119 135 132 127 123 139 141 128 548 517 Third-party Metal Products sales (1 000 mt) 76 82 81 85 84 78 76 78 84 79 78 323 3
Slide 105: Sapa joint venture information
Sapa joint venture information Sapa JV (100 % basis), underlying (unaudited) NOK million, except sales volumes Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Sales volume (1000 mt) 343 311 346 360 346 314 359 368 350 Revenues 10 414 9 654 10 367 10 974 10 798 10 132 11 346 1
Slide 106: Investor Relations in Hydro
Investor Relations in Hydro Next event Pål Kildemo Capital Markets Day Head of Investor Relations t: +47 970 96 711 November 27-28, 2014 e: pal.kildemo@hydro.com Forth quarter results February 11, 2015 Olena Lepikhina Investor Relations Officer t: +47 96853035 For more information see e: olena.lepik