Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (March 2003)
114 slides from Norsk Hydro Asa's investor day presentation, Mar 18, 2003
Slide 1: Business Area Seminar Hydro Aluminium
Business Area Seminar Hydro Aluminium Düsseldorf March 18/19 2003
Slide 2: Major acquisitions – new strategic platform
Major acquisitions – new strategic platform ! Full range aluminium company " No. 1 in Europe – top three integrated globally " Complementary product portfolios ! Low cost smelter assets in Australia and Canada ! Successful integration " Significant synergies and value creation " Improved market posi
Slide 3: Delivery
The Innovative Global Force Delivery ! Outperform competitors in key market segments ! Operational performance excellence " Benchmark in operation of key technologies " Ambitious cost reduction and value capturing programs " Continuous safety improvements " Strong environmental focus ! Turnaround/ex
Slide 4: Differentiation
The Innovative Global Force Differentiation ! Customer responsiveness ! Agile and flexible organisation ! Unique portfolio composition 41569_1 - 03.2003 - * 4 - H ydro Media
Slide 5: Strategic direction
The Innovative Global Force Strategic direction ! Short- and medium term focus: Performance improvements ! Restructure upstream portfolio – improve relative cost position ! Leverage value of number one positions mid- and downstream in Europe – also globally 41569_1 - 03.2003 - * 5 - H ydro Media
Slide 6: Our value chain
Our value chain Bauxite/ alumina Electrolysis metal Casthouse products Rolling Extru- sion Fabrication & Systems Automotive 41569_1 - 03.2003 - * 6 - H ydro Media
Slide 7: Hydro Aluminium 2002
Hydro Aluminium 2002 Revenues NOK 65 bn EBITDA NOK 4.3 bn CROGI 7.1% Gross NOK 64 bn Investment *) CAPEX NOK 6.5 bn Hydro Aluminium CEO Employees *) 27 100 Primary Metal Metal Products Rolled Products Extrusion Automotive North America (Oslo) (Oslo) (Cologne) (Lausanne) (Cologne) (Baltimore) Metals
Slide 8: Geographical presence 2002
Geographical presence 2002 Revenues per Continent Employees per Continent Total NOK 65 billion Total 27 100 employees 6% 1% 6% 1% 16% 17% 77% Europe 76% North America Asia/Oceania Rest of World 41569_1 - 03.2003 - * 8 - H ydro Media
Slide 9: Segment split 2002
Segment split 2002 Revenues (NOK billion) *) EBITDA (NOK million) 289 24.2 1 084 39.6 2 703 258 14.8 Gross Investment (NOK million) (31.12.2002) 16.9 Metals Rolled Products Extrusions and Automotive 34.9 Eliminations 11.9 * Including internal sales 41569_1 - 03.2003 - * 9 - H ydro Media
Slide 10: No. 1 in Europe – top three integrated globally
No. 1 in Europe – top three integrated globally Europe Global Million tonnes Million tonnes 1 200 1 120 4 000 Primary 1 100 3 647 Rolled Products 3 500 1 000 Extrusion 893 3 000 2 550 800 2 500 2 373 683 2 290 574 600 2 000 490 510 1 400 404 1 500 365 400 328 350 900 950 1 000 827 192 707 200 117 51
Slide 11: CROGI – our main challenge
CROGI – our main challenge CROGI 1998 – 2002: Actual prices Percent 12 10.8 10 10 9.3 *) 8.3 8 7.1 6 5.7 4 2 0 1998 1999 2000 2001 2002 2004 Target normalised * With normalised LME-price (1 500 USD/tonnes) and 8 NOK/USD 41569_1 - 03.2003 - * 11 - H ydro M edia
Slide 12: Aluminium industry affected by general economic downturn
Aluminium industry affected by general economic downturn CROGI proxy *) Percent 14 Alcoa Alcan 12 Pechiney 10 Hydro Aluminium 8 6 4 2 0 1998 1999 2000 2001 2002 * EBITDA less actual tax/Average Gross investment. Calculated proxy where needed to get comparable figures. Calculated tax for Hydro Alumin
Slide 13: Improvement program on track
Improvement program on track FTEs Workforce reduction Millions Cost reductions 1 800 3 000 1 600 Magnesium Aluminium M agnesium Aluminium 2 500 1 400 1 200 2 000 1 000 1 500 800 600 1 000 400 500 200 0 0 YTD Q2 YTD Q3 YTD Q4 T arget Target YTD YTD YTD Target Target Target 2002 2003 Q2 Q3 Q4 2002 200
Slide 14: Europe: We outperformed the market in 2002
Europe We outperformed the market in 2002 Rolled products shipments Extrusion shipments Annual change Annual change in percent in percent 8 8 7.4 6 6 Hydro 6.0 4 Hydro 4 4.2 Hydro 3.9 2 3.0 2 2.2 2.3 0.5 0 0 -2 -3.2 -2 -4 -4.4 -4 Hydro -6 -6 1995-1999 2000 2001 2002 2003E 1995-1999 2000 2001 2002 20
Slide 15: US: Truck market hit our total position in 2002
US Truck market hit our total position in 2002 Rolled products shipments Extrusion shipments Annual change Annual change in percent in percent 4 8 4.6 2 4 5.5 2.6 1.9 4.6 0 0 -2.4 -0.8 -0.6 -2 -4 Hydro -4 -8 Hydro -6 -12 -8 -8.9 -16 -21.1 -10 -20 -12 -24 1995-1999 2000 2001 2002 2003E 1995-1999 2000
Slide 16: Continuous safety improvements
Continuous safety improvements Total recordable injuries per million worked hours 50 45 Hydro Aluminium excl. VAW VAW only 40 35 30 25 20 15 10 5 0 1997 1998 1999 2000 2001 2002 41569_1 - 03.2003 - * 16 - H ydro M edia
Slide 17: Differentiation
Differentiation ! Customer responsiveness " Tailored offering to customer needs " Innovative business solutions ! Agile and flexible organisation " Agile organisation with local accountability " Mirror our customers: – Local business model in extrusion – in a global network – Local/regional model in
Slide 18: A different portfolio composition
A different portfolio composition 1 000 tonnes Alumina *) 700 700 Equity Long term contracts Electrolysis metal 1400 Equity Metal products 1400 290 820 650 Equity 3rd party Remelt external Remelt own primary scrap alliances Downstream 830 75 515 67 Rolled **) Extrusion & Castings Wire rod Automotive
Slide 19: A different portfolio composition and business model: Higher capital turnover
A different portfolio composition and business model: Higher capital turnover Revenues / Gross Investments EBITDA / Revenues Factor Percent 1.4 25 Pechiney 1.2 Hydro Aluminium 20 1.0 Alcan 15 0.8 Alcoa Alcoa 0.6 10 Alcan Pechiney 0.4 5 Hydro 0.2 Aluminium 0.0 0 1997 1998 1999 2000 2001 2002 1997 199
Slide 20: A higher capital turnover based on strategic choices and business strengths
A higher capital turnover based on strategic choices and business strengths ! Short in alumina " Long term supply contracts " Low cost equity production in Alunorte ! Leadership in Metal Products " Continue to have an active remelt/recycling strategy " Source and sell major volumes to third parties
Slide 21: Historically aluminium and magnesium growth has outperformed other materials
Historically aluminium and magnesium growth has outperformed other materials Global consumption in 2002: Aluminium 24.9 million tonnes Magnesium 0.4 million tonnes Copper 15.1 million tonnes Steel 799 million tonnes Factor Zinc 8.7 million tonnes 20 15 10 5 0 1950 1955 1960 1965 1970 1975 1980 1085
Slide 22: All segments growing steadily
All segments growing steadily Aluminium demand development Million tonnes CAGR 45 3.0% 40 1.7 3.5 35 1.5 1.4 3.1 Other 3 3.8 30 3.4 3.5 4.6 Cons.durables 1.4 4.2 Engineering 25 1.9 4 6 2.6 Electrical 5.4 6 20 1 3.2 Packaging 1.3 8.6 15 1.8 4.3 7.8 Construction 2.7 7.6 Transportation 10 2.9 6.2 4.8 1
Slide 23: Key elements in Hydro Aluminium’s strategy
Key elements in Hydro Aluminium’s strategy 1. Improve global cost position upstream 2. Strengthen leadership in European mid- and downstream 3. Performance focus and selective growth 4. Performance focus and selective growth in outside Europe mid- and downstream global automotive 41569_1 - 03.2003 -
Slide 24: Key elements in Hydro Aluminium’s strategy
Key elements in Hydro Aluminium’s strategy 1. Improve global cost position 2. Strengthen leadership in European upstream mid-- and downstream mid ! Secure low cost alumina, optimise ! European leadership in Metal Products – portfolio assets in place ! Enhance Extrusion’s leading position ! Restructu
Slide 25: Summary
Summary ! Short term – fragile market outlook ! Long term – attractive industry ! Bottom line focus, self help measures ! Differentiation – customer responsiveness, organisation, portfolio composition ! Clear strategic direction – capital discipline 41569_1 - 03.2003 - * 25 - H ydro M edia
Slide 26: Financial performance
Financial performance
Slide 27: Value drivers along the value chain
Value drivers along the value chain PEOPLE & INNOVATION CUSTOMER ORGANISATION FOCUS LME and currency Upstream Volume (primary) Cost – fixed and variable Cost to market (metal, logistics and operations) Performance Mid-stream Margin Value drivers (metal products) - Quality, service Volume Margin Down
Slide 28: EBITDA recent years by quarter
EBITDA recent years by quarter Other and Eliminations NOK million Extrusion and Automotive 2 000 Rolled Products 1 803 1 430 Metals 1 800 1 659 1 566 1 600 1 400 1 292 1 316 1 200 1 065 1 073 1 000 849 889 899 827 773 526 800 600 473 400 200 0 - 200 - 400 (302) 1999 2000 2001 2002 *) Accumulated 3 7
Slide 29: Variance analysis 2002
Variance analysis 2002 Hydro Aluminium excluding new business NOK million 2002 2001 Change EBITDA 4 334 2 543 1 791 New business (2 485) (2 485) (VAW, Technal) Restructuring & 90 760 (670) rationalisation Infrequent items *) 1 024 424 600 2001 losses on - 545 (545) aluminium options Adjusted EBITDA,
Slide 30: Adjusted EBITDA 2002
Adjusted EBITDA 2002 *) Hydro Aluminium Metals Segment NOK m illion NOK m illion 7 000 4 500 6 000 4 000 3 500 5 000 3 000 4 000 2 500 3 000 2 000 1 500 2 000 1 000 1 000 500 0 0 Reported 1.1. - 15.3 Infrequent Adjusted Reported 1.1. - 15.3 Infrequent Adj usted NOK m illion Rolled Products NOK m ill
Slide 31: Rolled Products adjusted EBITDA 2002
Rolled Products adjusted EBITDA 2002 NOK million 1 000 Non-recurring Recurring 900 800 700 600 500 400 300 200 100 0 Reported 1.1. - 15.3. Infrequent Adjusted for LME effect Adjusted also non-recurring inventory for recurring items items 41569_1 - 03.2003 - * 31 - H ydro M edia
Slide 32: CROGI 1998 – 2002
CROGI 1998 – 2002 Actual prices Percent 12 10 8 6 4 2 0 1999 2000 2001 2002 1999 2000 2001 2002 1999 2000 2001 2002 Metals Rolled Products Extrusion and Automotive Excluding infrequent items and annualised VAW 41569_1 - 03.2003 - * 32 - H ydro M edia
Slide 33: Impact of 20-50% owned ventures in Hydro Aluminium’s account
Impact of 20-50% owned ventures in Hydro Aluminium’s account General Rule: “One line” Exceptions: Pro-rata consolidation *) consolidation ! Excluded from operating income ! Hydro Aluminium’s share of revenues, but included in EBITDA expenses, assets and liabilities recorded to respective lines Non-c
Slide 34: Risk management
Risk management ! Primary Metals revenues fully exposed to LME price volatility ! Primary Metals costs fully exposed to currency risks " Mitigation of LME and currency risks related to Sunndal 4 project ! Mid-and downstream exposure to LME and currency on metal supply hedged back-to-back 41569_1 - 0
Slide 35: Closing the gap to 2004
Closing the gap to 2004 EBITDA NOK million ! In addition 8 000 " Cost improvement 7 000 programs 1 500 " Income from new 6 000 1 100 capacity 5 000 620 4 000 3 000 2 000 4 334 1 000 0 2002 Actual VAW 1.1. - Infrequent*) Normalised**) 15.3. * S,G&A-demanning cost, VAW-integration cost, Alunorte curre
Slide 36: Improvement program on track
Improvement program on track FTEs Workforce reduction Millions Cost reductions 1 800 3 000 1 600 Magnesium Aluminium M agnesium Aluminium 2 500 1 400 1 200 2 000 1 000 1 500 800 600 1 000 400 500 200 0 0 YTD Q2 YTD Q3 YTD Q4 Target Target YTD YTD YTD Target Target Target 2002 2003 Q2 Q3 Q4 2002 2003
Slide 37: Examples value capturing 2002
Examples value capturing 2002 ! Successful best practice sharing - improved operational performance " EUR 5.7 million realized ! Consolidation of procurement activities - spare parts and supplies " EUR 10.5 million achieved ! Safety improvements in Rolled Products " EUR 0.7 million achieved ! Reorga
Slide 38: Capturing full value of larger scale
Capturing full value of larger scale ! Optimising production systems, including plant closures " Porsgrunn Magnesium (N) *) 500 employees " Moultrie (US) 121 employees " Bromyard (UK) 30 employees " Ellay Enfield (US) 11 employees ! Streamlining Sales, General and Administration processes " So far -
Slide 39: Upstream expansion to improve unit costs
Upstream expansion to improve unit costs Planned CAPEX 2003 ! 2003 & 2004: NOK 6 billion Extrusion " Increasing scale of primary and Automotive production (Sunndal, Slovalco, Alunorte, Alouette) ! CAPEX 2005 forward: Metals " Will depend on market and performance Rolled " NOK 2 - 3 billion needed to
Slide 40: Performance going forward
Performance going forward ! Improvement programs on schedule with further increased ambitions ! Delivery on new capacity investment programs ! Organisation committed to value creation 41569_1 - 03.2003 - * 40 - H ydro M edia
Slide 41: Sensitivities Hydro Aluminium
Sensitivities Hydro Aluminium NOK million Price sensitivity Pre tax Post tax Change LME price sensitivity 830 580 $100 increase USD sensitivity *) USD sensitivity 1 650 1 160 1 NOK increase EUR sensitivity EUR sensitivity 420 300 1 NOK increase All sensitivities are calculated using the normalized p
Slide 42: Primary metal: Demand and supply outlook, Performance and strategy
Primary metal Demand and supply outlook Performance and strategy
Slide 43: Global Primary metal balance 2000 – 2010
Global Primary metal balance 2000 – 2010 Million tonnes 40 Consumption 35 Capacity gap 30 Existing effective production capacity 25 20 15 2000 2001 2002 2003E 2004E 2005E 2006E 2007E 2008E 2009E 2010E Average global demand growth rate: 4% (2000-2005); 4.4% (2006-2010) Average Western demand growth r
Slide 44: China – primary metal balance
China – primary metal balance 1 000 tonnes Supply growth drivers: ! High growth in domestic 7 000 consumption ! Import duties protecting domestic suppliers (primary and 6 000 Production downstream) ! Low labour cost 5 000 ! Support to local industries Consumption provided by regional authorities 4 0
Slide 45: Estimated change in supply to Western World 2002 – 2003
Estimated change in supply to Western World 2002 – 2003 1 000 tonnes 1 200 800 Range only. 400 High uncertainty Est. WW inventory increase excl. China/Russia 0 Underlying Effect 2003 of Increased Increased Change export "oversupply"- restarts last current capacity consumption China speed 2002 year (
Slide 46: Volatile price – long term falling trend
Volatile price – long term falling trend Aluminium real term price trend Prices 1970 – 2002 deflated by US PPI Real price decline -0.8% per year LME 3 months 2001 USD/tonne 3 000 Historic real prices 2 500 2 000 Trend price 1 500 1 000 500 0 1972 1976 1980 1984 1988 1992 1996 2000 2004 41569_2 - 03.
Slide 47: Market outlook
Market outlook ! Short-term – fragile " Economic situation " Temporary short-term “oversupply” – E.g. China exports, brownfield projects " Prices expected to remain under pressure – Idle capacity in the US expected to stay idle ! Long-term – improved attractiveness " Solid growth in consumption " Po
Slide 48: Metals Segment: CROGI
Metals Segment: CROGI CROGI 1998 – 2002: Actual prices NOK million Sales 39 650 Percent EBITDA reported 2 703 12 11.2 EBITDA adjusted *) 3 857 10 Gross Investment **) 34 900 8.2 Adjusted *) 8 7.1 6 6 4 2 0 1999 2000 2001 2002 * Adjusted for VAW 1.1 – 15.3 (average last 9.5 months multiplied with 2.5
Slide 49: Primary Metal
Primary Metal Liquid metal, Main products bauxite/alumina, carbon anodes Production 1 253 200 tonnes - Proforma *) 1 390 000 tonnes Employees **) 3 800 * Includes VAW 1.1 - 15.3 2002. ** Employees by 31.12.02 41569_2 - 03.2003 - * 8 - H ydro Media
Slide 50: Smelter cost curve 2001
Smelter cost curve 2001 2 000 Elbewerk 1 800 Hamburg Høyanger Rheinwerk Sunndal 2004 1 600 Årdal Karmøy Søral Kurri Kurri Cost USD/tonne Slovalco Alouette 2005: Total 0.7 1 400 Tomago million tonnes 2005: Total 1.0 Hydro million tonnes Aluminium 2002 1 200 1 000 800 600 0 5 000 10 000 15 000 20 000
Slide 51: Breakdown of Primary Metal average site operating cost position
Breakdown of Primary Metal average site operating cost position HAL weighted average, percent 4 14 13 Economy of scale Efficient work 21 processes Local cost level Regulator y 100 8 & Tax frames Technology 40 Contracts Alumina Carbon *) Power Labor **) Other ***) Cast- Site house operating costs cos
Slide 52: Alumina cost curve 2002
Alumina cost curve 2002 Conversion cost *) USD/tonne 160 Hydro Aluminium’s equity alumina capacity in Alunorte 2002: 410 000 tonnes 140 2003: 850 000 tonnes (speed from 2Q) Average Hydro Aluminium equity 02 120 Alpart 02 100 80 60 40 Alunorte 02 20 0 0 5 10 15 20 25 30 35 40 45 Cumulated production
Slide 53: Alunorte 2002
Alunorte 2002 ! Production: 1.64 million tonnes ! Lowest conversion cost worldwide: 62 USD/tonne ! Optimal alumina quality for our smelters ! Strong safety performance ! High environmental and Corporate Social Responsibility standards 41569_2 - 03.2003 - * 12 - H ydro M edia
Slide 54: Alunorte expansion 2003: Highest asset productivity globally
Alunorte expansion 2003 Highest asset productivity globally ! Expansion by 800 000 tonnes, to 2.5 million tonnes/year " On schedule (time, cost) " Full production from May 2003 ! Hydro Aluminium’s total equity increased to 34% (from 25.3%) ! Hydro Aluminium’s investment: USD 130 million " Alunorte:
Slide 55: Energy cost curve 2002
Energy cost curve 2002 ! Marginal spot exposure Mills/kwh in Norway 40 " Long term contracts " Mostly based on 35 Hydro’s captive production 30 25 ! Exposure in Germany HAL some years ahead 20 " Market liberalisation 15 " Eco-taxes. Emission trading 10 ! No spot exposure in 5 Canada and Australia 0
Slide 56: Sunndal expansion (1)
Sunndal expansion (1) ! Total investment: " USD 750 million (ex Carbon plant) ! Production increase: " From 156 000 to 329 000 tpy – Incl. closing 66 000 tonnes Søderberg ! Hydro HA 250 kA technology ! Environmental benchmark " Low emissions: 0.15 kgF/t Al " Energy efficiency: 13.0 kWh/kg Al 41569_2
Slide 57: Sunndal expansion (2)
Sunndal expansion (2) ! Competitive investment: " USD 3 100 per tonne Aluminium " Stepwise construction/ start-up " 16 months from construction to first metal " Productivity increase: 236 > 570 tonnes/man-year ! Forward sale 496 000 tonnes 2003 – 2007 evenly spread, at USD 1 500 per tonne and NOK 9.
Slide 58: Priorities Primary Metal
Priorities Primary Metal ! Delivery (operational): " Cost reductions " Best practice sharing " Low capital intensive capacity increases ! Direction: " Improve relative cost position in production " Portfolio improvements " No greenfield projects 41569_2 - 03.2003 - * 17 - H ydro M edia
Slide 59: Metal Products
Metall Prod cts i
Slide 60: Metal Products – 2002
Metal Products – 2002 Extrusion ingot, Sheet Main products ingot, Foundry alloys, High Purity, Magnesium Production - Aluminium 2 350 000 tonnes - proforma *) 3 170 000 tonnes - Magnesium 82 000 tonnes Employees **) 2 000 * Includes VAW 1.1 - 15.3. 41569_3 032003 *2 H ydro Media ** Employees by 31.1
Slide 61: Metal Products: Scope
Metal Products Sourcing Customers Extrusion ingot and 3rd party primary Sheet ingot external Hydro Aluminium HAL downstream primary Metal Products Rolled Products production casthouses Extrusion Automotive Foundry alloys/Ingot Ingot/Scrap external Scope of Metal Products 41569_3 032003 *3 H ydro Med
Slide 62: Metal Products physical volumes
Metal Products physical volumes Full year figures 2002 in 1 000 tonnes 70 3 170 500 External sources Internal sources 260 130 650 160 1 400 2 210 Ele ctrolysis*) P rodunction Inte rnal scrap External Exte rnal scrap Ingot Externa l Total above sha re**) production***) Conversion * At fully owned pla
Slide 63: Metal Products differentiation – Business model
Metal Products differentiation – Business model Separate casthouse sector creates values through: ! Better asset utilization than traditional aluminium plants ! Metal Supplier Concept: Remelters and third party products supplement smelter-based casthouses giving full product coverage through a multi
Slide 64: Better overall asset utilization
Better overall asset utilization Asset utilization in traditional Target asset utilization in aluminium company Hydro Aluminium Purchased scrap Externally sold Index Index and ingot metal products 160 160 140 Unused 140 capacity 120 120 100 100 80 80 60 60 40 40 20 20 0 0 Electro- Cast- Down- Electr
Slide 65: Optimising casthouses
Optimising casthouses Increased volume and lower cost in operations Karmøy ~196 000 tonnes per year Index 100 = Cost and Production volume in 1998 140 125 129 120 120 115 100 100 96 93 92 80 78 60 40 20 Production Cost per tonne 0 1998 1999 2000 2001 2002 41569_3 032003 *7 H ydro Media
Slide 66: Remelting capacity close to customers
Remelting capacity close to customers 1.5 million tonnes total remelting and recycling capacity in 2002 *) 150 Kt 50 Kt 450 Kt 400 Kt 150 Kt 100 Kt 100 Kt Small units close to customer in global network Scale effect: Largest system in Europe Lower metal cost (utilize more scrap) * Not including capa
Slide 67: Metal Supplier Concept example: Long term agreement with RusAl
Metal Supplier Concept example: Long term agreement with RusAl Hydro Aluminium contributions ● Melt treatment & casting technology ● Operational know-how Hydro Aluminium benefit Sayansk ● All extrusion ingot output marketed by Hydro (80 000 tonnes) Schedule ● Production start up 4Q 2003 ● Phase 2 20
Slide 68: Optimising casthouse system after VAW acquisition
Optimising casthouse system after VAW acquisition Production swap EBITDA impact NOK Tonnes million 9 000 18 17 8 300 8 000 16 14 ! Litho quality sheet 7 000 14 ingot in former VAW reallocated to Årdal 6 000 12 5 300 5 000 10 ! Better suited for Årdal 4 000 8 than previous product portfolio, reducing
Slide 69: Creating tailored value added solutions
Creating tailored value added solutions Sales development for Primary Foundry Alloys (PFA) 1 000 tonnes 300 2003: New PFA line at Sunndal 200 2000: Third party PFA sources MARKET SHARE (Europe 2003): 1996: Second PFA line in Årdal “Alm ost 2 wheels per and PFA line at Slovalco car” 100 ● Unique allo
Slide 70: The value of Hydro Billet Plus
The value of Hydro Billet Plus "Hydro Billets Plus with its service concept is a valuable tool to assist Profilgruppen in optimising the production system and to better understand the commercial risk in the market. Assistance to understand our LME exposure, establish routines to minimize this exposu
Slide 71: Priorities Metal Products
Priorities Metal Products ! Delivery (Operational): " Cost reductions and best practice sharing " Maximize throughput in Extrusion ingot, Foundry alloys and Sheet ingot " Expand and maintain leadership in remelting/recycling " Keep investments at a minimum ! Strategic: " Short-term improve and utili
Slide 72: Downstream
Downstream
Slide 73: Stronger downstream platform to serve customers
Stronger downstream platform to serve customers ● Expand leadership position Rolled in current and new segments ● Performance improvement Products ● Asset utilization ● Optimise product mix ● Strenghten leadership positions Europe Downstream Extrusion ● Expand fabrication in Europe ● Fix and sustain
Slide 74: Rolled Products 2002
Rolled Products 2002 Foil and strip for packaging, offset Main products printing, transportation, building Production 728 000 tonnes - proforma *) 900 000 tonnes Employees **) 4 300 Plus plant in Malaysia with 30 000 tpy capacity * Includes VAW 1.1 - 15.3. ** Employees by 31.12.02 41569_4 - 03.2003
Slide 75: Rolled products: CROGI
Rolled products: CROGI NOK million CROGI 1998 – 2002: Actual prices Sales 14 790 Percent EBITDA reported 258 12 EBITDA adjusted *) 605 10.4 10 Gross Investment **) 11 900 8 5.8 6 Adjusted* 3.8 3.5 4 2 0 1999 2000 2001 2002 * Adjusted for VAW 1.1 – 15.3 (average last 9.5 months multiplied with 2.5 mo
Slide 76: Market situation – Rolled Products’ position
Market situation – Rolled Products` position Percent Estimated market shares Europe 02 50 44 ! Total market*: 3.3 mill. tonnes 25 24 21 ! Expected growth 00 – 06: 20 19 17 2% annually 0 ! Global market outlook Litho He at- Auto- Foil Constr- Ca n Strip Ex ch motive uction " Moderate volume growth –
Slide 77: Rolled Products differentiation
Rolled Products differentiation ! 80% of rolling mill capacity next to smelters (advantage compared to competitors): " Norf-Neus-Grevenbroich triangle Reduces working capital " Karmøy- and Hamburg-mills and logistic costs ! Well-balanced product portfolio ! Outstanding reputation and strong market p
Slide 78: Strong Production Synergies
Strong Production Synergies Rheinwerk Smelter ALUNORF VAW Grevenbroich Plant Annual Capacity: Hot Rolling : 1.4 million tonnes Cold Rolling: 0.9 million tonnes 2 000 employees 1 700 employees 41569_4 - 03.2003 - * 7 - H ydro Media
Slide 79: Alunorf: From Rolling Ingots to Re-Roll
Alunorf: From Rolling Ingots to Re-Roll Saws Scalper Ingot-Preheating Rolling Ingots Sawing of ingots Scalping of ingots Homogenization from Casting Unit at bottom butt at wide side and Heating mm 600 ca. 600 mm ca. 4200 mm ca. 500°C Hot Mill Break-Down Mill Finishing Mill Ingot ca. 30 mm Coil Cold
Slide 80: Grevenbroich plant: From Re-Roll to Flat Rolled Products
Grevenbroich plant: From Re-Roll to Flat Rolled Products Example: Foil High-Rack Storage Pre-Heating Re-Roll from ALUNORF Cold Mill Quality Control Slitting Final Annealing S1 0,7 mm # Several passes gauge ca. 0,006 mm Packing Shipment 41569_4 - 03.2003 - * 9 - H ydro Media
Slide 81: Improved industry structure in Europe
Improved industry structure in Europe Estimated market shares Europe 2001 100% = 3.2 million tonnes per year Other Alcoa 14% 14% Pechiney 17% Alcan 27% Corus 9% Hydro Aluminium 19% Four largest 2002: 77% market share Four largest 1998: 58% market share Source: EAA. Annual Reports 41569_4 41569_4 --
Slide 82: Strong volume growth Rolled Products
Strong volume growth Rolled Products Volume 1 000 tonnes 1 000 800 Strip, other Construction Heat-Exchanger 600 Automotive Printing Can beverage 400 Packaging 200 0 1996 1997 1998 1999 2000 2001 2002 41569_4 - 03.2003 - * 11 - H ydro M edia
Slide 83: Case: Lithographic strip – global leader
Case: Lithographic strip – global leader Global Market Shares 2002 Others 17 Hydro Aluminium ! Total world market: 29 Approx. 400 000 tonnes Sumitomo 8 ! No. 1 position has been Ormet maintained over the past 3 2 decades Alcoa Alcan " High quality 12 23 " Customer service Star/Elval " Dedicated line
Slide 84: Case: Tetra Pak – a success story
Case: Tetra Pak – a success story ! Hydro Aluminium has maintained a truly global long-term relationship with Tetra Pak since the mid 70’s " Delivering to plants in Europe and Asia ! Key success factors: " Continuous product and service improvements " Contribution to increased productivity at Tetra
Slide 85: Case: Liquid packaging market 2002
Case: Liquid packaging market 2002 Foil (< 60 µ) Total global market volume 94 500 tonnes Hydro Aluminium market share 36% East Europe Western Europe 3 500 tonnes North America Asia / Pacific 52 000 tonnes 14% 3 000 tonnes 18 500 tonnes 78% 41% 25% Africa/ Near East 1 500 tonnes 0% South America 16
Slide 86: Improvements in productivity
Improvements in productivity Tonnes/employee in different plants / production lines* Alunorf 577 Hamburg 357 ! Several modernization 600 400 +5,5% +11,2% and revamping 358 300 programmes 400 200 170 200 100 ! Significantly increased 0 0 productivity through 1993 2002 1998 2005 state-of-the-art Litho
Slide 87: Priorities Rolled Products
Priorities Rolled Products ! Delivery (operational): " Reduce operating cost (continuous improvement) " Optimise production system (move products between plants) " Increase capacity utilization by growing sales ! Direction: " Strengthen leading market positions in Europe " Optimise large asset base
Slide 88: Extrusion and Automotive segment: CROGI
Extrusion and Automotive segment: CROGI CROGI 1998 – 2002: Actual prices NOK million Sales 24 250 Percent EBITDA reported 1 084 12 11.2 EBITDA adjusted *) 1 319 Gross Investment **) 16 850 10 8.9 8 Adjusted* 6 7 4.5 4 2 0 1999 2000 2001 2002 * Adjusted for VAW 1.1 – 15.3 (average last 9.5 months mul
Slide 89: General extrusions and Building Systems 2002
General extrusions and Building Systems 2002 General extrusions, extruded and drawn Main products tubing, Building Systems Production 416 800 tonnes Employees *) 10 000 * Employees by 31.12.02 41569_4 - 03.2003 - * 18 - H ydro M edia
Slide 90: Market situation – Extrusion position
Market situation – Extrusion position ! Europe: Estimated market shares 2002 " Total market*: 2.2 million tonnes " Market outlook Europe Percent – Expected growth 00 – 06: 2-3 % – Margins stable 16 " Hydro Aluminium Europe: Strong in most countries. Focus general 11 11 extrusions to local markets an
Slide 91: Extrusions differentiation
Extrusions differentiation ! Global system – best practice deployment ! Customer focus, high recognition in market ! Innovation " Acknowledged development competence for new extrusion applications and new alloys ! Performance Excellence " Business Model – Local accountability – Location of plants an
Slide 92: Extrusions: Increased press productivity – main lever to reduce cost per kg
Extrusions: Increased press productivity - main lever to reduce cost pr kg Extrusion Europe & South America Extrusion North-America Kg/hour (index,1986=100) Kg/hour (index, European 1986=100) 180 180 Productivity in acquired Productivity in acquired companies at acquisition point 160 companies at ac
Slide 93: Strong volume development extrusions
Strong volume development extrusions *) 1 000 tonnes 600 General Extrusion Building Systems Precision T ubing Automotive Structures 500 400 300 200 100 0 1994 1998 2000 2002 * Hydro Aluminium total: Includes also extrusions used in automotive sector 41569_4 - 03.2003 - * 22 - H ydro M edia
Slide 94: Building Systems – leading in “brand business”
Building Systems – leading in “brand business” ● Hydro Building System is a market leader ● Strong brands ● Product innovation leadership Targets projects and non- More than 20 distribution Market leader in France, residential segments in centers in Italy, sales presence in Portugal, ● High producti
Slide 95: Case: Nord-LB Hannover – a success story
Case: Nord-LB Hannover – a success story ● Sole supplier of aluminium Hydro Aluminium profíles (200 tonnes) ● Technical support through dedicated project service to the metal builder ● Profil constructions ● Object-specific and specially adapted products. ● Project duration: 1,5 years – from mid 200
Slide 96: Case: Building Systems customer relationship example – metal builder in Italy
Case: Building Systems customer relationship example – metal builder in Italy ● We develop and distribute complete building systems ● Our customers, metal builders, assemble and then install finished windows and doors ● In addition to selling systems we also provide support to our customers (calcula
Slide 97: Priorities Extrusion Europe and South America
Priorities Extrusion Europe and South America ! Delivery (operational): " Customer focus " Continue improvement programs on key value drivers, productivity, material yield " Optimise low cost capacity utilization ! Direction: " Strengthen position through selective acquisitions " Increase added valu
Slide 98: Priorities Extrusion US
Priorities Extrusion US ! Delivery (operational): " Drive productivity toward European levels " Reduce cost " Leading service and quality ! Direction: " Performance improvement " Better asset utilization - grow business volume, with existing and new customers " Enhance differentiation by developing
Slide 99: Automotive products 2002
Automotive products 2002 Bumpers, frames, Main tubing (heat transfer), products engine blocks, cylinder heads Production *) 165 200 tonnes Employees **) 6 000 * Includes VAW 01.01. – 15.03. 2002. ** Employees by 31.12.02 41569_4 - 03.2003 - * 28 - H ydro M edia
Slide 100: Market positions – Automotive
Market positions – Automotive Market shares Europe **) Percent ! Total market *): 6 million 75 tonnes 60 ! Expected growth 50 00 – 06: 5% 21 20 14 14 ! Market outlook 0 Bumpe rs Pre ci sion Engi ne Cyli nde r Shee t Finstock " Light weighting trend to tubing blocks he ads continue " Western markets
Slide 101: Presence in automotive
Presence in automotive Material Material Components(1) Complex Modules Metal Semis components(1) (1) Products Al alloys Extruded tubes Bumper beams Windshield frame Mg alloys Welded tubes Crash boxes to market Engine cradle Finstock Engine castings Body Sheet for Cylinder heads structures(3) compone
Slide 102: Aluminium components supplied by Hydro Aluminium
Aluminium components supplied by Hydro Aluminium Roll-over Fuel filler pipe Wind Shield protection Frame Dashboard / FP-Beam Manifold Engine blocks + cylinder heads Bumper Radiator Air suspension frames piston Subframe Side Doorbeam Seat rail & structural Bumper Reinforcement A-Piller seat componets
Slide 103: Automotive differentiation
Automotive differentiation ● Global leading market ● Solution focused product positions and process development ■ Extrusion-based ■ Integrated in customers structural components processes ■ Precision tubing ■ Highly reputed and ■ Magnesium alloys appreciated ■ Magnesium parts (Meridian 49%) ● Leadin
Slide 104: Trends promoting growth for aluminium
Trends promoting growth for aluminium ! Safety " Crash-behavior NCAP " Pedestrian protection ! Increasing Individualisation " Niche models SUV / minivans/ Sport cars ! Comfort " Air condition ! Driving dynamics, fun driving " Agility ! Environment/sustainability " Fuel consumption regulations (140 g
Slide 105: Growth in aluminium in cars: Priority of mass reduction areas
Growth in aluminium in cars: Priority of mass reduction areas Instrument panels Engine blocks Cylinder heads Tubes for radiators and air condition. 6 Bumpers, 4 3 2 Crashboxes, 1 Longitudals Body sheet 5 Axle parts Axle tubes Unsprung (incl. rotating masses) 1 In front of the front axle 2 Focus prod
Slide 106: Aluminium penetration rates growing
Aluminium penetration rates growing Percent 120 100 Europe US 80 60 40 20 0 Heat Heat Chassis Body Bumper Cr ash Engine Gasoline Diesel Cylinder Wheels tr ansfer transfer beam s boxes cr adle engines engines heads tubes finstock Source: Hydro Aluminium estimates for 2002 41569_4 - 03.2003 - * 35 - H
Slide 107: Our automotive product groups – still too heavy on “introduction”
Our automotive product groups - still too heavy on “introduction” Introduction Growth Maturity Decline Cylinder heads X Precision tubing Bumper beams X Gasoline engine blocks Chassis, X suspension Diesel Engine blocks X Body Precision tubing Engine structures Structures cradles X Castings 41569_4 -
Slide 108: Our most visible BMW product … the Z8 spaceframe
Our most visible BMW product ... … the Z8 spaceframe 41569_4 - 03.2003 - * 37 - H ydro M edia
Slide 109: Case: BMW and Hydro Aluminium – a partnership evolving for more than 25 years
Case: BMW and Hydro Aluminium – a partnership evolving for more than 25 years " 1975: First bumper beam contract " 1995: First supply of cylinder heads to BMW-cars " 1996: Rollover protection system – First full system responsibility for Hydro " 2000: Delivery of 1.3 million bumper beams – All model
Slide 110: Status and direction: Segment by segment
Status and direction Segment by segment Precision tubing ! Good profit ! Continue to grow – small niche with strong positions ! China/South America footholds to be utilized Structures ! Low profit. Still in build up, therefore high cost ! High quality asset base and leading competence Casting ! Fix
Slide 111: Priorities Automotive
Priorities Automotive ! Delivery (operational): " Accelerate lean manufacturing roll-out " Successfully launch new product programs " Fully utilize existing capacities ! Direction: " Differentiated value added products – leading edge " More of our business to low cost facilities in China, Mexico and
Slide 112: Summary
Summary
Slide 113: Concluding remarks
Concluding remarks Purpose of the seminar Summary ! Delivery ! Short term – fragile market outlook ! Long term – attractive industry ! Differentiation ! Bottom line focus focus,, self help measures ! Strategic direction ! Differentiation – customer responsiveness,, responsiveness organisation,, port
Slide 114: Safe harbour statement
Safe harbour statement In order to utilize the "Safe Harbour" provisions of the United States Private Securities Litigation Reform Act of 1995, Hydro is providing the following cautionary statement: This presentation contains certain forward-looking statements with respect to the financial condition