Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q3 2009 Earnings Presentation
55 slides from Norsk Hydro Asa's earnings presentation, Oct 27, 2009
Slide 1: Results reflect continued weak markets – volumes rise on restocking
Results reflect continued weak markets – volumes rise on restocking Q3 Third quarter 2009 October 27, 2009 (1)
Slide 2: (2)
(2)
Slide 3: Svein Richard Brandtzæg, President and CEO
President and CEO Svein Richard Brandtzæg (3)
Slide 4: Highlights
Highlights • Stable demand at low level, positively influenced by restocking • Capacity adjustments and cost reduction programs delivered as planned • Upstream result remains weak due to low aluminium prices and weakening USD • Improved downstream result supported by higher volumes and cost savings
Slide 5: Volumes improved – still at low level
Volumes improved – still at low level Hydro’s downstream sales Q3 2009 vs Q2 2009 Total downstream sales Rolled Extrusion Building Extrusion Automotive Precision Q3 09 vs Q2 09 Acc 09 vs Acc 08 Products Eurasia Systems Americas Structures Tubing 14% 13% 10% 8% 5% 0% -4% -23 % Hydro’s upstream sales
Slide 6: Aluminium price rebounds, USD weakens
Aluminium price rebounds, USD weakens USD per tonne 3 400 Primary aluminium LME USD/tonne NOK/tonne 3 200 Q3 2009 average 1 837 11 209 3 000 Q3 2009 end 1 890 10 886 2 800 2 600 Q2 2009 average 1 524 9 883 Q2 2009 end 1 651 10 611 2 400 2 200 Average 2008 2 620 14 453 2 000 Average 2007 2 662 15 638
Slide 7: Inventory days at high level
Inventory days at high level USD per tonne Days 3 300 130 120 2 800 110 100 2 300 90 80 1 800 70 60 1 300 50 40 800 30 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Aluminium inventories (days of consumption)* LME 3-month average *IAI and LME reported stoc
Slide 8: China expected to reduce imports
China expected to reduce imports 1 000 tonnes 600 550 • Swift response to drop in demand 500 • Production curtailments 450 400 • Strategic government purchases Net import 350 • Demand increasing incentives 300 250 200 150 • Production increase in 2009 100 • Restart of curtailed capacity 50 0 • New c
Slide 9: Supply/demand imbalance continues
Supply/demand imbalance continues World production and consumption of primary aluminium outside China in 1 000 tonnes 30 000 • Apparent annualized imbalance of Production C onsumption 2.5-3.0 million tonnes in Q3 25 000 • Partly mitigated by China importing 1.3 20 000 million tonnes January – August
Slide 10: Outlook
Outlook Q4 • Stabilized production outside China • Stable demand for primary aluminium 2009 vs. 2008 • Primary aluminium consumption outside China to decline 18-20% • Slight increase in Chinese consumption (10)
Slide 11: Power spot prices stabilize
Power spot prices stabilize South Norway price (NO1) Water reservoir levels in South Norway (NO1) NOK/MWh Percent 600 100 2008 2009 2008 2009 90 500 80 70 400 60 300 50 40 200 30 20 100 10 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Price
Slide 12: Qatalum nearing completion
Qatalum nearing completion Paste plant Anode baking furnaces Potroom building • 90% complete end-Q3 • Main ongoing activities • Construction of buildings • Installation of equipment • Development of operating organization • Investment • Cost estimate (100%) ~USD 5.7 billion • On schedule for start-u
Slide 13: Curtailments executed in flexible system
Curtailments executed in flexible system Primary aluminium Remelt 1 000 tonnes, production rate per year 1 000 tonnes, production rate per year 2 000 2 000 1 930 340 1 750 1 588 1 600 1 600 290 1 352 1 300 1 200 1 300 1 200 1 050 1 000 1 000 1 000 1 000 100 496 264 900 800 800 736 504 400 400 0 0 20
Slide 14: Targeted cash cost improvements achieved
Targeted cash cost improvements achieved Cost* in USD per tonne indexed, 2008=100 • Production curtailments at high-cost smelters • Reduced input costs in 2009 • Alumina ~(30)% • Petroleum coke • Fuel oil, caustic soda, coal, freight and alloys • Outlook • Weakening USD will have negative impact • A
Slide 15: Price and currency sensitivities
Price and currency sensitivities Net annual NOK/USD sensitivity Net annual aluminium price sensitivity +/- 1 NOK +/- 100 USD per tonne 1 800 800 1 600 700 1 500 630 600 1 200 500 900 400 300 600 200 300 100 0 0 EBIT EBIT Based on expected business volumes for 2009, aluminium price of 1 900 USD/tonne
Slide 16: Capacity and cost reductions delivered on plan
Capacity and cost reductions delivered on plan Production curtailments Capital expenditure cuts 2) 1000 tonnes NOK billion Aluminium Alumina 1) 5.9 1 750 1 300 1 350 3.5 1 050 3.0 2008 Q3 2009 2008 Q3 2009 2008 2009 2010 Operating capital reductions Manning reductions 3) NOK billion 0.7 5.8 1 450 4
Slide 17: Automotive Structures divestment signed
Automotive Structures divestment signed Underlying EBITDA • Deal with Benteler Group represents NOK million solid and long-term industrial solution 45 (198) (14) for automotive structures activities 48 45 15 14 24 (8) (6) • In line with Hydro’s strategy to focus (40) (32) (69) extruded activities on
Slide 18: Jørgen C. Arentz Rostrup, Executive Vice President and CFO
Executive Vice Jørgen C. Arentz President and CFO Rostrup (18)
Slide 19: Underlying EBIT
Underlying EBIT 2 032 1 619 1 490 868 (493) (618) (793) NOK million Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Primary Metal 938 795 906 93 (185) (895) (760) Metal Markets 363 139 (41) 242 (245) 196 (15) Rolled Products 147 240 170 93 (53) (28) 51 Extruded Products 223 296 152 (332) (20
Slide 20: Key financials
Key financials First First 9 months 9 months NOK million Q3 2009 Q2 2009 Q3 2008 2009 2008 Revenue 16 337 17 123 21 765 50 313 67 275 Underlying EBIT (793) (618) 1 490 (1 904) 5 141 Items excluded from underlying EBIT 1 512 1 029 924 1 435 (840) Reported EBIT 719 410 2 414 (469) 4 300 Financial inco
Slide 21: Items excluded from underlying EBIT
Items excluded from underlying EBIT First First 9 months 9 months NOK million Q3 2009 Q2 2009 Q3 2008 2009 2008 Underlying EBIT (793) (618) 1 490 (1 904) 5 141 Unrealized effects power contracts 54 (118) (185) 2 227 814 Unrealized LME and other derivative effects 1 508 1 427 1 038 516 (2 249) Metal
Slide 22: Primary Metal
Primary Metal Q3 Q2 Q3 Key figures 2009 2009 2008 Alumina production, kmt 514 494 589 Primary aluminium production, kmt 330 338 439 Total sales volumes, kmt 486 477 544 Realized LME price, USD/mt 1 523 1 468 2 848 Realized LME price, NOK/mt 9 480 9 598 15 114 Underlying EBIT, NOK million (760) (895)
Slide 23: Metal Markets
Metal Markets Q3 Q2 Q3 Key figures 2009 2009 2008 Remelt production, kmt 123 111 121 Total metal products sales, kmt 624 614 723 Underlying EBIT, NOK million (15) 196 (41) Underlying EBIT Q3 operating results NOK million • Negative currency effect of NOK 150 million 703 (63) compared to neutral curr
Slide 24: Rolled Products
Rolled Products Q3 Q2 Q3 Key figures 2009 2009 2008 External sales volumes, kmt 205 187 240 Underlying EBIT, NOK million 51 (28) 170 Underlying EBIT Q3 operating results NOK million • Increased volumes in litho, automotive and foil 651 (31) • Further contribution from cost savings 240 • Stable margi
Slide 25: Extruded Products
Extruded Products Q3 Q2 Q3 Key figures 2009 2009 2008 External sales volumes, kmt 127 120 148 Underlying EBIT Extrusion, 89 5 239 NOK million Underlying EBIT Automotive, 9 (37) (92) NOK million Underlying EBIT, NOK million 95 (26) 152 Underlying EBIT Q3 operating results NOK million • Expected seaso
Slide 26: Energy
Energy Q3 Q2 Q3 Key figures 2009 2009 2008 Power production, GWh 1 682 1 809 2 677 Net spot sales, GWh 480 413 1 233 Southern Norway spot price (NO1), 249 297 403 NOK/MWh Underlying EBIT, NOK million 217 281 493 Underlying EBIT Q3 operating results NOK million • Low spot prices 1 865 945 • Seasonall
Slide 27: Reduced operating capital supports cash flow
Reduced operating capital supports cash flow • Continued reduction in operating capital Q3 Q2 Q1 NOK million 2009 2009 2009 • ~NOK 5.8 billion realized in 2009 Net income (loss)* 1 001 282 (280) • Capital discipline – investments at Depreciation 1 076 805 827 Operating capital 657 2 907 2 199 low le
Slide 28: Financial position
Financial position Net cash / (debt) in NOK billion • Net cash of NOK 2.4 billion end-Q3 6.7 • Qatalum investments USD 5.7 billion (100%) • 46% project financed and 54% equity financed • Project financing: USD 0.1 billion unutilized end-Q3 • Equity: USD 1.2 billion remaining end-Q3 3.5 3.0 Sep 30, D
Slide 29: Priorities in 2009
Priorities in 2009 • Solid operations • Qatalum execution • Stay close to markets • Financial flexibility • Proactive corrective measures Capital Markets Day – December 2, 2009 (29)
Slide 30: Cautionary note in relation to certain forward-looking statements
Cautionary note in relation to certain forward-looking statements Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management’s plans, objectives and
Slide 31: Additional information
Additional information (31)
Slide 32: Underlying income Q3 2009
Underlying income Q3 2009 NOK million Reported income Adjustments Underlying income Primary Metal (153) (607) (760) Metal Markets 207 (222) (15) Rolled Products 484 (433) 51 Extruded Products 108 (14) 95 Energy 318 (101) 217 Other and eliminations (246) (135) (381) Total EBIT 719 (1 512) (793) Finan
Slide 33: Underlying income Q2 2009
Underlying income Q2 2009 NOK million Reported income Adjustments Underlying income Primary Metal (537) (357) (895) Metal Markets 472 (275) 196 Rolled Products 438 (466) (28) Extruded Products 87 (114) (26) Energy 321 (40) 281 Other and eliminations (370) 224 (146) Total EBIT 410 (1 029) (618) Finan
Slide 34: Underlying income Q3 2008
Underlying income Q3 2008 NOK million Reported income Adjustments Underlying income Primary Metal 1 768 (861) 906 Metal Markets (142) 101 (41) Rolled Products (341) 511 170 Extruded Products 53 99 152 Energy 499 (6) 493 Other and eliminations 577 (768) (191) Total EBIT 2 414 (924) 1 490 Financial in
Slide 35: Reported and underlying results
Reported and underlying results Hydro Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2007 2008 Reported EBIT 3 672 3 001 2 013 338 1 179 708 2 414 (3 106) (1 598) 410 719 9 025 1 194 Underlying EBIT 2 883 2 886 2 686 1 699 2 032 1 619 1
Slide 36: Items excluded from underlying results - 2009
Items excluded from underlying results - 2009 NOK million (+=loss/()=gain) Q1 2009 Q2 2009 Q3 2009 Unrealized derivative effects on LME related contracts (alunorte) Primary metal - - (16) Unrealized derivative effects on currency contracts (alunorte) Primary metal (11) (222) (105) Rationalization ch
Slide 37: Items excluded from underlying results - 2008
Items excluded from underlying results - 2008 NOK million Q1 2008 Q2 2008 Q3 2008 Q4 2008 2008 Unrealized derivative effects on LME related contracts (Alunorte) Primary Metal 83 (8) (134) (37) (96) Unrealized derivative effects on LME related contracts Primary Metal 263 (350) (586) 112 (561) Unreali
Slide 38: Items excluded from underlying results - 2007
Items excluded from underlying results - 2007 NOK million Q1 2007 Q2 2007 Q3 2007 Q4 2007 2007 Unrealized derivative effects on LME related contracts (Alunorte) Primary Metal (13) 40 (108) (82) (163) Unrealized derivative effects on LME related contracts Primary Metal (263) (110) (100) 49 (425) Unre
Slide 39: Operating segment information – Underlying EBIT
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2007 2008 Primary Metal 2,289 2,172 1,941 1,245 938 795 906 93 (185) (895) (760) 7,646 2,732 Metal Markets 135 186 252 65 363 139 (41) 242 (245)
Slide 40: Operating segment information – Underlying EBITDA
Operating segment information Underlying EBITDA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2007 2008 Primary Metal 2 789 2 652 2 416 1 735 1 398 1 285 1 399 638 290 (372) (285) 9 591 4,720 Metal Markets 175 221 285 101 388 162 (15) 2
Slide 41: Operating segment information – EBIT and EBITDA
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2007 2008 Primary Metal 2 407 2 437 2 033 1 136 215 1 343 1 768 (1 647) (1 837) (537) (153) 8 012 1 679 Metal Markets 176 12 150 35 546 106 (142) (178) (31
Slide 42: Operating segment information – Total revenue
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2007 2008 Primary Metal 11 321 10 766 9 894 8 780 8 858 9 837 9 256 8 478 6 471 6 365 6 361 40 761 36 428 Metal Markets 15 700 14 712 12 576 12 53
Slide 43: Operating segment information – Internal revenue
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2007 2008 Primary Metal 9 862 9 269 8 388 7 384 7 988 8 680 8 111 7 278 5 640 5 290 5 273 34 904 32 057 Metal Markets 5 864 5 595 4 417 4 743 4
Slide 44: Operating segment information – Depreciation, amortization and impairment
Operating segment information Depreciation, amortization and impairment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2007 2008 Primary Metal 490 471 465 473 452 481 484 1 295 464 461 451 1 899 2 711 Metal Markets 40 179 33 36 24 23 26
Slide 45: Income statement
Income statement First First Q3 Q2 Q3 9 months 9 months NOK million 2009 2009 2008 2009 2008 Revenue 16 337 17 123 21 765 50 313 67 275 Share of the profit (loss) in equity accounted investments (14) (42) 77 (468) 239 Other income, net 238 223 123 595 704 Total revenue and income 16 561 17 305 21 96
Slide 46: Balance sheets
Balance sheets September 30, June 30, March 31, December 31, September 30, NOK million 2009 2009 2009 2008 2008 Cash and cash equivalents 2 986 4 860 3 128 3 333 3 583 Short-term investments 1 477 1 439 1 652 1 648 4 454 Receivables and other current assets 14 776 14 988 16 077 18 833 19 744 Invento
Slide 47: Capital employed – upstream focus
Capital employed – upstream focus NOK million September 30, 2009 Primary Metal 29 555 Energy, 7% Metal Markets 4 050 Rolled Products 7 801 Extruded Extrusion 5 000 Products, 13% Automotive 1 542 Other and eliminations 191 Extruded Products 6 733 Energy 3 653 Rolled Products, 15% Primary Metal, 57% O
Slide 48: Primary aluminium production
Primary aluminium production 1 000 tonnes 1 472 1 720 1 826 1 799 1 742 1 750 1 064 457 461 464 449 451 449 450 441 446 444 433 435 435 439 433 437 439 442 415 418 397 381 388 360 343 338 330 2003 2004 2005 2006 2007 2008 2009 Slovalco consolidated from Q1 2004 (48)
Slide 49: Nordic power market – forward curves
Nordic power market – forward curves NOK/MWh 750 700 650 600 550 500 450 400 350 300 250 200 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 End Q1 2008 End Q2 2008 End Q3 2008 End Q4 2008 End Q1 2009 End Q2 2009 End Q3 2009 (49)
Slide 50: Power price and volume
Power price and volume Nordic System Price Hydropower production NOK/MWh TWh 600 12 11.4 11.0 10.7 500 10 10.3 9.4 400 8 8.3 8.0 7.5 300 6 6.0 200 4 100 2 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009 (50)
Slide 51: Primary Metal – operational data
Primary Metal – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Volumes and prices 1) 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 Realized premium above LME (USD/mt) 1) 326 338 331 330 350 353 328 268 230 230 260 Realized premium above LME (NOK/mt) 1) 2 035 2 056 1 928 1 843 1 905 1 832
Slide 52: Metal Markets and Rolled Products – operational data
Metal Markets – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Volumes and prices 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 Remelt production (1 000 mt) 190 179 163 153 141 145 121 97 89 111 123 Sale of metal products from own production (1 000 mt) 771 772 699 680 724 753 667 571 548
Slide 53: Extruded Products and Energy – operational data
Extruded Products – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Volumes and prices 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 Extrusion external shipments (1 000 mt) 134 135 123 117 130 133 122 103 96 99 104 Automotive external shipments (1 000 mt) 43 30 29 28 31 31 26 18 17 21 23
Slide 54: Investor Relations in Hydro
Investor Relations in Hydro t: +47 22 53 92 80 Stefan Solberg Head of Investor Relations m: +47 917 27 528 e: stefan.solberg@hydro.com t: +47 22 53 25 22 Stian Hasle Investor Relations Officer m: +47 977 36 022 e: stian.hasle@hydro.com t: +47 22 53 92 24 Irene Raposo Investor Relations Assistant m:
Slide 55: www.hydro.com
www.hydro.com