Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (2015)
32 slides from Norsk Hydro Asa's investor day presentation, 2015
Slide 1: Well-positioned in challenging markets
Well-positioned in challenging markets Svein Richard Brandtzæg Capital Markets Day 2015
Slide 2: Building competitiveness through HSE, CSR and compliance
Building competitiveness through HSE, CSR and compliance Corporate culture Idealist Leading Immature Formalized Safety performance Carbon-neutral from a (TRI) at industry benchmark life-cycle perspective Internal control system 3.1* On track Hydro highly ranked in global compliance comparison study*
Slide 3: Hydro's aspiration for higher value creation
Hydro’s aspiration for higher value creation 3
Slide 4: 2015: Optimizing and high-grading in challenging markets
2015: Optimizing and high-grading in challenging markets New Corporate BNOK 1 ‘From B to A’ Investment decision on MNOK 800 ‘Climb’ Long-term power sourcing Management Board improvement Karmøy technology improvement contracts in Norway and in place program* pilot program* abroad CMD CMD 2014 2015 Lo
Slide 5: Ambitious aspiration on track
Ambitious aspiration on track Ambitions from CMD 2014 Timeframe Progress¹ Status • Improve safety performance, reduce TRI < 2 2020 3.1 • Realize BNOK 1.5 from ongoing improvement efforts 2016 0.8 BNOK • Replace expiring power contracts for Norwegian smelters 2020 4.1 TWh • Lift Paragominas productio
Slide 6: Strong demand growth, near-term supply overhang
Strong demand growth, near-term supply overhang 6
Slide 7: Primary demand growth of 4-5% expected in 2016
Primary demand growth of 4-5% expected in 2016 Mixed developments in mature regions, softening in emerging markets Europe Mixed demand development, solid uptake within the China automotive industry Softer demand, strong supply North America ~2% growth creating Emerging markets surplus Strong demand
Slide 8: Aluminium's many qualities support robust long-term demand growth
Aluminium’s many qualities support robust long-term demand growth Highly versatile material with wide range of applications and end-user benefits Aluminium demand Copper demand Steel demand per segment per segment per segment Global primary aluminium demand growth 2015-2025 3-4 % Transport Electrica
Slide 9: Aluminium continues to win ground in automotive
Aluminium continues to win ground in automotive Hydro continues developing solutions to accelerate substitution trend 13 % CAGR* ~75% growth last year Global BIW demand 2015 - 2023 Source: Ducker Europe, Hydro analysis 9
Slide 10: Aluminium also gaining market share from copper
Aluminium also gaining market share from copper Price competitive with copper on a volume conductivity equivalent basis Further potential to substitute copper Aluminium shows clear advantages Strong potential within long-distance with aluminium in automotive cables within HVAC & R vs copper transmis
Slide 11: Aluminium is a key enabler for sustainable buildings
Aluminium is a key enabler for sustainable buildings Growth supported by energy-efficiency legislation Energy-efficiency legislation supports aluminium Buildings account for ~ 40% of energy consumption worldwide, triggering response from the legislators European Union US 2012 Energy Efficiency Direc
Slide 12: Aluminium price falls on global oversupply and lower cost curve
Aluminium price falls on global oversupply and lower cost curve Disrupting the strong correlation between LME and 90th percentile smelters World ex-China China Market balance in thousand tonnes* Nominal USD/t Market balance in thousand tonnes* Nominal USD/t 10,000 Current LME 2800 10,000 2800 (~1475
Slide 13: Chinese semis exports close the supply gap in the rest of the world
Chinese semis exports close the supply gap in the rest of the world Driven by arbitrage opportunities and domestic oversupply Exports Competitive advantage (USD/t)* Thousand tonnes 500 800 • Growth in net semis exports over the last year 450 amid relatively higher all-in prices outside China 400 600
Slide 14: 2016 to remain oversupplied due to capacity additions
2016 to remain oversupplied due to capacity additions But expected to moderate as a result of curtailments and slower supply growth of 2-4% globally Supply development 2016* Market balance 2016** Million tonnes Million tonnes 2 – 2.5 Mill t ~3.4 World Oversupply China ex-China 4-6 % supply 0-2 % sup
Slide 15: Potential return to global undersupply expected in 2017
Potential return to global undersupply expected in 2017 External analysts expect rebalancing in around a year CRU estimates of global primary metal balances at different points in time* Thousand tonnes 2000 1500 1000 500 0 -500 -1000 -1500 2014 2015 2016 2017 2018 2019 nov.12 dec. 14 oct.15 Source:
Slide 16: Our path towards realizing the aspiration
Our path towards realizing the aspiration 16
Slide 17: Attractively positioned world-class assets with global reach
Attractively positioned world-class assets with global reach Now in a first-quartile position on the industry cost curve Norway’s North America Norway 2nd largest • 1,015,000 tpy hydro-powered • Alouette aluminium smelter in hydropower Europe’s Canada, expansion potential aluminium capacity producer
Slide 18: Harvesting the benefits of integration
Harvesting the benefits of integration Combining dedicated business models in each area within an overall company framework Risk and opportunity Customers and market Bauxite Primary aluminium management intelligence mining production • Diversification and multi-cycle exposure • Local partnerships an
Slide 19: Continuing to shape the industry's strongest improvement culture
Continuing to shape the industry’s strongest improvement culture Bauxite & Alumina Primary Aluminium Rolled Products Energy • ‘From B to A’ delivered¹ BNOK 1 in • USD 300/t improvements • ‘Climb’ improved efficiency by • Secured long-term sourcing of 4.1 cost and efficiency gains completed in 2013 i
Slide 20: Making continuous improvements a Hydro trademark
Making continuous improvements a Hydro trademark Proven track-record of productivity gains Hydro’s improvement drive until 2014 Hydro’s mid-term improvement target Hydro’s new improvement ambition Total improvements 2011-2014: BNOK 3.7¹ Launched at Hydro’s CMD 2014 Total improvements of BNOK 2.9 fro
Slide 21: Stepping up improvements throughout the value chain
Stepping up improvements throughout the value chain Better Better Better Bauxite & Primary Rolled Alumina Metal Products BNOK 1.0 BNOK 1.0 BNOK 0.9 * Includes some larger investments of 3.2 billion NOK in 2015-2019: AL3 and UBC in Rolled Products, 100+100kt capacity creep in Primary Metal, Alunorte
Slide 22: Extending the technology and innovation lead
Extending the technology and innovation lead Key to maintain and further improve Hydro’s competitive position Step-change Instability Stability Bauxite & Alumina Primary Metal Rolled Products Technology approach • Debottlenecking to go beyond • Testing aluminium production • Automotive line 3 to lif
Slide 23: Establishing a new efficiency standard with the Karmøy technology pilot
Establishing a new efficiency standard with the Karmøy technology pilot With spin-off effects for the entire portfolio Next-generation technology R&D as the next step in cost optimization Testing the world’s most energy-efficient and climate-friendly smelter technology Significant spin-off effects t
Slide 24: Attractive commercial positions throughout the value chain
Attractive commercial positions throughout the value chain Building on strong in-house commercial competence Alumina Primary & casting Recycling • 2-3 million tonnes long • ~ 85% value-added sales* • Sourcing advantage due to in alumina • Aiming to increase sales higher utilization of cost- • Increa
Slide 25: Utilizing moderate power prices to improve on cost and predictability
Utilizing moderate power prices to improve on cost and predictability Recent long-term sourcing contracts in Norway, Germany and Canada New power contracts in Norway 2014 Agder Energi 1,0 TWh/yr 2021-2030 Lyse 0,7 TWh/yr 2021-2030 Axpo 0,5 TWh/yr 2021-2030 Agder Energi 0,5 TWh/yr 2021-2030 New power
Slide 26: Strong improvement trend in Sapa
Strong improvement trend in Sapa More applications and quality-focused customers Sapa results (100 % basis), MNOK Q4’13-Q3’14 Q4’14-Q3’15 1 224 725 367 161 Underlying EBIT Underlying Net income • Strong demand in North America, stable in Europe • BNOK 1 in synergy gains to be delivered ahead of plan
Slide 27: Strengthening relative industry position with ambitious targets
Strengthening relative industry position with ambitious targets 27
Slide 28: Managing industry cyclicality through a prudent financial framework
Managing industry cyclicality through a prudent financial framework Reliable Operating and Financial Disciplined shareholder Effective risk commercial strength capital remuneration management excellence and flexibility allocation policy Cost improvements: Investment grade • Long-term sustaining Revi
Slide 29: Leading performance compared to aluminium peers
Leading performance compared to aluminium peers Strong relative position drives value-creation in challenging markets First-quartile aluminium producer Strongest balance sheet, USD/t Total Debt/Total Equity, 2010-2014 2,000 251 % 181 % 1,500 1,000 71 % 25 % 11 % 500 0 10,000 20,000 30,000 40,000 50,
Slide 30: Hydro's roadmap towards sustainable profitability
Hydro’s roadmap towards sustainable profitability Solid contribution from improvement efforts and currency tailwinds compensate for lower prices RoaCE (%) 12 9 6 3 0 Hydro excluding Delivered Remaining RoaCE improvement programs improvement efforts improvement efforts scenario LME USD/t 1 500, 2011-
Slide 31: Ambitious mid-term strategic goals within the Hydro aspiration
Ambitious mid-term strategic goals within the Hydro aspiration Ambitions Target Timeframe • Improve safety performance, strive for injury free environment TRI<2 2020 • Deliver on Better improvement ambition BNOK 2.9 2019 • Secure new competitive sourcing contracts in Norway post 2020 4-6 TWh 2020 •
Slide 32: Hydro 2016: Well-positioned to create value in challenging markets
Hydro 2016 Well-positioned to create value in challenging markets • Strengthening relative industry position through improvement ambitions and R&D lead • Securing resources for future decades • Re-positioning portfolio towards high-margin markets and advanced customers • Financial strength through r