Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q1 2015 Earnings Presentation
58 slides from Norsk Hydro Asa's earnings presentation, April 2015
Slide 1: Record results on higher sales and currency tailwinds
Record results on higher sales and currency tailwinds First quarter presentation
Slide 2: Cautionary note
Cautionary note 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 strategies for Hydro, such as planned expansions,
Slide 3: Svein Richard Brandtzæg, President and CEO
Svein Richard Brandtzæg President and CEO (3)
Slide 4: Q1 highlights
Q1 highlights • Record-high quarterly underlying EBIT of NOK 3 208 million • Higher sales throughout the value chain • Positive currency developments • Acquisition of advanced sorting technology in Germany • Reduced market tightness due to Chinese semis exports (4)
Slide 5: Aluminium demand continues to exceed production World ex-China
Aluminium demand continues to exceed production World ex-China Demand and production (quarterly annualized) Production less demand* 1 000 mt primary aluminium 1 000 mt primary aluminium 30 000 4 000 3 000 25 000 2 000 1 000 20 000 0 (1 000) 15 000 (2 000) Jan-08 May-09 Sep-10 Jan-12 May-13 Mar-15 Se
Slide 6: Reported inventories world ex-China decline further
Reported inventories world ex-China decline further Warehouse rules in effect as of 1st of February 2015 Reported primary aluminium inventories Stock levels Detroit and Vlissingen 1 000 mt Days Million tonnes Queue days 8 000 120 800 2.4 7 000 750 2.2 100 6 000 2.0 700 80 5 000 1.8 650 1.6 4 000 60
Slide 7: Global primary aluminium market slightly oversupplied
Global primary aluminium market slightly oversupplied Chinese overproduction exceeds World ex-China deficit Demand and production (quarterly annualized) Production less demand* 1 000 mt primary aluminium 1 000 mt primary aluminium 60 000 5 000 55 000 4 000 50 000 3 000 45 000 2 000 1 000 40 000 0 35
Slide 8: Chinese exports decline from high levels in December amid reduced metal advantage
Chinese exports decline from high levels in December amid reduced metal advantage Semis exports Comp. adv. (monthly, kmt) (USD/mt) 500 1 000 450 800 400 Improved comp. adv. China 350 600 300 400 250 200 200 150 0 100 ( 200) 50 0 ( 400) Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 O
Slide 9: Standard ingot premiums fall sharply
Standard ingot premiums fall sharply Regional standard ingot premiums USD per mt 600 • US Mid-West and EU duty-paid ingot premium falling to currently ~320 and 500 220 USD/mt, respectively 400 • Japan premium at 425 USD/mt in Q1, negotiations for Q2 at ~380 USD/mt 300 • Current Japanese spot ingot p
Slide 10: Value-added premiums come down with standard ingot
Value-added premiums come down with standard ingot Hydro realizes premiums on 1-2 month time lag USD per mt 900 800 700 600 500 400 300 200 100 0 Jan-08 Jul-09 Jan-11 Jul-12 Jan-14 Apr-15 EI over ingot Ingot DDP Premium Indicator Metal Bulletin Billet Premium Indicator Source: Metal Bulletin, Hydro
Slide 11: Aluminium cost curve shifts down on USD appreciation
Aluminium cost curve shifts down on USD appreciation Many aluminium-producing nations are also oil exporters Top 15 aluminium producers World ex-China USD appreciation Million tonnes; % of global 2014 primary aluminium production Against currencies of major aluminium producers March14 - March-15 3.5
Slide 12: Decline in all-in ingot price partly offset by weak NOK
Decline in all-in ingot price partly offset by weak NOK USD/mt NOK/mt • 3-month LME price traded between 3 100 18 000 1 747 and 1 890 USD/mt during Q1 2 900 17 000 2 700 Primary aluminium LME* USD/mt NOK/mt 16 000 Q1 2015 average 1 813 14 062 2 500 Q1 2015 end 1 790 14 425 2 300 15 000 Q4 2014 avera
Slide 13: Resilient alumina prices, bauxite source diversification continues
Resilient alumina prices, bauxite source diversification continues Platts alumina index (PAX) Chinese bauxite imports by origin USD/mt Percent Million tonnes 450 20% 80 19% 70 400 18% 60 17% 50 350 16% 40 300 30 15% 14% 20 250 13% 10 200 12% 0 Aug 2010 Apr 2012 Nov 2013 Mar 2015 2011 2012 2013 2014
Slide 14: Lower implied alumina cost on currency developments
Lower implied alumina cost on currency developments • USD 4 per mt reduction in implied Implied alumina cost and margin, USD/mt 1) alumina cost from fourth quarter 475 − BRL weakens 12% against USD from Q4 10 425 to Q1 − Lower Paragominas production driven by 259 extended ball mill maintenance 74 75
Slide 15: Stable all-in implied primary aluminium cost
Stable all-in implied primary aluminium cost All-in implied primary cost and margin, USD/mt 1) • Developments Q1 vs Q4 275 ‒ Improvement efforts 800 700 ‒ Positive currency development 1 900 ‒ Increasing raw material costs 1 775 1 800 1 400 2) 1 175 2) 1 150 2) • USD 180 JV program on track, to be c
Slide 16: Strengthening recycling position towards carbon neutrality
Strengthening recycling position towards carbon neutrality • WMR Recycling acquired April 1 ‒ World’s most advanced sorting technology ‒ 36 000 tonnes annual sorting capacity ‒ To supply Hydro remelters ‒ Located in Dormagen, Germany • Technology to be used in Hydro’s recycling facility for used bev
Slide 17: Seasonally higher shipments in Rolled Products
Seasonally higher shipments in Rolled Products YoY decline driven by weak building markets and Chinese exports Q1 2015 vs Q4 2014 Q1 2015 vs Q1 2014 10% 7% 7% 4% (3%) (6%) (6%) (10%) Packaging Litho, Auto & General Total Rolled Packaging Litho, Auto & General Total Rolled & building Heat exchanger e
Slide 18: Seasonally stronger demand for extruded products
Seasonally stronger demand for extruded products • Seasonally stronger demand − 10% increase in North America − 9% increase in Europe • Demand increased compared to same quarter last year − 11% in North America due to increased building activity and strong automotive demand − Stable in Europe, weak
Slide 19: Sapa JV delivers solutions to Ford F-150
Sapa JV delivers solutions to Ford F-150 World’s most selling vehicle • Partnership to supply structural aluminium tubing − Also provide ongoing development support for future extrusion applications • Ford F 150 2015 Model − Aluminium-alloy body − ~700 pounds lighter than 2014 model Picture with cou
Slide 20: Energy: High snow reservoirs, low power prices
Energy: High snow reservoirs, low power prices Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 600 100 500 80 400 60 300 40 200 MIN NO2 (2002-2013) MAX NO2 (2002-2013) 2013 2013 20 100 2014 2014 2015 2015 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37
Slide 21: Eivind Kallevik, Executive Vice President and CFO
Eivind Kallevik Executive Vice President and CFO (21)
Slide 22: Record results on higher sales and currency tailwinds
Record results on higher sales and currency tailwinds NOK billion (0.3) 0.9 (0.2) (0.3) 0.2 3.2 2.9 0.8 Underlying Underlying Volumes Net currency Cost Prices and Other Underlying EBIT Q1-2014 EBIT Q4-2014 margins EBIT Q1-2015 (22)
Slide 23: Key financials
Key financials Revenues up on higher sales and currency; 14% higher underlying EPS NOK million Q1 2015 Q4 2014 Q1 2014 2014 Revenue 23 290 21 656 18282 77 907 Underlying EBIT 3 208 2 886 772 5 692 Items excluded from underlying EBIT (2) (591) 50 (18) Reported EBIT 3 206 2 295 822 5 674 Financial inc
Slide 24: Items excluded from underlying EBIT
Items excluded from underlying EBIT Offsetting effects NOK million Q1 2015 Q4 2014 Q1 2014 2014 Underlying EBIT 3 208 2 886 772 5 692 Unrealized effects on power and raw material contracts 151 (261) 175 (72) Unrealized derivative effects on LME related contracts (140) - (5) 352 Metal effect, Rolled
Slide 25: Bauxite & Alumina
Bauxite & Alumina Higher alumina sales on index and currency developments lift results Q1 Q4 Q1 Key figures 2015 2014 2014 Alumina production, kmt 1 451 1 501 1 428 Total alumina sales, kmt 2 136 2 043 1 906 Realized alumina price, USD/mt 300 303 269 Implied alumina cost, USD/mt 225 229 258 Bauxite
Slide 26: Primary Metal
Primary Metal Higher realized all-in price partly offset by higher raw material cost Q1 Q4 Q1 Key figures 2015 2014 2014 Primary aluminium production, kmt 497 499 484 Total sales, kmt 534 527 593 Realized LME price, USD/mt 1 897 1 997 1 749 Realized LME price, NOK/mt 14 383 13 355 10 702 Realized pr
Slide 27: Qatalum results down on lower sales
Qatalum results down on lower sales Q1 Q4 Q1 Key figures – Qatalum (50%) 2015 2014 2014 Revenue, NOK million 1 492 1 510 1 087 Underlying EBITDA, NOK million 585 614 342 Underlying EBIT, NOK million 305 371 115 Underlying Net income (loss), 246 317 75 NOK million Primary aluminium production, kmt 76
Slide 28: Metal Markets
Metal Markets Weak sourcing and trading performance hides strong results at remelters Q1 Q4 Q1 Key figures 2015 2014 2014 Remelt production, kmt 145 130 139 Metal products sales, kmt 1) 626 654 776 Underlying EBITDA, NOK million 47 243 157 Underlying EBIT excl currency and inventory 60 130 156 valua
Slide 29: Rolled Products
Rolled Products Higher shipments, margins and currency gains lift results Q1 Q4 Q1 Key figures 2015 2014 2014 External sales volumes, kmt 227 213 243 Underlying EBITDA, NOK million 465 280 351 Underlying EBIT, NOK million 292 96 181 Underlying EBIT Q1 results NOK million • Seasonally higher shipment
Slide 30: Energy
Energy High production partly offset by lower market prices Q1 Q4 Q1 Key figures 2015 2014 2014 Power production, GWh 3 071 2 823 2 964 Net spot sales, GWh 1 610 1 339 1 581 Southwest Norway spot price (NO2), 238 248 249 NOK/MWh Underlying EBITDA, NOK million 429 402 474 Underlying EBIT, NOK million
Slide 31: Improvement in Sapa JV results beyond seasonality
Improvement in Sapa JV results beyond seasonality • Results improved compared to the previous Q1 Q4 Q1 Key figures – Sapa (50%) 2015 2014 2014 quarter as well as same quarter last year driven by: Revenue, NOK million 7 067 5 945 5 673 − Strong North-American market developments − Improvement and res
Slide 32: Other and Eliminations
Other and Eliminations Increased eliminations of internal inventories Q1 Q4 Q1 Other and Eliminations 2015 2014 2014 Sapa JV 119 (22) 35 Other (117) (118) (127) Eliminations (284) (168) 84 Other and Eliminations (281) (308) (8) (32)
Slide 33: Net cash(debt) development
Net cash(debt) development Above seasonal build-up in operating capital NOK billion Net cash flow from operations NOK 1.4 billion (2.9) 4.4 (0.1) (0.9) (0.7) (0.1) (0.3) End Q4-2014 Underlying Operating Taxes* Investments Currency End Q1-2015 EBITDA capital and other * Includes 600 MNOK reimbursemen
Slide 34: Priorities
Priorities • Deliver on improvement efforts • ICMS dialog • Strengthen competitiveness in uncertain markets (34)
Slide 35: Additional information
Additional information (35)
Slide 36: 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: 40% of net income over the cycle − Average ordinary pay-out ratio 2010-2014 is ~95%* − Share buybacks and extraord
Slide 37: 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 • Metal Markets, Rolled Products − Operational LME and currency he
Slide 38: Adjusted net debt development Q1 2015
Adjusted net debt development Q1 2015 Mar 31 Dec 31 Sep 30 NOK billion 2015 2014 2014 Cash and cash equivalents 7.2 9.3 6.0 Short-term investments 2.5 1.8 1.7 Short-term debt (4.2) (6.0) (5.0) Long-term debt (5.7) (5.1) (4.8) Net cash/(debt) (0.3) (0.1) (2.1) Net pension liability at fair value, net
Slide 39: Capital allocation mainly upstream
Capital allocation mainly upstream NOK billion Debt-financed investments Qatalum • Long-term sustaining capex NOK ~3.5 billion Investments Qatalum 10.2 annually Growth capex Sustaining capex • Sustaining projects for 2014-2016: - Red mud disposal area - Bauxite tailing dam - Smelter relining ~6.8 6.
Slide 40: Commodity prices drive industry costs
Commodity prices drive industry costs Fuel oil A1 (USD/mt) Steam coal (USD/mt) 750 180 600 150 120 450 90 300 60 150 30 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Caustic soda (USD/mt) Petroleum coke FOB USG (USD/mt) 900 600 750 500 600 40
Slide 41: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10%* Currency sensitivities +10%* Hydro Group: Sustainable effect: NOK NOK million EBIT million USD BRL EUR EBIT 3 430 (750) (350) Aluminium 3 400 One-off reevaluation effect: Fuel oil (250) Financial (1 160) 700 (1 380) items Pet coke (2
Slide 42: Bauxite & Alumina sensitivities
Bauxite & Alumina sensitivities Sensitivities on underlying EBIT if +10% in price Revenue impact NOK million • ~14.5% of 3-month LME price per tonne alumina 835 • ~One month lag • Realized alumina price lags PAX by one month 525 Cost impact Bauxite • ~2.45 tonnes bauxite per tonne alumina • Pricing
Slide 43: Primary Metal sensitivities
Primary Metal sensitivities Sensitivities on underlying EBIT if +10% in price Revenue impact NOK million • Realized price lags LME spot by ~1-2 months 2,360 • Realized premium lags market premium by ~2-4 months Cost impact Alumina • ~1.9 tonnes per tonne aluminium • ~14.5% of 3-month LME price per t
Slide 44: Depreciation by currency and business area
Depreciation by currency and business area Total 2014 depreciation 4.6 BNOK Depreciation currency exposure by business area Depreciation by business area* NOK & 4% 1% Percent USD EUR BRL Others 15% Bauxite & Alumina 100% 39% Primary Metal 25% 20% 55% 2% Metal Markets 25% 75% Rolled Products 90% 10%
Slide 45: Items excluded from underlying results - 2015
Items excluded from underlying results - 2015 NOK million (+=loss/()=gain) Q1 2015 Unrealized derivative effects on LME related contracts Bauxite & alumina 3 Total impact Bauxite & alumina 3 Unrealized derivative effects on LME related contracts Primary metal 54 Unrealized effects on power contracts
Slide 46: Items excluded from underlying results - 2014
Items excluded from underlying results - 2014 NOK million (+=loss/()=gain) Q1 2014 Q2 2014 Q3 2014 Q4 2014 2014 Unrealized derivative effects on LME related contracts Bauxite & Alumina (4) (1) (2) (10) (16) Total impact Bauxite & Alumina (4) (1) (2) (10) (16) Unrealized derivative effects on LME rel
Slide 47: Operating segment information
Operating segment information Underlying EBIT NOK million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Bauxite & Alumina (63) (244) (370) (379) (288) (269) (26) 528 780 (1 057) (55) Primary Metal 364 237 337 484 312 420 1 216 1 989 2 012 1 422 3 937 Met
Slide 48: Operating segment information
Operating segment information EBIT NOK million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Bauxite & Alumina (76) (241) (370) (491) (284) (269) (23) 537 776 (1 178) (39) Primary Metal 19 122 338 377 303 434 1 278 1 912 1 956 855 3 928 Metal Markets 228
Slide 49: Operating segment information
Operating segment information Total revenue NOK million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Bauxite & Alumina 3 304 3 147 3 354 3 546 3 511 3 828 3 737 4 770 5 461 13 350 15 847 Primary Metal 5 945 5 896 5 884 5 554 6 618 6 384 6 986 8 075 9 09
Slide 50: Operating segment information
Operating segment information Internal revenue NOK million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Bauxite & Alumina 1 322 1 253 1 277 1 375 1 304 1 424 1 480 2 071 2 074 5 226 6 279 Primary Metal 5 132 4 856 4 860 4 566 5 391 5 047 5 396 5 833 7 3
Slide 51: Operating segment information
Operating segment information Depreciation, amortization and impairment NOK million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Bauxite & Alumina 429 448 417 424 410 431 442 519 460 1 718 1 802 Primary Metal 470 472 461 452 437 427 431 499 511 1 855 1
Slide 52: Income statements
Income statements NOK million Q1 2015 Q4 2014 Q1 2014 Year 2014 Revenue 23 290 21 656 18 282 77 907 Share of the profit (loss) in equity accounted investments 265 (34) 40 415 Other income, net 271 327 132 751 Total revenue and income 23 827 21 948 18 454 79 073 Raw material and energy expense 14 662
Slide 53: Balance sheets
Balance sheets NOK million Mar 31 2015 Dec 31 2014 Sep 30 2014 Jun 30 2014 Mar 31 2014 Cash and cash equivalents 7 172 9 253 6 045 6 617 6 476 Short-term investments 2 456 1 786 1 745 1 765 3 081 Accounts receivable 15 122 11 703 11 280 10 835 11 116 Inventories 13 392 12 642 10 334 10 213 9 599 Oth
Slide 54: Operational data
Operational data Bauxite & Alumina Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Alumina production (kmt) 1 361 1 248 1 316 1 452 1 428 1 526 1 478 1 501 1 451 5 377 5 933 Sourced alumina (kmt) 476 427 711 395 550 431 532 503 666 2 009 2 016 Total alumin
Slide 55: Operational data
Operational data Metal Markets Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year2013 Year2014 Remelt production (1 000 mt) 135 132 127 123 139 141 128 130 145 517 538 Third-party Metal Products sales (1 000 mt)2) 88 84 82 82 84 81 80 79 74 336 324 Metal Products sales excl
Slide 56: 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 Q4 2014 Q1 2015 Year 2014 Sales volume (1000 mt) 343 311 346 360 346 314 359 367 350 322 353 1 399 Revenues 10 414 9
Slide 57: Investor Relations in Hydro
Investor Relations in Hydro Next events Pål Kildemo Head of Investor Relations Annual General meeting t: +47 970 96 711 e: pal.kildemo@hydro.com May 6, 2015 Sapa JV conference call 18th of May, 2015 Olena Lepikhina Second quarter results Investor Relations Officer July 21, 2015 t: +47 96853035 e: ol
Slide 58: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO