Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q4 2011 Earnings Presentation
55 slides from Norsk Hydro Asa's earnings presentation, Feb 16, 2012
Slide 1: Lower sales and prices, solid production performance
Lower sales and prices, solid production performance February 16, 2012
Slide 2: Weaker demand, repositioning, record production
• Weaker aluminium demand • Intensified repositioning measures • Record production in Paragominas and Qatalum (2)
Slide 3: Q4 highlights
Q4 highlights • Underlying EBIT NOK 1 133 million • Lower metal prices and volumes • Weaker markets and lower seasonal demand • Solid Energy results • Proposed 2011 dividend NOK 0.75 per share (3)
Slide 4: Weaker demand for fabricated products
Weaker demand for fabricated products Hydro’s fabricated products sales Total fabricated Q4 2011 vs Q3 2011 products sales Foil Litho Can Packaging Auto General Extrusion Building Extrusion Extrusion Precision Q4 11 vs Q4 11 vs 2011 vs beverage & building & heat engineering Eurasia Systems North Sou
Slide 5: Fabricated products sales stable 2011 vs 2010
Fabricated products sales stable 2011 vs 2010 Difference in product mix Hydro’s fabricated products sales Total fabricated 2011 vs 2010 products sales Foil Litho Can Packaging Auto General Extrusion Building Extrusion Extrusion Precision Q4 11 vs Q4 11 vs 2011 vs beverage & building & heat engineeri
Slide 6: Extruded Products turnaround
Extruded Products turnaround Restructuring in mature markets Restructuring portfolio • Closure Karmøy press and Prague fabrication plant • Mothballed Spanish and Portuguese presses EUR 40 million cost reductions by end 2012 Building Systems cost improvement • Turnaround in Iberia and Italy program •
Slide 7: Encouraging emerging market outlook for Extruded Products
Encouraging emerging market outlook for Extruded Products • New capacity in Suzhou, China Extrusion capacity in emerging markets 1 000 mt • 7 000 mtpy precision tubing, 2012, 83 for automotive and HVAC&R* • 12 000 mtpy general extrusion, 2013 • New capacity in Acro, Brazil 47 • 17 000 mtpy general e
Slide 8: Aluminium prices declined during Q4
Aluminium prices declined during Q4 USD per tonne 3 400 Primary aluminium LME USD/mt NOK/mt Q4 2011 average 2 110 12 134 3 000 Q4 2011 end 1 992 11 905 Q3 2011 average 2 432 13 372 2 600 Q3 2011 end 2 243 13 150 Average 2011 2 420 13 539 2 200 Average 2010 2 199 13 257 1 800 Average 2009 1 702 10 57
Slide 9: Softening market towards end-2011
Softening market towards end-2011 World outside China (quarterly annualized) 1 000 mt 30 000 • Q4 demand influenced by 25 000 seasonality and weak markets 20 000 • Improved supply-demand balance expected in 2012 15 000 • ~1 million mtpy announced curtailments 10 000 • 3-5% aluminium demand growth 5
Slide 10: Global inventories edging higher
Global inventories edging higher World reported primary aluminium inventories 1 000 mt Days 8 000 80 • Estimated total reported and 7 000 70 unreported inventories 12 million mt 6 000 60 • Represents 3 months of consumption 5 000 50 • Financial deals continue to lock 4 000 40 up metal 3 000 30 2 000
Slide 11: Ingot premiums slightly down in Q4
Ingot premiums slightly down in Q4 USD per mt 225 200 175 150 125 100 75 50 25 0 Feb- Apr- Jun- Aug- Oct- Dec- Feb- Apr- Jun- Aug- Oct- Dec- Feb- Apr- Jun- Aug- Oct- Dec- Feb- Apr- Jun- Aug- Oct- Dec- 08 08 08 08 08 08 09 09 09 09 09 09 10 10 10 10 10 10 11 11 11 11 11 11 US Mid West Japan Europe (d
Slide 12: China a significant net importer
China a significant net importer In terms of aluminium equivalents across the total value chain Annualized aluminium equivalents*, million mt 15 2006 2007 2008 2009 2010 2011 • Bauxite and alumina • Increased bauxite imports throughout 2011 • Stable alumina imports to China Import 10 • Primary alumi
Slide 13: Softening alumina price
Softening alumina price Platts index in USD USD per mt Percent 500 18.0 Alumina price % of LME 450 17.0 400 16.0 350 15.0 300 14.0 250 13.0 200 12.0 Aug-10 Sep-10 Nov-10 Dec-10 Feb-11 Mar-11 May-11 Jun-11 Jul-11 Sep-11 Oct-11 Nov-11 Jan-12 Source: Platts (13)
Slide 14: Energy: high reservoir levels
Energy: high reservoir levels Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 700 100 2010 2011 2012 2010 2011 2012 90 600 80 500 70 400 60 50 300 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 2
Slide 15: Stabilizing bauxite and alumina performance
Stabilizing bauxite and alumina performance Annualized production million mt 10 • Paragominas H2 bauxite 9 production up 23% from H1, 2011 8 7 • Alunorte H2 alumina production 6 up 9% from H1, 2011 5 4 • Stabilizing production at higher level 3 • Paragominas above 9 mtpy 2 • Alunorte above 6 mtpy 1
Slide 16: Primary Metal improvement program on target
Primary Metal improvement program on target Estimated primary aluminium cash cost and margin • USD 300 per mt improvement program USD/mt 1) • USD 200 per mt realized 2011 vs 2009 475 • USD 50 in 2010, USD 150 in 2011 475 475 425 • Improved operational performance 2 175 25 375 375 • Reduced fixed cos
Slide 17: First quarter of full production in Qatalum
First quarter of full production in Qatalum • 600 000 mt annualized production in Q4 • Strong operational performance • Focus on post ramp-up improvements (17)
Slide 18: Active portfolio management
Active portfolio management Building Systems restructuring • EUR 40 million cost savings • Turnaround to meet challenging markets Sale of Alpart stake completed • Sale of 35% stake in curtailed alumina refinery in Jamaica • NOK 465 million gain recognized in Q4 Curtailment in Kurri Kurri • 1 potline
Slide 19: Growing share of sales priced in global markets
Growing share of sales priced in global markets Total sales, metal equivalents 2009 • ~75% of total sales globally priced Alumina • Increased alumina position, priced Metal and sold globally Fabricated products • Increased metal capacity in Brazil and Qatar. Sales based on global commodity pricing (
Slide 20: 2011: Reflecting a new Hydro
2011: Reflecting a new Hydro • Improved earnings in 2011 Underlying EBIT NOK million (2 555) 3 351 • Established fully-integrated aluminium 6 133 company 2 100 1 800 • Achieved strong operational 1 500 improvements in Bauxite & Alumina 1 200 • Completed Qatalum ramp-up 900 600 • Strengthened focus o
Slide 21: Underlying EBIT
Underlying EBIT 1906 1646 1448 1110 1133 965 688 588 (493) (618) (651) (793) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 Bauxite & Alumina 1) (228) (73) 21 (117) 162 288 71 113 155 272 302 159 Primary Metal 1) 3 (815) (780) (623) (169)
Slide 22: High-level quarterly result development
High-level quarterly result development NOK billion 0.1 (0.3) 1.6 (0.2) (0.1) 1.1 Q3 2011 Raw material cost Aluminium volume LME price and currency Bauxite & Alumina Q4 2011 (22)
Slide 23: Key financials
Key financials NOK million Q4 2011 Q3 2011 Q4 2010 Year 2011 Year 2010 Revenue 21 749 23 829 19 406 91 444 75 754 Underlying EBIT 1 133 1 646 588 6 133 3 351 Items excluded from underlying EBIT (1 494) 576 180 3 694 167 Reported EBIT (362) 2 222 768 9 827 3 184 Financial income (expense) (26) (1 363
Slide 24: Tax and financial expense
Tax and financial expense Tax Finance NOK million Year 2011 Year 2010 NOK million Year 2011 Year 2010 Income before tax 8 539 3 706 Interest income 263 201 Equity accounted investments 260 606 Dividends received and net loss on securities (53) 145 Tax free gain sale shares and revaluation Financial
Slide 25: Q4 2011 impairments
Q4 2011 impairments Kurri Kurri smelter • NOK 970 million impairment • One potline curtailed – 60 000 mt • Challenging financial situation Building Systems • NOK 235 million impairment • Assets in Spain, Portugal and Italy • Euro zone debt crisis, particularly challenging markets in Southern Europe
Slide 26: Items excluded from underlying EBIT
Items excluded from underlying EBIT NOK million Q4 2011 Q3 2011 Q4 2010 Year 2011 Year 2010 Underlying EBIT 1 133 1 646 588 6 133 3 351 Unrealized effects power contracts (31) 25 (151) 195 (609) Unrealized LME and other derivative effects (348) (19) 283 (399) (117) Metal effect, Rolled Products (134
Slide 27: Bauxite & Alumina
Bauxite & Alumina Q4 Q3 Q4 Key figures 2011 2011 2010 Alumina production, kmt 1 490 1 553 1 448 Total alumina sales, kmt 1 956 2 092 2 018 Realized alumina price, USD/mt 306 345 311 Apparent alumina cash cost, USD/mt 261 280 251 Bauxite production, kmt 2 317 2 186 2 017 Underlying EBITDA, NOK millio
Slide 28: Primary Metal
Primary Metal Q4 Q3 Q4 Key figures 2011 2011 2010 Primary aluminium production, kmt 539 522 475 Total sales, kmt 593 650 633 Realized LME price, USD/mt 2 439 2 592 2 131 Realized LME price, NOK/mt 13 834 14 225 12 739 Underlying EBITDA, NOK million 1 097 1 206 808 Underlying EBIT, NOK million 484 65
Slide 29: Metal Markets
Metal Markets Q4 Q3 Q4 Key figures 2011 2011 2010 Remelt production, kmt 131 133 147 Total metal products sales, kmt 804 850 688 Underlying EBITDA, NOK million (13) 118 88 Underlying EBIT excl currency and 80 90 73 inventory valuation effects, NOK million Underlying EBIT, NOK million (39) 93 62 Q4 o
Slide 30: Rolled Products
Rolled Products Q4 Q3 Q4 Key figures 2011 2011 2010 External sales volumes, kmt 215 228 234 Underlying EBITDA, NOK million 211 235 226 Underlying EBIT, NOK million 86 124 105 Underlying EBIT NOK million 864 673 Q4 operating results 309 • Sales volumes 6% down in a seasonally weak quarter 227 232 232
Slide 31: Extruded Products
Extruded Products Q4 Q3 Q4 Key figures 2011 2011 2010 External sales volumes, kmt 121 137 127 Underlying EBITDA, NOK million 31 165 162 Underlying EBIT, NOK million (90) 40 24 Underlying EBIT NOK million 444 151 Q4 operating results 201 • Volumes down 11% on weaker underlying demand and seasonality
Slide 32: Energy
Energy Q4 Q3 Q4 Key figures 2011 2011 2010 Power production, GWh 2 706 2 737 2 263 Net spot sales, GWh 1 430 1 639 827 Southwest Norway spot price (NO2), 259 253 469 NOK/MWh Underlying EBITDA, NOK million 484 543 502 Underlying EBIT, NOK million 441 506 482 Underlying EBIT Q4 operating results NOK m
Slide 33: Net debt development Q4 2011
Net debt development Q4 2011 NOK billion Net cash flow from operations NOK 3.5 billion 2.4 (1.4) (1.3) 2.5 (0.4) 1.7 (0.1) Q3 2011 Underlying EBITDA Operating capital Other effects Investments/ C urrency Q4 2011 divestments translation & other (33)
Slide 34: Net debt development full year 2011
Net debt development full year 2011 NOK billion 11.2 (3.6) (4.3) 1.4 (1.7) (0.8) 13.2 (11.5) 11.0 1.7 End 2010 Underlying Other effects Investments Divestments Dividends C urrency End 2011* Vale End 2011 EBITDA translation & adjustments other *Adjusted for NOK 5.8 billion in payment to Vale and NOK
Slide 35: Increased net pension liability
Increased net pension liability NOK billion December 31, 2011 December 31, 2010 ● Benefit obligation up NOK 2.1 billion Projected benefit obligation (20.5) (18.4) ● Mainly due to reduced discount rate of 1.25% in Norway Fair value of plan assets 12.6 12.5 Termination benefits and other (0.5) (0.6) ●
Slide 36: Robust financial position
Robust financial position Net cash/(debt), NOK billion Dec 31, Sep 30, Dec 31, 11.0 NOK billion 2010 2011 2011 Cash and cash equivalents 10.9 6.9 8.4 Short-term investments 1.3 1.6 1.8 Short-term debt (0.9) (4.4) (4.3) Long-term debt (0.3) (4.2) (4.2) Net cash/(debt) 11.0 (0.1) 1.7 Net int.-bearing
Slide 37: Proposed 2011 dividend NOK 0.75 per share
Proposed 2011 dividend NOK 0.75 per share • Strong commitment to return cash to shareholders • Improved operational performance • Solid financial position • Uncertain market outlook • Average five year payout ratio* is ~70% • Dividend policy is 30% payout over the cycle • Represents payout of ~NOK 1
Slide 38: Priorities 2012
Priorities 2012 • Continued performance improvements upstream • Responding with appropriate measures • Capital discipline (38)
Slide 39: 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 40: Items excluded from underlying results - 2011
Items excluded from underlying results - 2011 NOK million (+=loss/()=gain) Q1 2011 Q2 2011 Q3 2011 Q4 2011 2011 Unrealized derivative effects on currency contracts (Alunorte) Bauxite & alumina (1) - - - (1) Derivative effects on LME related contracts (Vale Aluminium) Bauxite & alumina 16 (67) (24) 3
Slide 41: Items excluded from underlying results - 2010
Items excluded from underlying results - 2010 NOK million (+=loss/()=gain) Q1 2010 Q2 2010 Q3 2010 Q4 2010 Year 2010 Unrealized derivative effects on currency contracts (Alunorte) Bauxite & alumina 23 12 (65) (20) (50) Derivative effects on LME related contracts (Vale Aluminium) Bauxite & alumina -
Slide 42: Operating segment information
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2009 2010 2011 Bauxite & Alumina (228) (73) 21 (117) 162 288 71 113 155 272 302 159 (397) 633 887 Primary Metal 3 (815) (780) (623)
Slide 43: Operating segment information
Operating segment information Pro forma underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2010 2011 Bauxite & Alumina 205 448 348 223 237 272 302 159 1 225 969 Primary Metal (203) 481 306 230 592 765 653 484 816 2 495 Metal Markets 65 31 163 62 143
Slide 44: Operating segment information
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2009 2010 2011 Bauxite & Alumina* (426) 117 142 (115) 139 574 43 91 4 561 339 326 620 (282) 847 5 846 Primary Metal* (1 451) (649) (294) (783)
Slide 45: Operating segment information
Operating segment information Pro forma reported EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2010 2011 Bauxite & Alumina 205 768 47 140 213 339 326 620 1 161 1 498 Primary Metal (41) 723 (368) 499 622 826 675 (760) 813 1 363 Metal Markets (32) 59 18 115
Slide 46: Operating segment information
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2009 2010 2011 Bauxite & Alumina* 1 526 1 495 1 525 1 588 1 631 2 426 1 735 2 090 2 183 4 271 4 227 3 790 6 134 7 882 14 471 Primary
Slide 47: Operating segment information
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2009 2010 2011 Bauxite & Alumina* 1 042 746 974 869 1 003 1 241 1 076 1 199 1 168 1 688 1 587 1 433 3 631 4 518 5 876 Primary Meta
Slide 48: Operating segment information
Operating segment information Depreciation, amortization and impairment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2009 2010 2011 Bauxite & Alumina* - - - - - 1 1 1 178 482 470 450 1 2 1 580 Primary Metal* 463 461 451 44
Slide 49: Income statements
Income statements Q4 Q3 Q4 Year Year NOK million 2011 2011 2010 2011 2010 Revenue 21 749 23 829 19 406 91 444 75 754 Share of the profit (loss) in equity accounted investments (164) 11 17 (260) (606) Other income, net 639 852 112 6 222 568 Total revenue and income 22 223 24 691 19 535 97 406 75 717
Slide 50: Balance sheets
Balance sheets Dec 31 Sep 30 Jun 30 March 31 December 31 NOK million 2011 2011 2011 2011 2010 Cash and cash equivalents 8 365 6 863 3 831 3 698 10 929 Short-term investments 1 780 1 573 1 744 1 319 1 321 Receivables and other current assets 13 883 17 202 17 858 20 440 13 597 Inventories 14 157 14 34
Slide 51: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Pro forma Bauxite & Alumina 2010 2010 2010 2010 2011 2011 2011 2011 2010 2011 Alumina production (kmt) 1) 1 394 1 521 1 442 1 448 1 336 1 448 1 553 1 490 5 805 5 827 Sourced alumina (kmt) 539 557 488 556 470 599 581 418 2 141 1 958 Total alumina sal
Slide 52: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Pro forma Primary Metal 2010 2010 2010 2010 2011 2011 2011 2011 2010 2011 Realized aluminium price LME, USD/mt 2 039 2 200 2 137 2 131 2 366 2 509 2 592 2 439 2 128 2 478 Realized aluminium price LME, NOK/mt 11 826 13 192 13 226 12 739 13 664 13 803
Slide 53: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year Metal Markets 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2009 2010 2011 Remelt production (1 000 mt) 1) 89 111 123 133 143 156 141 147 150 151 133 131 455 586 565 Metal products sales, own production (1 000 mt) 550
Slide 54: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10% Currency sensitivities +10% NOK Financial Income Net NOK million EBIT EBIT million items before tax income Aluminium 2 800 USD 2 300 (550) 1 750 1 200 Oil (270) BRL (850) 750 (100) (75) Pet coke (240) EUR (150) (1 150) (1 300) (900) C
Slide 55: Investor Relations in Hydro
Investor Relations in Hydro t: +47 417 51 199 Rikard Lindqvist Head of Investor Relations e: rikard.lindqvist@hydro.com t: +47 977 36 022 Stian Hasle Investor Relations Officer e: stian.hasle@hydro.com Irene Alyanakian Investor Relations Assistant t: +47 414 02 174 Kristiansen e: irene.alyanakian.kr