Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (2017)
45 slides from Norsk Hydro Asa's investor day presentation, Dec 12, 2017
Slide 1: Strategic direction: Better, Bigger, Greener
Strategic direction Better, Bigger, Greener
Slide 2: Better, Bigger, Greener
Better, Bigger, Greener Hydro’s aspiration for higher value creation Better Bigger Greener Raise performance and Expand the use of aluminium Lead the transition towards improve customer offering and strengthen Hydro’s platform sustainable solutions for growth 118
Slide 3: Ambitious mid-term strategic goals within the Hydro aspiration
Ambitious mid-term strategic goals within the Hydro aspiration* Ambitions Target Timeframe Progress¹ Status • Improve safety performance, strive for injury free environment TRI<2 2020 2.82 • Realize ongoing improvement efforts Better BNOK 3.0 2019 1.7 BNOK • Secure new competitive sourcing contracts
Slide 4: Bauxite & Alumina: Better than ever through operational excellence
Bauxite & Alumina Better than ever through operational excellence Silvio Porto, EVP Bauxite & Alumina
Slide 5: Paragominas: New production record achieved
Paragominas: New production record achieved Bauxite production in thousand mt 12 000 LTM* Q3 2017 production up 3% from strong 2016 11 000 • 11.4 million mt production LTM Q3 2017 • Successfully implemented Bauxite & Alumina Business System 10 000 • Improved equipment condition, operating standards
Slide 6: MRN – important part of Alunorte's bauxite sourcing strategy
MRN – important part of Alunorte’s bauxite sourcing strategy Strategic Importance Long-term issues Short-term issues Update Mtpy Bauxite Paragominas MRN 5.5 6.5 4.8 11.0 11.0 11.0 6.3* Mtpy 6.6* Mtpy 7.0* Mtpy • Secures strong relative cost • Need to move to new mining • Lower production at the • Ba
Slide 7: Alunorte 7.0: On the way to extended capacity
Alunorte 7.0: On the way to extended capacity Alumina production in thousand mt 6 500 Significantly improved production stability 6 250 • 6.3 million mt production LTM* Q3 2017 • Improved equipment effectiveness and process stability based 6 000 on Bauxite & Alumina Business System 5 750 • Further d
Slide 8: Commercial: Successful implementation of strategy
Commercial: Successful implementation of strategy .. Hydro alumina sales exposure to index pricing increased 35% 50% 65% 75% 75% 85% Improved alumina & bauxite margins 100% • New alumina contracts: 100% sold on index 80% • Continued focus on CIF terms & end-users 60% 40% • External bauxite sales of
Slide 9: Improvement program ahead of plan
Improvement program ahead of plan Better Bauxite & Lifting 2019-target from BNOK 1.0 to BNOK 1.3 Alumina BNOK 1.3 Improvement categories Improvements in NOK million Operational costs Optimize margins 1200 • Optimize purchase conditions for raw materials 1000 • Reduce fixed costs Process improvements
Slide 10: Primary Metal: Better, bigger and greener with technology and digitization
Primary Metal Better, bigger and greener with technology and digitization Hilde M. Aasheim, EVP Primary Metal
Slide 11: Primary Metal continues ambitious improvement efforts
Primary Metal continues ambitious improvement efforts Better Primary Will deliver BNOK ~0.5 in period 2018-2019 Metal BNOK 1.0 Long history of improvement efforts Strengthened relative position BNOK 0.5 to be BNOK 3 delivered 2010-2016 Underlying EBITDA per mt in USD for respective delivered 2018-20
Slide 12: Initiatives in place to lift Albras performance
Initiatives in place to lift Albras performance Lower improvement speed than planned in Primary Metal for 2017 primarily due to Albras performance 2017 improvement efforts behind plan at Albras due to asset integrity issues • Reduced amperage to relieve high rectifier load • Higher maintenance costs
Slide 13: Karmøy Technology Pilot enabling spin-offs to existing smelters
Karmøy Technology Pilot enabling spin-offs to existing smelters Production at fully owned and joint venture plants 2014-2025 (Ktpy) 200 Fully owned Joint ventures Albras reduction 175 150 125 100 75 Delivered 50 25 Spin-off effects 0 2014 2015 2016 2017E 2018E 2019E 2020 2021 2022 2023 2024 2025E -2
Slide 14: Driving innovation to further strengthen our position in the market
Driving innovation to further strengthen our position in the market Continue to capture strong growth in automotive segments Sales to automotive in Europe Mt per year 600 500 400 300 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021 Extrusion ingot Foundry alloys Sheet ingot * Europe only. Forward v
Slide 15: Growing in recycling
Growing in recycling Targeting 30% increase in RFA Sales Investing in the leading recycling Targeting 100% increase in RFA sales for EI remelters, in mt capabilities and technology post-consumer scrap usage Post-consumer scrap usage, in mt 350 58% 200 25% 300 56% 54% 160 20% 250 52% 200 120 15% 50%
Slide 16: Industry 4.0 enabling further improvements
Industry 4.0 enabling further improvements Digitized support functions Karmøy Technology Pilot scope Industry 4.0 stretching further Autonomous Connected Advanced Automation, robotics Digital and predictive processes operator analytics and AGV maintenance Virtual supply chain 132
Slide 17: Better, bigger and greener with technology and digitization
Better, bigger and greener with technology and digitization Strengthening our competitive position further Karmøy Product Recycling Technology Pilot differentiation Industry 4.0 Taking advantage Enabling ambitious Driving demand Enabling further of increased creep program growth for improvements scr
Slide 18: Rolled Products: Expanding in higher-margin and fast-growing segments
Rolled Products Expanding in higher-margin and fast-growing segments Kjetil Ebbesberg, EVP Rolled Products
Slide 19: Portfolio high-grading, recycling and cost efficiency are key
Portfolio high-grading, recycling and cost efficiency are key Automotive with the highest growth ambitions, recycling of used beverage cans of strategic importance Automotive Foil Beverage can Lithography Special products Ambition Gain No.2 position Fostering No.1 position in Grow No.2 position Defe
Slide 20: 2017 result influenced by operational issues
2017 result influenced by operational issues AluNorf and Hamburg mainly solved, UBC and AL3 with clear measures in place RP Underlying EBIT - YTD Q3 2017 vs YTD Q3 2016 Four main performance issues - measures being implemented • AluNorf – production performance stabilized • Hamburg – production perf
Slide 21: Ramp up of used beverage can recycling line in progress
Ramp up of used beverage can recycling line in progress Highly advanced sorting technology, closing the loop for our can customers • Ramp-up delayed due to equipment design issues – production performance negatively impacted • Main actions taken: • Main design modifications completed in October 2017
Slide 22: Automotive line 3 qualification process ongoing
Automotive line 3 qualification process ongoing Potential of the line is well perceived by customers as future technology in automotive • Line installed within planned investment frame and Indicative BiW ramp-up plan vs original plan with good safety performance • Ramp-up process delayed due to tech
Slide 23: Doubling of automotive share with ramp-up of Automotive line 3
Doubling of automotive share with ramp-up of Automotive line 3 Automotive to support high-grading ambitions Sales by segment 2010 2016 2021 11% 15% 24% 8% 10% 16% Auto Can Europe Can overseas Litho Foil Special 139
Slide 24: Innovation as strong driver for increased competitiveness
Innovation as strong driver for increased competitiveness Customer surveys outline Hydro as the preferred innovation partner HPSplus LIBS System The next generation for sorting of of lithographic sheet automotive scrap brought to the successfully installed market by Hydro - at R&D center Bonn – impr
Slide 25: Way forward on NOK 900 million improvement ambition
Way forward on NOK 900 million improvement ambition Better Rolled Products Challenging to meet ambition in 2019, risk of 1 year delay due to operational issues 700 MNOK Improvement ambition Rolled Products 1000 MNOK 900 Improvements driven by 800 Recycling • Automotive growth 700 • Recycling 600 Hig
Slide 26: The future belongs to sustainable businesses
The future belongs to sustainable businesses Arvid Moss, EVP Energy and Corporate Business Development
Slide 27: The world of aluminium is greatly influenced by key long-term trends
The world of aluminium is greatly influenced by key long-term trends Producers, consumers, regulators and end-users Technology driving Resource depletion Climate challenge solutions for the future 143
Slide 28: Responsibility has been part of Hydro's DNA for 112 years
Responsibility has been part of Hydro’s DNA for 112 years “…create a more viable society by innovative and efficient use of natural resources and products” Innovation Infrastructure Safety Community Environment Natural resources Welfare Education Innovation 144
Slide 29: The Sustainable Development Goals cannot be reached without business
The Sustainable Development Goals cannot be reached without the active participation of business 145
Slide 30: Making responsibility and sustainability a competitive edge
Making responsibility and sustainability a competitive edge Planet, people, prosperity Improving Making a Driving our positive innovation footprint difference 146
Slide 31: Making responsibility and sustainability a competitive edge
Making responsibility and sustainability a competitive edge Planet, people, prosperity Improving Making a Driving our positive innovation footprint difference 147
Slide 32: The climate paradox
The climate paradox Increasing share of aluminium production is coal-based CO2 emissions and main energy source in Aluminium production by power source aluminium production by country Mill tonnes Tonne CO2 / tonne aluminium 20 Coal An industry challenge 90 Forecast 18 Governments Direct Indirect wil
Slide 33: Our global industry's most ambitious climate strategy
Our global industry’s most ambitious climate strategy Hydro on track to be carbon-neutral from a life-cycle perspective by 2020 Hydro’s CO2 emissions from a life-cycle perspective* Million kg Co2 Production – reduction in 2.5 own emissions 2.0 1.5 Products – use 1.0 phase benefits 0.5 Recycling of 0
Slide 34: Strengthening rehabilitation at Hydro Paragominas
Strengthening rehabilitation at Hydro Paragominas Updated targets and research partnership guide rehabilitation efforts to restore biodiversity Forest Clearing Topsoil Forest rehabilitation removal and storage Overburden Topsoil removal and recovery storage Updated 1:1 rehabilitation target • 1:1 re
Slide 35: A long-term agenda to optimize stakeholder and shareholder benefits
A long-term agenda to optimize stakeholder and shareholder benefits ‘Business cannot succeed in societies that fail’ – World Business Council on Sustainable Development Improving Making a Driving our positive innovation footprint difference 151
Slide 36: Targeting the fundamental drivers of long-term development
Targeting the fundamental drivers of long-term development Aligned with community expectations and needs, and through local partnerships Contribute to quality education in our communities* Promote decent work throughout the value and supply chain Foster economic growth in our communities* Strengthen
Slide 37: Making responsibility and sustainability a competitive edge
Making responsibility and sustainability a competitive edge Planet, people, prosperity Improving Making a Driving our positive innovation footprint difference 153
Slide 38: Renewables, flexibility and storage to play together
Renewables, flexibility and storage to play together Competitive long-term sourcing solutions, and making Hydro «Better, Bigger, Greener» Positioning for the future means: • Greener competitive sourcing, industrial processes and electrification Hydropower Norway, Wind Nordic and Brazil Demand flexib
Slide 39: Part of the solution
Part of the solution Use-phase benefits, recycling friendly Setting new standards Hydro Extruded Solutions to deliver in environmentally friendly to the world’s first purpose-built, and sustainable buildings. mass-market electric taxi in London. 155
Slide 40: Combining high-value outputs with lower cost inputs
Combining high-value outputs with lower cost inputs Repositioning Hydro’s recycling activities, preparing for the circular economy >50% of EI remelter sales Rolled Products in 2016 based on RFA 100 kmt 250 kmt post-consumer scrap by 2020 ~50 kmt in 150 kmt in post-consumer 2017 post-consumer scrap r
Slide 41: Sustainability and competitiveness hand-in-hand
Sustainability and competitiveness hand-in-hand Sustainability will become more and more important Producers Users Third party certification system for responsible Civil society production of aluminium 157
Slide 42: Commercializing low-carbon aluminium
Commercializing low-carbon aluminium Promoting responsible aluminium as the metal of the future 158
Slide 43: Hydro's climate strategy converted into low-carbon products
Hydro’s climate strategy converted into low-carbon products Our uniqueness is our integrated value chain, share of hydro-power and post consumer scrap recycling Hydro 4.0 Hydro 75R Bauxite Alumina Shipping Energy Anodes Electrolysis Casting All-in approach At least 75% post-consumer Maximum or below
Slide 44: Capturing growing markets for low-carbon and recyclable aluminium
Capturing growing markets for low-carbon and recyclable aluminium 160
Slide 45: Responsibility and business hand in hand
Responsibility and business hand in hand The future belongs to sustainable businesses 161