Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (July 2014)
105 slides from Norsk Hydro Asa's investor presentation, July 2014
Slide 1: Investor presentation July 2014
Investor presentation July 2014 2014
Slide 2: Table of contents and cautionary note
Table of contents Second quarter results 2014 03 Cautionary note Certain statements included within this announcement contain forward- looking information, including, without limitation, those relating to (a) Market 37 forecasts, projections and estimates, (b) statements of management’s plans, objec
Slide 3: Q2 2014
Q2 2014 (3)
Slide 4: Q2 highlights
Q2 highlights • Underlying EBIT NOK 544 million • Higher all-in aluminium and realized alumina prices • Alunorte production at record levels • Seasonally lower power production and prices • World outside China primary aluminium demand continues to exceed production (4)
Slide 5: Demand to exceed production in 2014
Demand to exceed production in 2014 World outside China World outside China (quarterly annualized) Production less demand, (quarterly annualized)* 1 000 mt 1 000 mt 30 000 4 000 3 000 25 000 2 000 1 000 20 000 0 15 000 (1 000) Jan-08 Dec-08 Nov-09 Oct-10 Sep-11 Aug-12 Jul-13 Jun-14 Dec-08 Nov-09 Oct
Slide 6: Standard ingot premiums remain at record levels
Standard ingot premiums remain at record levels Regional standard ingot premiums • European and Japanese standard USD per mt 500 ingot premium continued to rise through Q2 2014 450 400 • US, EU (duty-paid) and Japanese 350 premiums above 400 USD/mt 300 250 • Value-added premiums also at record- high
Slide 7: Tighter physical markets driving all-in aluminium price
Tighter physical markets driving all-in aluminium price USD per mt • 3-month LME price ranged between 2 900 1 750 and 1 900 USD/mt during Q2 2 700 − Traded at 16-month high in July 2 500 2 300 • LME increase partly offset by strengthening NOK 2 100 1 900 • Realized price for Q2 1 762 USD/mt 1 700 1
Slide 8: Reduction in reported inventories world ex-China
Reduction in reported inventories world ex-China World outside China reported primary aluminium inventories 1 000 mt Days 8 000 120 7 000 100 6 000 80 5 000 4 000 60 3 000 40 2 000 20 1 000 0 0 Q1 00 Q1 01 Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 IAI Other LME Wo
Slide 9: Declining alumina prices
Declining alumina prices Platts alumina index (PAX) USD per mt Percent 450 20% • Average price 316 USD/mt, down 19% 12 USD/mt from Q1 400 18% • Alumina as % of LME decreased due 350 17% to rising LME price, lowest level since January 2013 16% 300 15% 14% 250 PAX % of LME 13% 200 12% Aug May Mar Dec
Slide 10: Indonesia bauxite ban remains in place
Indonesia bauxite ban remains in place Average Chinese import price USD per mt 65 • Uncertainty around possibility to obtain export licenses for those with plans to 60 build Indonesia alumina capacity 55 • Indonesian election in progress 50 • Increased price for bauxite imports to China 45 40 35 Jan
Slide 11: China bauxite imports continue to decline
China bauxite imports continue to decline Annualized aluminium equivalents*, million mt YTD 2011 2012 2013 2014** • Bauxite and alumina 25 − Significant drop in bauxite imports from January to China import 20 May as Indonesia export ban is taking effect 15 − Alumina imports increasing YTD compared t
Slide 12: Record levels of alumina production
Record levels of alumina production ICMS negatively affects implied alumina cost • Alumina production at record level Implied alumina cost and margin, USD/mt 1) 47527 • Bauxite production increasing 425 267 12 28 • “From B to A” improvement program 260 258 progressing according to plan − Target NOK
Slide 13: Primary Metal operational improvements continue
Primary Metal operational improvements continue Implied primary cost and margin, USD/mt 1) • Primary cost continues downward trend 475 325 − Improvement efforts with bottom-line effect 375 425 − Favorable exchange rate development 1 825 350 − Increasing premiums 1 600 1 400 • USD 180 JV program on t
Slide 14: Qatalum confirms first-decile cost position
Qatalum confirms first-decile cost position Implied Qatalum primary cost and margin, USD/mt 1) 475 650 425 1 500 800 750 1 175 1 000 H1 2012 H1 2013 H1 2014 2 161 1 986 1 755 LME2) Implied EBITDA cost per mt EBITDA margin per mt 1) Realized aluminium price minus EBITDA margin per mt primary aluminiu
Slide 15: Hydro to take over Søral aluminium plant
Hydro to take over Søral aluminium plant • To take over RTAs 50% share • Short-term cost relief • Closing expected second half 2014, pending regulatory approval Sør-Norge Aluminium (Søral) • Annual capacity of 180 kmt • Currently producing 90 kmt • 100% value added products • Located on the west coa
Slide 16: Enova supports Hydro's technology pilot
Enova supports Hydro’s technology pilot • NOK 1.5 billion contribution − Pending ESA approval • Potentially world’s most energy-efficient production line for aluminium − Target of 12.3 KWh/kg − Reduced carbon emissions • Other conditions necessary for building − Strengthened regional grid − Competit
Slide 17: Norwegian power sourcing until 2030
Norwegian power sourcing until 2030 • Competitive power sourcing key to Nordic system forward prices, EUR/MWh sustaining operations for Norwegian 70 aluminium portfolio 60 • Statkraft contract expires 2020 50 − 6.4 TWh 40 30 • Four new power contracts signed − Total 2.7 TWh 20 − Agder Energi, Lyse E
Slide 18: Advanced Hydro casting technology targeting growing automotive market
Advanced Hydro casting technology targeting growing automotive market • Investment in high-tech casting tables − Adjustable Flexible Moulds (AFM) − In-house technology − Årdal and Høyanger • Strengthens Hydro’s position as supplier of advanced sheet ingot • Positive customer feedback − Surface quali
Slide 19: The automotive industry embraces aluminium
The automotive industry embraces aluminium • Regulations driving light weighting of cars − Corporate average fuel economy (CAFE) − EU 2020 vehicle targets • Aluminium is the clear choice − Ductile material with high specific energy absorption − Especially competitive for body in white, due to stiffn
Slide 20: Stable shipments in Rolled Products
Stable shipments in Rolled Products Rolled Products sales by segment Q2 2014 vs. Q1 2014 Q2 2014 vs. Q2 2013 Packaging & Litho, Auto & Heat General engineering Total Rolled Packaging & Litho, Auto & Heat General engineering Total Rolled Building exchanger Products Building exchanger Products 11% 8%
Slide 21: Seasonally stronger demand for extruded products
Seasonally stronger demand for extruded products • Seasonal demand rises from Q1 − Increases in North America and Europe • Increased demand compared to same period last year • Global demand for precision tubing continues − Strong automotive market − Substitution within automotive and residential seg
Slide 22: Higher reservoir levels, lower prices
Higher reservoir levels, lower prices Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2)* NOK/MWh Percent 700 100 90 600 80 500 70 400 60 50 300 40 200 30 2013 2013 20 100 2014 2014 10 10 year average 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 1
Slide 23: High-level quarterly result development
High-level quarterly result development NOK billion 0.1 (0.3) 0.1 0.8 (0.2) 0.5 0.5 Underlying EBIT Q2 Underlying EBIT Q1 Price and Margin Sapa Energy volume and Other Underlying EBIT Q2 2013 2014 price 2014 Figures for 2013 throughout the presentation have been adjusted reflecting IFRS 11 (23)
Slide 24: Key financials
Key financials NOK million Q2 2014 Q1 2014 Q2 2013 First Half 2014 First Half 2013 Revenue 18 272 18 282 16 052 36 553 32 161 Underlying EBIT 544 772 520 1 316 1 596 Items excluded from underlying EBIT 75 50 (144) 126 (516) Reported EBIT 620 822 376 1 442 1 081 Financial income (expense) (199) 92 (1
Slide 25: Items excluded from underlying EBIT
Items excluded from underlying EBIT NOK million Q2 2014 Q1 2014 Q2 2013 First Half 2014 First Half 2013 Underlying EBIT 544 772 520 1 316 1 596 Unrealized effects on power and raw material contracts (40) 175 155 135 (114) Unrealized derivative effects on LME related contracts 136 (5) (129) 131 (159)
Slide 26: Bauxite & Alumina
Bauxite & Alumina Q2 Q1 Q2 Key figures 2014 2014 2013 Alumina production, kmt 1 526 1 428 1 248 Total alumina sales, kmt 2 071 1 906 1 696 Realized alumina price, USD/mt 276 269 275 Implied alumina cost, USD/mt 263 258 254 Bauxite production, kmt 2 370 2 242 1 765 Underlying EBITDA, NOK million 162
Slide 27: Primary Metal
Primary Metal Q2 Q1 Q2 Key figures 2014 2014 2013 Primary aluminium production, kmt 488 484 483 Total sales, kmt 559 593 531 Realized LME price, USD/mt 1 762 1 749 1 926 Realized LME price, NOK/mt 10 660 10 702 11 217 Implied primary cost USD/mt 1 375 1 400 1 575 Underlying EBITDA, NOK million 852 7
Slide 28: Higher premiums drive Qatalum earnings
Higher premiums drive Qatalum earnings Key figures – Qatalum (50%) Q2 2014 Q1 2014 Q2 2013 • Underlying net income increases by NOK 37 million from Q1 2014 Revenue, NOK million 1 095 1 087 1 080 Underlying EBITDA, NOK million 370 342 338 • Higher realized premiums partially offset by lower volumes U
Slide 29: Metal Markets
Metal Markets Q2 Q1 Q2 Key figures 2014 2014 2013 Remelt production, kmt 141 139 132 Metal products sales, kmt* 700 720 678 Underlying EBITDA, NOK million 120 157 165 Underlying EBIT excl currency and inventory 122 161 109 valuation effects, NOK million Underlying EBIT, NOK million 100 141 147 Under
Slide 30: Rolled Products
Rolled Products Q2 Q1 Q2 Key figures 2014 2014 2013 External sales volumes, kmt 245 243 245 Underlying EBITDA, NOK million 350 351 346 Underlying EBIT, NOK million 177 181 183 Underlying EBIT NOK million 615 358 Q2 results • Stable shipments • Lower margins due to rising premiums 183 181 181 177 152
Slide 31: Energy
Energy Q2 Q1 Q2 Key figures 2014 2014 2013 Power production, GWh 2 248 2 964 2 090 Net spot sales, GWh 1 028 1 581 829 Southwest Norway spot price (NO2), 168 249 296 NOK/MWh Underlying EBITDA, NOK million 209 474 302 Underlying EBIT, NOK million 169 435 268 Underlying EBIT Q2 results NOK million • R
Slide 32: Sapa joint venture
Sapa joint venture Key figures – Sapa (50%) Q2 2014 Q1 2014 • Seasonally stronger quarter Revenue, NOK million 5 772 5 673 • Underlying net income increases by NOK 96 million from Q1 Underlying EBITDA, NOK million 321 220 Underlying EBIT, NOK million 175 78 • Restructuring agenda progressing accordi
Slide 33: Other and Eliminations
Other and Eliminations Q2 Q1 Q2 Other and Eliminations 2014 2014 2013 Sapa JV 131 35 - Other (176) (127) (110) Eliminations (8) 84 40 Other and Eliminations (52) (8) (70) (33)
Slide 34: Net cash/(debt) development Q2 2014
Net cash/(debt) development Q2 2014 NOK billion Net cash flow from operations NOK (1.0) billion 1.7 (0.4) (0.2) (0.7) (0.6) (1.6) (1.9) Net debt Q1 2014 Underlying EBITDA Operating Capital Other adjustments Investments Dividends Net debt Q2 2014 (34)
Slide 35: Adjusted net debt increased to NOK 13.6 billion
Adjusted net debt increased to NOK 13.6 billion NOK billion Jun 30. 2014 Mar 31, 2014 Cash and cash equivalents 6.6 6.5 Short-term investments 1.8 3.1 Short-term debt (6.1) (6.3) Long-term debt (4.1) (3.9) Net cash/(debt) (1.9) (0.6) Net pension liability at fair value, net of (6.3) (5.2) expected t
Slide 36: Outlook priorities
• Stabilize bauxite and alumina production • Deliver on improvement programs • Harvest potential in improved market (36)
Slide 37: Market
(37) QQ) HYDRO
Slide 38: Aluminium is part of the solution
Aluminium is part of the solution Demand for semis Share of semis consumption Million mt 2013– 70 million mt Global trends 120 4-6% Consumer durables annual growth 5% 100 Electrical 13% Packaging 8% 55 80 Foil stock 8% Machinery 44 & equipment 10% Other 5% 60 30 40 Transport 25% Construction 25% Cap
Slide 39: Global FRP consumption growth of 6%, driven by transport
Global FRP consumption growth of 6%, driven by transport Global - CAGR 2013-2017 10% 13% Transport 10% 11% Electrical 7% 4% Construction 6% 52% 9% Total 6% Machinery & Equipment 5% Transport Consumer durables/others 5% Construction Electrical Packaging 4% Machinery & Equipment Packaging Consumer dur
Slide 40: Aluminium is the metal of the future
Aluminium is the metal of the future • Lightweight • Corrosion resistant • Excellent conductivity − 1/3 density of steel − Oxide layer − Thermal – electrical • Recyclability • Formability • Alloying technology − 5% of original energy − Extrusion, rolling, casting − Gives wide range of physical consu
Slide 41: Aluminium – a perfect fit for next-generation automotive
Aluminium – a perfect fit for next-generation automotive Aluminium vs. high-strength steel in automotive applications Better Hang-on parts • Aluminium has higher specific energy absorption compared to steel Safer • Maximum performance with lowest possible mass within stiffness, crash performance and
Slide 42: Increased bauxite imports into China
Increased bauxite imports into China Currently affected by Indonesia export ban Annualized aluminium equivalents*, million mt 2006 2007 2008 2009 2010 2011 2012 2013 2014* 20 to China Import 15 10 5 from China 0 Export ( 5) Bauxite Alumina Scrap Primary aluminium Fabricated Semis Total aluminium imp
Slide 43: Large and concentrated bauxite resources
Large and concentrated bauxite resources with many challenges to overcome for future developments Billion mt Guinea 41.0 China 4.1 2.9 India Jamaica 6.2 3.0 1.1 0.5 1.0 Venezuela Vietnam 1.8 0.3 4.7 Indonesia 0.5 5.0 2.0 Brazil 8.7 Australia 2.5 9.5 5.6 Atlantic Pacific Big-league (Top- 3) Total bau
Slide 44: Alumina market is consolidating
Alumina market is consolidating Net long equity alumina position, million tonnes Alcoa 4.3 Alcoa/AWAC 9.2 Vale 3.0 Rio Tinto Alcan* 2.8 Glencore 2.4 BHP Billiton 2.7 BHP Billiton 1.9 Hydro 2.0 Kaiser 1.0 Hindalco 0.2 Alcan 0.8 Glencore/Century 0.0 Sual 0.7 Vedanta (1.1) Rio Tinto 0.5 UC Rusal (1.2)
Slide 45: Commodity prices drive industry costs
Commodity prices drive industry costs Fuel oil A1 (USD/mt) Steam coal (USD/mt) Petroleum coke FOB USG (USD/mt) 750 180 600 600 150 500 120 400 450 90 300 300 60 200 150 30 100 0 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 201
Slide 46: Business overview
Business overview (46)
Slide 47: Hydro - Group
Hydro - Group (47)
Slide 48: Hydro: a resource rich global aluminium company
Hydro: a resource rich global aluminium company • Based in Norway, involved Hydro underlying EBIT quarterly, NOK million in activities in more than 50 (2 555) 3 551 5 982 1 297 2 725 1 316 countries 2 200 • 13 000 employees 1 700 • Operating revenues 1 200 − 2012: NOK 64 billion − 2013: NOK 65 billi
Slide 49: Strong positions across aluminium value chain
Strong positions across aluminium value chain Raw materials Primary aluminium production, Aluminium in products processing and energy marketing and recycling Bauxite Rolled Sapa JV (50%) Energy Primary Metal Metal Markets & Alumina Products • Bauxite capacity • Long-term power supply • 2.4 million t
Slide 50: Hydro - a first tier aluminium company
Hydro - a first tier aluminium company Equity production in 2013 in aluminium equivalents excl. China, thousand mt 9 000 Alumina Aluminium 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 Alcoa/AWAC Rio Tinto Alcan* UC Rusal BHP Billiton Norsk Hydro Glencore/Century Hindalco Vedanta Emirates Global
Slide 51: Raw material is key to our aluminium future
Raw material is key to our aluminium future Aluminium equivalent consolidated capacity, million tonnes End-2010 End-2013 Post-CAP 4.3 • Long position in bauxite and alumina creates 3.4 flexibility 3.3 • Strategically attractive 2.3 2.4 2.4 assets 1.9 • New business 1.4 opportunities 0.5 • Resource c
Slide 52: Hydro's path towards global leadership
Hydro’s path towards global leadership Curtailing 26% of USD 300 Climb From B to A JV-program primary metal capacity program 2009 2010 2011 2012 2013 Starting up Acquiring bauxite Establishing Qatalum and alumina assets Sapa JV (52)
Slide 53: Strategy for further value creation
Strategy for further value creation Bauxite & Alumina Primary Metal Energy Mid- and downstream • Improvement efforts and • Reposition • Increase value of energy • Adjust capacity and cost cost reduction • Keep solid cash flow in business base to market • Commercialize current assets • Develop curren
Slide 54: Hydro positions
Attractive Improvement Hydro positions throughout the culture and technological Financial strength value chain leadership (54)
Slide 55: Safe and responsible operations is a top priority
Safe and responsible operations is a top priority TRI Rate 10.3 7.0 6.0 5.4 4.0 4.1 3.9 3.7 3.8 3.4 3.4 3.2 2.9 2002 2004 2006 2008 2010 2012 YTD 2014 (55)
Slide 56: Hydro aims to be climate neutral
Hydro aims to be climate neutral Emissions User-phase benefits Recycling (56)
Slide 57: Hydro's value proposition
Hydro’s value proposition • Improve relative industry position • Capitalize on raw material positions • Maintain financial strength and flexibility • Ensure competitive shareholder return (57)
Slide 58: Bauxite & Alumina
Bauxite & Alumina (58)
Slide 59: High-quality asset portfolio
High-quality asset portfolio MRN Paragominas Alunorte alumina CAP alumina bauxite mine bauxite mine refinery refinery project • 5% ownership • Full financial exposure, increase • 92% ownership • 81% ownership • Volume off-take agreement for ownership to 100% by 2016 • World’s largest alumina refiner
Slide 60: Strengthening the competitiveness of Bauxite & Alumina
Strengthening the competitiveness of Bauxite & Alumina From B to A Alunorte • Increase productivity and rightsize organization • Stabilize performance at nameplate capacity • Improve logistics efficiency Paragominas • Increase productivity and rightsize organization • New methods to support producti
Slide 61: Paragominas – One of the world's largest bauxite mines
Paragominas – One of the world’s largest bauxite mines • 2013 production: 7.6 million mt • Target to deliver production increases and stabilize • Possible expansion: up to 15 million mt • Current reserve life: 30 years − ~300 million mt − Long-life resource (61)
Slide 62: Bauxite operational mining costs in Paragominas
Bauxite operational mining costs in Paragominas • Energy cost - Power and fuel Paragominas bauxite mining costs 2013 • Labor cost 10% − Influenced by Brazilian wage level 15% − Productivity improvements 11% • Maintenance and consumables − Influenced by Brazilian inflation 23% • Large fixed cost base
Slide 63: Alunorte – World's largest alumina refinery
Alunorte – World’s largest alumina refinery • 2013 production: 5.4 million mt • Targeting stable production above 6 million tonnes • World-class conversion cost position • Modern technology • Bauxite supplied from Paragominas and MRN (63)
Slide 64: Favorable integrated alumina cash cost position
Favorable integrated alumina cash cost position • Implied alumina cash cost position 2013 Implied alumina cash cost position 2013 − USD 260 per mt − Alunorte, Paragominas and sourced alumina 4% • Bauxite − Internal bauxite from Paragominas at cost, sourced 17% bauxite from MRN 33% • Energy − First-q
Slide 65: External alumina sourcing
External alumina sourcing • 2.0 million mt of external alumina sourcing in 2013 • Long term off-take agreement with Rio Tinto − 900 000 mt annually from Yarwun • Short- and medium term contracts − To balance and optimize position geographically − Various pricing mechanisms − Older contracts linked t
Slide 66: Alumina pricing shifting from LME-link to market fundamentals
Alumina pricing shifting from LME-link to market fundamentals 100% • Future pricing should reflect fundamentals of bauxite and alumina value chain • New norm for the industry − Index pricing and short to medium-term contracts − Getting wider acceptance in the market • Hydro’s commercial strategy − M
Slide 67: Primary Metal
Primary Metal (67) W) HYDRO
Slide 68: World-wide production network
World-wide production network Primary aluminium annual production capacity 47% Norway, 925 000 tonnes • Sunndal (100%) : 390 000 tonnes • Årdal (100%): 190 000 tonnes 6% • Karmøy (100%): 190 000 tonnes Canada, 120 000 tonnes • Høyanger (100%): 65 000 tonnes • Alouette (20%): 120 000 tonnes • Søral (
Slide 69: Delivering on ambitious USD 300 improvement program
Delivering on ambitious USD 300 improvement program Total annual improvement effect of NOK ~1.5 billion Improvement categories Improvements in USD per mt* Operational improvements 300 • Improved current efficiency • Reduced power consumption • Reduced anode consumption 250 Fixed cost reductions and
Slide 70: Primary Metal joint ventures improvement program
Primary Metal joint ventures improvement program USD 180 per mt improvements by end-2016, corresponding to NOK 1.2billion Improvement categories Improvements in USD per mt* 180 160 Fixed cost reductions and lean operations 140 120 100 USD 180 per mt Operational improvements 80 • Improved current eff
Slide 71: Improvement drive yields results in primary production
Improvement drive yields results in primary production Underlying EBITDA per mt in USD for respective primary aluminium divisions 1H 2011 2H 2011 1H 2012 2H 2012 1H 2013 2H 2013 700 700 700 700 700 700 500 500 500 500 500 500 300 300 300 300 300 300 100 100 100 100 100 100 -100 -100 -100 -100 -100 -
Slide 72: Develop technology to fulfill ambitions
Develop technology to fulfill ambitions HAL 300 HAL4e R&D portfolio • Operating for several years in • Benchmark technology • HAL4e optimization – to be Sunndal – process parameters and ready for next project environment • Ramping up in Qatar • HAL Ultra – future vision • 30 months of operations in
Slide 73: Metal Markets
Metal Markets (73)
Slide 74: Preferred partner in casthouse products
Preferred partner in casthouse products • Capitalizing on value-added casthouse products portfolio Extrusion ingot • Extensive multi-sourcing system 1.3 million mt including fully- and part-owned primary casthouses and stand- alone remelters Foundry alloys 0.4 million mt • Flexible sourcing system e
Slide 75: Metal Markets earnings drivers
Metal Markets earnings drivers • Remelters Underlying EBIT excluding currency effects and − Revenue impact – volume and product ingot stock valuation effect, NOK million premiums above LME 250 − Cost impact − Scrap and standard ingot premiums 200 above LME − Raw material mix 150 − Freight cost – pro
Slide 76: Rolled Products
Rolled Products (76) Q) HYDRO
Slide 77: No. 1 flat rolled products producer in Europe
No. 1 flat rolled products producer in Europe External sales in tonnages 2013 • World leader in high-end products foil and litho Foil 12% − Alunorf (JV 50%) – world’s largest rolling mill Litho 19% − Grevenbroich plant – world’s largest finishing mill Can • Strategy of high-grading product portfolio
Slide 78: Attractive market position and customers
Attractive market position and customers More than 50% of products with global reach Our products Our customers Our position Litho World market leader Global reach Foil Can Leading position in Europe Auto Regional Leading position in Europe reach GE/ Building (78)
Slide 79: Rolled Products earnings drivers
Rolled Products earnings drivers Underlying EBIT per tonne, NOK 1 400 • Contract structure 1 200 − Margin business based on conversion price − LME element passed on to customers 1 000 − Range from spot contracts to multi-year 800 contracts 600 • High share of fixed costs - volume 400 sensitive 200 •
Slide 80: Sapa joint venture
Sapa joint venture HYDRO
Slide 81: Global leader in extruded products established
Global leader in extruded products established • Sapa, 50/50 joint venture, between Hydro and Orkla • Positioned for restructuring and value creation • Established September 1, 2013 • Hydro has agreed to supply the new company with extrusion billets, ~400 000 mt per year at market prices (81)
Slide 82: Sapa joint venture - facts
Sapa joint venture - facts North American and European leader with global presence External sales in tonnages (2013)* Precision Tubing 7% Building • No. 1 position in North America System 6% Extrusions and Europe Asia 2% Extrusions Europe 46 % • Strong foothold in emerging markets • External sales o
Slide 83: Energy
Energy (83)
Slide 84: Power production increased to 10 TWh
Power production increased to 10 TWh Power production capacity (TWh), per region and reversion year Telemark • Power producing assets and ongoing projects Normal 3.1 0.5 − Maintain cost control in operations and projects production 2044- − Holsbru and Vasstøl power plants into operation in No revers
Slide 85: Hydro's energy map
Hydro’s energy map Energy consumption in alumina refineries, smelters and rolling mills Europe Power 16.7 TWh North America Natural gas 3.3 TWh Power 1.7 TWh Middle East Power 4.6 TWh South America Power 4.6 TWh Australia/Asia Coal 5.3 TWh Power 1.0 TWh Fuel oil 7.3 TWh Based on Hydro’s equity produ
Slide 86: Reversion regime secures Hydro's values
Reversion regime secures Hydro’s values • Pursue value enhancement strategy − Develop and enhance value of power assets − Power assets remain an integrated part of aluminium production in Norway − Power and smelter portfolio will be reviewed concurrently − Participate in restructuring of power secto
Slide 87: Energy earnings drivers
Energy earnings drivers Underlying EBIT* and spot price • Production and market prices strongly NOK million NOK/MWh 2000 500 linked to hydrological conditions 1500 400 • Relatively stable annual EBIT contribution 300 1000 − Large quarterly variations due to volatile spot 200 sales and spot prices 50
Slide 88: Additional information
Additional information (88)
Slide 89: 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: 30% of net income over the cycle − Average ordinary pay-out ratio 2009-2013 is ~90%* − Share buybacks and extraord
Slide 90: 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 − BRL hedged for 2014 • Metal Markets, Rolled Products − Operation
Slide 91: Capital allocation mainly upstream
Capital allocation mainly upstream NOK billion Debt-financed investments Qatalum Investments Qatalum • Sustaining capex NOK ~3.5 billion 10.2 Growth capex annually Sustaining capex • Minor growth projects planned for 2014 • ~85% of sustaining capital to be 6.2 allocated upstream in 2014 4.6 1 ~4.3 •
Slide 92: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10%* Currency sensitivities +10%* NOK million EBIT NOK million EBIT Financial items Aluminium 2 500 USD 2 045 (1 125) Oil (180) BRL (840) 730 Pet coke (185) EUR (155) (1 120) • Annual sensitivities based on normal annual business volumes,
Slide 93: Items excluded from underlying results - 2014
Items excluded from underlying results - 2014 NOK million (+=loss/()=gain) Q1 2014 Q2 2014 Unrealized derivative effects on LME related contracts Bauxite & Alumina (4) (1) Total impact Bauxite & Alumina (4) (1) Unrealized derivative effects on LME related contracts Primary Metal (12) (38) Unrealized
Slide 94: Items excluded from underlying results - 2013
Items excluded from underlying results - 2013 NOK million (+=loss/()=gain) Q1 2013 Q2 2013 Q3 2013 Q4 2013 2013 Unrealized derivative effects on LME related contracts Bauxite & Alumina 13 (3) - 3 12 Legal settlements Bauxite & Alumina - - - 109 109 Total impact Bauxite & Alumina 13 (3) - 112 121 Unr
Slide 95: Operating segment information
Operating segment information Underlying EBIT NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Year 2012 Year 2013 Bauxite & Alumina (144) (188) (386) (73) (63) (244) (370) (379) (288) (269) (791) (1 057) Primary Metal 36 245 (4) 58 364 237 337 484 312 420
Slide 96: Operating segment information
Operating segment information EBIT NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Year 2012 Year 2013 Bauxite & Alumina (136) (199) (387) (62) (76) (241) (370) (491) (284) (269) (783) (1 178) Primary Metal (91) (1 227) (48) 112 19 122 338 377 303 434 (1 2
Slide 97: Operating segment information
Operating segment information Total revenue NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Year 2012 Year 2013 Bauxite & Alumina 3 195 3 573 3 032 3 465 3 304 3 147 3 354 3 546 3 511 3 828 13 265 13 350 Primary Metal 7 458 7 578 6 169 5 485 5 945 5 896 5
Slide 98: Operating segment information
Operating segment information Internal revenue NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Year 2012 Year 2013 Bauxite & Alumina 1 241 1 356 1 111 1 098 1 322 1 253 1 277 1 375 1 304 1 424 4 806 5 226 Primary Metal 6 331 6 341 5 097 4 442 5 132 4 856 4
Slide 99: Operating segment information
Operating segment information Depreciation, amortization and impairment NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Year 2012 Year 2013 Bauxite & Alumina 475 439 428 409 429 448 417 424 410 431 1 750 1 718 Primary Metal 542 1 645 482 356 470 472 461 45
Slide 100: Income statements
Income statements NOK million Q2 2014 Q1 2014 Q2 2013 First half 2014 First half 2013 Year 2013 Revenue 18 272 18 282 16 052 36 553 32 161 64 877 Share of the profit (loss) in equity accounted investments 122 40 (70) 162 (36) (240) Other income, net 147 132 213 279 450 801 Total revenue and income 1
Slide 101: Balance sheets
Balance sheets NOK million Jun 30 2014 Mar 31 2014 Dec 31 2013 Sep 30 2013 Jun 30 2013 Cash and cash equivalents 6 617 6 476 8 412 8 397 7 399 Short-term investments 1 765 3 081 2 480 1 433 1 273 Accounts receivable 10 835 11 116 9 539 10 769 9 811 Inventories 10 213 9 599 10 070 9 758 9 669 Other c
Slide 102: Operational data
Operational data Year Year Bauxite & Alumina Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 2012 2013 Alumina production (kmt) 1 464 1 491 1 441 1 397 1 361 1 248 1 316 1 452 1 428 1 526 5 792 5 377 Sourced alumina (kmt) 324 332 399 335 476 427 711 395 550 431 1 390
Slide 103: Operational data
Operational data Year Year Metal Markets Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 2012 2013 Remelt production (1 000 mt) 152 142 136 119 135 132 127 123 139 141 548 517 Third-party Metal Products sales (1 000 mt) 76 82 81 85 84 78 76 78 84 79 323 317 Metal Prod
Slide 104: 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 Sales volume (1000 mt) 343 311 346 360 346 314 359 368 Revenues 10 414 9 654 10 367 10 974 10 797 10 132 11 346 11 544 Underl
Slide 105: Investor Relations in Hydro
Investor Relations in Hydro Pål Kildemo Head of Investor Relations Next event t: +47 970 96 711 e: pal.kildemo@hydro.com Third Quarter Results October 22, 2014 For more information see www.hydro.com/ir (105)