Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (December 2004)
35 slides from Norsk Hydro Asa's investor day presentation, Dec 15, 2004
Slide 1: Capital Markets Day 2004 – Financial perspective
Capital Markets Day 2004 Financial perspective John Ottestad, Executive Vice President and CFO 2004-12-15
Slide 2: Financial perspective
Financial perspective z Strong operational performance z Strong financial position z Robust and profitable investment portfolio z Competitive shareholder returns 52358_2 12 2004 • 2 Hydro Media
Slide 3: Positive development in earnings
Positive development in earnings EBITDA – NOK billion Actual Actual Jan-Sep 38.6 37.9 33.4 31.7 2001 2002 2003 2004 Jan-Sep Adjusted EBITDA from continuing operations 52358_2 12 2004 • 3 Hydro Media
Slide 4: Improvement driven by internal factors
Improvement driven by internal factors EBITDA – NOK billion z Normalization assumptions - Oil price $25 Actual Normalized Actual Jan-Sep - Aluminium price $1500 38.6 37.9 - USD/NOK 7 33.4 - EUR/NOK 8 31.7 33.8 29.3 z Restructuring charges and gain/loss on divestments 23.4 are eliminated from normali
Slide 5: Delivering volume growth
Delivering volume growth Petroleum production Primary aluminium production 1000 boe/day 1000 tonnes 1 600 570 530 1 473 480 1 253 413 421 339 272 736 746 762 785 1998 1999 2000 2001 2002 2003 2004E 1998 1999 2000 2001 2002 2003 2004E Slovalco consolidated from 2004 52358_2 12 2004 • 5 Hydro Media
Slide 6: Delivering cost reductions
Delivering cost reductions Petroleum production cost Aluminium improvements NOK/boe NOK million Aluminium 2 800 24.1 Magnesium 2 350 22.6 20.7 20.0 1 600 1 000 2001 2002 2003 2004 4Q02 2Q03 4Q03 2004E Jan-Sep 52358_2 12 2004 • 6 Hydro Media
Slide 7: Delivering profitable projects
Delivering profitable projects z Attractive project portfolio Capital expenditure - Meeting high return requirements NOK billion 18-19 z Excellent project execution 15.5 15.9 15.8 - A key value driver 13.8 13.9 - Basis for future profitability - Important for access to new opportunities z Strong tra
Slide 8: Improving capital efficiency
Improving capital efficiency Return On Average Capital Employed – business areas Oil & Energy Aluminium Actual Normalized Actual Jan-Sep Actual Normalized Actual Jan-Sep 16.2% 14.5% 13.1% 11.6% 11.0% 8.9% 8.1% 5.9% 4.7% 2.7% 4.1% 0.9% 2.8% 2001 2002 2003 2004 2001 2002 2003 2004 Jan-Sep Jan-Sep 5235
Slide 9: Improving capital efficiency
Improving capital efficiency Return On Average Capital Employed – group level Actual Normalized Actual Jan-Sep 9.5% 8.4% 7.5% 7.2% 6.3% 6.0% 4.6% 2001 2002 2003 2004 Jan-Sep Continuing operations 52358_2 12 2004 • 9 Hydro Media
Slide 10: Targeting improved returns
Targeting improved returns Normalized ROACE Normalized Target range (normalized) 7.5-8.5% 6.3% 6.0% 4.6% z Volumes z Fixed costs z Margins 2001 2002 2003 2006 Continuing operations 52358_2 12 2004 • 10 Hydro Media
Slide 11: Strong EUR and NOK a challenge
Strong EUR and NOK a challenge Weakened competitiveness of European operations z Relative cost position impaired EUR/USD since 1999 for European smelters 1.4 - Main trigger for write-down of German smelters 1.3 z Negative margin impact for 1.2 European downstream operations 1.1 z Not subject to norm
Slide 12: Indicative price and currency sensitivities 2005
1) Indicative price and currency sensitivities 2005 Based on 2004 prices and currency NOK million Before tax After tax Change Oil price per barrel 1,150 310 1 USD Aluminium price per tonne 800 560 100 USD USD Oil & Energy 7,250 1,960 1 NOK USD Aluminium 2,500 1,750 1 NOK USD before financial items 9
Slide 13: Financial perspective
Financial perspective z Strong operational performance z Strong financial position z Robust and profitable investment portfolio z Competitive shareholder returns 52358_2 12 2004 • 13 Hydro Media
Slide 14: Sources and uses of cash
Sources and uses of cash NOK billion 40 30 20 Dividends Buyback Debt (net) 10 Acquisitions Investments Disposals* 0 Operations Sources Uses Sources Uses Sources Uses 2002 2003 2004 Jan-Sep * Net cash from discontinued operations (Agri) included 52358_2 12 2004 • 14 Hydro Media
Slide 15: Strong financial position
Strong financial position Debt/equity ratio z Maintain current credit rating - S&P: A 0.67 - Moodys: A2 0.60 z Secure financial preparedness for potential strategic opportunities 0.44 0.38 z Strong balance sheet allows for 0.34 variance in earnings due to cyclicality Î Target debt/equity ratio 0.5 0
Slide 16: Financial perspective
Financial perspective z Strong operational performance z Strong financial position z Robust and profitable investment portfolio z Competitive shareholder returns 52358_2 12 2004 • 16 Hydro Media
Slide 17: Capital and exploration expenditure
Capital and exploration expenditure NOK billion Oil & Energy Exploration Aluminium Other 24 20 20 2004 plan 2004 estimate 2005 plan Continuing operations 52358_2 12 2004 • 17 Hydro Media
Slide 18: Oil & Energy growth from attractive projects
Oil & Energy growth from attractive projects z Generating above 10% IRR after tax at USD 16/bbl - Grane - Kvitebjørn - Kristin - Dalia z All Hydro-operated projects on time and cost z Ormen Lange – the next step 52358_2 12 2004 • 18 Hydro Media
Slide 19: Aluminium growth from attractive projects
Aluminium growth from attractive projects z Generating above 10% IRR after tax at USD 1400/tonne - Sunndal - Alouette - Alunorte z All projects on time and cost z Qatar – the next step 52358_2 12 2004 • 19 Hydro Media
Slide 20: Investment criteria
Investment criteria Capital discipline – basis for future profits z Strategic fit Oil price Hurdle Average z Hurdle rate 10% real IRR after tax USD-04/bbl Forward 45 Historical z Mid-cycle price assumptions 40 - Oil $25 per barrel - Aluminium $1500 per tonne 35 - USD/NOK 7 30 - Aligned with business
Slide 21: Investment criteria
Investment criteria Capital discipline – basis for future profits z Strategic fit Aluminium price Hurdle Average USD-04/tonne Forward z Hurdle rate 10% real IRR after tax 2 200 Historical z Mid-cycle price assumptions - Oil $25 per barrel 2 000 - Aluminium $1500 per tonne - USD/NOK 7 1 800 - Aligned
Slide 22: Investment criteria
Investment criteria Capital discipline – basis for future profits z Strategic fit USD/NOK Historical Average z Hurdle rate 10% real IRR after tax Hurdle 10 z Mid-cycle price assumptions - Oil $25 per barrel 9 - Aluminium $1500 per tonne - USD/NOK 7 8 - Aligned with business planning assumptions 7 z
Slide 23: Financial perspective
Financial perspective z Strong operational performance z Strong financial position z Robust and profitable investment portfolio z Competitive shareholder returns 52358_2 12 2004 • 23 Hydro Media
Slide 24: Dividend policy
Dividend policy z A steady development in line with the Dividend per share growth in the company’s results 11.0 10.5 NOK 10.0 9.5 8.0 7.5 7.5 7.0 1996 1997 1998 1999 2000 2001 2002 2003 52358_2 12 2004 • 24 Hydro Media
Slide 25: Dividend policy
Dividend policy z A steady development in line with the Payout ratio growth in the company’s results 1 year 5 years Target 30% z 30% payout ratio over time 58% 46% 33% 33% 31% 26% 27% 18% 1996 1997 1998 1999 2000 2001 2002 2003 52358_2 12 2004 • 25 Hydro Media
Slide 26: Dividend policy
Dividend policy z A steady development in line with the Buyback and dividend growth in the company’s results NOK million Dividend Buyback z 30% payout ratio over time 1684 z Buyback of shares – a supplement 1155 when high earnings 1599 555 - New authorization of 10 million shares 763 approved 1 Dece
Slide 27: Dividend policy
Dividend policy z A steady development in line with the growth in the company’s results z 30% payout ratio over time Dividend Buyback 5 years z Buyback of shares – a supplement when high earnings 43% - New authorization of 10 million shares approved 1 December 58% 46% 8% 26% 14% 33% 33% 6% 31% 27% 2
Slide 28: Competitive shareholder returns
Competitive shareholder returns New York Stock Exchange, USD TSR since December 31, 2003 TSR since December 31, 1999 Hydro Hydro Statoil Total BG BG BP ChevTex ChevTex ExxonMobil Total Alcan ExxonMobil Shell Shell RoyalDutch BP Alcan RoyalDutch Alcoa Alcoa -20% 0% 20% 40% 60% -50% 0% 50% 100% 150% S
Slide 29: Financial priorities
Financial priorities Continue delivering shareholder value z Relentless focus on performance z Profitable growth z Continued capital discipline z Competitive shareholder returns 52358_2 12 2004 • 29 Hydro Media
Slide 30: Additional information
Additional information 52358_2 12 2004 • 30 Hydro Media
Slide 31: Indicative price and currency sensitivities 2005
1) Indicative price and currency sensitivities 2005 Based on normalized prices and currency NOK million Before tax After tax Change Oil price per barrel 1,400 380 1 USD Aluminium price per tonne 2) 950 665 100 USD USD Oil & Energy 4,750 1,285 1 NOK USD Aluminium 2) 2,350 1,645 1 NOK USD before finan
Slide 32: Portfolio dramatically changed last 5 years
Portfolio dramatically changed last 5 years Development of Capital Employed 200 150 100 50 0 1998 Capex M&A Asset sales Yara Depreciation Other 2004 Q3 52358_2 12 2004 • 32 Hydro Media
Slide 33: Financial solidity – calculation
Financial solidity – calculation 31 31 31 31 31 30 Amounts in NOK million December December December December December September 1999 2000 2001 2002 2003 2004 [A] Cash and cash equivalents 7 435 21 766 27 148 5 965 15 249 30 246 [B] Other liquid assets 2 535 2 490 2 421 2 647 1 581 1 632 [C] Bank lo
Slide 34: Forward-looking statements/use of non-GAAP financial measures
Forward-looking statements/ use of non-GAAP financial measures In order to utilize the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, Hydro is providing the following cautionary statement: This presentation contains certain forward-looking statements
Slide 35: Hydro is an energy and aluminium supplier founded in 1905
Hydro is a Fortune 500 energy and aluminium supplier founded in 1905, with 36,000 employees in nearly 40 countries. We are a leading offshore producer of oil and gas, the world's third-largest integrated aluminium supplier and a pioneer in renewable energy and energy-efficient solutions. As we look