Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (December 2000)
34 slides from Norsk Hydro Asa's investor day presentation, Dec 14, 2000
Slide 1: Capital Markets Day: Light Metals
&DSLWDO0DUNHWV'D\ /LJKW0HWDOV Executive Vice President Eivind Reiten and President Aluminium Metal Products Jon-Harald Nilsen Norsk Hydro ASA December 14, 2000 20683_1 - 12.00* 1 - Hydro Media
Slide 2: What we said and what we have done
2 :KDWZHVDLGDQGZKDWZHKDYHGRQH Objectives announced Oct. 99 Actions taken Alunorte 25% stake & decision to Strengten alumina coverage expand Sunndal 5,4 Bn NOK expansion Exploit brownfield smelter expansions decision Casthouses UK, Spain, US and Leverage metal supplier concept Venezuela. 1 mill. mt m
Slide 3: Sunndal expansion an attractive proposition
3 6XQQGDOH[SDQVLRQDQDWWUDFWLYHSURSRVLWLRQ Internal rate of return exceeds Payment Profile 15 percent Annual Mill. NOK Accumulated Mill. NOK 234 kt expansion 2000 6000 manning productivity doubles Proprietary HAL 250 technology 1500 4500 capital and operating cost efficient unique environmental featu
Slide 4: Return on assets benchmark shows Hydro outperforming Alcan and trailing Alcoa
5HWXUQRQDVVHWVEHQFKPDUNVKRZV+\GUR 4 RXWSHUIRUPLQJ$OFDQDQGWUDLOLQJ$OFRD Percent Yearly Quarterly 25 20 Alcoa 15 Alcan 10 Reynolds Pechiney 5 NH Light Metals 0 (5) 87 89 91 93 95 97 99 2Q00 88 90 92 94 96 98 1Q00 3Q00 * Operating income in % of total assets Mg included in Hydro LM from 1999 Source: Co
Slide 5: Primary aluminium apparent consumption exceeding growth in industrial production
3ULPDU\DOXPLQLXPDSSDUHQWFRQVXPSWLRQ 5 H[FHHGLQJJURZWKLQLQGXVWULDOSURGXFWLRQ Western World Index 160 Al shipments indexed 100 in 1985 Industrial production indexed 100 in 1985 140 120 100 80 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000(f) 20683_1 - 12.00* 5 - Hydro Media
Slide 6: Russian primary Al production and Western World capacity utilisation
5XVVLDQSULPDU\DOSURGXFWLRQDQG 6 :HVWHUQ:RUOGFDSDFLW\XWLOLVDWLRQ Consumption Export Average annual operating rate % '000 t % 3500 100 3000 98 2500 96 2000 94 1500 92 1000 500 90 0 88 1989 1991 1993 1995 1997 1999 2001(f) 2003(f) 1990 1992 1994 1996 1998 2000(f) 2002(f) Source: WBMS, IPAI updated Oct.
Slide 7: Primary aluminium balance
7 3ULPDU\DOXPLQLXPEDODQFH Western World Mill. mt 28 Shipment Existing base case supply 26 24 22 Need for new capacity 20 18 1997 1999 2001 2003 2005 2007 2009 1998 2000 2002 2004 2006 2008 2010 Source: HAMP Market Analysis 20683_1 - 12.00* 7 - Hydro Media Dept.
Slide 8: Global aluminium metal flow
8 *OREDODOXPLQLXPPHWDOIORZ Surplus and deficit regions Export Scale = mill t Import Source: EAA//HAMP 20683_1 - 12.00* 8 - Hydro Media
Slide 9: Aluminium supply
9 $OXPLQLXPVXSSO\ Increased share of remelt Markets Customers Society Car Post-Consumed Scrap dismantling Clipping Bailing Frag- Frag- Landfill Sorting menting Delacq. Delacq. Cutting Briq. menting mining Building 21% Clean Process Scrap demolishing "Casthouse" 19% Casthouse Input 65% Other Material
Slide 10: Multi-Sourcing Concept
10 0XOWL6RXUFLQJ&RQFHSW Casthouses Equity Primary Plants Primary Equity * Liquid Metal Market Market Products Metal Primary * Standard Ingots Partners Plants * Scrap Remelt Plants 20683_1 - 12.00* 10 - Hydro Media
Slide 11: Partner Alliance Concept
11 3DUWQHU$OOLDQFH&RQFHSW Commercial Operational Research & Support Support Development Sales and Raw Materials Casthouse Electrolysis - Alumina Marketing - Carbon Technology Equipment 20683_1 - 12.00* 11 - Hydro Media
Slide 12: Increased business volume through limited asset investments
,QFUHDVHGEXVLQHVVYROXPH 12 WKURXJKOLPLWHGDVVHWLQYHVWPHQWV '000 mt 3200 Primary production Remelt 2800 Strategic alliances Commercial agreements 2400 2000 1600 1200 800 400 0 1992 1994 1996 1998 2000 2005 Planned 20683_1 - 12.00* 12 - Hydro Media
Slide 13: Hydro market shares aluminium products
13 +\GURPDUNHWVKDUHVDOXPLQLXPSURGXFWV % % 60 60 Europe US 50 50 40 36 40 30 30 27 30 22 20 20 11 10 10 5 7 0 0 0 1999 plan 2005 1999 plan 2003 Extrusion ingot Extrusion ingot Primary foundry alloy Primary foundry alloy 20683_1 - 12.00* 13 - Hydro Media
Slide 14: Building multisourcing network (Europe)
14 %XLOGLQJPXOWLVRXUFLQJQHWZRUN Europe 2000 900 Primary Remelt 100% Equity 40 50 100 Equity 100 45 share 40 Strategic alliance 60 (2001) Numbers decribe volume in 1000 t 20683_1 - 12.00* 14 - Hydro Media
Slide 15: Building multisourcing network (North America)
15 %XLOGLQJPXOWLVRXUFLQJQHWZRUN North-America capacity end 2000 100 90 Primary Remelt/ 85 casthouse 100% Equity 40 100 Equity ingot share Strategic alliance 40 Numbers decribe volume in 1000 t 20683_1 - 12.00* 15 - Hydro Media
Slide 16: Aluminium projects yielding attractive returns
16 $OXPLQLXPSURMHFWV\LHOGLQJDWWUDFWLYHUHWXUQV Typical Investment Net op. IRR real after tonnage pr. ton cash flow tax % kT/year USD/ton USD/ton Greenfield 250-500 3,800-4,500 8 -13 450-550 smelter Brownfield smelter 10-250 2,000-3,500 13 -18 400-500 expansion Remelt plant 40-110 350-450 15 -20 70 20
Slide 17: Hydro not like other integrated Al companies
17 +\GURQRWOLNHRWKHULQWHJUDWHGDOFRPSDQLHV Hydro Aluminium Other integrated Rolling Other 24% Extrusions 5% 20% Other 10% Extrusions Rolling 66% 75% Downstream volume distribution Hydro Aluminium 20683_1 - 12.00* 17 - Hydro Media Extrusion
Slide 18: Profiles are a common denominator
18 3URILOHVDUHDFRPPRQGHQRPLQDWRU Tubes Profiles Extrusion Structural applications Primary Aluminium Profile based Extr. ingot automotive parts Scrap Bending/ forming/ Recycling assembling back to extrusion ingot Research & Development - processes, applications & products 20683_1 - 12.00* 18 - Hydro
Slide 19: Cash Return On Gross Investments
19 &DVK5HWXUQ2Q*URVV,QYHVWPHQWV Gross investment CROGI Light Metals distribution 1999 Percent 38 Bn NOK 20 15 Other Light Metals Metal Products 10 32% 48% Extrusions 5 20% 0 1995 1996 1997 1998 1999 Metal Production Extrusions Other Light Metals 20683_1 - 12.00* 19 - Hydro Media
Slide 20: Automotive challenges & opportunities
20 $XWRPRWLYHFKDOOHQJHV RSSRUWXQLWLHV Al bumpers produced p.a. Automotive Structures - Mill. bumpers product leadership strategy 9 9 2004(e) strong order intake within Potential US 8 8 crash management 2004 Other 7 Mercedes/Renault 7 main product area & industry GM/Opel leadership 6 2000 Other 6 alu
Slide 21: Rolling challenges & opportunities
21 5ROOLQJFKDOOHQJHV RSSRUWXQLWLHV Hydro is a European low 1999 CRU Cost curve Building Sheet cost niche producer Europe/Middle East/Africa (DM/mt) 4400 building value added capabilities on present asset base 4200 4000 evolving as a profitable niche player 3800 3600 scrap based sourcing & technologi
Slide 22: Magnesium challenges & opportunities
22 0DJQHVLXPFKDOOHQJHV RSSRUWXQLWLHV Market Global demand for Mg die castings 1000 tons Chinese challenge - 1/3 of market captured with low cost material 110 100 Price deterioration increases 90 competitiveness of Mg 80 Explosive growth in automotive 19.6% per year* 70 60 Hydro's position 50 50% of
Slide 23: Magnesium challenges & opportunities (Meridian)
23 0DJQHVLXPFKDOOHQJHV RSSRUWXQLWLHV Meridian turnover Mg die castings Hydro's response to market mill. CAD challenge 600 500 secured long term contracts 400 casthouse in China - leverage global market position with low 300 cost metal 200 49% in Meridian Technologies Inc. 100 - the world's largest d
Slide 24: Light Metals going forward
24 /LJKW0HWDOVJRLQJIRUZDUG Continue to leverage our strengths roll out metal supplier & extrusion concepts develop existing and new partnerships capitalise on metallurgical & technological competencies exploit attractive brownfield opportunities Continued top & bottom line growth increase differenti
Slide 25: Backup foils: Light Metals
25 %DFNXSIRLOV Light Metals 20683_1 - 12.00* 25 - Hydro Media
Slide 26: Aspirations for Hydro Light Metals
26 $VSLUDWLRQVIRU+\GUR/LJKW0HWDOV A profitable position among the world's top three integrated light metals companies 20683_1 - 12.00* 26 - Hydro Media
Slide 27: Strongest demand growth expected in Asia and Latin America
6WURQJHVWGHPDQGJURZWKH[SHFWHG 27 LQ$VLD H[FO-DSDQ DQG/DWLQ$PHULFD Average growth rates 2000-2010 Per Capita Al Consumption 40 Africa 2,8% Australia 2,8% 30 Europe N. America 2,8% 2,6% 20 Rest of Asia Japan 5% 10 1,5% 0 1990 1992 1994 1996 Latin America 4,4% 1991 1993 1995 1997 USA Brazil Germany Can
Slide 28: Hydro with strong focus mid and downstream
28 +\GURZLWKVWURQJIRFXVPLGDQGGRZQVWUHDP - level of integration along the value chain Alumina Primary Casthouse Extrusion Fabricated / Bauxite aluminium / Remelt / Rolling products Alumina / Bauxite Primary aluminium Sales Casthouse product Extrusion / Rolling Fabricated products 0% 50% 100% 150% 200
Slide 29: Aluminium producers production capacities
29 $OXPLQLXPSURGXFHUVSURGXFWLRQFDSDFLWLHV 1000 ton 5000 Primary 4500 Rolling Extrusion 4000 3500 3000 2500 2000 1500 1000 500 0 Alcoa/Reyn Billiton Hydro *) VAW Alcan/algr Pechiney Comalco Kaiser *) Hydro inclusive SU4 20683_1 - 12.00* 29 - Hydro Media
Slide 30: Full operating costs world smelters
30 )XOORSHUDWLQJFRVWVZRUOGVPHOWHUV CRU cost curve Total capacity 1999: 23.4 million tons USD/t 2200 2000 1800 Hydro 1999: (51%) 1600 1400 Best third 1999: 1,102 usd/t 1200 World average 1999: 1000 1,202 usd/t 800 0 5 10 15 20 25 Million tons 20683_1 - 12.00* 30 - Hydro Media
Slide 31: Energy Rich Pockets
31 (QHUJ\5LFK3RFNHWV Competitive power for the aluminium industry Gas Electricity Coal 20683_1 - 12.00* 31 - Hydro Media
Slide 32: Extrusion consumption in Europe
32 ([WUXVLRQFRQVXPSWLRQLQ(XURSH Mio MT growth rate, yoy 3,00 30,0% 2,41 2,48 2,50 2,28 2,17 20,0% 2,08 2,00 1,91 1,91 1,87 1,80 1,71 11,7% 11,2% 1,50 10,0% 5,1% 5,7% 4,3% 2,9% 1,00 0,6% 0,0% 0,0% 0,50 -2,1% -5,0% 0,00 -10,0% 1992 1994 1996 1998 2000e 1993 1995 1997 1999 2001e Source: EAA Short Term
Slide 33: Rolled products consumption in Europe
33 5ROOHGSURGXFWVFRQVXPSWLRQLQ(XURSH Mio MT growth rate, yoy 4,00 30,0% 3,32 3,40 3,09 3,19 3,01 3,00 2,87 2,81 20,0% 2,66 2,68 2,55 2,00 10,0% 7,1% 7,1% 5,1% 3,5% 3,2% 4,1% 2,7% 2,4% 1,00 0,0% -2,1% -4,1% 0,00 -10,0% 1992 1994 1996 1998 2000e 1993 1995 1997 1999 2001e Source: EAA Short Term Panel 2
Slide 34: Safe harbour statement
6DIHKDUERXUVWDWHPHQW Certain statements in this presentation are or may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not in the nature of historical facts may be deemed to be forward-looking statements and may