Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q3 2014 Earnings Presentation
50 slides from Norsk Hydro Asa's earnings presentation, 2014
Slide 1: Lower Alunorte costs and higher all-in metal price lift results
Lower Alunorte costs and higher all-in metal price lift results Third quarter presentation (1)
Slide 2: 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 3: Svein Richard Brandtzæg, President and CEO
Svein Richard Brandtzæg President and CEO (3)
Slide 4: Q3 highlights
Q3 highlights • Underlying EBIT NOK 1,490 million • Higher realized all-in* metal and alumina prices • Lower operating costs at Alunorte • Expected 3-4 percent demand growth in 2014 for primary aluminum World ex-China • World ex-China primary aluminium demand continues to exceed production * LME alu
Slide 5: Mixed macro picture
Mixed macro picture Recent signals of uncertainty • Weak industrial production in August, especially in Germany Eurozone • Low growth and inflation, but so far no quantitative easing measures from the ECB • Aluminium demand weakening • Solid growth momentum, positive consumer and business sentiment
Slide 6: Physical market deficit continues World ex-China
Physical market deficit continues World ex-China Demand and production (quarterly annualized) Production less demand, (quarterly annualized)* 1 000 mt primary aluminium 1 000 mt primary aluminium 30 000 4 000 3 500 3 000 2 500 25 000 2 000 1 500 1 000 20 000 500 0 ( 500) (1 000) 15 000 (1 500) Jan-0
Slide 7: Standard ingot premiums rise to record levels
Standard ingot premiums rise to record levels Regional standard ingot premiums • Standard ingot premiums continue to USD/mt 600 rise in all regions through Q3 500 • US and EU (duty-paid) premiums up to ~500 USD/mt 400 • Value-added premiums at record-high 300 levels 200 100 0 Jan-08 May-09 Sep-10 Ja
Slide 8: Premiums supported by primary metal deficits in North America and Europe
Premiums largely supported by increasing primary metal deficits in North America and Europe Mid-west premium and NA primary market balance European DP premium and primary market balance Market balance Ingot premium Market balance Ingot premium (1000 mt) (USD/mt) (1000 mt) (USD/mt) ( 600) 500 (1 000)
Slide 9: All-in standard ingot price continues to rise
All-in standard ingot price continues to rise USD/mt • 3-month LME price ranged between 2 900 1 850 and 2 100 USD/mt during Q3 2 700 2 500 • End of period LME decrease partly offset 2 300 by strengthening USD 2 100 • Realized LME price for Q3 1 906 USD/mt 1 900 1 700 Primary aluminium LME* USD/mt NO
Slide 10: Reduction in reported inventories World ex-China
Reduction in reported inventories World ex-China World ex-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 Q3 02 Q1 05 Q3 07 Q1 10 Q3 12 Q3 14 IAI Other LME World ex. China inventory days Source: CRU/Hydro (10)
Slide 11: LME to implement warehouse rules
LME to implement warehouse rules Total stock levels, Detroit and Vlissingen • UK Court of Appeal upheld LME’s Million mt Queue days appeal against High Court Judgment 800 • LME planning to introduce warehousing 2,2 750 reforms first quarter 2015 2,0 700 • Reform targets warehouses with queues over 5
Slide 12: Chinese bauxite costs continue to rise
Chinese bauxite costs continue to rise Average Chinese import price and Value in use USD/mt 80 • Increased price for bauxite imports to Average Chinese import price 75 Value in use China 70 • Uncertainty around possibility to obtain 65 export licenses for those with plans to 60 build Indonesian alum
Slide 13: Increasing alumina prices in tightening market
Increasing alumina prices in tightening market Platts alumina index (PAX) USD/mt Percent 450 20% • Average price 322 USD/mt, up 19% 6 USD/mt from Q2 400 18% • Positive development through quarter, 17% with alumina prices ending the quarter 350 at 355 USD/mt 16% − Highest level since October 2011 300
Slide 14: China: Bauxite imports increased, exports of semis risen
China: Bauxite imports increased Exports of semis and fabricated have risen Annualized aluminium equivalents*, million mt YTD 2011 2012 2013 2014** • Bauxite and alumina 25 − Significant drop in bauxite imports since January China import 20 amid Indonesian export ban, but higher volumes in 15 Q3 tha
Slide 15: Lower implied alumina cost
Lower implied alumina cost • “From B to A” improvement program Implied alumina cost and margin, USD/mt 1) progressing according to plan 475 − Target NOK 1 billion by end-2015, of which 13 425 NOK 600 million by end-2014 11 − USD 11 per mt implied alumina cost 263 reduction from second quarter 258 35
Slide 16: Increased EBITDA margin in Primary Metal
Increased EBITDA margin in Primary Metal Implied primary cost and margin, USD/mt 1) • Implied cost continuing downward trend ‒ Improvement efforts 475 300 425 ‒ Positive exchange rate development 400 450 ‒ Increasing premiums 1 775 1 500 1 350 • EBITDA margin3) ~630 USD/mt in Q3 2014 • USD 180 JV pr
Slide 17: Stable shipments in Rolled Products
Stable shipments in Rolled Products Rolled Products sales by segment Q3 2014 vs. Q2 2014 Q3 2014 vs. Q3 2013 Packaging & Litho, Auto & Heat General engineering Total Rolled Packaging & Litho, Auto & Heat General engineering Total Rolled Building exchanger Products Building exchanger Products 17% 5%
Slide 18: Strong North American demand for extruded products, weaker in Europe
Strong North American demand for extruded products, weaker in Europe • Demand increased compared to same quarter last year − 7% in North America − 1% in Europe • Global demand for precision tubing continues − Supported by automotive sector (18)
Slide 19: Energy: Lower inflow, higher prices
Energy: Lower inflow, higher 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 MIN NO2 (2002-2013) 2013 20 MAX NO2 (2002-2013) 100 2013 2014 10 2014 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 4
Slide 20: Eivind Kallevik, Executive Vice President and CFO
Eivind Kallevik Executive Vice President and CFO (20)
Slide 21: High-level quarterly result development
High-level quarterly result development NOK billion 0.2 (0.3) 1.2 (0.2) 1.5 0.7 0.1 0.5 Underlying EBIT Underlying EBIT Energy volume LME and Raw materials and Other margins and Eliminations and Underlying EBIT Q3 2013 Q2 2014 and price premiums fixed costs volumes other Q3 2014 Figures for 2013 thr
Slide 22: Key financials
Key financials First 9 months First 9 months NOK million Q3 2014 Q2 2014 Q3 2013 2014 2013 Revenue 19 698 18 272 16 145 56 251 48 306 Underlying EBIT 1 490 544 658 2 806 2 254 Items excluded from underlying EBIT 447 75 (62) 573 (577) Reported EBIT 1 937 620 596 3 379 1 677 Financial income (expense)
Slide 23: Items excluded from underlying EBIT
Items excluded from underlying EBIT First 9 months First 9 months NOK million Q3 2014 Q2 2014 Q3 2013 2014 2013 Underlying EBIT 1 490 544 658 2 806 2 254 Unrealized effects on power and raw material contracts 54 (40) (7) 189 (121) Unrealized derivative effects on LME related contracts 220 136 34 351
Slide 24: Bauxite & Alumina
Bauxite & Alumina Q3 Q2 Q3 Key figures 2014 2014 2013 Alumina production, kmt 1 478 1 526 1 316 Total alumina sales, kmt 1 922 2 071 1 879 Realized alumina price, USD/mt 287 276 267 Implied alumina cost, USD/mt 252 263 263 Bauxite production, kmt 2 287 2 370 1 513 Underlying EBITDA, NOK million 417
Slide 25: Primary Metal
Primary Metal Q3 Q2 Q3 Key figures 2014 2014 2013 Primary aluminium production, kmt 487 488 491 Total sales, kmt 542 559 540 Realized LME price, USD/mt 1 906 1 762 1 822 Realized LME price, NOK/mt 11 909 10 660 10 938 Implied primary cost USD/mt 1 275 1 375 1 450 Underlying EBITDA, NOK million 1 651
Slide 26: Higher realized all-in metal price drives Qatalum earnings
Higher realized all-in metal price drives Qatalum earnings Q3 Q3 Key figures – Qatalum (50%) 2014 Q2 2014 2013 Revenue, NOK million 1 207 1 095 1 074 Underlying EBITDA, NOK million 446 370 331 Underlying EBIT, NOK million 231 158 78 Underlying Net income (loss), 189 111 31 NOK million Primary alumin
Slide 27: Metal Markets
Metal Markets Q3 Q2 Q3 Key figures 2014 2014 2013 Remelt production, kmt 128 141 127 Metal products sales, kmt* 671 700 668 Underlying EBITDA, NOK million 192 120 149 Underlying EBIT excl currency and inventory 136 122 73 valuation effects, NOK million Underlying EBIT, NOK million 171 100 111 Underl
Slide 28: Rolled Products
Rolled Products Q3 Q2 Q3 Key figures 2014 2014 2013 External sales volumes, kmt 244 245 234 Underlying EBITDA, NOK million 417 350 351 Underlying EBIT, NOK million 243 177 181 Underlying EBIT NOK million 615 601 Q3 results • Seasonally lower operating costs 243 • Increased margin pressure 183 181 18
Slide 29: Energy
Energy Q3 Q2 Q3 Key figures 2014 2014 2013 Power production, GWh 2 170 2 248 2 838 Net spot sales, GWh 873 1 028 1 673 Southwest Norway spot price (NO2), 247 168 267 NOK/MWh Underlying EBITDA, NOK million 275 209 523 Underlying EBIT, NOK million 234 169 485 Underlying EBIT Q3 results NOK million • R
Slide 30: Sapa joint venture
Sapa joint venture Key figures – Sapa (50%) Q3 2014 Q2 2014 Q1 2014 • Strong US development more than offset by seasonally lower sales 5 802 5 772 5 673 Revenue, NOK million volumes in Europe Underlying EBITDA, NOK million 246 321 220 • Share of underlying net income reduced by NOK 76 million from Q
Slide 31: Other and Eliminations
Other and Eliminations Q3 Q2 Q3 Other and Eliminations 2014 2014 2013 Sapa JV 55 131 10 Other (128) (176) (90) Eliminations (276) (8) (7) Other and Eliminations (349) (52) (87) (31)
Slide 32: Net cash/(debt) development Q3 2014
Net cash/(debt) development Q3 2014 NOK billion Net cash flow from operations NOK (1.1) billion 2.6 (0.9) (1.9) (0.5) (2.1) (0.9) (0.5) Net debt Q2 2014 Underlying EBITDA Operating Capital Other adjustments Investments Currency Net debt Q3 2014 (32)
Slide 33: Adjusted net debt development Q3 2014
Adjusted net debt development Q3 2014 Sep 30, Jun 30. Mar 31, NOK billion 2014 2014 2014 Cash and cash equivalents 6.0 6.6 6.5 Short-term investments 1.7 1.8 3.1 Short-term debt (5.0) (6.1) (6.3) Long-term debt (4.8) (4.1) (3.9) Net cash/(debt) (2.1) (1.9) (0.6) Net pension liability at fair value,
Slide 34: Priorities
Priorities • Lift bauxite and alumina production • Deliver on improvement programs • Continue active margin management in tight market
Slide 35: Additional information
Additional information (35)
Slide 36: Items excluded from underlying results - 2014
Items excluded from underlying results - 2014 NOK million (+=loss/()=gain) Q1 2014 Q2 2014 Q3 2014 Unrealized derivative effects on LME related contracts Bauxite & Alumina (4) (1) (2) Total impact Bauxite & Alumina (4) (1) (2) Unrealized derivative effects on LME related contracts Primary Metal (12)
Slide 37: 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 38: 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 Q3 2014 Year 2012 Year 2013 Bauxite & Alumina (144) (188) (386) (73) (63) (244) (370) (379) (288) (269) (26) (791) (1 057) Primary Metal 36 245 (4) 58 364 237 337
Slide 39: 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 Q3 2014 Year 2012 Year 2013 Bauxite & Alumina (136) (199) (387) (62) (76) (241) (370) (491) (284) (269) (23) (783) (1 178) Primary Metal (91) (1 227) (48) 112 19 122 338 377
Slide 40: 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 Q3 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 3 737 13 265 13 350 Primary Metal 7 458 7 578 6 169 5 485
Slide 41: 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 Q3 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 1 480 4 806 5 226 Primary Metal 6 331 6 341 5 097 4 442
Slide 42: 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 Q3 2014 Year 2012 Year 2013 Bauxite & Alumina 475 439 428 409 429 448 417 424 410 431 442 1 750 1 718 Primary Metal 542 1 645 482 356 47
Slide 43: Income statements
Income statements First 9 months First 9 months NOK million Q3 2014 Q2 2014 Q3 2013 2014 2013 Year 2013 Revenue 19 698 18 272 16 145 56 251 48 306 64 877 Share of the profit (loss) in equity accounted investments 287 122 (54) 450 (90) (240) Other income, net 145 147 248 424 698 801 Total revenue and
Slide 44: Balance sheets
Balance sheets NOK million Sep 30 2014 Jun 30 2014 Mar 31 2014 Dec 31 2013 Sep 30 2013 Cash and cash equivalents 6 045 6 617 6 476 8 412 8 397 Short-term investments 1 745 1 765 3 081 2 480 1 433 Accounts receivable 11 280 10 835 11 116 9 539 10 769 Inventories 10 334 10 213 9 599 10 070 9 758 Other
Slide 45: Operational data
Operational data Bauxite & Alumina Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Year2012 Year2013 Alumina production (kmt) 1 464 1 491 1 441 1 397 1 361 1 248 1 316 1 452 1 428 1 526 1 478 5 792 5 377 Sourced alumina (kmt) 324 332 399 335 476 427 711 395 55
Slide 46: Operational data
Operational data Metal Markets Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Year2012 Year2013 Remelt production (1 000 mt) 152 142 136 119 135 132 127 123 139 141 128 548 517 Third-party Metal Products sales (1 000 mt) 76 82 81 85 84 78 76 78 84 79 78 323 3
Slide 47: 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 Q3 2014 Sales volume (1000 mt) 343 311 346 360 346 314 359 368 350 Revenues 10 414 9 654 10 367 10 974 10 798 10 132 11 346 1
Slide 48: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10%* Currency sensitivities +10%* NOK NOK Income million EBIT million EBIT Financial items before tax Aluminium 2 750 USD 2 275 (1 075) 1 200 Oil (200) BRL (875) 705 (170) Pet coke (200) EUR (155) (1 000) (1 155) • Annual sensitivities ba
Slide 49: Investor Relations in Hydro
Investor Relations in Hydro Next event Pål Kildemo Capital Markets Day Head of Investor Relations t: +47 970 96 711 November 27-28, 2014 e: pal.kildemo@hydro.com Forth quarter results February 11, 2015 Olena Lepikhina Investor Relations Officer t: +47 96853035 For more information see e: olena.lepik
Slide 50: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO