Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (August 2004)
34 slides from Norsk Hydro Asa's investor presentation, August 2004
Slide 1: Metals segment
Aluminium Arvid Moss Sector President, Metal Products Metals segment
Slide 2: Main messages
Main messages z Increasing equity alumina production at lower cost z Improving primary system z Cost improvement in progress for “in-the-market” smelters z Portfolio changes to improve cost z Expanding profitable metal products system z The preferred supplier in Europe z Achieving attractive profita
Slide 3: Metals segment – 2003
Metals segment – 2003 Primary Metal Metal Products Aluminium 1 470 000 tonnes 3 300 000 tonnes* Magnesium 92 000 tonnes Employees 3 700 2 000 Primary Metal and Metal Products Primary Metal only Metal Products only Metal products in North-American Sector * Total shipments of metal products under Hydr
Slide 4: Metals segment: EBITDA
Metals segment: EBITDA EBIT and EBITDA 2002 – 2004 2003 4 500 39 900 Revenues (millions) 4 000 CROGI % 9,8% 3 500 1570 Gross Investment *) 38 900 3 000 2 500 894 NOK million 1177 2 000 1 500 2728 1 000 1989 Depreciation & Amortisation 1526 500 EBIT 0 2002 2003 1H 2004 EBITDA 1H 2003 * Gross Investme
Slide 5: Delivering on our commitments – Primary Metal
Delivering on our commitments – Primary Metal What we said What we have done Delivery (operational): z Cost reductions. z Total fixed cost increased approx 1 %, Best practice sharing while production increased 8% z Low capital intensive capacity z Increased volume with 35 000 tonnes - positive resul
Slide 6: Primary metal production – key value drivers
Primary metal production – key value drivers Achieve competitive edge through… Sourcing z Alumina z Power z Carbon Production z Continuous cost reductions and operational excellence z Asset quality and favourable operating locations z Market proximity or low cost operating climate Technology leaders
Slide 7: Cash operating cost 2003 – world ranking
Cash operating cost 2003 – world ranking (Høyanger Sø) (Årdal Sø) Elbewerk Sunndal Pb Hamburg (33%) Karmøy Pb Rheinwerk 2 000 Høyanger Pb Årdal Pb Søral (50%) Kurri Kurri Alouette (20%) Karmøy Sø Tomago (12.4%) 2003: 0,8 mtpy Slovalco (20%) Hydro 2007: 0. 7 mtpy 1 500 2003: 0,7 mtpy 2007: 1,0 mtpy C
Slide 8: Increasing equity alumina at lower cost
Increasing equity alumina at lower cost 220 Hydro equity alumina production versus needs in primary plant 200 Year 2002 2004E 2006E 180 000 tonne 1150 1500 2000 Coverage 40% 50% 60% 160 Cash Cost USD/t 140 World weighted average 2004 (140 USD/t) 120 Hydro Aluminium equity 2002 (139 USD/t) 100 Hydro
Slide 9: Alumina market balance should improve – attractive long term contracts possible
Alumina market balance should improve – attractive long term contracts possible Potentials for increased production globally 2004-2012 z Capacity potential above 9 30 expected demand z Continue mix of medium and Million tonnes 5 long term contractual and equity supply of alumina 4 12 z Equity: Evalu
Slide 10: Global power prices trend upward
Global power prices trend upward Average power price to aluminium smelters-world wide Nominal values 25 20 15 USD/MWh 10 5 0 1984 1989 1994 1999 2004E z Hydro Aluminium after 2006 z Increased power cost Norway - compensated by Aluimprover z Increased power cost Germany - negotiations ahead Sources:
Slide 11: Improving primary system: Continuous cost reductions
Improving primary system Continuous cost reductions z 2004 – 2005 z Norway: demanning 800 employees (Aluimprover) z Potentials being evaluated in Germany z 2006-2007 z Closure of Søderberg capacity in Årdal and Høyanger, 70 000 tonnes – Expected demanning 280 employees – No net book value at time of
Slide 12: Improving primary system: Portfolio changes
Improving primary system Portfolio changes Share of production in smelters above 350 000 tonnes annual capacity z Western World z 2002: 24 % z 2007E: 40 % (20 % above 500 000 tonnes per year) z Hydro Aluminium z 2002: 4% z 2007E: 30 % (10 % above 500 000 tonnes per year) z Hydro moves closer to aver
Slide 13: Improving primary system: Project excellence
Improving primary system Project excellence z Alunorte I (+ 900.000 tonnes z Aardal Carbon per year) (+ 108.000 tonnes per year) z USD 325 /tonne z On time. Final cost approx. 85% of CEP z Final cost approx. 80% of CEP z Sunndal IV z On time. Accelerated start up (+ 258.000 tonnes per year) z Sloval
Slide 14: Priorities Primary Metal
Priorities Primary Metal Improve relative cost position z Continue to pursue improved alumina position z Improving primary system z Continuous cost reductions and operational excellence z Deliver on investment projects z Portfolio changes to improve cost 51145_1 • H ydro M edia • 08.2004 • 14
Slide 15: Expanding profitable metal products system
Expanding profitable metal products system 51145_1 • H ydro M edia • 08.2004 • 15
Slide 16: Metal Products market portfolio 2003
Metal Products market portfolio 2003 Extrusion Ingot Sheet Ingot Foundry Alloy External Internal Internal 24% 0% 39% External 61% Internal External 76% 100% 51145_1 • H ydro M edia • 08.2004 • 16
Slide 17: Delivering on our commitments – Metal Products
Delivering on our commitments – Metal Products What we said What we have done Delivery (Operational): z Cost reductions and best z Fixed cost per ton reduced practice sharing z Ma ximize throughput z Volume up 16% on last year z Keep investments at a minimum z Done (CAPEX only 4% of Gross Assets) St
Slide 18: Metal Products - Key value drivers
Metal Products - Key value drivers Achieve superior returns on capital through… z Offering additional value to customer z Optimised and streamlined operations z Primary casthouses – Maximize capacity utilisation. Long series z Remelters close to market – Optimize logistic costs. Shorter series z Con
Slide 19: De-commoditize
De-commoditize 51145_1 • H ydro M edia • 08.2004 • 19
Slide 20: Strong market pull based on business model and value proposition
Strong market pull based on business model and value proposition in market place Europe 35 Estimated percent market share 30 30 23 24 25 1995 20 1998 2003 15 10 5 0 Extrusion Ingot Sheet Ingot Primary Foundry Alloys 51145_1 • H ydro M edia • 08.2004 • 20
Slide 21: Customers clearly see a value in additional services
Customers clearly see a value in additional services "Which kind of additional services would add value for your business?" April 2001 79% 72% December 2003 61% 58% 48% 48% 47% 42% 38% 28% E-Commerce Technical Common ISO TS LME/Risk Service product/process 16949 Management development programs Sourc
Slide 22: A valuable Hydro Billet Plus service concept
A valuable Hydro Billet Plus service concept Value for our customers Value for Hydro Aluminium z Service concept Customers' overall satisfaction z Increased Excellent/ z Optimization of 10.0 customer loyalty perfect 9.0production system 8.0 7.5 7.7 z Higher sales z7.0Improve understanding of volumes
Slide 23: Rolling out the concept in North America – Asia next
Rolling out the concept in North America – Asia next Europe 35 Estimated percent market s hare 30 30 24 25 23 35 20 1995 1998 30 15 2003 Estimated percent market share 10 25 5 0 20 1998 Extrusion Sheet Ingot PFA 2000 Ingot 15 2003 15 10 5 5 0 US Extrusion Ingot Asia Extrusion Ingot 51145_1 • H ydro
Slide 24: North American market restructuring – opportunity in extrusion ingot
North American market restructuring – opportunity in extrusion ingot Extrusion ingot market structure 500 The situation: 450 z Shortage of primary 400 z Smaller players in trouble z Securing scrap a major challenge 350 000 tonnes sales 2003 300 Our response: Contribute to reshaping 250 Primary Remel
Slide 25: Optimizing casthouses
Optimizing casthouses Increased volume and lower cost in operations Karmøy 2003 ~ 261 000 tonnes per year 160 100 = cost and production volume in 1998 148 140 120 100 80 77 60 Cash cost 40 per tonne Production Index 20 0 1998 1999 2000 2001 2002 2003 2004 YTD 51145_1 • H ydro M edia • 08.2004 • 25
Slide 26: Hydro Aluminium electrolysis metal 2004
Hydro Aluminium electrolysis metal 2004 Europe 1300 To North Alouette 50 America 400 Kurri Kurri Kurri Kurri / Tomago 220 With ownership 51145_1 • H ydro M edia • 08.2004 • 26
Slide 27: Global system with third party partners metal
Global system with third party partners metal Metal flows 2004 Europe 1300 Sayansk 80 To North Alouette 50 Slovalco & Sayansk America Talum 200 400 Pianmeca Kurri 40 Albras Kurri 100 Kurri Kurri / Tomago 220 With ownership Aluar 30 30--50 Without ownership 51145_1 • H ydro M edia • 08.2004 • 27
Slide 28: Remelters in the markets create flexibility
Remelters in the markets create flexibility Europe 1300 Sayansk 80 To North Alouette 50 1100 Slovalco & Sayansk America Talum 200 400 400 Pianmeca Kurri 40 Albras Kurri 100 Kurri Kurri / With ownership Tomago 220 Without ownership Aluar 30 30--50 Remelt 51145_1 • H ydro M edia • 08.2004 • 28
Slide 29: Hydro well positioned when more metal will travel in the future
Hydro well positioned when more metal will travel in the future Norway: Extrusion Ingot premium 250 $/mt $/mt Operating/freight cost -130 $/mt $/mt = Net margin 120 $/mt $/mt Europe 1300 Sayansk 80 To North Alouette 50 1100 Slovalco & Sayansk America Talum 200 400 400 Pianmeca Kurri 40 Albras Kurri
Slide 30: Priorities Metal Products
Priorities Metal Products Expanding profitable metal products system z Enhance value of unique customer service concept z Lead in Europe - strengthen positions in the US and Asia z Operational concept - technology, logistics, system optimization z Cost reductions and best practice sharing z Growing
Slide 31: Forward-looking statements/ use of non-GAAP financial measures
31 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 statemen
Slide 32: Appendix
Aluminium Appendix
Slide 33: Breakdown of Primary Metal average site operating cost position
Breakdown of Primary Metal average site operating cost position HAL weighted average, percent 5 16 12 Economy of scale Efficient work processes 26 Local cost level Regulator y 100 & 8 Tax frames Technology 33 Contracts Alumina Carbon *) Power Labor **) Other ***) Cast-house Site costs operating cost
Slide 34: Aluminium price
Aluminium price 3 months LME price, average per quarter USD/tonne 2 000 1 800 1 600 1 400 1 200 1 000 91 92 93 94 95 96 97 98 99 00 01 02 03 04 51145_1 • H ydro M edia • 08.2004 • 34