Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q3 2022 Earnings Presentation
130 slides from Norsk Hydro Asa's earnings presentation, Oct 25, 2022
Slide 1: Third quarter 2022 Investor presentation
Third quarter 2022 Investor presentation October 25, 2022
Slide 2: Cautionary note
Third quarter results 2022 3 Cautionary note Certain statements included in this announcement contain forward-looking information, Market 32 including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objective
Slide 3: Hilde Merete Aasheim, Chief Executive Officer
Hilde Merete Aasheim Chief Executive Officer October 25, 2022
Slide 4: Free cash flow NOK 2 billion, Adj. RoaCE 27%
Free cash flow NOK 2 billion Adj. RoaCE 27% Company wide response to challenging markets, improvement program on track Continued strong results in Aluminium Metal, Metal Markets and Extrusions Revised CO2 compensation scheme in Norway Executing on 2025 strategy, higher sales of greener aluminium pro
Slide 5: TRI steadily improving, reduced by 20% since end of 2021
TRI steadily improving, reduced by 20% since the end of 2021 TRI1) per million hours worked 12 months rolling average 5 4 3.04 average 3 since Q3’18 2.65 per end-Q3’22 2 1 0 Q3’18 Q3’19 Q3’20 Q3’21 Q3’22 1) Total Recordable Injuries includes own employees and contractors 2) Average over period 5
Slide 6: Manoeuvring a more unpredictable world
Manoeuvring a more unpredictable world _ The . The — The | Economist Economist i Economist feat We te ‘agar CA] og The ce Economist fx WEAT NENT?
Slide 7: Alleviating the energy crisis and driving the green transition
Alleviating the energy crisis and driving the green transition • Energy crisis threatens competitiveness of EU business & industry • EU moving forward with gas market package • Commission consultation on electricity market reform • Conclusion of EU-ETS and CBAM scheduled for Q4 2022 7
Slide 8: Proposed tax increases for renewable power
Proposed tax increases for renewable power: • Hydropower resource rent tax increased from 37% - 45% • Estimated impact of NOK 250 – 300 million per year • High-price contribution on 23% of the price that exceeds 0.70 NOK/kWh • Expected to have limited effect on Hydro, power consumed for own use • Ne
Slide 9: Europe hardest hit with energy price pressures, war and monetary tightening
Europe hardest hit with energy price pressures, war and monetary tightening 2022 global GDP forecast fallen significantly since start of the year Eurozone GDP growth lagging in both China and US Real GDP, % YoY Quarterly real GDP, change from previous quarter 8 2.6% 2.3% 1.8% 1.0% 0.8% (0.8%) 0.7% C
Slide 10: European capacity at risk on high energy price
European capacity at risk on high energy price, could tighten balance by 1-1.5Mt Estimated global balance Primary supply and demand growth (Mt) estimates China World ex. China 0.5 3% 2% V 4,0% 3,5% 1% 1,9% -0.1 -0.2 0,1% 2022 2023 0% -0.3 2022 2023 2022 2023 Demand Supply World ex. China China Sourc
Slide 11: Extrusion ingot falling faster than standard ingot
Extrusion ingot falling faster than standard ingot, squeezing remelt margins USD/mt NOK/mt USD/mt 4 600 38 000 1 600 36 000 4 200 34 000 1 400 32 000 3 800 30 000 1 200 3 400 28 000 1 000 26 000 3 000 24 000 800 22 000 2 600 20 000 600 18 000 2 200 400 16 000 1 800 14 000 200 12 000 1 400 10 000 0 M
Slide 12: Hydro well positioned on the cost curves
Hydro well positioned on the cost curves Hydro is at the 17th percentile of smelters in 2022 Hydro is at the 30th percentile of refineries in 2022 USD/t USD/t 3 200 Share under water at USD 2 187/t 750 Share under water at USD 310/t 3 000 2 800 14% 67% 25% 49% in World ex. in China 550 in World ex.
Slide 13: Hydro Extrusions segment sales volume
[speaker notes mention specific auto, solar? – could also include on graph) Q3 2022 vs Q3 2021 Hydro Extrusions segment sales volume Growth in % 8 0 -3 -4 -4 -9 -11 Distribution B&C Industrial HVAC&R Transport Automotive Total 11% 30% 20% 1% 20% 17% Share of Q3 2022 Hydro Extrusions sales 13
Slide 14: Automotive and renewable show stronger development
Automotive and renewable show stronger development Year over Year Extrusion market growth per quarter Growth in % 8 4 4 4 2 0 0 0 (4) (6) (7) (15) Q1 22 Q2 22 Q3 22 Q4 22 2022 2023 North America Europe 14
Slide 15: Power prices are expected to be high through the winter
Power prices are expected to be high through the winter Monthly Average Power Price Q3 2022 average power prices EUR/MWh EUR/MWh 500 450 Nord Pool System Nordic 400 NO2 350 NO3 EPEX Germany 300 EEX German Futures Nasdaq Nordic Futures 250 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Slide 16: Inflow and net imports have contributed to rising reservoir levels
Inflow and net imports have contributed to rising reservoir levels in the last three weeks • Statnett (TSO) proposed mitigating measures to the pressed power situation Pressed energy situation in Southern Norway • Including close monitoring of reservoir levels and possibility of buying energy option
Slide 17: Power sourcing for smelters and hedging
Power sourcing for smelters in Norway1) TWh 18 Total consumption AM 16 14 12 10 8 Robust power coverage across smelter portfolio 6 4 • Norwegian smelters well covered until 2030 2 0 • Albras well underway with sourcing strategy for 2025 and 2022 2025 2030 2035 2040 beyond Other Wind power Hydropower
Slide 18: Strengthened improvement efforts and capacity reductions
Strengthened improvement efforts and capacity reductions NOK 8.5 billion improvement program progressing according to plan Aluminium Metal • Commercial ambitions challenged in weaker markets • Electrolysis production to be curtailed by 110 -130kt (Karmøy, Husnes) New improvement initiatives being id
Slide 19: Seizing opportunities where capabilities match the megatrends
Seizing opportunities where our capabilities match the megatrends 1 2 Increasing PCS recycling and extrusion capacity Rein capital raise Vianode investment 19
Slide 20: CIRCAL and REDUXA sales growth
CIRCAL and REDUXA sales growth (‘000t) YTD Q3 2021 Q3 2021 YTD Q3 2022 Q3 2022 187 +76% 329 67 +46% 98 27 +48% 40 9 +33% 12 20
Slide 21: On track delivering on our sustainability ambitions
On track delivering on our sustainability ambitions Fuel switch, important enabler for Progress to protect biodiversity and Improve the lives and livelihoods by climate ambition, to be operational reduce environmental footprint strengthening education in Brazil in H2 2023 2121
Slide 22: Pål Kildemo, Executive Vice President and CFO
Pål Kildemo, Executive Vice President and CFO
Slide 23: Q3-2022 vs. Q2-2022 adjusted EBITDA bridge
Q3-2022 vs. Q2-2022 11.6 0.6 9.0 0.7 3.0 9.7 1.6 4.6 Other & eliminations 1.0 0.5 Power sales Slovalco & Albras 0.6 CO2 compensation revision 0.7 1.4 1.2 0.4 0.7 Adj. EBITDA Q2 2022 Realized aluminium Raw material Downstream Energy price FX CO2 compensation Adj. EBITDA Q3 2022 and alumina price and
Slide 24: Financial summary Q3 2022
NOK million Q3 2022 Q3 2021 Q2 2022 Year 2021 Revenue 52 445 36 710 64 793 149 654 Reported EBITDA 9 828 4 610 17 561 26 050 Adjustment to EBITDA (108) 2 608 (5 966) 1 959 Adjusted EBITDA 9 721 7 219 11 594 28 010 Reported EBIT 7 670 2 533 15 418 17 887 Adjusted EBIT 7 611 5 309 9 452 20 786 Financi
Slide 25: Bauxite & Alumina results
Implied alumina cost and margin USD/mt1) Lower results on higher raw material costs, partly 27 51 52 offset by higher alumina sales prices 337 378 4) 233 Key figures Q3 2022 Q3 2021 Q2 2022 3Q22 3Q21 2Q22 Alumina production, kmt 1 579 1 579 1 536 364 2844) 430 Price3) Total alumina sales, kmt 2 344
Slide 26: Aluminium Metal results
All-in implied primary cost and margin USD/mt1,4) 1325 950 1400 Results up on higher all-in prices, currency, CO2 2 500 1 925 compensation and power sales 1 975 1 200 1 450 1 500 Key figures Q3 2022 Q3 2021 Q2 2022 3Q22 3Q21 2Q22 Primary aluminium production, kmt 543 573 532 3 298 2 868 3 901 All-in
Slide 27: Metal Markets results
Higher results on recycling results and inventory valuation, and currency effects, partly offset by lower commercial results Key figures Q3 2022 Q3 2021 Q2 2022 Recycling production, kmt 124 132 158 Metal products sales, kmt 1) 635 675 710 Adjusted EBITDA Recycling (NOK million) 401 132 554 Adjusted
Slide 28: Extrusions results
Slightly lower results on lower volumes and higher costs, partly offset by higher recycling results Indre Key figures Q3 2022 Q3 2021 Q2 2022 External sales volumes, kmt 301 315 338 Adjusted EBITDA, NOK million 1 385 1 457 2 365 Adjusted EBIT, NOK million 640 828 1 600 Adjusted RoaCE, % LTM1) 10.9%
Slide 29: Energy results
Lower results on lower production, partly offset by gain from price area differences Key figures Q3 2022 Q3 2021 Q2 2022 Power production, GWh 1 330 1 688 1 602 Net spot sales, GWh (703) (401) (433) Southwest Norway spot price (NO2), NOK/MWh 3 519 807 1 752 Adjusted EBITDA, NOK million 321 465 824 A
Slide 30: Larger working capital build driven by CO2 compensation and inventories
Larger working capital build driven by NOK 1.9 billion CO2 compensation and higher inventories NOK billion Free cash flow NOK 2 billion (3.3) (1.0) Collateral 9.7 Pension assets/(liabilities) (3.4) Other assets/(liabilities) (3.0) (1.7) (0.5) 1.0 (3.1) (1.2) (4.4) (7.8) (4.7) Net cash adj.EBITDA Cha
Slide 31: Priorities: safety, uncertainty, improvements, Hydro 2025 strategy
1. Health and safety first 2. Managing geopolitical and market uncertainty 3. Deliver improvements and commercial ambitions 4. Execute Hydro 2025 strategy • Strengthen position in low-carbon aluminium • Expand and diversify in new energy 31
Slide 32: Market
Investor presentation, May 3, 2022
Slide 33: Strategic direction to realize aluminium's qualities and versatility
Hydro’s strategic direction aims to realize full potential of aluminium’s strong qualities and versatility Aluminium Steel Copper Composites PVC Lightness and strength Strength and durability Conductivity Lightness Lightness and formability Durability and formability Recyclability Corrosion resistan
Slide 34: Ambitious abatement targets driving demand for greener aluminium
Ambitious abatement targets driving demand in all sectors but especially Automotive OEMs Share of greener1) aluminium demand per segment OEMs are pushing for ever more ambitious lifecycle decarbonization targets % greener of total aluminium demand Timeline to achieve target Decarbonization target 20
Slide 35: Global semis demand 2021
Global semis demand 2021: ~93 million tonnes Per segment Per product form Per region 6% 1% 2% 1% 9% 2% 2% 11% 24% 14% 32% 6% 23% 49% 15% 12% 24% 9% 17% 8% 34% Transport Electrical Rolled products Wire & Cable China Central & South America Construction Consumer durables Extrusions Forgings Asia ex. C
Slide 36: Global segment composition, extrusions
Global segment composition, extrusions (2021) 3% 5% Construction Transport 9% Machinery & equipment Electrical Consumer durables 13% Other 57% 14% Source: CRU, Hydro Analysis 36
Slide 37: LME and SHFE aluminium prices, premiums, alumina index
LME and SHFE aluminium prices Regional standard ingot premiums Platts alumina index (PAX) USD/mt NOK/mt USD/mt USD/mt 1 000 750 34,0% 650 30,0% 800 550 26,0% 600 450 22,0% 400 350 18,0% 200 250 14,0% 0 150 10,0% Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-
Slide 38: Raw material price indices
Petroleum coke FOB USG (indexed) Pitch FOB USG (indexed) Alumina PAX index (indexed) 2,5 2,5 2,5 2,0 2,0 2,0 1,5 1,5 1,5 1,0 1,0 1,0 0,5 0,5 0,5 0,0 0,0 0,0 Q3-18 Q1-19 Q3-19 Q1-20 Q3-20 Q1-21 Q3-21 Q1-22 Q3-23 Q3-18 Q1-19 Q3-19 Q1-20 Q3-20 Q1-21 Q3-21 Q1-22 Q3-23 Q3-18 Q1-19 Q3-19 Q1-20 Q3-20 Q1-21
Slide 39: Primary metal market
Primary metal market World ex-China China Market balance in thousand tonnes 1) Nominal USD/t Market balance in thousand tonnes 1) Nominal USD/t 10 000 2 800 10 000 3 300 2 600 8 000 8 000 2 400 2 800 6 000 2 200 6 000 2 000 2 300 4 000 4 000 1 800 2 000 2 000 1 600 1 800 0 1 400 0 1 200 1 300 -2 000
Slide 40: Primary metal market cost curve
Primary metal market CRU BOC curve by smelter USD/t 3 000 2 750 2 500 2 250 2 000 1 750 1 500 1 250 1 000 750 500 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 000’tons 2017 2018 2019 2020 2021 Source: Republished under license from CRU International Ltd 40
Slide 41: Alumina market
Alumina market CRU BOC curve by refinery USD/t 600 500 400 300 200 100 0 0 30 000 60 000 90 000 120 000 150 000 000’tons 2017 2018 2019 2020 2021 Source: Republished under license from CRU International Ltd 41
Slide 42: Estimated net equity alumina position
Estimated net equity alumina position, in million tonnes Year 2000 Year 2021 Alcoa/AWAC 4.3 Alcoa/AWAC 8,1 Vale 3.0 South 32 3,3 Glencore 2.4 Rio Tinto 2,1 BHP Billiton 1.9 Kaiser 1.0 Hydro 1,6 Alcan 0.8 Nalco 1,4 Sual 0.7 Hindalco 0,5 Rio Tinto 0.5 UC Rusal -0,1 Pechiney 0.4 Vedanta -1,3 VAW (0.5)
Slide 43: Guinea stands out as a long-term source
Guinea stands out as a long-term source Bauxite resources billion mt Guinea 41.0 China 4.0 Vietnam Jamaica 9.2 1.2 Venezuela India 1.8 3.5 Big-league (Top 4) Mid-league (each > 1 Bt) Indonesia Less significant bauxite resources 4.0 Total bauxite resources Brazil 8.7 Australia 9.5 Atlantic Pacific So
Slide 44: Guinea bauxite increasingly satisfying Chinese demand
Guinea bauxite increasingly satisfying Chinese demand Growing need for bauxite imports amid domestic depletion Monthly Chinese bauxite imports by origin Mt 12 Domestic bauxite 60% Guinea Brazil Alumina imports (bx equiv) Malaysia Indonesia Bauxite imports 10 50% India Australia % of imports - RHS 40
Slide 45: Sustainability
Investor presentation, May 3, 2022
Slide 46: Net zero products, company and society
Net zero products, net zero Protect biodiversity and reduce Improve the lives and livelihoods company, net zero society our environmental footprint wherever we operate 4646
Slide 47: Renewables, energy storage, green hydrogen
Reducing GHG emissions in society at large by delivering climate friendly solutions • Increased renewables production • Energy storage and solutions • Green hydrogen replacing fossil fuel • Low carbon and recycled aluminium Deliver zero carbon aluminium Remove emissions from own Reduce and avoid emi
Slide 48: Technologies ready for pilot phase
Technologies ready for pilot phase Carbon capture and storage HalZero chloride process decarbonizing existing smelters technology for decarbonizing greenfield developments Tonnes CO2e / tonne aluminium, scope 1 and 2 emissions, liquid metal Tonnes CO2e / tonne aluminium, scope 1 and 2 emissions, liq
Slide 49: Post Consumer Scrap: scaling up volumes
Post Consumer Scrap (PCS): scaling up volumes in line with market demand PCS Decarbonization Tonnes CO2e / tonne aluminium ~6.9 ~0.3-0.5 • Going deeper in the scrap pile to lift profitability - Laser-based sorting (LIBS) Scope 1 Scope 2 Scope 3 - Screw extruder 4.8 • Recycling friendly alloys • Rene
Slide 50: Capitalize on market demand through circularity while decarbonizing
Capitalize on market demand through circularity while decarbonizing primary value chain XX tCO2/t first commercially 2.3 available volumes XX tCO2/t pilot volumes Advanced sorting technology 1.0 Circal Decarbonization of remaining <0.5 Pilot for Hydrogen in recyclers emissions 0.0 2025 2030 2040 205
Slide 51: On track for 30% emissions reduction by 2030 and net zero by 2050
On track to achieve 30% carbon emissions reduction by 2030 and net zero by 2050 or earlier GHG emissions – ownership equity Million tonnes CO2 (% of 2018 baseline emissions) Fuel switch, Electrifying coal electrical boilers, boilers, grid mix Roadmap to 2050 other initiatives improvements, 11.3 smel
Slide 52: Hydro's unique position to capture value from decarbonization
Hydro’s unique position to capture commercial value from decarbonization Fastest way to near-zero carbon PCS technology ready for Leading position in high growth Strong track record of partnering products at scale industrialization market segments Credibility to seek public funding Profitable growth
Slide 53: Biodiversity and waste ambitions
Today 2030 2040 2050 1:1 rehabilitation available mined areas within 2 years No net loss biodiversity in new projects Tailings dry backfill Eliminate the need for new Utilize 10% of bauxite permanent residue generated bauxite residue storage Landfill <35% spent Eliminate landfilling of pot linings g
Slide 54: Education, community and responsible supply chains
Equip people with essential skills for future Contribute to economic and social Ensure transparency and responsible economy development in communities where we business practices in our supply chains operate V V V Empower 500,000 people with education Business-specific targets Transparency and trace
Slide 55: Business overview
Investor presentation, May 2021
Slide 56: Hydro - Group
Hydro — Group
Slide 57: Profitability and sustainability targets
Profitability Sustainability ROACE > 10% CO2 - 30% 57
Slide 58: Adjusted EBITDA, free cash flow, adjusted RoaCE
Adjusted EBITDA Free cash flow1) Adjusted RoaCE2) NOK million NOK billion 12-month rolling % 11 594 4.4 26.5% 26.9% 9 721 7 219 2.8 2.0 12.7% 3Q21 2Q22 3Q22 3Q21 2Q22 3Q22 3Q21 2Q22 3Q22 Upstream costs3,4) Extrusion volumes Improvement program status5) USD per tonne Thousand tonnes NOK millions 8 50
Slide 59: Leadership in HSE, CSR and compliance
Leadership in HSE, CSR and compliance as a license to operate TRI Rate1) 10.3 7.0 6.0 5.4 4.0 4.1 3.9 3.7 3.8 3,5 3.4 3.4 3.2 3.3 2.9 3.0 3.1 3.1 2.6 2.7 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1) Total recordable incidents (TRI) rate defin
Slide 60: Hydro at a glance
Hydro adjusted EBITDA quarterly, NOK billion1) 10 299 14 680 11 474 17 369 16 344 11 832 13 106 28 010 32 480 • Based in Norway, • Operating revenues2) involved in activities in • 2021: NOK 150 billion 40 countries • 2020: NOK 138 billion • 2019: NOK 150 billion Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q
Slide 61: World class assets and leading market positions
World class assets, high-end products and leading market positions Raw materials Primary aluminium production, Aluminium in products processing and energy marketing and recycling Bauxite & Alumina Energy Aluminium Metal Metal Markets Extrusions • High quality Gibsite bauxite • Long-term power supply
Slide 62: Built on market understanding, customer closeness and competence
Built on market understanding, customer closeness and competence The complete North America Europe aluminium company Aluminium Metal • High-quality bauxite and alumina 9.4 TWh in Energy #3 position #1 position #1 position production in Brazil extrusion extruded the Nordic extruded Bauxite & Alumina
Slide 63: Equity production in 2021 in aluminium equivalents
Equity production in 2021 in aluminium equivalents, thousand tonnes Alumina 10 000 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 China Hongqiao United Company Xinfa Group Rio Tinto Chalco Emirates Global Alcoa Yunnan East Hope Group Norsk Hydro Vedanta Ltd Jinquan Iron & Hindalco State Pow
Slide 64: Seizing opportunities where capabilities match the megatrends
Seizing opportunities where our capabilities match the megatrends 1 2 64
Slide 65: Key strategic levers
Improvement program, commercial ambition and recycling investments key strategic levers • Safety and operational excellence • New products, including greener brands • Double post-consumer scrap use by 2025 • 1st quartile cost positions upstream • Market share in attractive segments • Develop recycli
Slide 66: Renewable energy leader enabling decarbonization
With renewables, energy efficiency and electrification we can tackle Green hydrogen to address 30% 70% of global emissions from ‘hard to abate’ sectors World-class energy competence center Batteries The renewable energy leader enabling the decarbonization and energy transition for industries 66
Slide 67: Strategic modes reflect global megatrends
Strategic modes reflect global megatrends and high-return opportunities Safe, compliant and efficient operations – The Hydro Way Businesses B&A Aluminium Metal Recycling Energy Extrusions Strategic mode Sustain and improve Sustain and improve Selective growth Selective growth Selective growth Reduce
Slide 68: Investment highlights
Attractive asset base Strong market position Leadership in greener aluminium 1st NOK 8 billion 2.3 and 4.0 quartile cost position of EBITDA in tons CO2 per ton Extrusions by 2025 aluminium in Low greener products carbon footprint Profitable growth journey Strong balance sheet and shareholder focus S
Slide 69: Bauxite & Alumina
Bauxite & Alumina
Slide 70: MRN, Paragominas and Alunorte
MRN bauxite mine Paragominas bauxite mine Alunorte alumina refinery • Top 3 bauxite mine in the world • 100% ownership • 92% ownership • Bauxite supplied from • 5% ownership • Nameplate capacity of 9.9 million tonnes • World’s largest alumina Paragominas and MRN • Volume off-take agreement for Vale’
Slide 71: Bauxite and alumina production
Bauxite production in Paragominas Alumina production at Alunorte Annualized million tonnes Annualized million tonnes 12,2 11,8 12,112,1 6,5 6,5 6,7 11,4 11,0 10,6 11,0 10,8 10,6 10,9 11,3 6,2 6,2 6,3 6,4 6,1 6,2 6,3 6,3 6,4 6,1 6,1 6,3 10,4 10,4 10,2 5,7 5,8 9,7 5,6 9,4 9,3 5,2 5,2 8,5 8,8 4,3 6,5 3
Slide 72: Paragominas bauxite mining costs
• Energy cost - Power and fuel Indicative Paragominas bauxite mining costs • Large fixed cost base Labor 16% Energy • Labor cost 25% Support & infrastructure • Influenced by Brazilian wage level Maintenance/consumables Other costs • Maintenance and consumables • Mainly influenced by Brazilian inflat
Slide 73: Implied alumina cost
• Implied alumina cost 2021 - USD 249 per mt1) Indicative implied alumina cost composition • Alunorte, Paragominas and external alumina sourcing for resale • Bauxite Bauxite 21% • Internal bauxite from Paragominas at cost, sourced bauxite from MRN 21% Caustic soda • External bauxite sales Energy (oi
Slide 74: External alumina sourcing and long positions
External alumina sourcing Long positions in bauxite and alumina • 2.0-2.5 million mt of external alumina sourced annually • Pricing should reflect bauxite and alumina market fundamentals • Long term off-take agreement with Rio Tinto • Selling surplus MRN bauxite externally • ~900 000 mt annually fro
Slide 75: Index pricing the new norm for the industry
Index pricing the new norm for the industry Sales exposure to index and short term pricing1) 35% 50% 65% 75% 75% 85% 88% index index index index index index index 100 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0% 2015 2016 2017 2018 2019 2020 2021 Internal index Intenal LME External index Extern
Slide 76: Profitability roadmaps: Bauxite & Alumina
Profitability roadmaps Returns below the cost of capital reflecting challenging markets, embargo and operational issues during the early years Capital employed in B&A 12 % 9% 23 % 6% 6% 3% 3% ~28 BNOK 2016 2017 2018 2019 2020 2021 ARoaCE > CoC Nominal long-term (30 Sep.22) cost of capital 2016-2021
Slide 77: Energy
nergy
Slide 78: Center of energy excellence in Hydro
Center of energy excellence in Hydro Bauxite Alumina Primary Extrusion ~25% ~35% ~35% Energy cost 1) ~8% ~50% Energy business area’s • Power sourcing • Power sourcing • Power sourcing and • Power sourcing contribution to Hydro production • Fuel switch project (LNG) • Gas sourcing • Gas sourcing • En
Slide 79: Spanning the entire aluminium value chain and energy carriers
Spanning the entire aluminium value chain, all global regions and energy carriers Hydro’s total energy portfolio amounts to 214 million GJ per year based on ownership equity Europe Power 19.1 TWh North America Natural gas 5.7 million MMBtu Power Natural gas Power 2.2 TWh Power Natural Natural gas 6.
Slide 80: Unique combination of hydro and wind power
Unique combination of hydro and wind power Sourcing platform for fully-owned smelters, Norway 1), 3) Sourcing platform for JVs2),3) 20 12,00 18 16 10,00 14 8,00 12 TWh TWh 10 6,00 8 6 4,00 4 2,00 2 0 - 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Current captive Hy
Slide 81: Lower captive volume and higher operator volume post transaction
Lower captive volume and higher operator volume post transaction Before the RSK transaction After the RSK transaction Normal annual production, Normal annual production, Equity share Sogn Equity share Sogn 2051-2057 1) 2051-2057 1) 10.2 TWh 3.2 9.4 TWh 3.2 Operator hydropower Operator hydropower Tel
Slide 82: Based on external price references
Based on external price references Sourcing side Revenue side TWh TWh Spot price 0-3 3) • Long-term contract 1 9.4 (7-11) 1) • Market pricing • Fixed annual Regulated pricing price adjustments • Market pricing 16-182) • Duration varies • Different Mainly Back-to-back 8-104) indexation parameters Nor
Slide 83: Adjusted EBITDA and NO2 spot price
Adjusted EBITDA and NO2 spot price • Production and market prices strongly linked to hydrological NOK million NOK/MWh conditions 4 000 800 3 500 700 • Lift in annual EBITDA contribution from 2021 3 000 600 2 500 500 • Positive impact from expiry of legacy supply contract from 2021 2 000 400 1 500 30
Slide 84: A platform for growth, scaling and new ideas
A platform for growth, scaling and new ideas 1 2 3 4 Engaging Capitalizing Developing Delivering on in attractive on current new partnering responsibility growth competences models and climate markets and expertise Wind and solar Extensive experience in liberalized Extracting value from existing Res
Slide 85: Capturing existing value in Hydro's power demand
• Capturing existing value in Hydro’s power demand and industrial footprint • Approx. 10 TWh repowering required by 2025 • 100+ sites globally • Leveraging Hydro’s unique position in value chain • Power sourcing and trading, source optimization • Asset operations (hydro, wind) • Project management;
Slide 86: Battery industry
Battery industry Batteries are needed for Industrial and political push Long value chain with Partnerships needed Industry driven by electrification and for a European sustainable optimization of high-value to succeed automotive OEM customers decarbonization battery value chain materials 86 Experien
Slide 87: Building a new battery business
• Aim: to build a new sustainable and profitable business that will diversify and strengthen Hydro’s overall portfolio • New business unit “Hydro Batteries” to perform active industrial ownership of current assets and develop new opportunities • Expanding battery footprint with selective positions a
Slide 88: Profitability roadmaps: Energy
Profitability roadmaps Returns above the cost of capital reflecting the depreciated asset base Capital employed in Energy 25 % 8% 21 % 18 % 18 % 6-7% 13 % 9% ~9 BNOK ARoaCE > CoC (30 Sep.22) 2016 2017 2018 2019 2020 2021 Nominal long-term cost of capital 2016-2021 ~17% average ARoaCE Capex, BNOK Low
Slide 89: Aluminium Metal
Aluminium Metal
Slide 90: Aluminium Metal and Metal Markets
Aluminium Metal and Metal Markets Norway, 1 125 000 tonnes 50% • Sunndal (100%): 405,000 tonnes • Årdal (100%): 195,000 tonnes • Karmøy (100%): 270,000 tonnes • Høyanger (100%): 65,000 tonnes • Husnes (100%): 190,000 tonnes Slovakia, 175 000 tonnes 8% • Slovalco (100%): 175,000 tonnes • Hydro owns 5
Slide 91: Ongoing digital projects
40 ongoing projects Robotics & Automation projects Trusted Data Layer Casthouse Soft Sensor incl. Trusted Data Layer Mobile Maintenance Worker Trusted Data Layer Carbon + Analytics Bring Your Own Device workbench improvements Digital Foundation including Cyber Security Organization Foundation includ
Slide 92: Energy consumption and emissions in smelters
Total emissions, in tonne CO2/t al Energy consumption in Hydro smelters1), kwh/kg al 20 17.5 18 18 16 15.0 14.8 14.4 14.1 16 13.9 13.5 14 12.5 12.3 14 11.5-11.8 12 12 10.0 10 10 8 8 6 6 4 4 2 2 0 0 Hydro Karmøy Hydro Hydro Hydro Hydro Hydro HAL300 HAL4E HAL4e HAL4e Hydro 1967 1993 1998 2003 2018 202
Slide 93: Primary aluminium cash cost 2021
• Primary aluminium cash cost 2021 Liquid aluminium cash cost 2021 3) • All-in implied primary aluminium cash cost1) USD 1 950 per mt • LME implied primary aluminium cash cost2) USD 1 500 per mt • Alumina • Purchases based on alumina index ~85% 6% • Purchased based on LME link ~15% (only for Qatalum
Slide 94: Profitability roadmaps: Aluminium Metal
Profitability roadmaps Investments in recycling capacity to support growth Capital employed in AM (MM) 28 % 13 % 5% 5% 3% ~53 (4) BNOK 2016 2017 2018 -3 % 2019 2020 2021 ARoaCE > CoC (30 Sep.22) 3% Nominal long-term cost of capital 43 % 2016-2021 average ARoaCE Capex, BNOK 5.0 4.0 Sustain and Invest
Slide 95: Metal Markets
f v Metal Markets
Slide 96: Metal Markets value creation and products
• Capitalizing on value-added casthouse Leading global position products portfolio Extrusion ingot Unique primary and • Extensive multi-sourcing system 1.4 million mt recycling capacity network including fully- and part-owned primary casthouses and stand-alone remelters Leading global position Found
Slide 97: Product pricing by region
Smelter Intermediate product Casthouse Aluminium Standard ingot Value added products Extrusion ingot Foundry alloy Sheet ingot Wire rod Traded on LME • US Midwest - 1020 • Extrusion Ingot – Priced above standard ingot • Foundry Alloy – Priced above standard ingot US (in cent per pound) • Sheet ingot
Slide 98: Metal Markets adjusted EBITDA drivers
• Remelters Adjusted EBITDA excluding currency effects and inventory • Revenue impact – volume and product premiums valuation effect, NOK million1) above LME • Cost impact 750 • Scrap and standard ingot premiums above LME 650 • Raw material mix • Freight cost – proximity to market 550 • Energy consu
Slide 99: Hydro Extrusions
Hydro Extrusions
Slide 100: Hydro Extrusions at a glance
Present in ~35 countries ~ 21 300 people 1) 1.3 Million mt sales2) 1) Permanent employees as of end-2021 2) Total sales in 2021 100
Slide 101: Unrivalled position as #1 extrusions provider globally
Unrivalled position as #1 extrusions Four distinct Business Units, all with strong segment presence provider globally Total volume 2021: 1.3 million tonnes1) Extrusion sales volume (2020), tonnes (000s) 1500 Building 7% Systems Distribution 12% Precision 10% Tubing 1000 Automotive 16% Extrusion Tran
Slide 102: Extrusions business units
21,100 highly competent people across the world, total turnover of BNOK 70 Extrusion Europe Extrusion North America Precision Tubing Building Systems • Market leader focusing on • Uniquely positioned as the only • Global Technology market leader in • Leading European player with value-added products
Slide 103: Targeting the high-tech, high-competence segments
Targeting the high-tech, high-competence segments of extrusion Deliver value-added Simplify and to our customers at a Grow to lift margins and collaborate reasonable cost profitability Simplification drive to Higher share of value-added solutions Lifting margins and creating increase focus, reduce t
Slide 104: Hydro Extrusions and peers EBITDA margins
Hydro Extrusions Hydro Extrusions and peers EBITDA-margin per unit in Hydro Extrusion (%) Annual reported EBITDA margins (%) Hydro Extrusions Peers1) Oct 2021 YTD Oct 2018 YTD 10.8 10.4 10.3 >5% 9.7 8.9 8.0 0-5% 6.4 6.6 <0% Total HE portfolio (~100 sites), 1.3 million tonnes 2018 2019 2020 YTD 2021
Slide 105: Extrusions contract structure and adjusted EBITDA per tonne
Adjusted EBITDA per tonne1), NOK • Contract structure 8 000 • Margin business based on conversion price • LME element passed on to customers 7 000 • Mostly short-term contract, typically ranging from spot to 12 months, few 6 000 longer term contracts with floating price or hedging in place 5 000 • H
Slide 106: Extrusions EBITDA target 2025
Extrusions EBITDA NOK billions 2.1 Underlying market growth 8.0 • Capitalize on underlying growth in extrusion demand in 2.4 key regions and segments -1.5 Dedicated cost reduction programs • Procurement 0.9 • SG&A cost 4.1 • Restructuring • Operational improvements through our way of working, Extrus
Slide 107: Profitability roadmaps: Extrusions
Profitability roadmaps Returns in line with the cost of capital reflecting leading market positions in high value segments and portfolio optimization Capital employed in Extrusions 10 % 7% 7% 6% 6% 23 % ~29 BNOK 2017 2018 2019 2020 2021 ARoaCE > CoC Nominal long-term (30 Sep.22) cost of capital 2017
Slide 108: Additional information
») Hydro Additional information
Slide 109: Improvement program and commercial ambition
Improvement New strategic program and growth commercial initiatives ambition Lifting cash flows towards 2025 Strengthen working Capex capital optimization management 109
Slide 110: Evaluate funds available for allocation
Evaluate funds available for allocation Review Projected funds from operations in several market scenarios Strategy Strong balance sheet Dividend commitments to shareholders Sustaining capex License to operate (HSE, CSR, compliance) External and internal benchmarking Affordability Excess cash flow K
Slide 111: Dividend policy and hedging strategy
• Aiming for competitive shareholder returns and dividend yield compared to • Hedging strategy alternative investments in peers • Fluctuating with the market: primarily exposed to LME and USD • Dividend policy • Volatility mitigated by strong balance sheet • Average ordinary payout ratio: 50% of adj
Slide 112: Adjusted net debt
Adjusted net debt Adjusted net debt to adjusted EBITDA1) BNOK 2.3 December 31, 2021 -7.1 -9.5 -0.8 3.2 1.9 <2x March 31, 2022 -7.7 -13.9 5.1 1.0 1.4 1.3 1.3 1.2 1.2 June 30, 2022 -6.3 -1.7 -6.0 1.4 0.7 0.7 0.5 0.4 September 30, 2022 -7.8 -3.1 -5.6 1.0 Net debt Other adjustments Net pension liability
Slide 113: Clear principles for capital allocation, capex outlook
Clear principles for capital allocation ~50% of capex 2022-25 is related to return seeking and growth capex 2022-25e CAPEX outlook Growth & Return-seeking NOK billion • Capacity investments in Extrusions with new presses in USA, Europe and China • Recycling investments including greenfield investmen
Slide 114: Price and currency sensitivities
Aluminium price sensitivity +10% Currency sensitivities +10% NOK million Sustainable effect: 3 830 NOK million USD BRL EUR 2 681 Adj. EBITDA 4 750 (650) (200) One-off reevaluation effect: Adj EBITDA Adjusted Net Income Financial items (510) 890 (4 180) Other commodity prices, sensitivity +10% NOK mi
Slide 115: Bauxite & Alumina sensitivities
Annual sensitivities on adjusted EBITDA if +10% in price Revenue impact NOK million • Realized alumina price lags PAX by one month 1 900 Cost impact Bauxite • ~2.45 tonnes bauxite per tonne alumina • Pricing partly LME-linked Caustic soda ( 50) ( 230) ( 500) ( 520) • ~0.1 tonnes per tonne alumina •
Slide 116: Aluminium Metal sensitivities
Annual sensitivities on adjusted EBITDA if +10% in price Revenue impact NOK million • Realized price lags LME spot by ~1-2 months • Realized premium lags market premium by ~2-3 months 3 880 Cost impact Alumina 1 010 • ~1.9 tonnes per tonne aluminium • ~ 2-3 months lag ( 220) • Mainly priced on Platt
Slide 117: Items excluded from adjusted EBITDA
NOK million (+=loss/()=gain) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Year 2021 Unrealized derivative effects on raw material contracts Hydro Bauxite & Alumina (27) (84) (143) 113 (376) (173) 157 (141) Community contributions Brazil Hydro Bauxite & Alumina - - 202 15 - - - 217 Other e
Slide 118: Adjusted EBIT and adjusted EBITDA
Adjusted EBIT NOK million Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Year 2020 Year 2021 Hydro Bauxite & Alumina 535 1 047 108 116 556 383 466 1 913 718 484 10 1 806 3 318 Hydro Aluminium Metal 573 (37) (156) 844 1 185 2 246 3 684 4 111 4 183 6 349 5 837
Slide 119: EBIT and EBITDA
EBIT NOK million Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Year 2020 Year 2021 Hydro Bauxite & Alumina 406 1 047 108 111 583 467 407 1 830 1 094 657 (147) 1 672 3 288 Hydro Aluminium Metal 784 (777) (93) 880 (171) 325 909 7 311 254 11 777 6 061 794 8 376
Slide 120: Total revenue and external revenue
Total revenue NOK million Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Year 2020 Year 2021 Hydro Bauxite & Alumina 6 029 6 173 5 334 5 503 6 026 5 976 6 984 8 713 7 901 9 413 8 652 23 039 27 699 Hydro Aluminium Metal 9 753 7 720 8 228 8 702 8 953 9 467 9 96
Slide 121: Internal revenue and equity accounted investments
Internal revenue NOK million Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Year 2020 Year 2021 Hydro Bauxite & Alumina 2 780 2 380 2 168 2 330 2 479 2 438 2 452 3 242 2 848 3 549 3 011 9 658 10 610 Hydro Aluminium Metal 7 785 6 328 6 596 6 656 8 191 8 846 9
Slide 122: Capital employed and RoaCE
Return on average capital employed 1) (RoaCE) Reported RoaCE Adjusted RoaCE 2021 2020 2019 2018 2017 2016 2015 2021 2020 2019 2018 2017 2016 2015 Hydro Bauxite & Alumina 11.9% 5.4% 1.9% 4.6% 8.5% 2.7% 5.3% 12.0% 5.9% 2.5% 6.0% 8.5% 2.8% 5.3% Hydro Aluminium Metal 21.6% 1.9% (3.9%) 5.6% 11.8% 5.2% 10
Slide 123: Depreciation, amortization and impairment
Depreciation, amortization and impairment NOK million Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Year 2020 Year 2021 Hydro Bauxite & Alumina 567 503 470 472 443 472 589 514 553 633 624 2 011 2 018 Hydro Aluminium Metal 655 1 130 589 618 694 736 756 972 60
Slide 124: Condensed income statement
NOK million Q3 2022 Q3 2021 Q2 2022 First 9 First 9 Year 2021 months 2022 months 2021 Revenue 52 445 36 710 64 793 163 854 103 221 149 654 Share of the profit (loss) in equity accounted investments 426 280 403 1 207 867 1 340 Other income, net 2 036 577 877 3 355 1 276 2 219 Total revenue and income
Slide 125: Condensed balance sheet
NOK million Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Cash and cash equivalents 25 852 24 507 21 161 22 923 18 792 20 147 15 011 Short-term investments 2 511 1 882 8 588 6 763 7 020 3 607 4 348 Trade and other receivables 28 442 29 164 25 955 20 579 1
Slide 126: Hydro Bauxite & Alumina key figures
Hydro Bauxite & Alumina Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Year 2020 Year 2021 Alumina production (kmt) 1 531 1 442 1 074 1 410 1 540 1 586 1 579 1 600 1 519 1 536 1 579 5 457 6 305 Sourced alumina (kmt) 664 667 940 783 698 737 806 765 741 758 764
Slide 127: Metal Markets and Extrusions key figures
Hydro Metal Markets Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Year 2020 Year 2021 Remelt production (1 000 mt) 137 88 124 140 143 154 132 144 151 158 124 488 572 Third-party sales (1 000 mt) 79 85 85 77 77 78 72 85 72 74 76 326 311 Hydro Metal Markets sa
Slide 128: Precision Tubing and Extrusion Europe
Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Precision Tubing 2020 2020 2020 2020 2020 2021 2021 2021 2021 2021 2022 2022 2022 Extrusion Europe 2020 2020 2020 2020 2020 2021 2021 2021 2021 2021 2022 2022 2022 Volume (kmt) 29 17 28 33 108 35 33 30 29 127 31 28
Slide 129: Next event and investor relations contacts
Next event Line Haugetraa Fourth quarter results t: +47 41406376 e: line.haugetraa@hydro.com February 14, 2023 Martine Rambøl Hagen For more information see t: +47 91708918 e: martine.rambol.hagen@hydro.com www.hydro.com/ir Matz Coucheron-Aamot t: +47 94829696 e: matz.coucheron-aamot@hydro.com 129
Slide 130: Hydro - Industries that matter
Hydro Industries that matter