Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Nomura Aluminium Seminar 2011
32 slides from Norsk Hydro Asa's conference presentation, Jun 2, 2011
Slide 1: Resource rich and fully integrated
Resource rich and fully integrated Vice President and Head of Investor Relations Stefan Solberg Nomura Aluminium Seminar, June 2, 2011 (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: Historic Vale transaction completed
Historic Vale transaction completed • Platform for further growth as fully integrated resource-rich aluminium company • Positions Hydro as a leading global bauxite and alumina player • Integration process well under way • Key priority: increase production towards nameplate capacity • Weak production
Slide 4: Strong positions across aluminium value chain
Strong positions across aluminium value chain Raw materials processing Primary aluminium production, Aluminium in products and energy marketing and recycling Bauxite Primary Metal Rolled Extruded & Alumina Energy Metal Markets Products Products • Bauxite capacity • Long-term power • 2.4 million tonn
Slide 5: Attractively positioned, global reach
Attractively positioned, global reach Norway • 900 000 tonnes hydro-powered aluminium production Continental Europe • Technology centre, R&D for next-generation smelter • Leading mid and downstream position • Hydropower developments (Holsbru) • New recycling centre (Karmøy) North America Asia • Alou
Slide 6: Significant aluminium demand growth expected
Significant aluminium demand growth expected Demand for primary aluminium World outside China China Million tonnes 90 80 +80% 70 37 60 28 50 40 17 37 30 31 20 24 10 0 2010 2015 2020 Fight for raw materials to continue Resource-constrained world (6)
Slide 7: 66% of bauxite reserves in 3 countries
66% of bauxite reserves in 3 countries Billion tonnes Guinea 14.9 China 2.1 Mali 0.9 1.2 0.0 4.0 India Vietnam Jamaica Venezuela 1.6 2.3 1.1 0.5 1.8 0.4 0.3 0.0 Indonesia Cameroon 1.0 0.1 1.2 0.0 Brazil Australia 8.2 9.5 5.9 2.0 Big-league (Top- 3) Total bauxite, billion tonnes: reserves, mine site
Slide 8: Alumina market expected to remain balanced
Alumina market expected to remain balanced Alumina balance world outside China, million tonnes 90 Alumina demand + export to China 6-10 80 Highly probable new capacity million Alumina production tonnes 70 60 50 40 30 20 10 0 2011 2012 2013 2014 2015 2020 Export to 3.5 3.5 4.0 4.5 4.5 5.0 China Idled
Slide 9: Alumina market is consolidating
Alumina market is consolidating Net long alumina position, million tonnes Alcoa 4.3 Alcoa 8.0 Vale 3.0 Chalco 2.8 Glencore 2.4 BHP Billiton 2.1 Chalco 2.0 Hydro 1.5 BHP Billiton 1.9 Glencore 1.5 Kaiser 1.0 Rio Tinto 0.7 Alcan 0.8 Klesch -0.5 Sual 0.7 Rusal -0.6 Rio Tinto 0.5 Tajik -0.8 Pechiney 0.4
Slide 10: Global inventory days trending down
Global inventory days trending down World reported primary aluminium inventories • Inventory days reduction driven by 1 000 tonnes Days increased consumption 7 000 80 6 000 70 • Q1 LME stocks increase believed to partly reflect unreported metal moved into 60 5 000 reported warehouses 50 4 000 • High
Slide 11: China balanced in primary aluminium
China balanced in primary aluminium 1 000 tonnes 600 • Reduced production due to 500 Chinese New Year celebration in February 400 Net import 300 • Production resumed after 200 Chinese New Year 100 • China expected to be broadly balanced in 2011 0 (100) • New capacity to be built in Net export (200)
Slide 12: Positive 2011 market outlook maintained
Positive 2011 market outlook maintained World outside China (quarterly annualized) • World outside China 1 000 tonnes • Annualized demand at 25.3 million tonnes in Q1 30 000 • Up 1% vs Q4 2010 28 000 26 000 • 7% demand growth expected in 2011 24 000 • Capacity development 22 000 • 1.2 million tonnes
Slide 13: Solid long-term power coverage for Primary Metal
Solid long-term power coverage for Primary Metal 35 000 • 90% of power needs secured until 2020 30 000 • High share of renewable energy • More than 2/3 of power needs from 25 000 renewable sources • Albras smelter in Brazil has hydropower 20 000 based contracts through 2024 15 000 • High share of ge
Slide 14: Substantial values in long-term assets in Norway
Substantial values in long-term assets in Norway • Stable and solid cash generation • Indicative annual EBITDA NOK 1.6 – 1.8 billion • Hydro’s power balance, normal year • Normal production ~9.4 TW • Sourcing on long-term contracts ~7.0 TWh • Consumption in Primary Metal* ~12.5 TWh • Contract sales
Slide 15: High-quality Bauxite & Alumina portfolio
High-quality Bauxite & Alumina portfolio MRN Paragominas Alunorte alumina CAP alumina Alpart alumina bauxite mine bauxite mine refinery refinery project refinery • 5% ownership • 60% ownership, 100% • 91% ownership • 81% ownership • 35% ownership • Volume off-take by 2015 • World’s largest alumina •
Slide 16: Paragominas
Paragominas One of the world’s largest bauxite mines • 2010 production: 7.5 million tonnes • Targeting significant production increase • Possible expansion: up to 15 million tonnes • Current reserve life: 30 years • ~300 million tonnes • Long-life resource (16)
Slide 17: Paragominas priorities
Paragominas priorities Bauxite production, million tonnes • Operational improvements 10 • Housekeeping and safety 9 • Improve performance stability 8 • Beneficiation plant • Dewatering filters in Alunorte 7 • Stripping ratio 6 • Recovery rate 5 • Improved production system 4 3 • Target significant p
Slide 18: Alunorte
Alunorte World’s largest alumina refinery • 2010 production: 5.8 million tonnes • Targeting stable production above 6 million tonnes • World-class conversion cost position • Modern technology • Bauxite supplied from Paragominas and MRN (18)
Slide 19: Alunorte priorities
Alunorte priorities Alumina production, million tonnes • Operational improvements 7 • Housekeeping and safety • Improve plant efficiency 6 • Performance in older lines 5 • Availability of coal boilers • Dewatering filters 4 • Port costs • Improved production system 3 2 • Targeting stable production
Slide 20: Favorable integrated alumina cash cost position
Favorable integrated alumina cash cost position • Integrated alumina cash cost position 2010 Integrated alumina cash cost position 2010 • USD 238 per tonne • Alunorte, Paragominas and sourced alumina Sourced alumina; • Bauxite 8% • Cash cost to be improved as Paragominas increase production and pipe
Slide 21: Attractive alumina position
Attractive alumina position 1 000 tonnes 9 000 8 000 Sourcing contracts 7 000 CAP equity 6 000 Alunorte equity 5 000 4 000 3 000 Smelter demand* 2 000 1 000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 *Sunndal 3 line assumed back in operation, Neuss and Søral at 2010 production level (21)
Slide 22: Attractive alumina position
Attractive alumina position 1 000 tonnes 9 000 Open position not committed to sales contracts Available Open alumina position not1committed to sales contracts 8 000 7 000 6 000 5 000 4 000 3 000 Smelter demand2 2 000 1 000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1) Alunorte, CAP 1st phas
Slide 23: Shift towards shorter contract durations
Shift towards shorter contract durations % of LME per tonne alumina for Contract durations long-term contracts <2000 2011 13.00-14.00% 13.25-15.25% 12.00-13.00% 20% 20% 25% 45% 35% 55% Long-term contracts (>6 years) Medium-term contracts (3-5 years) Spot (< 2 years) 1990-2000 2000-2005 2005-2010 Sou
Slide 24: Hydro's commercial strategy
Hydro’s commercial strategy • Move towards index pricing • Currently not offering medium/long-term LME linked contracts • First contract based on index pricing signed • Actively promote index pricing • Focus on contracts with 1-4 year duration • Focus on selling to end-users • Hydro’s existing combi
Slide 25: Ambitious cost improvement program on target
Ambitious cost improvement program on target Estimated primary aluminium cash cost and margin • USD 300 per tonne cost improvement USD/tonne 1) • USD 50 per tonne realized in 2010 475 475 • Further USD 125 per tonne targeted in 2011 425 475 375 375 2 175 25 • Cash cost up ~USD 125 from 2010 1 750 1
Slide 26: Attractive Qatalum fundamentals
Attractive Qatalum fundamentals Joint venture (50/50) between World-class smelter Qatar Petroleum and Hydro • Cash costs estimated around 1 400-1 500 USD per tonne at 2010 • Capacity: 585 000 tonnes market conditions when in full production 2011 focus Ideally located to serve all major • Ramp-up to
Slide 27: No. 1 flat rolled products producer in Europe
No. 1 flat rolled products producer in Europe • World leading positions in high-end Packaging products: foil, litho and automotive & building Revenues: • Solid cash generation NOK 11.3 billion • Record results in 2010 Automotive, heat • Technology leadership and innovation exchangers & general engin
Slide 28: Strong extrusion position in Europe, U.S. and Brazil
Strong extrusion position in Europe, U.S. and Brazil • Leading position in Europe in Extrusion and Building Systems • Strong position in the U.S. and Brazil Extrusion Eurasia Building Systems Revenues: NOK 8.8 billion Revenues: NOK 5.6 billion • Global leader in precision tubing • Strategy • Reinfor
Slide 29: Robust financial position
Robust financial position Net cash/(debt), NOK billion Dec 31, Dec 31, Mar 31, 11.0 NOK billion 2009 2010 2011 Cash and cash equivalents 2.6 10.9 3.7 Short-term investments 1.5 1.3 1.3 Short-term debt (2.0) (0.9) (2.5) Long-term debt (0.1) (0.3) (4.5) Net cash/(debt) 2.0 11.0 (2.0) Net int.-bearing
Slide 30: Strategy for further value creation
Strategy for further value creation Bauxite & Alumina • Integrate • Expand • Commercialize Primary Metal • Reposition • Qatalum ramp-up • Keep solid cash flow in current assets • Expand in high-class assets Energy • Increase value of business and competence • Focus on operation and commercialization
Slide 31: Priorities 2011
Priorities 2011 • Successful integration and improved performance in Bauxite & Alumina • Primary Metal repositioning through USD 300 program and Qatalum ramp-up • Solid operations with firm cost control and strong market focus (31)
Slide 32: www.hydro.com
www.hydro.com