Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — SEB Enskilda Nordic Metals and Mining Seminar 2010
25 slides from Norsk Hydro Asa's conference presentation, Sep 28, 2010
Slide 1: Hydro - a resource rich and fully integrated aluminium company
Hydro - a resource rich and fully integrated aluminium company Jørgen C. Arentz Rostrup, Executive Vice President and CFO September 28, 2010 (1)
Slide 2: Cautionary note in relation to certain forward-looking statements
Cautionary note in relation to certain forward-looking statements Certain statements contained in this announcement constitute “forward-looking information” within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as a
Slide 3: Hydro's value proposition
Hydro’s value proposition • Resource rich and fully integrated aluminium and energy company with global reach and attractive positions across the value chain • Upstream cost position to be improved by the world-class Qatalum smelter • Strong operational performance and cost focus • Financial discipl
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: Downstream sales up on demand and seasonal effects
Downstream sales up on demand and seasonal effects Hydro’s downstream sales Q2 2010 vs Q1 2010 Total downstream sales* Q2 10 vs Q1 10 1H 10 vs 1H 09 24% Foil Litho Packaging Auto, heat Extrusion Building Extrusion Precision & building exchanger Eurasia Systems Americas Tubing & general engineering 1
Slide 7: Increased ingot premiums
Increased ingot premiums USD per tonne 200 US Mid West Japan Europe* 150 100 50 0 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 * Duty-paid Source: Metal Bulletin, MW/MJP: Platts (7)
Slide 8: China balanced in primary aluminium
China balanced in primary aluminium 1 000 tonnes 600 550 • Balanced supply and demand 500 during Q2 450 400 • Announced production cuts due Net import 350 to low prices and high costs 300 250 • New capacity coming on stream 200 150 100 50 • Modest primary production 0 surplus expected in 2010 (50) N
Slide 9: Stable inventory levels
Stable inventory levels 1 000 tonnes 7 000 • Reported inventories outside IAI stocks LME NYMEX/TOC OM/Japan China: ~6 million tonnes 6 000 5 000 • Large portion of inventories held by financial investors 4 000 • Unavailable to market • Time horizon depending on interest 3 000 rates, warehousing cost
Slide 10: Reduced market imbalance outside China
Reduced market imbalance outside China World outside China (annualized), 1 000 tonnes 30 000 C onsumption Production • Annualized imbalance of 28 000 0.5 million tonnes in Q2 26 000 24 000 • Imbalance expected to 22 000 continue in 2010 20 000 • New capacity coming on 18 000 16 000 14 000 stream in
Slide 11: Underlying EBIT
Underlying EBIT 2 032 1 619 1 490 1 110 868 688 -493 -618 -651 -793 NOK million Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Primary Metal 938 795 906 93 (185) (895) (760) (717) (49) 657 Metal Markets 363 139 (41) 242 (245) 196 (15) (20) 65 31 Rolled Products 147 2
Slide 12: Upstream repositioning continues
Upstream repositioning continues Cash cost up from 2009 on increased alumina cost and weaker NOK/USD Estimated primary aluminium • Unsatisfactory cost position production cash costs • Estimated first half 2010 cash cost USD 1 775/ In USD/tonne* NOK 10 500 2 175 • Stronger USD positively influences U
Slide 13: Further upstream improvements necessary
Further upstream improvements necessary • Increased ambition for an additional USD 200 reduction in cash cost • Cost reduction and efficiency improvements • Purchasing • Logistics • Technology • Maintenance • Manning and organization • Improvement in casthouse margins (13)
Slide 14: Qatalum – a world class smelter
Qatalum – a world class smelter • 50/50 joint venture with Qatar Petroleum • Capacity of 585 000 tonnes per year • Very competitive cash cost position when in full production • Investment (100%) ~USD 5.7 billion • Power outage August 10 • Affecting 444 out of 704 cells • Ramp-up resumed September 15
Slide 15: Financial position
Financial position Net cash / (debt) in NOK billion Dec 31, Mar 31, Jun 30, NOK billion 2009 2010 2010 Cash and cash equivalents 2.5 2.5 2.2 Short-term investments 1.5 1.6 1.3 2.0 Short-term debt (1.9) (1.0) (1.5) Long-term debt (0.1) (2.6) (2.1) 0.5 (2.1) Net cash/(debt) 2.0 0.5 (0.1) Dec 31, 2009
Slide 16: World-class assets in resource-rich Brazil
World-class assets in resource-rich Brazil CAP alumina Alunorte refinery project alumina refinery Increasing stake from Increasing stake from 20% to 81% 34% to 91% • Bauxite licenses • Sales contract portfolio • Competence MRN bauxite mine Paragominas bauxite mine Albras aluminium smelter Current st
Slide 17: Upstream earnings become more robust
Upstream earnings become more robust Average 2007-2008 EBITDA Assumed assets Hydro and assumed Hydro from Vale assets combined USD 2.0 billion USD 0.8 billion USD 2.8 billion 8% 11% 4% 20% 15% 39% 21% 61% 64% 57% Bauxite & Alumina Primary Aluminium Downstream Energy and other Hydro Underlying EBITDA
Slide 18: Resource owners take rising share of profits
Resource owners take rising share of profits Significant shift in profit pool split in steel sector USD billion 1) 90 38 210 404 8% 15% 17% 11% 26% 7% Raw materials 22% 39% 81% 78% 61% 35% 1995 2000 2005 2008 Steel making Coking coal Iron ore 1) Calculated based on EBITDA x demand/production, calcul
Slide 19: Alumina prices on upwards trend
Alumina prices on upwards trend Hydro estimates of average contract prices USD per tonne alumina % of LME per tonne alumina • 3 to 10 years contract prices 313 13.4-14.0% have moved upwards 13.0-13.8% 12.2-12.7% • Bauxite and alumina prices strongly affected by Chinese growth 211 184 • China bauxite
Slide 20: Long alumina and bauxite position
Long alumina and bauxite position Upstream position transformed Hydro end-2010 Pro forma end-2010 Pro forma 2016 (60% Paragominas) (100% Paragominas) 4.2 Aluminium equivalent equity 3.7 capacity in million tonnes 3.3 2.2 2.2 1.9 1.8 1.4 0.5 Bauxite Alumina Aluminium Bauxite Alumina Aluminium Bauxite
Slide 21: Takeover of Vale's aluminium business on track
Takeover of Vale’s aluminium business on track • NOK 10 billion rights issue successfully completed July 16 • Hydro’s integration planning well underway • All relevant regulatory applications submitted • Consent received from joint-venture partner Nippon Amazon Aluminium Company for transfer of owne
Slide 22: 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 23: World-class upstream growth pipeline
World-class upstream growth pipeline Strong track-record in project execution Qatalum Hydropower Paragominas CAP Aluminium aluminium plant developments bauxite mine alumina refinery and power Qatar Norway Brazil Brazil plant Angola • Potential for • Development potential • Brownfield expansion • Fir
Slide 24: Priorities
Priorities Priorities • Firm cost control • Qatalum ramp-up • Solid operations • Upstream repositioning • Capture market opportunities • Vale assets integration • Cash flow generation (24)
Slide 25: www.hydro.com
www.hydro.com
Norsk Hydro — SEB Enskilda Nordic Metals and Mining Seminar 2010 on 6ix