Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q2 2012 Earnings Presentation
51 slides from Norsk Hydro Asa's earnings presentation, Jul 24, 2012
Slide 1: Weak markets and results, improvement ambitions stepped up
Weak markets and results, improvement ambitions stepped up 2012 July 24, 2012
Slide 2: President and CEO Svein Richard Brandtzæg
President and CEO Svein Richard Brandtzæg (2)
Slide 3: Softening macro-economic environment; corrective measures
• Softening macro-economic environment • Corrective measures and operational improvements (3)
Slide 4: Q2 highlights
Q2 highlights • Underlying EBIT NOK 549 million • Realized prices and sales volumes largely unchanged • Results positively influenced by reduced operating cost • Lower power prices and production in Energy • Closure of Kurri Kurri, NOK 1.5 billion in charges (4)
Slide 5: Marginally higher sales quarter-on-quarter
Marginally higher sales quarter-on-quarter Hydro’s fabricated product sales Total fabricated Q2 2012 vs Q1 2012 product sales Foil Litho Can Packaging Auto General Extrusion Building Extrusion Precision Q2 12 vs beverage & building & heat engineering Eurasia Systems Americas Tubing Q1 12 exchanger 8
Slide 6: Weaker year-on-year demand
Weaker year-on-year demand Total fabricated Hydro’s fabricated product sales product sales Q2 2012 vs Q2 2011 Rolled Rolled Products Extrusion Building Extrusion Precision Q2 12 vs Products adjusted* Eurasia Systems Americas Tubing Q2 11 8% 0% -3% -5% -6% -6% -12% *Rolled Products sales adjusted for
Slide 7: Higher Q2 primary aluminium demand
Higher Q2 primary aluminium demand World outside China (quarterly annualized) • Seasonal demand increase 1 000 mt 30 000 • Lower aluminium production 25 000 due to curtailments • ~1.2 million tonnes announced 20 000 curtailments 15 000 • ~2% aluminium demand growth 10 000 expected in world outside C
Slide 8: Ingot premiums continue to rise
Ingot premiums continue to rise Inventories remain tied up in financial deals World reported primary aluminium inventories Regional ingot premiums 1 000 mt Days USD per mt 8,000 80 250 225 7,000 70 200 6,000 60 175 5,000 50 150 4,000 40 125 100 3,000 30 75 2,000 20 50 1,000 10 25 0 0 0 Q1 Q1 Q1 Q1 Q
Slide 9: China continues to increase net imports
China continues to increase net imports Annualized aluminium equivalents*, million mt 20 2006 2007 2008 2009 2010 2011 2012 • Bauxite and alumina ** • Strong increase in imports to China 15 Import • Primary aluminium • Expected to remain 10 broadly balanced in 2012 • Fabricated and semis 5 • Exports
Slide 10: Aluminium price falls further in Q2
Aluminium price falls further in Q2 USD per tonne 3 400 • Low aluminium price • Reflecting weak macro-economic 3 000 outlook • High inventories from long period 2 600 of oversupply 2 200 • Industry profitability challenge 1 800 Primary aluminium LME USD/mt NOK/mt 1 400 Q2 2012 average 2 019 11 888 Q
Slide 11: Absolute alumina prices remain low
Absolute alumina prices remain low Significant increase as percentage of LME Platts index in USD USD per mt Percent 500 18.0 • Alumina market outside China in balance, Alumina price % of LME supported by imports to China 450 17.0 • Strong increase in Chinese alumina imports • Supported by uncertaint
Slide 12: Weak result in Bauxite & Alumina
Weak result in Bauxite & Alumina Driven by higher raw material cost and weaker LME Indexed cash cost and realized alumina price* (Cash cost 1H 2011 = 100) 143 • Results negatively affected by cost and price squeeze -15% 122 • Cost increase driven by increase in raw 108 material cost 100 -9% • Bauxit
Slide 13: Improvement efforts in Bauxite & Alumina
Improvement efforts in Bauxite & Alumina NOK 1 billion improvement potential next 2-3 years Alunorte – Towards 6.3 Mtpy ● Stabilize performance and availability ● Increase productivity ● Improve logistics efficiency ● Optimize efficiency and rightsizing Paragominas – Towards 9.9 Mtpy ● Boost product
Slide 14: Improved cash cost position
Improved cash cost position Estimated primary aluminium cash cost and margin ● Cash cost down ~USD 175 per mt USD/mt 1) from 2011 475 475 425 325 ● Cash cost down on lower alumina cost, 375 2 000 cost improvements and currency 1 825 ● Qatalum EBITDA included in 1H 2012 - 1 375 further reducing cash
Slide 15: Primary Metal improvement program continues
Primary Metal improvement program continues USD 235 per mt by end-2012 ● Additional USD 35 per mt New measures targeted realized in 2012 • Closure of Kurri Kurri aluminium plant ● Weak markets put pressure • Primary Metal and Metal Markets on casthouse margins combined under one management • Aiming
Slide 16: Strong performance in Qatalum
Strong performance in Qatalum • Continued strong production • Firm progress in reconstruction after fire in seawater cooling tower • Final insurance settlement relating to power outage verifies robust coverage • One steam turbine expected back during third quarter 2012 (16)
Slide 17: Raised improvement target in Extruded Products
Raised improvement target in Extruded Products EUR 80* million improvement in 2013 vs 2011 Achieved In million EUR • >50 distribution sites/sales offices 80 closed • 3 presses idled / 2 presses closed • Manning reduced by 770 60 Way forward • Operational initiatives 40 • Restructure logistics • Redu
Slide 18: Jørgen C. Arentz Rostrup, Executive Vice President and CFO
Executive Vice Jørgen C. President and CFO Arentz Rostrup (18)
Slide 19: Underlying EBIT
Underlying EBIT 1 906 1 646 1 448 1 110 1 133 965 688 588 557 549 NOK million Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Bauxite & Alumina 1) 162 288 71 113 155 272 302 159 (144) (188) Primary Metal 1) (169) 382 318 86 583 765 653 484 30 240 Metal Markets 65 31 1
Slide 20: High-level quarterly result development
High-level quarterly result development NOK billion 0.1 (0.2) 0.1 0.55 0.55 Underlying EBIT Q1 2012 Alumina and aluminium C ost & other Energy volume and price Underlying EBIT Q2 2012 price (20)
Slide 21: Key financials
Key financials First half First half NOK million Q2 2012 Q1 2012 Q2 2011 2012 2011 Revenue 21 604 21 748 24 728 43 351 45 867 Underlying EBIT 549 557 1 906 1 106 3 354 Items excluded from underlying EBIT (1 269) 108 206 (1 161) 4 613 Reported EBIT (720) 665 2 111 (54) 7 967 Financial income (expense
Slide 22: Tax and financial expense
Tax and financial expense Tax Finance NOK million Q2 2012 NOK million Q2 2012 Income before tax (1 688) Interest income 68 Equity accounted investments 16 Dividends received and net loss on securities (16) Impairment of PP&E and rationalization charges 1 583 Financial income 52 Adjusted income (loss
Slide 23: Items excluded from underlying EBIT
Items excluded from underlying EBIT First half First half NOK million Q2 2012 Q1 2012 Q2 2011 2012 2011 Underlying EBIT 549 557 1 906 1 106 3 354 Unrealized effects on power and raw material contracts 335 252 142 588 166 Unrealized derivative effects on LME related contracts (35) 55 124 20 4 Metal e
Slide 24: Bauxite & Alumina
Bauxite & Alumina Q2 Q1 Q2 Key figures 2012 2012 2011 Alumina production, kmt 1 491 1 464 1 448 Total alumina sales, kmt 1 888 1 776 2 087 Realized alumina price, USD/mt 296 293 349 Apparent alumina cash cost, USD/mt 268 269 272 Bauxite production, kmt 2 115 2 290 1 928 Underlying EBITDA, NOK millio
Slide 25: Primary Metal
Primary Metal Q2 Q1 Q2 Key figures 2012 2012 2011 Primary aluminium production, kmt 502 514 505 Total sales, kmt 615 627 668 Realized LME price, USD/mt 2 167 2 155 2 509 Realized LME price, NOK/mt 12 637 12 404 13 803 Underlying EBITDA, NOK million 736 577 1 313 Underlying EBIT, NOK million 240 30 7
Slide 26: Improved result for Qatalum
Improved result for Qatalum Positive effect from one-off items Q2 Q1 • High and stable production volumes Key figures – Qatalum (50%) 2012 2012 Revenue, NOK million 1 166 1 018 • Underlying net income up NOK 79 million from Q1 2012 Underlying EBITDA, NOK million 343 226 • Results positively affected
Slide 27: Metal Markets
Metal Markets Q2 Q1 Q2 Key figures 2012 2012 2011 Remelt production, kmt 142 152 151 Metal products sales, kmt 777 785 753 Underlying EBITDA, NOK million 69 113 269 Underlying EBIT excl currency and 117 116 140 inventory valuation effects, NOK million Underlying EBIT, NOK million 44 87 244 Q2 operat
Slide 28: Rolled Products
Rolled Products Q2 Q1 Q2 Key figures 2012 2012 2011 External sales volumes, kmt 228 227 242 Underlying EBITDA, NOK million 316 263 339 Underlying EBIT, NOK million 204 151 232 Underlying EBIT NOK million 673 355 Q2 operating results • Stable sales volumes 232 232 204 • Improved result from lower cos
Slide 29: Extruded Products
Extruded Products Q2 Q1 Q2 Key figures 2012 2012 2011 External sales volumes, kmt 137 133 142 Underlying EBITDA, NOK million 165 125 222 Underlying EBIT, NOK million 53 14 96 Underlying EBIT NOK million 151 68 Q2 operating results • Volumes up in seasonally stronger quarter • Stable product margins,
Slide 30: Energy: low prices, high reservoir levels
Energy: low prices, high reservoir levels Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 700 100 2011 2012 2011 2012 90 600 80 500 70 400 60 50 300 40 200 30 20 100 10 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22
Slide 31: Energy
Energy Q2 Q1 Q2 Key figures 2012 2012 2011 Power production, GWh 2 513 3 190 1 830 Net spot sales, GWh 1 284 1 879 600 Southwest Norway spot price (NO2), 203 272 410 NOK/MWh Underlying EBITDA, NOK million 391 584 392 Underlying EBIT, NOK million 362 556 363 Underlying EBIT Q2 operating results NOK m
Slide 32: Net cash/(debt) development Q2 2012
Net cash/(debt) development Q2 2012 NOK billion Net cash flow from operations NOK 0.8 billion 0.7 (1.7) 1.8 (0.8) 1.5 (1.7) (0.2) (0.4) Net cash Q1 2012 Underlying Operating capital Other Investments Dividends C urrency Net cash Q2 2012 EBITDA adjustments translation & other (32)
Slide 33: Robust financial position
Robust financial position • Cash position of NOK 7.2 billion • Net debt position of NOK 0.4 billion • Re-entered bond market • NOK 1.5 billion bond issued • Maturity: 2019 • Revolving credit facility • USD 1.7 billion • Maturity: 2014 (33)
Slide 34: Taking action in challenging times
Taking action in challenging times Weaker markets Corrective measures • European debt crisis • Ambitious improvement programs • Softening Chinese growth • Capacity adjustments • Increased global uncertainty • Financial discipline (34)
Slide 35: 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 36: Additional information
Additional information (36)
Slide 37: Items excluded from underlying results - 2012
Items excluded from underlying results - 2012 NOK million (+=loss/()=gain) Q1 2012 Q2 2012 Unrealized derivative effects on LME related contracts Bauxite & alumina (8) 11 Total impact Bauxite & alumina (8) 11 Unrealized derivative effects on LME related contracts Primary metal 113 (84) Unrealized de
Slide 38: Operating segment information
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina 162 288 71 113 155 272 302 159 (144) (188) 633 887 Primary Metal (169) 382 318 86 583 765 653 484 30 240 617 2 486 Metal Mar
Slide 39: Operating segment information
Operating segment information Pro forma underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina 205 448 348 223 237 272 302 159 (144) (188) 1 225 969 Primary Metal (203) 481 306 230 592 765 653 484 30 240 816 2
Slide 40: Operating segment information
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina* 139 574 43 91 4 561 339 326 620 (136) (199) 847 5 846 Primary Metal* (8) 645 (378) 355 525 826 675 (760) (96) (1 232) 615 1 265 Metal
Slide 41: Operating segment information
Operating segment information Pro forma reported EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina 205 768 47 140 213 339 326 620 (136) (199) 1 161 1 498 Primary Metal (41) 723 (368) 499 622 826 675 (760) (96) (1 23
Slide 42: Operating segment information
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina* 1 631 2 426 1 735 2 090 2 183 4 271 4 227 3 790 3 195 3 573 7 882 14 471 Primary Metal* 6 607 7 448 6 558 6 979 8 234 9 627 9
Slide 43: Operating segment information
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina* 1 003 1 241 1 076 1 199 1 168 1 688 1 587 1 433 1 241 1 356 4 518 5 876 Primary Metal* 6 210 6 992 6 166 6 620 7 582 8 283
Slide 44: Operating segment information
Operating segment information Depreciation, amortization and impairment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina* - 1 1 1 178 482 470 450 475 439 2 1 580 Primary Metal* 416 430 428 462 467 543 548 1 577 542 1 64
Slide 45: Income statements
Income statements Q2 Q1 Q2 First half First half Year NOK million 2012 2012 2011 2012 2011 2011 Revenue 21 604 21 748 24 728 43 351 45 867 91 444 Share of the profit (loss) in equity accounted investments (16) (115) (88) (131) (107) (260) Other income, net 159 268 179 427 4 732 6 222 Total revenue a
Slide 46: Balance sheets
Balance sheets Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 NOK million 2012 2012 2011 2011 2011 Cash and cash equivalents 7 234 8 786 8 365 6 863 3 831 Short-term investments 1 743 1 568 1 780 1 573 1 744 Accounts receivable 14 320 14 524 13 217 15 742 16 715 Inventories 12 411 13 201 14 157 14 343 14 254 Ot
Slide 47: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year Pro forma Bauxite & Alumina 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Alumina production (kmt) 1 394 1 521 1 442 1 448 1 336 1 448 1 553 1 490 1 464 1 491 5 805 5 827 Sourced alumina (kmt) 539 557 488 556 436 523 581 418 324
Slide 48: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year Pro forma Primary Metal 1) 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Realized aluminium price LME, USD/mt 2 039 2 200 2 137 2 131 2 366 2 509 2 592 2 439 2 155 2 167 2 128 2 478 Realized aluminium price LME, NOK/mt 11 826 13
Slide 49: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year Metal Markets 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Remelt production (1 000 mt) 143 156 141 147 150 151 133 131 152 142 586 565 Third-party metal products sales (1 000 mt) 19 31 38 32 38 47 59 73 76 82 121 217 Metal prod
Slide 50: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10% Currency sensitivities +10% NOK Financial Income Net NOK million EBIT EBIT million items before tax income* Aluminium 2 600 USD 2 200 (800) 1 400 1 000 Oil (220) BRL (800) 750 (50) (50) Pet coke (210) EUR (150) (1 200) (1 350) (1 000)
Slide 51: Investor Relations in Hydro
Investor Relations in Hydro t: +47 417 51 199 Rikard Lindqvist Head of Investor Relations e: rikard.lindqvist@hydro.com t: +47 977 36 022 Stian Hasle Investor Relations Officer e: stian.hasle@hydro.com Irene Alyanakian Investor Relations Assistant t: +47 414 02 174 Kristiansen e: irene.alyanakian.kr