Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (2012)
110 slides from Norsk Hydro Asa's investor day presentation, 2012
Slide 1: Financial update
Financial update Jørgen C. Arentz Rostrup Capital Markets Day 2012 (1)
Slide 2: Agenda
Agenda • Financial and shareholder policy • Financial reporting going forward • Improvement efforts • Earning drivers (2)
Slide 3: Financial and shareholder policy
Financial and shareholder policy 01 (3)
Slide 4: Robust financial position
Robust financial position NOK billion 1.7 Net cash/(debt) 0.0 31-Dec-11 30-Sep-12 Adjusted net debt1 (13.6) (19.9) 31-Dec-11 30-Sep-12 1) Net pension liability, operating lease commitments and other. Net interest-bearing debt in equity accounted investments taken out of adjusted net debt as of Sep 3
Slide 5: Net cash development YTD 2012
Net cash development YTD 2012 NOK billion Net cash flow from operations NOK 2.4 billion 0.2 (2.7) 4.9 (2.7) 1.7 (1.7) 0.3 0 Net cash Q4 2011 Underlying EBITDA Operating capital Other adjustments Investments Dividends Currency translation Net cash Q3 2012 & other (5)
Slide 6: Priorities for capital allocation
Priorities for capital allocation • Maintain a solid balance sheet • Ensure competitive return to shareholders • Pursue disciplined and selected growth (6)
Slide 7: Maintain financial flexibility
Maintain financial flexibility • Robust balance sheet • Strong focus on liquidity − NOK 8.7 billion in cash and cash equivalents by end-Q3 2012 − USD 1.7 billion facility with maturity 2014, currently undrawn − NOK 1.5 billion bond issued with maturity 2019 • Maintain investment grade rating − Curre
Slide 8: Aiming for competitive returns to shareholders
Aiming for competitive returns to shareholders Dividend payout ratio • Dividend payout ratio* to average 30% over the cycle − Average 71% 2007-2011 202% • Buyback of shares and extraordinary dividends considered when earnings, liquidity position and capital structure allow • Ambition to maintain abs
Slide 9: Capital allocation mainly upstream
Capital allocation mainly upstream NOK billion Debt-financed investments Qatalum • Sustaining capex NOK 3 billion annually 10.2 Investments Qatalum Grow th capex • No major growth projects planned for 2013 Sustaining capex • ~85% of capital to be allocated upstream in 2013 6.2 • Depreciation signifi
Slide 10: Financial reporting going forward
Financial reporting going forward 02 (10)
Slide 11: Reporting effects following Sapa joint venture
Reporting effects following Sapa joint venture Until closing • Extruded Products reported as “discontinued operations” from Q4 2012 − Continue to present Extruded Products details After closing • Expect to recognize a gain • Sapa joint venture accounted for according to equity method • Closing expec
Slide 12: Pension
Pension • Pension liability highly dependent on assumptions − Hydro estimate 2% discount rate in Norway − Ongoing discussion on what discount rate to use • Net pension liability at fair value estimated up ~NOK 1 billion from end-2011 to end-2012 − Reduced discount rates − Extruded Products as discon
Slide 13: New pricing formula for metal sales
New pricing formula for metal sales Today • 3-month forward pricing formula − 3-month LME price with 3.5-4 month lag − Done to match customer pricing behavior From February 1, 2013 • 1-month forward pricing formula − Spot LME price with 1.5-2 month lag − Customer pricing metal closer to delivery fol
Slide 14: Short-term update: continued challenging markets
Short-term update: continued challenging markets • Decreasing LME price • Stable Platts alumina price • Seasonal decline downstream • Higher energy production and prices • Macro uncertainty and weak markets (14)
Slide 15: Improvement efforts
Improvement efforts 03 (15)
Slide 16: Challenging markets
Challenging markets Underlying EBIT in NOK million 1 906 1 646 1 448 1 110 1 133 965 688 588 557 549 8 2010 2011 2012 (16)
Slide 17: Significant achievements in ongoing improvement efforts
Significant achievements in ongoing improvement efforts Primary Metal Extruded Products 300 60 USD per tonne EUR million 200 40 100 20 0 0 Realized 2010 Realized 2011 Estimate 2012 Realized 2011 Estimate 2012 (17)
Slide 18: Positive trend in net operating capital days
Positive trend in net operating capital days Days 90 84 80 74 71 70 69 60 50 Q1-Q3 2009 Q1-Q3 2010 Q1-Q3 2011 Q1-Q3 2012 (18)
Slide 19: Sensitivities
Sensitivities 04 (19)
Slide 20: Understanding of Hydro's earning drivers
Understanding of Hydro’s earning drivers • Starting point and assumptions • Simplified models • Negative correlations • Complexity (20)
Slide 21: Price and currency sensitivities
Price and currency sensitivities Aluminium price sensitivity +10% Currency sensitivities +10% NOK million 2,700 NOK Financial Income Net million EBIT items before tax income USD 2 100 (700) 1 400 1 000 2,000 BRL (850) 650 (200) (100) EUR (150) (1 400) (1 550) (1 100) • Annual sensitivities based on
Slide 22: Bauxite & Alumina sensitivities
Bauxite & Alumina sensitivities Sensitivities on underlying EBIT if +10% in price Revenue impact NOK million • ~14% of 3-month LME price per tonne alumina • ~One month lag 1,000 Cost impact Bauxite • ~2.45 tonnes bauxite per tonne alumina • Pricing partly LME-linked for bauxite from MRN Caustic soda
Slide 23: Primary Metal sensitivities
Primary Metal sensitivities Sensitivities on underlying EBIT if +10% in price Revenue impact NOK million • Realized price lags LME spot by ~1-2 months 1,650 Cost impact Alumina • ~1.9 tonnes per tonne aluminium • ~14% of 3-month LME price per tonne alumina, increasing volumes priced on Platts index
Slide 24: Annualized underlying EBITDA scenarios
Annualized underlying EBITDA scenarios Scenarios are not forecasts, but represent earnings potential based on sensitivities Indicative EBITDA-range in 3 different scenarios Additional factors influencing NOK billion future earnings 14 12 10 Extruded Products Improvement 8 accounting efforts 6 4 2 ?
Slide 25: Summary
Summary 05 (25)
Slide 26: Financial priorities
Financial priorities • Continuous improvements • Margin management • Cash flow and financial flexibility • Shareholder returns (26)
Slide 27: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO
Slide 28: Hedging policy
Hedging policy Upstream − Remain primarily exposed to LME prices – Partly off-setting effects through raw material prices and negative currency correlations with LME − Operational LME hedging – One month forward sales − Currency exposure, mainly USD and BRL – Policy of maintaining long-term debt in
Slide 29: Adjusted net debt
Adjusted net debt Dec 31, Dec 31, Dec 31, Sep 31, NOK billion 2009 2010 2011 2012 Cash and cash equivalents 2.5 10.9 8.4 8.7 Short-term investments 1.5 1.3 1.8 2.5 Short-term debt (1.9) (0.9) (4.3) (6.3) Long-term debt (0.1) (0.3) (4.2) (4.8) Net cash/(debt) 2.0 11.0 1.7 0.0 Cash and short-term inve
Slide 30: Creating a global leader
Creating a global leader Svein Richard Brandtzæg Capital Markets Day 2012 (1)
Slide 31: Hydro's path towards global leadership
Hydro’s path towards global leadership Curtailing 26% of primary Launching USD 300 program Announcing SAPA JV metal capacity Creating the world’s leading aluminium solutions provider 2009 2010 2011 2012 Acquiring bauxite and Starting up Qatalum alumina assets (2)
Slide 32: Qatalum
Qatalum Building a world-class, first-quartile smelter (3)
Slide 33: Bauxite & Alumina
Bauxite & Alumina Acquiring high-quality raw materials in Brazil (4)
Slide 34: Sapa joint venture
Sapa joint venture Establishing a global extrusion champion (5)
Slide 35: The industry's most ambitious repositioning drive
The industry’s most ambitious repositioning drive Implementing improvement programs across the value chain Bauxite & Alumina Primary Metal Rolled Products Extruded Products ‘From B to A’ ‘USD 300 program’ ‘Climb 10’ ‘Mission 1000’ (6)
Slide 36: Hydro Capital Markets Day 2011
Hydro Capital Markets Day 2011 Recap • Improve relative position • Focus on operational excellence • Develop commercial opportunities • Manage portfolio actively (7)
Slide 37: A resource-rich global aluminium company
A resource-rich global aluminium company Robust positions across the value chain Recycling Rolling Bauxite Alumina Energy Primary Casting Products Extrusion Recycling (8)
Slide 38: Attractively positioned, global reach
Attractively positioned, global reach Norway Continental Europe • 900 000 tpy hydro-powered aluminium production • Leading upstream, midstream and • Technology centre, R&D for next-generation smelter Rolled Products positions • Hydropower developments • Recycling network • Recycling/remelting North
Slide 39: Challenging markets, positive long-term trends
Challenging markets, positive long-term trends (10)
Slide 40: Solid history of growth in aluminium demand
Solid history of growth in aluminium demand Yet industry’s ability to capitalize on the rising trend remains a concern Yearly consumption (Index 2000=100) 3-month LME price (Index 2000=100) 185 800 175 700 165 600 155 500 145 400 135 300 125 115 200 105 100 95 0 2000 2001 2002 2003 2004 2005 2006 20
Slide 41: Volatile world economy
Volatile world economy North America Europe China • Labor market improving • Ongoing sovereign debt crisis • Economic growth softening • Consumer sentiment picking up • Weak growth in industrial • Exports subdued by weaker production in line with poor PMI global demand • Industrial production modera
Slide 42: Aluminium prices reflecting macroeconomic uncertainty
Aluminium prices reflecting current macroeconomic uncertainty LME 3-month in USD per mt 3,600 2,400 3,200 2,800 2,200 2,400 2,000 2,000 1,600 1,800 January April July October 1,200 2006 2007 2008 2009 2010 2011 2012 Source: Reuters Ecowin (13)
Slide 43: Demand-side indicators illustrating multi-speed world economy
Demand-side indicators illustrating multi-speed world economy Automotive indicators Construction indicators January 2008=100 January 2008=100 120 120 100 100 80 80 60 60 40 40 jan. 08 jul. 08 jan. 09 jul. 09 jan. 10 jul. 10 jan. 11 jul. 11 jan. 12 jul. 12 jan. 08 jul. 08 jan. 09 jul. 09 jan. 10 jul.
Slide 44: Global megatrends favor continued rise in aluminium demand
Global megatrends favor continued rise in aluminium demand Megatrends Impact Aluminium industry effect • Industrialization • Automotive, rail and aerospace • Infrastructure • Electrical cables Millions climb • Transport • Consumer goods out of poverty • Construction • Packaging • Consumer products •
Slide 45: Positive long-term outlook for growth in aluminium demand
Positive long-term outlook for growth in aluminium demand Demand for semis in million mt 120 4-6% annual growth 100 80 53 41 60 27 40 54 47 20 38 0 2012 2017 2022 World outside China China Source: CRU (16)
Slide 46: Highly versatile metal, broad range of applications
Highly versatile metal, broad range of applications 6% 10 % 26 % Transport 5% Construction Packaging Foil 13 % Electrical Consumer durables 8% 25 % Machinery & Equipment Other 8% Source: CRU. Global demand per segment demand, 2011. (17)
Slide 47: Strong trend in automotive light-weighting
Strong trend in automotive light-weighting Gaining ground in high-volume segments Body-In-White – 16% CAGR estimated 6% 10 % 26 % 5% 13 % CO2 emissions (g/km) 160 8% 25 % 150 8% 140 130 120 110 100 100 200 300 400 500 Aluminium substitution for steel (kg) (18)
Slide 48: Aluminium gaining from materials substitution
Aluminium gaining from materials substitution Strong potential in HVACR market 6% 10 % 26 % 5% Aluminium tube potential in HVACR industry 13 % 800 Thousand mt 600 8% 25 % 8% 400 200 0 Aluminium tube Global potential Residential A/C Refrigeration Heat pump Liquid lines A/C Liquid lines Refrig HVACR=
Slide 49: Construction turns to aluminium for energy-efficient solutions
Construction turns to aluminium to create energy-efficient solutions Considerable global potential 6% 10 % 26 % 5% 13 % World energy use per sector 36 % 8% 25 % 28 % 27 % 8% 9% Buildings Industry Transport Other Source: IEA, 2010 (20)
Slide 50: Low prices despite balanced primary metal market
Low prices despite balanced primary metal market Balanced market Large inventories Low and volatile LME 30 000 8 000 80 3 400 7 000 70 25 000 3 000 6 000 60 20 000 2 600 5 000 50 15 000 4 000 40 2 200 3 000 30 10 000 1 800 2 000 20 5 000 1 400 1 000 10 0 0 0 1 000 Feb-10 May-10 Aug-10 Nov-10 Feb-11
Slide 51: Bauxite and alumina market in transition
Bauxite and alumina market in transition China bauxite import China alumina import Commercialization 1250 1250 450 20 Alumina price % of LME 1000 1000 400 18 750 750 350 16 500 500 300 14 250 250 0 0 250 12 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Aug-
Slide 52: Aiming to become the industry benchmark
Aiming to become the industry benchmark (23)
Slide 53: Highly attractive bauxite and alumina position
Highly attractive bauxite and alumina position Despite lower LME and weak EBITDA Underlying EBITDA per mt in USD for respective bauxite and alumina divisions 1H 2011 2H 2011 1H 2012 100 100 100 50 50 50 0 0 0 -50 -50 -50 Hydro Peers All figures based on public accounting data, not verified by Hydro.
Slide 54: Improvement drive yields results in primary production
Improvement drive yields results in primary production Underlying EBITDA per mt in USD for respective primary aluminium divisions 1H 2011 2H 2011 1H 2012 700 700 700 500 500 500 300 300 300 100 100 100 -100 -100 -100 Hydro Peers All figures based on public accounting data, not verified by Hydro. Dat
Slide 55: Upstream raw material cost challenge
Upstream raw material cost challenge LME continues to lag key raw material prices Indexed (Q1 2010=100) 3-month LME Caustic price Coal price Fuel oil price* Pet coke price +127% +119% +105% +87% +88% +84% +67% +67% +56% +50% +35% +36% +15% +17% +10% +1% +3% -1% -8% -12% Q1 Q1 Q1 Q2 Q3 Q1 Q1 Q1 Q2 Q3
Slide 56: Strengthening the competitiveness of Bauxite & Alumina
Strengthening the competitiveness of Bauxite & Alumina From B to A Alunorte Improvements in million NOK • Increase productivity and rightsize organization 1000 • Stabilize performance at nameplate capacity • Improve logistics efficiency 800 Paragominas • Increase productivity and rightsize organizat
Slide 57: Primary Metal to complete USD 300 improvement program in 2013
Primary Metal to complete USD 300 improvement program in 2013 • Estimated to deliver according to target for 2012 Improvements in USD per mt − USD 235 per mt improvements by end-2012 300 − Challenging markets put pressure on margin 65 above standard ingot premium − Outperforming on cost reductions a
Slide 58: Extruded Products improvement program continues
Extruded Products improvement program continues • Sale of Portalex Completed • Closure of ~50 sites • 3 presses idled / 2 presses closed • Manning reduced by ~900 Under • Closure of Monett extrusion plant in US execution • Closure of Guaymas fabrication site in Mexico • Further rightsizing of organi
Slide 59: Enhancing performance in Rolled Products
Enhancing performance in Rolled Products • Portfolio optimization • High-grading product portfolio • Cost programs and margin management • Capital discipline (30)
Slide 60: No. 1 flat rolled products producer in Europe
No. 1 flat rolled products producer in Europe • World leader in high-end products foil and litho • Focus production system on core assets − Alunorf (50%) – world’s largest rolling mill − Grevenbroich plant – world’s largest finishing mill • Technology leadership and innovation − Developing new produ
Slide 61: Energy: optimization of equity hydropower production
Energy: optimization of equity hydropower production • First-class hydropower assets in Norway − 9.5 TWh normal annual production − Highly competitive cost position − Stable operations • Focus on optimization − Commercial activities − Production • Solid cash-flow generation (32)
Slide 62: Securing energy across the value chain
Securing energy across the value chain and growing equity portfolio • Sourcing energy across the value chain • Growing and upgrading portfolio − 2012 achievements: competitive power secured − Expansions completed: Holsbru, Vasstøl for Neuss and Søral − 2013 focus: new contract for Slovalco and − Suc
Slide 63: HSE, CSR and compliance are key components
HSE, CSR and compliance are key components in a performance culture TRI rate 10.3 HSE YTD performance 7.0 6.0 3.4 5.4 CSR Performance 4.0 4.1 3.9 3.7 3.8 3.4 2.9 Compliance 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD2012 People (34)
Slide 64: Ideally positioned for growth
Ideally positioned for growth Attractive growth Partnerships and project portfolio joint ventures Hydro Financial strength Structural changes and flexibility (35)
Slide 65: Our value proposition
Our value proposition (36)
Slide 66: Value proposition priorities
• Improve relative industry position • Capitalize on raw material positions • Maintain financial strength and flexibility • Ensure competitive shareholder return (37)
Slide 67: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO
Slide 68: Primary Metal: Improving robustness
Primary Metal Improving robustness Hilde M. Aasheim Capital Markets Day 2012 (1)
Slide 69: Primary Metal's smelter portfolio
Primary Metal’s smelter portfolio Norway Canada Slovakia Qatar Brazil Australia Consolidated capacity: 2.2 million mt - Slovalco and Albras are fully consolidated, Qatalum and Søral are equity accounted. 300.000 tons of capacity currently curtailed in Kurri-Kurri, Sunndal and Søral (2)
Slide 70: Primary Metal main agenda – repositioning
Primary Metal main agenda – repositioning Estimated primary aluminium cash cost and margin • Curtailed high-cost capacity USD per mt 1) 475 475 425 • Qatalum first-quartile cost position confirmed 300 • Improvement efforts progressing within all 2 000 1 800 existing assets 1 375 1 250 • Securing com
Slide 71: Robust power coverage
Robust power coverage Power coverage (%), based on consolidated production in 2012, year-end level • Alouette power contract extended for current capacity, power for potential expansion secured 100% • EU CO2 compensation framework in place − Norway committed to implement compensation 75% • Søral pow
Slide 72: Primary Metal delivers on improvement program
Primary Metal delivers on improvement program USD 300 to be delivered by end-2013 Operational improvements 300 •Improved current efficiency •Reduced power consumption •Reduced anode consumption Fixed cost reductions and lean operations 200 Further operational improvements Technology costs/spin-offs
Slide 73: Improvement focus will continue
Improvement focus will continue • Continuing USD 300 improvement program in all areas based on Primary Metal production system (AMPS) • New areas will be explored − Commercial optimization after Primary Metal and Metal Markets combined under one management − Black raw materials – Using new coke qual
Slide 74: Estimated USD 300 improvement program achievements end-2013
Estimated USD 300 improvement program achievements end-2013 Total annual effects in real terms NOK ~1.4 billion Fixed cost at plant Sustaining capex and above and relining Amperage, current efficiency and energy consumption NOK ~150 million NOK ~250 Logistics NOK ~650 million Casthouse margins* mill
Slide 75: Working with partners in the six joint venture smelters
Working with partners for improvements in the six joint venture smelters Søral 176kt (49.9%) Slovalco 163 kt (55.3%) Alouette 570 kt (20%) Albras 460 kt (51%) Qatalum 600 kt (50%) Tomago 585 kt (12.4%) (8)
Slide 76: Qatalum – world-class smelter
Qatalum – world-class smelter Smelter • Full electrolysis capacity from 21 September, 2011 • Estimate above 600 000 tonnes liquid metal in 2012 • High-quality anode operation • Casthouse production >90% value-added products • Technology verified Power Plant • Seawater cooling tower in full operation
Slide 77: Qatalum – first quartile cost position confirmed
Qatalum – first quartile cost position confirmed • Business operating cost ~USD 1 450 - 1 500 at current market conditions • Further operational streamlining and cost optimization • Further creep potential beyond 2012 level (10)
Slide 78: Albras – promising changes in energy framework
Albras – promising changes in energy framework • Business environment improved • Focus on operational improvements − Exchange rates significantly improved − Positive governmental announcements on power framework – Actual impact and implementation needs further clarification (11)
Slide 79: Primary Metal priorities
Primary Metal priorities • Continued drive to reposition portfolio • Deliver on USD 300 program by end-2013 • Intensified improvement focus in JVs • Power sourcing • Optimizing casthouse operations after combining Primary Metal and Metal Markets (12)
Slide 80: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO
Slide 81: Bauxite & Alumina
Bauxite & Alumina Johnny Undeli Capital Markets Day 2012 (1)
Slide 82: Bauxite & Alumina – key priorities
Bauxite & Alumina – key priorities • Deliver on ambitious improvement program • Strengthen cash generation • Lift and stabilize production • Continue commercial focus • Focus on HSE and CSR (2)
Slide 83: Commercial
Commercial 01 (3)
Slide 84: Attractive alumina portfolio
Attractive alumina portfolio Alumina position Estimated index exposure in external sales portfolio Thousand mt 8 000 60% 7 000 6 000 Sourcing 40% 5 000 Equity 4 000 20% 3 000 Hydro smelter demand* 2 000 0% 2013 2017 2020 1 000 • Legacy contracts limiting index exposure next few years - 2012 2013 201
Slide 85: Index pricing gaining ground
Index pricing gaining ground Short/medium-term contract prices in % of LME Alumina price development 17% 450 18% 16% 17% 400 16% 15% 350 15% 14% Introduction of PAX 300 14% 13% 13% 250 12% 12% 200 11% 11% 10% 150 10% 1990-2000 2001-2005 2006-2010 2011-2012 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 J
Slide 86: Optimizing global bauxite and alumina positions
Optimizing global bauxite and alumina positions Estimated shipments 2012 • 7.3 million mt alumina • 2.6 million mt bauxite External sourcing and swapping • Saving logistical cost and improving margins • Ensuring global reach • Enabling market opportunities (6)
Slide 87: Commercial strategy
Commercial strategy Increasing alumina index exposure • All new contracts to be based on index pricing • Allowing alumina to be priced on own fundamentals Alumina marketing targets • Increase sales on CIF* basis • Establish premium for Alunorte quality Bauxite marketing targets • Improve margins on
Slide 88: Ambitious improvement program 'From B to A'
Ambitious improvement program ”From B to A” 02 (8)
Slide 89: Paragominas – one of the world's largest bauxite mines
Paragominas – one of the world's largest bauxite mines Million mt annually Paragominas production 12 Capacity 8 Estimate 4 0 2007 2008 2009 2010 2011 2012 • High-quality gibbsite bauxite • Efficient integrated system with mine, pipeline and refinery • Record production in 2012 (9)
Slide 90: Alunorte – world's largest alumina refinery
Alunorte – world's largest alumina refinery Million mt annually Alunorte production 8 Capacity Estimate 4 0 2007 2008 2009 2010 2011 2012 • Premium alumina quality • Benchmark energy consumption • Ambition to reach nameplate capacity • Continue to improve production stability (10)
Slide 91: Hydro's position – competitive compared to peers
Hydro’s position – competitive compared to peers Despite lower LME and weak EBITDA Underlying EBITDA per mt in USD for respective bauxite and alumina divisions 1H 2011 2H 2011 1H 2012 100 100 100 50 50 50 0 0 0 -50 -50 -50 Hydro Peers All figures based on public accounting data, not verified by Hydr
Slide 92: From B to A
“From B to A” • Total contribution of NOK 1 billion − Full impact in 2015 − 50% in 2013 • Defined actions in Alunorte, Paragominas and Commercial • Production stability, volumes and costs • Focus on underlying performance improvements (12)
Slide 93: Target 20% demanning by end-2015
Target 20% demanning by end-2015 % demanning versus 2011 headcount • Baseline 6 000 employees, including contractors % 2012 2013 2014 2015 0 • Target reduction of 1 200, primarily contractors − Centralization of contract management − Major potentials in the area of transportation, 10 cleaning and ma
Slide 94: Paragominas cost ambition
Paragominas cost ambition Paragominas production cash costs Paragominas influencable costs % shares of costs % shares of costs Targeted reduction 20% reduction of influencable costs Influencable Materials (14)
Slide 95: Paragominas – improving productivity with surface miners
Paragominas – improving productivity with surface miners • Surface miner increasing productivity and reducing unit costs − Increasing productivity in the mining process, from 400 t/h to 800 t/h − Operating over wider mining areas − Reducing ore losses (15)
Slide 96: Paragominas – increasing mass recovery
Paragominas – increasing mass recovery Development of mass recovery since start-up Target % • Increase life of mine 70 • Increase production Target • Decrease tailing volumes and reduce investments 65 Actions • Installation of a “crossover” 60 − Allowing use of most suitable line • Increase of fines
Slide 97: Pipeline – installing second pump station
Pipeline – installing second pump station • Bauxite slurry flow currently provided through pump station in Paragominas • Construction of second pump station halfway to Alunorte • Improved operations − Availability − Flexibility − Prolonged lifetime − Safety and environment (17)
Slide 98: Raw materials represent significant share of total costs
Raw materials represent significant share of total costs Caustic soda, coal and fuel accounting for ~50% Cost split Bauxite & Alumina YTD September 2012 Caustic soda Coal Fuel Others (18)
Slide 99: Alunorte – reduction of influencable costs
Alunorte – reduction of influencable costs Alunorte production cash costs Alunorte influencable costs % shares of costs % shares of costs Targeted reduction 20% reduction of influencable costs Influencable Materials (19)
Slide 100: Alunorte – stabilizing hydrate production lines 1/2/3
Alunorte – stabilizing hydrate production lines 1/2/3 Hydrate production in mt per month • Alunorte hydrate production lines 1/2/3 with 210 production below design capacity Target • Identified actions − House-keeping of tanks and digesters 200 − Review of critical operational procedures − Overhaul o
Slide 101: Alunorte – emergency preparedness towards power outage
Alunorte – emergency preparedness towards external power outage • Ensure 100% energy availability to avoid production losses • Identified actions − Install emergency generation in precipitation area − Implement rejection load system to keep operation during power grid system failure − Recovery tower
Slide 102: Alunorte – improving cost position
Alunorte – improving cost position 500 Business operating cash costs in USD per mt 2012 450 400 350 300 First quartile 250 Alunorte 200 0 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 100 000 110 000 Source: CRU (22)
Slide 103: Commercial – reducing demurrage costs
Commercial – reducing demurrage costs Annual demurrage cost savings in USD million • Identified actions 12 − “Bauxiteiro” vessels for transport from MRN to Alunorte Target 10 − Dredging in Alunorte port − Upgrade Alunorte port for rainy season 8 − Stabilize production volumes 6 4 2 0 2012 2013 2014
Slide 104: Ambitious improvement program 'From B to A'
Ambitious improvement program “From B to A” EBIT improvement of NOK 1 billion and 20% manning reduction Annual improvements versus 2011 ! “From B to A” improving result significantly NOK 1 bn ! Additional impact from inflationary pressure and EBIT (NOK billion) exchange rates 2011 2012 2013 2014 201
Slide 105: HSE/CSR
HSE/CSR 03 (25)
Slide 106: Safety – The Hydro Way
Safety – The Hydro Way Improved transparency Cultural development (26)
Slide 107: Social and environmental commitment
Social and environmental commitment • Health, safety and environment culture is the foundation for excellent operations • Environment − Mining 1:1 ratio of opening and rehabilitating land in 2017 − Letter of intent with University of Oslo on biodiversity and climate − Supporting Para Green Municipal
Slide 108: Summary
Summary 04 (28)
Slide 109: Deliver on 'From B to A'
Deliver on "From B to A" Annual improvement versus 2011 NOK 1 bn 2011 2012 2013 2014 2015 20% reduction (29)
Slide 110: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO