Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (March 2003)
42 slides from Norsk Hydro Asa's investor presentation, Mar 4, 2003
Slide 1: Norsk Hydro ASA
Norsk Hydro ASA Executive Vice President and CFO, John Ottestad London, 4th March 2003
Slide 2: Norsk Hydro's core businesses
2 Norsk Hydro’s core businesses Revenues 2002: NOK 163 billion Aluminium Oil & Energy Agri NOK 65 bn NOK 52 bn NOK 33 bn The largest European The second largest The world’s aluminium company producer of oil and leading supplier of and among the top gas on the plant nutrients three world wide Norwegi
Slide 3: Norsk Hydro – highlights 2002
3 Norsk Hydro – highlights 2002 ! Acquisition of VAW Aluminium ! Record high oil and gas production ! Weak markets for Aluminium and Agri ! Significant currency effects ! Delivering on financial targets
Slide 4: Net income
4 Net income NOK million Gains from divestments 15 000 13 981 10 000 8 765 7 892 5 000 3 446 0 1999 2000 2001 2002 EPS 13.9 53.4 30.5 34.0 Dividend 8.0 9.5 10.0 10.5
Slide 5: CROGI
5 CROGI Cash return on gross investment * 12.5% 9.4% 8.5% 8.5% 1999 2000 2001 2002 * EBITDA less tax, divided by gross invested capital
Slide 6: CROGI per business area
6 CROGI per business area Cash return on gross investment * Oil & Energy Aluminium Agri 14.4% 13.0% 11.9% 10.8% 9.7% 9.6% 9.4% 8.3% 7.8% 7.1% 5.7% 1.6% 1999 2000 2001 2002 1999 2000 2001 2002 1999 2000 2001 2002 * EBITDA less tax, divided by gross invested capital
Slide 7: Divestments
7 Divestments NOK billion ! On track to reach 1999-2001 2002-2003 divestment target of NOK 10 billion by end of 2003 16 ! Signed deals in 2002 " KFK grain and feedstuff " Flexible Packaging 10 10 " Other 6.3 ! 2001 EBITDA for divested assets approximately NOK 600 million (pro forma) target actual ta
Slide 8: Comfortable financial strength
8 Comfortable financial strength Net interest-bearing debt / equity 0.71 0.5 0.44 0.41 0.28 0 1999 2000 2001 2002 Net interest-bearing debt divided by shareholders' equity plus minority interest
Slide 9: Capital allocation
9 Capital allocation ! Planned 2003 capex: NOK 22 billion Exploration Other Agri ! Strict capital discipline ! Strong competition for Oil & Energy funds Aluminium
Slide 10: Hydro Oil & Energy
Hydro Oil & Energy
Slide 11: Hydro Oil & Energy – strategic direction
11 Hydro Oil & Energy – strategic direction Norway Canada Norway Russia Gulf of Mexico ! International growth E&P ! Further integration in the european energy market Iran European energy market Angola Libya
Slide 12: Hydro Oil & Energy – highlights 2002
12 Hydro Oil & Energy – highlights 2002 ! Record high petroleum production ! High oil and gas prices ! Reduced production costs per unit ! Disappointments in exploration ! Major projects on track ! Reserve replacement " 98% organic1 " 187% total2 1) Excl. sales, purchase, swaps and PSA effects 2) In
Slide 13: High oil prices … but weaker USD
13 High oil prices Average Brent Blend dated per quarter USD/bbl NOK/bbl 35 300 30 250 25 200 20 150 15 100 10 5 50 0 0 1999 2000 2001 2002 … but weaker USD
Slide 14: Strong petroleum production
14 Strong petroleum production Per quarter 1 000 boe/day 600 Gas 540 Oil 482 143 500 442 451 448 452 429 443 427 411 419 104 382 104 110 385 115 110 88 400 98 86 371 93 91 74 397 67 57 378 364 287 337 334 336 338 300 272 314 331 325 313 333 311 328 71 58 200 216 214 100 0 1999 2000 2001 2002 Average
Slide 15: High exploration activity … but few discoveries
15 High exploration activity Exploration activity Costs 2002 1492 429 3558 883 1090 1832 702 2495 1900 796 916 928 663 1999 2000 2001 2002 2003 Activity Capital- Previous Expense plan ized years* Norway International … but few discoveries * Costs capitalized in previous years, charged to earnings in
Slide 16: Well positioned for further growth
16 Well positioned for further growth 1 000 boe/day 700 R * 8% 600 CAG 500 400 300 200 100 0 1998 1999 2000 2001 2002 2003E 2004E 2005E 2006E Norwegian fields International SAGA acquisition SDFI acquisition * Compound Annual Growth Rate, 2001 baseline
Slide 17: New fields on stream 2003-2006
17 New fields on stream 2003-2006 Hydro share boe/day Development Jasmim 4 000 International activity PDO Submittal PDO Approval/ Dalia 20 000 Sanctioning Rosa/Lirio 12 000 Start Production Kharyaga 2+3 18 000 (phase 1-3) Murzuq A-field 4 000 NCS Operator Grane 77 000 Fram Vest 15 000 Visund gas pha
Slide 18: Hydro Oil & Energy – the way forward
18 Hydro Oil & Energy – the way forward ! Operations " Production growth " Cost discipline ! Developments " Grane start-up " Ormen Lange development plan ! Exploration " Substantial exploration activities in 2003 " Evaluation of future exploration strategy
Slide 19: Hydro Aluminium
Hydro Aluminium
Slide 20: Hydro Aluminium – one of the majors
20 Hydro Aluminium – one of the majors Total production 2002, thousand tonnes Europe Global 1 200 4 000 3 500 Primary 1 000 Rolling 3 000 800 Extrusion 2 500 600 2 000 1 500 400 1 000 200 500 0 0 Hydro Al. Alcan Alcoa Pechiney Alcoa Alcan Hydro Al. Pechiney Source: CRU
Slide 21: Hydro Aluminium – highlights 2002
21 Hydro Aluminium – highlights 2002 ! Acquisition and integration of VAW Aluminium ! Challenging aluminium markets ! Improvement program launched – progressing well ! Major development projects on track
Slide 22: Weak aluminium prices
22 Weak aluminium prices Aluminium, LME 3M Fwd NOK 16,000 $1,800 NOK USD NOK 15,000 $1,700 $1,600 NOK 14,000 $1,500 NOK 13,000 $1,400 NOK 12,000 $1,300 NOK 11,000 $1,200 NOK 10,000 $1,100 NOK 9,000 $1,000 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Source: Reuters
Slide 23: Aluminium improvement program on track
23 Aluminium improvement program on track Workforce reduction Cost reductions 2000 3000 Magnesium Aluminium Magnesium Aluminium 2500 1500 2000 1000 1500 1000 500 500 0 0 YTD Q2 YTD Q3 YTD Q4 Target Target YTD Q2 YTD Q3 YTD Q4 Target Target Target 2002 2003 2002 2003 2004 Restructuring and rationaliz
Slide 24: Aluminium – the way forward
24 Aluminium – the way forward ! No immediate help from the markets " Flat demand expected " Inventories building up " No immediate rebound in prices ! So we must help ourselves " Cost reductions NOK 2.5 billion (2004 vs 2001) " Harvest synergies " Turnaround, sell or close underperforming units " S
Slide 25: Hydro Agri
Hydro Agri
Slide 26: Hydro Agri – combining size and global presence
Hydro Agri – 26 combining size and global presence All fertilizer products Agri sales tonnes NorthAmerica 25 Europe 2 million 9.8 million Million tonnes products 20 sold 2001 * 15 Asia 10 2.9 million Latin 5 America 2.8 million Africa 0 2.1 million m ro lz S C iu PC IM Sa yd gr i+ H A al Accumulated
Slide 27: Agri – highlights 2002
27 Agri – highlights 2002 ! Turnaround project completed " Fixed costs reduction > NOK 2.5 billion (> 35%) " Closed/sold 11 plants, 12 sales offices " Substantial productivity improvement " Created a simpler, more focused Agri ! 2002 market trends " Fertilizer prices low " Gas costs high " Depreciat
Slide 28: Fertilizer prices were low in 2002 … but on the rise
28 Fertilizer prices were low in 2002 Urea fob Middle East USD/tonne 150 100 50 1999 2000 2001 2002 2003 … but on the rise so far in 2003
Slide 29: Hydro Agri – the way forward
29 Hydro Agri – the way forward ! Tighter supply/demand balance, increasing fertilizer prices ! Margins under pressure due to currency effects and high gas costs ! Stable fertilizer sales volumes expected ! Continued productivity improvements
Slide 30: Norsk Hydro – priorities 2003
30 Norsk Hydro – priorities 2003 ! Meet 2003 CROGI target 8.5% - 9.5% (normalized) ! Deliver on Aluminium improvement program ! Deliver on petroleum production target ! Strengthen Agri’s global leading position ! Complete NOK 10 billion divestment program ! Maintain financial strength
Slide 31: Additional information
Additional information
Slide 32: Indicative P&L sensitivities
32 Indicative P&L sensitivities NOK million Price sensitivity Pre tax After tax OIL price sensitivity, O&E 1 300 350 $1 increase OIL price sensitivity, Agri (110) (80) $1 increase OIL price sensitivity 1 190 270 $1 increase LME price sensitivity, Aluminium 830 580 $100 increase CAN price sensitivity
Slide 33: Hydro Oil & Energy – financial performance
33 Hydro Oil & Energy – financial performance EBITDA Eliminations NOK million Energy and Oil Marketing Exploration and Production 9 000 7 976 7 986 7 894 7 887 8 000 7 697 7 425 6 982 6 757 7 000 6 155 6 000 5 847 5 528 5 451 5 314 5 000 4 075 4 000 3 000 2 228 1 962 2 000 1 000 0 1999 2000 2001 200
Slide 34: A cost-efficient offshore operator
34 A cost-efficient offshore operator Company Platform Troll C Troll B Oseberg A Oseberg East Top 25% Snorre/Vigdis Oseberg C Njord Oseberg South Visund Brage Average 0 10 20 30 40 50 0 20 40 60 80 100 NOK/boe NOK/boe Benchmark of Norway and UK Central North Sea Source: McKinsey, June 2002
Slide 35: Major offshore development projects
35 Major offshore development projects ! Grane ! Ormen Lange " Start-up Oct 2003 " Second largest gas " Plateau production field in Norway 200 000 bbl/day " Expected reserves " Hydro share 38% 375 bcm " Development costs " Plateau production below plan 15-20 bcm/year " Hydro share 18% " PDO in Q4 20
Slide 36: Aluminium – financial performance
36 Aluminium – financial performance EBITDA Other and Eliminations NOK million Extrusion and Automotive Rolled Products 2 000 1 803 1 430 Metals 1 750 1 659 1 566 1 500 1 292 1 316 1 250 1 065 1 073 1 000 849 889 899 827 773 526 750 473 500 250 (302) 0 - 250 - 500 1999 2001 2002 2000 Accumulated 3 7
Slide 37: Hydro Aluminium value chain
37 Hydro Aluminium value chain Pro forma 2002 Alumina* 680 734 Equity LT Contracts Electrolysis metal 1414 Primary Metal products 1414 300 925 555 Equity Primary: 3rd Remelt external Remelt own party alliances scrap Downstream 840 564 67 Cast products Rolled Extrusion & Automotive *Aluminium equival
Slide 38: Aluminium – cyclical demand
38 Aluminium – cyclical demand 10 Extrusions demand Rolled products demand 7.5 Annual % change Industrial production Real GDP 5 2.5 0 -2.5 -5 1999 2000 2001 2002 2003E 2004E Sharp turning points are mainly explained by major changes in inventory levels Source: EAA, OEF, OECD
Slide 39: Agri – financial performance
39 Agri – financial performance EBITDA NOK million 2 000 1 570 1 500 1 383 1 198 1 078 1 099 951 1 008 1 000 819 705 725 719 645 604 503 500 0 - 40 - 500 - 427 -1 000 1999 2000 2001 2002 Accumulated 640 3 553 4 402 3 945
Slide 40: Our six areas of global strength
40 Our six areas of global strength Ammonia " Leading position Nitrates " Leading position Balanced fertilization " Leading position (high value crops) (NPK) Speciality fertilizers " Leading position with SQM (cash crops) Selected industrial applications " Leading West European position Distribution
Slide 41: Agri value drivers
41 Agri value drivers Drivers Effect on Gas price USA # Ammonia price Income Ammonia price # Urea price Grain prices # Urea price European market balance # Nitrate margin Market segmentation # Value added margins Oil price # Gas costs Europe Cost Production volume # Unit cash cost Productivity # Fix
Slide 42: Safe harbour statement
42 Safe harbour statement In order to utilize the "Safe Harbour" provisions of the United States Private Securities Litigation Reform Act of 1995, Hydro is providing the following cautionary statement: This presentation contains certain forward-looking statements with respect to the financial condit