Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q1 2007 Earnings Presentation
62 slides from Norsk Hydro Asa's earnings presentation, 2007
Slide 1: First quarter 2007
First quarter 2007 www.hydro.com
Slide 2: Highlights first quarter
Highlights first quarter z Strong results in Aluminium Metal and Oil & Energy z Results for Aluminium Products significantly improved z Continued strong market conditions z Ormen Lange/Langeled on track z Oil and gas merger with Statoil expected to close 1 October 2
Slide 3: Net income from continuing operations
Net income from continuing operations NOK million 5 932 5 594 US GoM impairment 4 783 Gains from divestments 4 176 4 183 3 858 3 638 3 661 3 522 3 361 3 135 2 481 2 224 2004 2005 2006 2007 US GAAP US GAAP IFRS IFRS Accumulated US GAAP 11 477 15 542 17 224 IFRS 17 933 5 594 3
Slide 4: Consolidated income statements
Consolidated income statements NOK million Q1 2007 Q4 2006 Q1 2006 Revenue 48 753 48 213 53 050 Share of the profit in equity accounted investment 286 59 321 Other income, net 1 075 496 244 Revenues and income 50 114 48 768 53 615 Depreciation, amortization and impairment (4 703) (8 425) (4 131) Oth
Slide 5: Earnings before financial items and tax (EBIT)
Earnings before financial items and tax (EBIT) NOK million Q1 2007 Q4 2006 Q1 2006 Exploration and Production 10 146 7 246 12 927 Energy and Oil Marketing 1 310 1 324 1 157 Eliminations (290) 539 57 Oil & Energy 11 166 9 109 14 140 Aluminium Metal 2 534 899 1 706 Aluminium Products 1 315 (481) 486 O
Slide 6: EBITDA
EBITDA NOK million 21 033 20 493 19 952 19 556 17 002 16 820 16 635 15 733 15 379 13 546 13 210 12 266 12 094 2004 2005 2006 2007 US GAAP US GAAP IFRS IFRS Accumulated 51 116 64 933 78 112 19 556 6
Slide 7: Adjusted net debt/equity ratio
Adjusted net debt/equity ratio 0.50 0.31 0.23 0.11 0.07 2004 2005 2006 Q1 2007 US GAAP US GAAP IFRS IFRS Interest-bearing debt + net pension liability (tax adjusted) + operating lease commitments (discounted) – cash and cash equivalents – other liquid assets divided by shareholders’ equity + minorit
Slide 8: Oil & Energy – highlights
Oil & Energy – highlights z Oil and gas production 610 000 boed z Four new discoveries z Ormen Lange/Langeled on track – 94 percent complete z Peregrino field development plan approved by Brazilian authorities z Realized oil price: USD 55.94 per bbl z Realized gas price: NOK 1.90 per Sm3 8
Slide 9: Oil & Energy – key figures
Oil & Energy – key figures Operational data Q1 2007 Q4 2006 Q1 2006 Oil and gas production (1 000 boe/day) 610 595 610 Realized oil price, USD/boe 55.94 57.80 60.61 Realized oil price, NOK/boe 347.80 369.20 403.50 Realized gas price, NOK/Sm³ 1.90 1.97 2.16 Exploration expense, NOK million 786 2 093
Slide 10: Petroleum production per quarter
Petroleum production per quarter 1 000 boe/day Oil Gas 173 208 192 147 176 178 184 197 154 142 168 123 169 442 422 418 415 406 399 405 402 398 391 385 368 381 2004 2005 2006 2007 Average 572 563 573 610 10
Slide 11: Production costs per barrel
Production costs per barrel NOK/boe Gas injection costs Production costs excluding gas injection 32.2 30.8 30 25.3 7.9 5.7 25 20.7 5.4 20 2.8 15 24.3 25.1 10 17.9 19.9 5 0 2004 2005 2006 2007 YTD Production in million boe 209 206 209 55 11
Slide 12: Exploration activity
Exploration activity z 60 wells planned in 2007 z Nine wells completed z Four discoveries – three in Norway and one in US Gulf of Mexico z Activity of NOK 900 million 12
Slide 13: Oil & Energy – prospects
Oil & Energy – prospects z 2007 production target of 585 000 boed z Ormen Lange start-up on schedule z Peregrino development phase on track z High exploration activity z Planned merger with Statoil expected to close 1 October 2007 13
Slide 14: Aluminium Metal – highlights
Aluminium Metal – highlights z Best-ever quarterly result z Realized aluminium price of 2 588 USD per tonne z Smelter production 433 000 tonnes as projected z Strong casthouse product premiums in Europe 14
Slide 15: Aluminium market price – 3 month LME
Aluminium market price – 3 month LME USD per mt Primary aluminium LME USD/tonne LME (3-month avg.) Q1 2007 average 2 746 3 000 LME forward Q1 2007 end 2 780 2 500 Q4 2006 average 2 725 Q4 2006 end 2 803 2 000 Q3 2006 average 2 528 Q3 2006 end 2 584 1 500 Q2 2006 average 2 682 Q2 2006 end 2 630 1 000
Slide 16: Aluminium Metal – EBIT
Aluminium Metal – EBIT Adjusted for special items NOK million z Realized aluminium price 2 399 - USD 2 588 per tonne 2 120 - +7% vs. Q4 2006, +21% vs Q1 2006 1 928 - NOK 16 480 per tonne 1 832 1 812 - +4% vs. Q4 2006, +12% vs Q1 2006 z Primary production 433 000 tonnes z Higher raw material and ener
Slide 17: Aluminium Metal – prospects
Aluminium Metal – prospects z Continued high aluminium prices z 83 percent of expected Q2 production sold at 2 573 USD/tonne as of 31 March - Including full effect of strategic hedges z Final build decision for Qatalum expected in July 2007 z 2007 production target – 1 730 000 tonnes - Årdal Søderbe
Slide 18: Aluminium Products – highlights
Aluminium Products – highlights z Record results - Strong performance in Extrusion and Rolled Products - Divestment of Automotive businesses, net gain NOK 690 million z Primary magnesium plant in Canada closed in March z Continued restructuring 18
Slide 19: Aluminium Products – EBIT
Aluminium Products – EBIT Adjusted for special items NOK million z Rolled Products 498 - Margin and volume improvement compared with Q1 and Q4 2006 398 367 z Extrusion - Positive margin development, somewhat down from Q4 269 260 - Volumes stable z Automotive - Weak results - Divested activities (Cas
Slide 20: Aluminium Products – prospects
Aluminium Products – prospects z Building on competitive positions in Europe - Strong markets for Extrusion, Building Systems and Rolled Products in Europe z Weak automotive and US markets z Portfolio restructuring continues - US Ellenville extrusion plant to be closed in Q2 20
Slide 21: Strong results for “new” Hydro in Q1 2007
Strong results for “new” Hydro in Q1 2007 Estimated Estimated NOK million EBIT EBITDA Aluminium Metal 2 534 3 074 Aluminium Products 1 315 1 661 Power 300 328 Corporate and other (250) (233) Total * 3 899 4 830 Special items (800) (800) Total after special items * 3 099 4 030 * Hydro Polymers exclud
Slide 22: Hydro – priorities
Hydro – priorities z Successful integration of oil and gas activities with Statoil z Launch of “new” Hydro z Operational excellence z Competitive return on capital z World-class execution of Qatalum z Solid platform for upstream growth 22
Slide 23: 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 24: Use of non-GAAP financial measures/ Cautionary note in relation to oil and gas reserves
Use of non-GAAP financial measures/ Cautionary note in relation to oil and gas reserves With respect to each non-GAAP financial measure Hydro uses in connection with its financial reporting and other public communications, Hydro provides a presentation of what Hydro believes to be the most directly
Slide 25: Additional information
Additional information 25
Slide 26: Conversion to IFRS
Conversion to IFRS z Hydro will use IFRS as primary GAAP from 2007 z Comparable IFRS figures for 2006 z US GAAP figures for 2005 and earlier z Limited impact on results - Net income 2006 - US GAAP NOK 17.4 billion - IFRS NOK 17.7 billion z Main differences compared with US GAAP - Presentation and cl
Slide 27: Adjusted income Q1 2007
Adjusted income Q1 2007 NOK million Reported income Adjustments Adjusted income Exploration and Production 10 146 772 10 918 Energy and Oil Marketing 1 310 45 1 355 Eliminations (290) 289 (1) Oil & Energy 11 166 1 106 12 272 Aluminium Metal 2 534 (135) 2 399 Aluminium Products 1 315 (817) 498 Other
Slide 28: Special items impacting income statement Q1 2007
Special items impacting income statement Q1 2007 NOK million Unrealized (gains)/losses on oil and gas derivatives, Spinnaker Exploration & Production 355 Unrealized (gains)/losses on gas contracts Exploration & Production 417 Unrealized (gains)/losses on gas contracts Energy and Oil Marketing 67 Unr
Slide 29: Adjusted income Q1 2006
Adjusted income Q1 2006 NOK million Reported income Adjustments Adjusted income Exploration and Production 12 927 447 13 374 Energy and Oil Marketing 1 157 (144) 1 013 Eliminations 57 (57) - Oil & Energy 14 140 246 14 387 Aluminium Metal 1 706 126 1 832 Aluminium Products 486 (119) 367 Other activit
Slide 30: Special items impacting income statement Q1 2006
Special items impacting income statement Q1 2006 NOK million Unrealized (gains)/losses on oil and gas derivatives, Spinnaker Exploration & Production 127 Unrealized (gains)/losses on gas contracts Exploration & Production 320 Unrealized (gains)/losses on gas contracts Energy and Oil Marketing (262)
Slide 31: Estimated EBIT and EBITDA for ”new” Hydro Q1 2007
Estimated EBIT and EBITDA for ”new” Hydro Q1 2007 Estimated EBIT Reported Special items Adjusted Aluminium Metal 2 534 (135) 2 399 Aluminium Products 1 315 (817) 498 Power 300 (22) 278 Corporate and other (250) 174 (76) Total * 3 899 (800) 3 099 Hydro Polymers 145 50 195 Estimated EBITDA Reported Sp
Slide 32: Variance analysis Hydro
Variance analysis Hydro NOK million Q1 2007 2007 14 823 2006 16 870 Variance EBIT (2 047) Prices and currency (619) - Oil (518) - Gas 1 031 - LME (1 003) - Currency - Margin 402 - Volume (251) - Strategic hedges (261) - Derivatives (1 741) - Associates and JCE (28) - Exploration and production costs
Slide 33: Consolidated balance sheets
Consolidated balance sheets NOK million 31 March 2007 31 December 2006 31 March 2006 Cash and cash equivalents 21 881 6 760 20 762 Short-term investments 14 982 15 020 3 850 Receivables and other current assets 44 377 42 488 48 294 Inventories 16 564 16 497 15 230 Assets held for sale - 3 691 - Non-
Slide 34: Statement of cash flows
Statement of cash flows NOK million Q1 2007 Q1 2006 Year 2006 Operating activities: Net income 5 594 4 783 17 933 Depreciation, amortization and impairment loss 4 703 4 131 22 707 Other adjustments 4 544 6 583 (2 256) Net cash provided by operating activities 14 841 15 497 38 384 Investing activitie
Slide 35: High oil price driven by supply concerns
High oil price driven by supply concerns Million bbl/day USD per bbl 5 80 70 4 60 3 50 40 2 30 20 1 10 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 OPEC spare capacity Brent dated Brent forward Sources: Pira, Reuters, Platts 35
Slide 36: Oil & Energy – EBIT
Oil & Energy – EBIT NOK million Eliminations 14 140 Energy and Oil Marketing 13 196 12 696 Exploration and Production 11 629 12 186 11 166 9 877 9 501 9 109 8 692 7 880 7 558 7 229 2004 2005 2006 2007 US GAAP US GAAP IFRS IFRS Accumulated 31 359 43 703 48 632 11 166 36
Slide 37: Average realized gas prices
Average realized gas prices NOK/Sm3 1.03 1.09 1.52 1.93 1.90 2.16 1.97 1.90 1.85 1.79 1.73 1.47 1.36 1.31 1.20 1.10 1.07 1.03 1.01 1.06 0.99 0.98 2003 2004 2005 2006 Q1 2007 37
Slide 38: Average prices and exchange rates
Average prices and exchange rates Oil Oil Gas 450 NOK/boe USD/boe 80 USD/boe NOK/boe NOK/USD NOK/Sm3 400 70 350 Q1 2005 46.4 291.7 6.29 1.47 60 Q2 2005 49.8 317.9 6.39 1.31 300 50 Q3 2005 60.4 390.6 6.47 1.36 250 Q4 2005 55.6 368.8 6.63 1.85 40 Avg. 2005 53.1 342.2 6.44 1.52 200 30 150 Q1 2006 60.6
Slide 39: Operating costs per boe
Operating costs per boe 160 154.1 NOK/boe 140 126.8 120 109.0 100 94.9 82.1 80 60 40 20 0 2004 2005 2006 2007 YTD YTD excl HGoM Exploration 6.0 8.9 23.9 14.3 8.3 Net transportation 8.3 9.4 12.4 10.8 11.1 Other costs/income 0.7 3 2.7 6.9 6.9 Deprec.& aband. 46.4 48.2 83.1 63.9 52.8 Gas for injection
Slide 40: Oil production per field – Q1
Oil production per field – Q1 Boe/day Oil and NGL/Condensate Share Hydro Q1 2006 Hydro Q1 2007 Grane 38.00% 82 83 Oseberg incl. C 34.00% 50 46 Snorre 17.77% 28 30 Girasol/Jasmin/ Dalia 10.00% 13 25 Ekofisk 5.81-6.65% 23 22 Oseberg South 34.00% 24 20 Troll 9.78% 24 20 Åsgard 9.61% 18 20 Terra Nova 15
Slide 41: Gas production per field – Q1
Gas production per field – Q1 Boe/day Share Hydro Q1 2006 Hydro Q1 2007 Troll 9.78% 53 61 Sleipner Area 8.85-10.00% 25 23 Åsgard 9.61% 17 19 Oseberg incl. C 34.00% 34 14 Tune 40.00% 20 13 US Gulf of Mexico 9 13 Kvitebjørn 15.00% 17 9 Kristin 14.00% 5 8 Gullfaks incl. Sat 9.00% 8 7 Visund 20.30% 1 6
Slide 42: New fields on stream 2007 - 2010
New fields on stream 2007 - 2010 Hydro share at Start year Field name peak production Country Type Operator (boed) 2007 Ormen Lange 70 000 Norway Gas/ Condensate Hydro Rosa 14 000 Angola Oil Total Independence Hub Area 12 500 US GoM Gas Hydro, Dominion, Anadarko Vilje 10 000 Norway Oil Hydro Njord G
Slide 43: Exploration activity/costs
Exploration activity/costs NOK million 2 400 2 200 2 000 1 800 1 600 1 400 1 200 1 000 Expensed 800 share 600 400 200 0 - 200 - 400 - 600 - 800 2003 2004 2005 2006 2007 Capitalized -1 000 share Expensed Expensed old wells Refund insurance Iran Seismic Spinnaker 43
Slide 44: UK gas prices – NBP forward curves
UK gas prices – NBP forward curves Pence/th 105 95 85 75 65 55 45 35 25 15 5 jan-06 jan-07 jan-08 jan-09 jan-10 jan-11 jan-12 End Q1 2006 End Q4 2006 End Q1 2007 44
Slide 45: Nordic power market – forward curves
Nordic power market – forward curves NOK/MWh 500 450 400 350 300 250 200 150 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 End Q1 2006 End Q4 2006 End Q1 2007 45
Slide 46: Variance analysis Oil & Energy
Variance analysis Oil & Energy NOK million Q1 2007 2007 11 166 2006 14 140 Variance EBIT (2 974) Prices and currency - Oil (619) - Gas (518) - Currency (1 003) - Margin 555 - Volume (192) - Derivatives (1 070) - Associates and JCE (23) - Exploration and production costs 420 - Other operational costs
Slide 47: Variance analysis Exploration and Production
Variance analysis Exploration and Production NOK million Q1 2007 2007 10 146 2006 12 927 Variance EBIT (2 780) Prices and currency (619) - Oil (518) - Gas (1 003) - Currency - Volume (160) - Derivatives (326) - Associates and JCE (1) - Exploration costs 621 - Production costs (201) - Other operation
Slide 48: Variance analysis Energy and Oil Marketing
Variance analysis Energy and Oil Marketing NOK million Q1 2007 2007 1 310 2006 1 157 Variance EBIT 153 - Margin 415 - Volume (32) - Derivatives (258) - Associates and JCE (22) - Other operational costs, net 53 - Depreciation (3) Variance EBIT 153 48
Slide 49: Primary aluminium production per quarter
Primary aluminium production per quarter 1 000 tons 1 472 1 720 1 826 1 799 433 457 461 464 449 451 449 450 441 446 444 433 415 418 381 388 360 343 2003 2004 2005 2006 2007 YTD Slovalco consolidated from Q1 2004 49
Slide 50: Primary aluminium market
Primary aluminium market USD per tonne days Aluminium inventories (days of consumption) 3 000 80 Aluminium price (LME 3 month) 2 600 60 2 200 1 800 40 1 400 1 000 20 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 50
Slide 51: Aluminium Metal hedge programs
Aluminium Metal hedge programs 1) 2007 2008 2006-2008 program – volume tonne 2) 163 800 167 100 2006-2008 program – LME price USD/tonne 2 300 2 200 2003-2007 program (Sunndal) – volume tonne 3) 108 900 - 2003-2007 program (Sunndal) – LME price USD/tonne 1 500 - 2003-2007 program (Sunndal) – LME pric
Slide 52: Aluminium – operational data
Aluminium – operational data Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Volumes and prices 2007 2006 2006 2006 2006 2005 2005 2005 2005 Primary production (1 000 mt) 433 450 449 451 449 464 461 457 444 LME realized (USD/mt) including hedges 2 588 2 430 2 462 2 368 2 146 1 851 1 770 1 842 1 783 NOK/USD realized incl
Slide 53: Aluminium Metal – EBIT
Aluminium Metal – EBIT NOK million z Realized aluminium price Sourcing & Trading (S&T) - USD 2 588 per tonne Unrealized LME effects -+7% vs. Q4 2006, +21% vs Q1 2006 - NOK 16 480 per tonne Aluminium Metal (excl. unrealized LME and S&T) - +4% vs. Q4 2006, +12% vs Q1 2006 2 534 2 333 2 365 177 201 388
Slide 54: Aluminium Products – EBIT
Aluminium Products – EBIT NOK million z Rolled Products Rolled Products Extrusion - Margin and volume improvement Automotive Other and eliminations compared to both Q1 and Q4 2006 - Metal effect NOK 149 million in Q1 1 315 z Extrusion - Positive margin development, somewhat down from Q4 486 - Volume
Slide 55: Variance analysis Aluminium Metal
Variance analysis Aluminium Metal NOK million Q1 2007 2007 2 534 2006 1 706 Variance EBIT 828 - Price LME 1 031 - Margin (286) - Volume (126) - Strategic hedges (261) - Derivatives 136 - Associates and JCE 3 - Other operational costs, net 393 - Depreciation (37) - Portfolio (25) Variance EBIT 828 55
Slide 56: Variance analysis Aluminium Products
Variance analysis Aluminium Products NOK million Q1 2007 2007 1 315 2006 486 Variance EBIT 829 - Margin 32 - Volume (86) - Derivatives (184) - Associates and JCE 3 - Other operational costs, net 375 - Depreciation 27 - Portfolio 662 Variance EBIT 829 56
Slide 57: Variance analysis Rolled Products
Variance analysis Rolled Products NOK million Q1 2007 2007 343 2006 469 Variance EBIT (126) - Margin (129) - Volume 61 - Derivatives (10) - Associates and JCE 11 - Other operational costs, net (89) - Depreciation 10 - Portfolio 19 Variance EBIT (126) 57
Slide 58: Variance analysis Extrusion
Variance analysis Extrusion NOK million Q1 2007 2007 245 2006 (156) Variance EBIT 401 - Margin 120 - Volume (77) - Associates and JCE (1) - Other operational costs, net 347 - Depreciation 12 Variance EBIT 401 58
Slide 59: Variance analysis Automotive
Variance analysis Automotive NOK million Q1 2007 2007 748 2006 20 Variance EBIT 728 - Margin 62 - Volume (71) - Associates and JCE (7) - Other operational costs, net 96 - Depreciation 5 - Portfolio 643 Variance EBIT 728 59
Slide 60: Variance analysis Hydro Polymers
Variance analysis Hydro Polymers NOK million Q1 2007 2007 145 2006 86 Variance EBIT 59 - Margin 37 - Volume 153 - Derivatives (50) - Associates and JCE (5) - Other operational costs, net (63) - Depreciation (13) Variance EBIT 59 60
Slide 61: Investor Relations in Hydro
Investor Relations in Hydro t: +47 22 53 84 83 Ada Christiane Rieker Vice President m: +47 951 82 718 e: ada.christiane.rieker@hydro.com t: +47 22 53 24 55 Gudmund Isfeldt Investor Relations Officer m: +47 480 01 180 e: gudmund.isfeldt@hydro.com t: +47 22 53 92 80 Stefan Solberg Investor Relations O
Slide 62: hydro.com
hydro.com 62