Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q2 2005 Earnings Presentation
65 slides from Norsk Hydro Asa's earnings presentation, Jul 26, 2005
Slide 1: Second quarter 2005
Second quarter 2005 Eivind Reiten, CEO 26.07.2005
Slide 2: Highlights second quarter
Norsk Hydro ASA – Second quarter 2005 Highlights second quarter z High oil price – strong results z Promising exploration results z Weaker results for Metals, mixed result downstream z Solid financials 54377E 07 2005 2 Hydro Media
Slide 3: High commodity prices
Norsk Hydro ASA – Second quarter 2005 High commodity prices Aluminium price – LME 3 months Oil price – Brent USD/tonne USD/bbl NOK indexed USD 60 NOK indexed USD 2000 50 1800 40 1600 1400 30 1200 20 1000 10 1999 2000 2001 2002 2003 2004 2005 1999 2000 2001 2002 2003 2004 2005 54377E 07 2005 3 Hydro
Slide 4: Income from continuing operations
Norsk Hydro ASA – Second quarter 2005 Income from continuing operations* By quarter NOK million Gains from divestments 3 638 3 693 3 577 3 100 3 135 2 991 2 342 2 480 2 224 2 005 1 851 1 809 1 417 241 2002 2003 2004 2005 Accumulated 7 100 8 656 11 477 7 270 * Including the effect of change in accoun
Slide 5: Consolidated income statements
Norsk Hydro ASA – Second quarter 2005 Consolidated income statements 2nd quarter 2nd quarter NOK million 2005 2004 Operating revenues 42 119 37 864 Operating income 11 255 8 290 Non-consolidated investees 246 121 Financial income (expense), net (558) (447) Other income, net 233 - Income from continu
Slide 6: Adjusted EBITDA
Norsk Hydro ASA – Second quarter 2005 Adjusted EBITDA 15 852 15 533 NOK million 13 546 13 211 12 266 12 094 11 045 9 820 9 935 9 451 7 955 8 197 7 199 6 775 2002 2003 2004 2005 Accumulated 31 749 38 628 51 117 31 385 54377E 07 2005 6 Hydro Media
Slide 7: Oil & Energy – operating income
Norsk Hydro ASA – Second quarter 2005 Oil & Energy – operating income 2nd quarter 1st quarter 2nd quarter Operating income, NOK million 2005 2005 2004 Exploration and Production 9 049 9 057 6 606 Energy and Oil Marketing 660 1 046 573 Eliminations (262) (261) 5 Oil & Energy 9 447 9 842 7 184 2nd qua
Slide 8: Aluminium – operating income
Norsk Hydro ASA – Second quarter 2005 Aluminium – operating income 2nd quarter 1st quarter 2nd quarter Operating income, NOK million 2005 2005 2004 Metals 715 1 239 839 Rolled Products 308 230 278 Extrusion and Automotive 59 (36) 182 Other and eliminations 255 (92) (30) Aluminium 1 337 1 341 1 269 2
Slide 9: Operating income
Norsk Hydro ASA – Second quarter 2005 Operating income Individual operating segment 2nd quarter 1st quarter 2nd quarter NOK million 2005 2005 2004 Exploration and Production 9 049 9 057 6 606 Energy and Oil Marketing 660 1 046 573 Eliminations (262) (261) 5 Oil & Energy 9 447 9 842 7 184 Metals 715
Slide 10: Adjusted net debt/equity ratio
Norsk Hydro ASA – Second quarter 2005 Adjusted net debt/equity ratio 0.6 0.38 0.14 0.11 2002 2003 2004 2005 Interest-bearing debt + net pension liability (tax adjusted) + operating lease commitments (discounted) – cash and cash equivalents – other liquid assets divided by shareholders’ equity + mino
Slide 11: Oil & Energy – highlights
Norsk Hydro ASA – Second quarter 2005 Oil & Energy – highlights z Strong result – all-time high oil price z High maintenance activity – increased unit production cost z Exploration activity bearing fruit z Ormen Lange/Langeled on track – 38 percent complete 54377E 07 2005 11 Hydro Media
Slide 12: Oil & Energy – operating income
Norsk Hydro ASA – Second quarter 2005 Oil & Energy – operating income NOK million 9 842 Exploration and Production Energy and Oil Marketing Eliminations 9 447 8 621 7 818 7 521 7 184 6 175 5 994 5 384 5 322 3 707 3 686 3 652 3 170 2002 2003 2004 2005 Accumulated 15 947 21 143 31 144 19 289 54377E 07
Slide 13: Production costs per barrel
Norsk Hydro ASA – Second quarter 2005 Production costs per barrel NOK/boe 25.6 26.3 24.0 23.2 22.9 23.9 22.3 21.1 21.0 20.1 19.8 19.6 17.4 17.1 2002 2003 2004 2005 Weighted average - YTD 22.6 20.7 20.7 22.8 54377E 07 2005 13 Hydro Media
Slide 14: Promising potential in Iran
Norsk Hydro ASA – Second quarterTEHRAN 2005 Anaran Khorramabad AFGHANISTAN IRAQ IRAN KUWAIT PAKISTAN Promising potential in Iran z Azar discovery – Anaran - Promising flow tests - Commerciality studies ongoing - Exclusive right to negotiate a development contract - Exploration drilling to start on n
Slide 15: Hydro sees increased NCS opportunities
Norsk Hydro ASA – Second quarter 2005 Hydro sees increased NCS opportunities z High oil price provides new commercial opportunities z Thorough review of prospects - Significant potential to increase resource base - Supported by competence and technology z Actively pursuing new opportunities - Increa
Slide 16: Securing future growth
Norsk Hydro ASA – Second quarter 2005 Securing future growth z Exploration – Norway and international - Eight wells completed, four discoveries in the first half of 2005 - Currently drilling six wells - Spudding of 15-20 wells planned in the second half of 2005 z Plans for Development and Operation
Slide 17: Oil & Energy – prospects
Norsk Hydro ASA – Second quarter 2005 Oil & Energy – prospects z Continued high energy prices z 2005 targets maintained - Production 575 000 boe/day - Production cost NOK 24/boe z High exploration activity - Rig capacity secured z Actively pursue increased NCS opportunities z Promising potential in
Slide 18: Aluminium – highlights
Norsk Hydro ASA – Second quarter 2005 Aluminium – highlights z Metals – weaker results - Sourcing and Trading reported an operating loss of NOK 127 million - Higher operating costs and higher metal cost negatively impacted margins z Mixed development in downstream sectors - Weaker result in Extrusio
Slide 19: Aluminium – operating income
Norsk Hydro ASA – Second quarter 2005 Aluminium – operating income NOK million Metals Rolled Products Extrusion and Automotive Other and eliminations 1 629 1 341 1 269 1 337 858 711 709 653 564 530 412 230 345 (1951) 2002 2003 2004 2005 Accumulated 1 698 2 456 1 805 2 678 54377E 07 2005 19 Hydro Med
Slide 20: Cost reductions to strengthen competitive position
Norsk Hydro ASA – Second quarter 2005 Cost reductions to strengthen competitive position* Manning reduction in 2005 Man years z Aluimprover and restructuring 550 - Aluimprover (Norway)** - Raufoss (Norway) - Toulouse (France) - Holland (USA) - Leeds (UK) z Rationalization initiatives - all sectors 6
Slide 21: Aluminium – prospects
Norsk Hydro ASA – Second quarter 2005 Aluminium – prospects z Strong primary market fundamentals z Lower results expected second half 2005 - Seasonal effects - Limited impact from hedging in second half - Continued margin pressure expected on standard rolled products - Continued improvement measures
Slide 22: Hydro – priorities
Norsk Hydro ASA – Second quarter 2005 Hydro – priorities z Operational improvements z First-class project execution z Improve Aluminium profitability z Strengthen oil & gas resource base 54377E 07 2005 22 Hydro Media
Slide 23: Additional information
Additional information
Slide 24: Adjusted income second quarter 2005
Norsk Hydro ASA – Second quarter 2005 Adjusted income second quarter 2005 Reported Adjusted NOK million Adjustments income income Exploration and Production 9 049 - 9 049 Energy and Oil Marketing 660 - 660 Eliminations (262) 272 10 Oil & Energy 9 447 272 9 719 Metals 715 - 715 Rolled Products 308 (1
Slide 25: Infrequent and other special items second quarter 2005
Norsk Hydro ASA – Second quarter 2005 Infrequent and other special items impacting income statement second quarter 2005 NOK million Eliminations of unrealized loss on internal gas contracts Oil & Energy eliminations 272 Metal effect from FIFO valuation Rolled Products (83) Settlement Malaysia Rolled
Slide 26: Adjusted income - YTD 2005
Norsk Hydro ASA – Second quarter 2005 Adjusted income - YTD 2005 Reported Adjusted NOK million Adjustments income income Exploration and Production 18 106 - 18 106 Energy and Oil Marketing 1 706 (250) 1 456 Eliminations (523) 543 20 Oil & Energy 19 289 293 19 582 Metals 1 954 6 1 960 Rolled Products
Slide 27: Infrequent and other special items - YTD 2005
Norsk Hydro ASA – Second quarter 2005 Infrequent and other special items impacting income statement - YTD 2005 NOK million Accounting imbalance gas portfolio Energy and Oil Marketing (250) Eliminations of unrealized loss on internal gas contract Oil & Energy eliminations 543 Rationalization cost due
Slide 28: Adjusted income second quarter 2004
Norsk Hydro ASA – Second quarter 2005 Adjusted income second quarter 2004 Reported Adjusted NOK million Adjustments income income Exploration and Production 6 606 - 6 606 Energy and Oil Marketing 573 (31) 542 Eliminations 5 - 5 Oil & Energy 7 184 (31) 7 153 Metals 839 - 839 Rolled Products 278 (121)
Slide 29: Infrequent and other special items second quarter 2004
Norsk Hydro ASA – Second quarter 2005 Infrequent and other special items impacting income statement second quarter 2004 Item NOK million Oil price effect from FIFO valuation Energy and Oil Marketing (31) Metal effect from FIFO valuation Rolled Products (121) Rationalization costs due to closure of p
Slide 30: Operating income – Adjusted EBIT – Adjusted EBITDA
Norsk Hydro ASA – Second quarter 2005 Operating income – Adjusted EBIT – Adjusted EBITDA Second quarter 2005 Non- Selected Depr. Operating Interest Other Adjusted Adjusted NOK million income cons. income fin. income EBIT and EBITDA investees items amort. Exploration and Production 9 049 1 4 - - 9 05
Slide 31: Adjusted EBITDA
Norsk Hydro ASA – Second quarter 2005 Adjusted EBITDA Individual operating segment NOK million 2nd quarter 2005 2nd quarter 2004 Exploration and Production 11 348 8 990 Energy and Oil Marketing 881 769 Eliminations (262) 5 Oil & Energy 11 967 9 764 Metals 1 267 1 305 Rolled Products 464 456 Extrusio
Slide 32: Variance analysis Hydro group
Norsk Hydro ASA – Second quarter 2005 Variance analysis Hydro group NOK million 1st half 2nd quarter 2005 31 385 15 533 2004 25 812 12 266 Variance adjusted EBITDA 5 573 3 267 - Prices and currency, Exploration and Production (E&P) 6 740 3 395 - Margin incl. currency effects ¹) (95) (445) - Volume (
Slide 33: Depreciation, depletion and amortization
Norsk Hydro ASA – Second quarter 2005 Depreciation, depletion and amortization Individual operating segment NOK million 2nd quarter 2005 2nd quarter 2004 Exploration and Production 2 293 2 371 Energy and Oil Marketing 170 153 Oil & Energy 2 463 2 524 Metals 396 387 Rolled Products 147 166 Extrusion
Slide 34: Net financial income (expense)
Norsk Hydro ASA – Second quarter 2005 Net financial income (expense) NOK million 2nd quarter 2005 2nd quarter 2004 Interest income 197 201 Dividends and net gain (loss) on securities 58 21 Interest income and other financial income 255 222 Interest expense (457) (600) Capitalized interest 231 166 Ne
Slide 35: Equity in net income of non-consolidated investees
Norsk Hydro ASA – Second quarter 2005 Equity in net income of non-consolidated investees Individual operating segment NOK million 2nd quarter 2005 2nd quarter 2004 Exploration and Production 1 - Energy and Oil Marketing 41 25 Eliminations (1) - Oil & Energy 41 25 Metals 139 50 Rolled Products (6) (3
Slide 36: Net income
Norsk Hydro ASA – Second quarter 2005 Net income* By quarter NOK million Gains from divestments 4 218 3 765 3 638 3 693 3 577 3 280 2 840 2 482 2 480 2 324 2 397 2 224 2 132 513 2002 2003* 2004 2005 Accumulated 8 765 10 968 12 560 7 270 * Including the effect of change in accounting principles for 1
Slide 37: Investments
Norsk Hydro ASA – Second quarter 2005 Investments 1) Individual operating segment NOK million 2nd quarter 2005 2nd quarter 2004 Exploration and Production 2 858 2 175 Energy and Oil Marketing 715 378 Oil & Energy 3 573 2 553 Metals 345 758 Rolled Products 74 67 Extrusion and Automotive 270 216 Other
Slide 38: Consolidated balance sheet
Norsk Hydro ASA – Second quarter 2005 Consolidated balance sheet NOK million 30.06.2005 31.03.2005 31.12.2004 Cash and cash equivalents 11 120 15 467 14 366 Short-term investments 13 815 15 392 10 970 Receivables and other current assets 36 565 38 539 32 219 Inventories 13 660 13 824 12 851 Non-curr
Slide 39: Statement of cash flow
Norsk Hydro ASA – Second quarter 2005 Statement of cash flow NOK million 1st half 2005 1st half 2004 Operating activities: Net income 7 270 6 442 Depreciation, depletion and amortization 7 062 7 288 Other adjustments (2 580) (1 513) Net cash provided by operating activities 11 752 12 217 Investing a
Slide 40: Financial solidity – calculation
Norsk Hydro ASA – Second quarter 2005 Financial solidity – calculation 31 31 31 31 30 Amounts in NOK million December December December December June 2001 2002 2003 2004 2005 [A] Cash and cash equivalents 27 148 5 965 15 249 14 366 11 120 [B] Short-term investments 2 421 2 647 1 581 10 970 13 815 [C
Slide 41: Oil & Energy
Norsk Hydro ASA – Second quarter 2005 Oil & Energy Adjusted EBITDA Eliminations Energy and Oil Marketing 12 416 Exploration and Production 11 967 NOK million 11 583 10 503 9 928 9 764 9 139 8 668 7 887 7 745 6 155 6 274 5 847 5 451 2002 2003 2004 2005 Accumulated 25 340 31 826 41 778 24 383 54377E 0
Slide 42: Variance analysis Oil & Energy
Norsk Hydro ASA – Second quarter 2005 Variance analysis Oil & Energy NOK million 1st half 2nd quarter 2005 24 383 11 967 2004 20 267 9 764 Variance adjusted EBITDA 4 116 2 203 - Prices and currency 6 260 3 085 - Oil 1 745 860 - Gas (1 265) _ (550) _ - Currency 6 740 3 395 - Margin (470) (395) - Volu
Slide 43: Variance analysis Exploration and Production
Norsk Hydro ASA – Second quarter 2005 Variance analysis Exploration and Production NOK million 1st half 2nd quarter 2005 22 804 11 348 2004 18 583 8 990 Variance adjusted EBITDA 4 221 2 358 Prices and currency - Oil 6 260 3 085 - Gas 1 745 860 - Currency (1 265) _ (550) _ 6 740 3 395 - Volume (1 425
Slide 44: Variance analysis Energy and Oil Marketing
Norsk Hydro ASA – Second quarter 2005 Variance analysis Energy and Oil Marketing NOK million 1st half 2nd quarter 2005 2 101 881 2004 1 676 769 Variance adjusted EBITDA 425 112 - Margin 60 (130) - Volume 305 220 - Fixed costs 55 10 - Depreciation (10) (15) - Other (10) - Variance operating income 40
Slide 45: Petroleum production per quarter
Norsk Hydro ASA – Second quarter 2005 Petroleum production per quarter 1 000 boe/day 615 596 591 584 Oil Gas 552 569 540 539 173 514 482 484 489 166 147 176 178 448 452 143 156 123 154 104 112 116 88 430 442 110 422 415 406 397 396 391 385 378 364 372 373 338 2002 2003 2004 2005 Average YTD 480 530
Slide 46: Production per field – Q2 2005
Norsk Hydro ASA – Second quarter 2005 Production per field – Q2 2005 Boe/day (oil including Hydro Share % 2Q 04 Hydro NGL and 2Q 05 2Q 05 condensate) 2Q 04 Grane 38.00 105 000 39 900 151 000 57 380 Oseberg incl C 34.00 161 000 54 740 134 000 45 560 Snorre 17.65 212 000 37 418 170 000 30 005 Ekofisk
Slide 47: New fields on stream 2005 - 2007
Norsk Hydro ASA – Second quarter 2005 New fields on stream 2005 - 2007 Field Hydro Plateau (boe/day) Plateau Year 2003 2004 2005 2006 2007 International Kharyaga 10 000 2007 W W Dalia 24 000 2007 W Rosa 13 000 2008 W W Oseberg South J 7 000 2006 W W Oseberg Vestflanken 14 000 2007 W Oseberg East Dri
Slide 48: Operating costs per barrel
Norsk Hydro ASA – Second quarter 2005 Operating costs per barrel NOK/boe 99.7 100 90.1 83.8 84.8 82.1 80 60 40 20 0 2001 2002 2003 2004 1H 2005 Exploration 9.1 20.3 8.1 6.0 5.4 Net transportation * 8.5 9.0 6.8 8.3 9.1 Other cost/income 2.0 1.4 1.8 0.7 1.6 Deprec. and aband. 46.4 46.4 46.4 46.4 46.0
Slide 49: Exploration activity and costs
Norsk Hydro ASA – Second quarter 2005 Exploration activity and costs NOK million 1 500 1 200 900 Expensed 600 share 300 0 - 300 2002 2003 2004 2005 Capitalized share Activity Expensed old wells Cost reduction repayment Angola Refund insurance Iran 54377E 07 2005 49 Hydro Media
Slide 50: High oil price driven by supply concerns
Norsk Hydro ASA – Second quarter 2005 High oil price driven by supply concerns OPEC spare capacity at low levels million bbl/day USD per bbl 5 60 50 4 40 3 30 2 20 1 10 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 OPEC spare capacity Brent dated Brent forward Sources: Pira, Reuters, Platts
Slide 51: Average Realized Gas Prices
Norsk Hydro ASA – Second quarter 2005 Average Realized Gas Prices 3 NOK/Sm 1.47 1.50 1.31 1.20 1.07 1.10 1.07 1.03 1.06 0.98 0.99 1.01 0.98 1.00 0.89 0.86 0.50 0.00 2002 2003 2004 2005 54377E 07 2005 51 Hydro Media
Slide 52: UK gas prices – NBP forward curves
Norsk Hydro ASA – Second quarter 2005 UK gas prices – NBP forward curves pence/th End 2003 End Q3 '04 End 2004 End Q1 '05 End Q2 '05 95 85 75 65 55 45 35 25 15 2004 2005 2006 2007 2008 2009 54377E 07 2005 52 Hydro Media
Slide 53: Nordic power market – forward curves
Norsk Hydro ASA – Second quarter 2005 Nordic power market – forward curves NOK/MWh End Q2 '04 End Q3 '04 End Q4 '04 End Q1 '05 End Q2 '05 350 300 250 200 150 2005 2006 2007 2008 54377E 07 2005 53 Hydro Media
Slide 54: Aluminium
Norsk Hydro ASA – Second quarter 2005 Aluminium Adjusted EBITDA NOK million 2 708 Other and Eliminations 2 436 2 096 2 453 Extrusion and Automotive 2 335 Rolled Products Metals 1 809 1 619 1 572 1 498 1 517 1 292 1 316 899 827 2002 2003 2005 2004 Accumulated 4 334 6 498 8 656 4 889 54377E 07 2005 54
Slide 55: Aluminium – business comments
Norsk Hydro ASA – Second quarter 2005 Aluminium – business comments z Metals - Record output 457,000 tonnes primary aluminium - Sourcing and Trading reported an operating loss of NOK 127 million - Higher operating costs and higher metal cost negatively impacted margins - Decision to close Stade and
Slide 56: Variance analysis Aluminium
Norsk Hydro ASA – Second quarter 2005 Variance analysis Aluminium NOK million 1st half 2nd quarter 2005 4 889 2 453 2004 5 043 2 335 Variance adjusted EBITDA (154) 118 - Margin (535) (435) - Volume (50) 100 - Fixed costs 595 65 - Depreciation 85 25 - Infrequent items (85) 70 - Trading and hedging (7
Slide 57: Variance analysis Metals
Norsk Hydro ASA – Second quarter 2005 Variance analysis Metals NOK million 1st half 2nd quarter 2005 3 056 1 267 2004 2 778 1 305 Variance adjusted EBITDA 278 (38) - Margin (290) (320) - Volume 335 225 - Fixed costs 160 5 - Depreciation 25 (5) - Infrequent items (5) - - Trading & price hedging (70)
Slide 58: Variance analysis Rolled Products
Norsk Hydro ASA – Second quarter 2005 Variance analysis Rolled Products NOK million 1st half 2nd quarter 2005 859 464 2004 791 456 Variance adjusted EBITDA 68 8 - Margin (210) (85) - Volume 35 45 - Fixed costs 195 10 - Depreciation 40 20 - Infrequent items 50 45 - Other - (5) Variance operating inco
Slide 59: Variance analysis Extrusion and Automotive
Norsk Hydro ASA – Second quarter 2005 Variance analysis Extrusion and Automotive NOK million 1st half 2nd quarter 2005 810 467 2004 1 173 605 Variance adjusted EBITDA (363) (138) - Margin (60) (40) - Volume (420) (170) - Fixed costs 240 50 - Depreciation 20 10 - Infrequent items (130) 25 - Other 10
Slide 60: Primary aluminium market
Norsk Hydro ASA – Second quarter 2005 Primary aluminium market Aluminium inventories (days of consumption) Aluminium price (LME 3m) 2,200 70 65 2,000 60 55 USD per tonne 1,800 50 days 1,600 45 40 1,400 35 30 1,200 25 1,000 20 1997 1998 1999 2000 2001 2002 2003 2004 2005 54377E 07 2005 60 Hydro Media
Slide 61: Inventories – primary aluminium
Norsk Hydro ASA – Second quarter 2005 Inventories – primary aluminium 1 000 tonnes IAI (Producers' inventories) LME (London Metal Exchange) 5 000 4 000 3 000 2 000 1 000 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005* Sources: IAI and LME, 2005* as of end-May 54377E 07
Slide 62: Aluminium – operational data
Norsk Hydro ASA – Second quarter 2005 Aluminium – operational data Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Volumes and prices 2005 2005 2004 2004 2004 2004 2003 2003 Primary production (1 000 tonnes) * 457 444 446 441 418 415 388 381 Total metal products sales excluding trading 718 702 639 648 676 688 483 506 (1 00
Slide 63: Variance analysis Polymers
Norsk Hydro ASA – Second quarter 2005 Variance analysis Polymers NOK million 1st half 2nd quarter 2005 472 146 2004 298 87 Variance adjusted EBITDA 174 59 - Margin 190 45 - Volume (75) (35) - Fixed costs 40 25 - Depreciation (5) (5) Variance operating income 150 29 - Non-consolidated investees 22 32
Slide 64: Forward-looking statements/ use of non-GAAP financial measures
Norsk Hydro ASA – Second quarter 2005 Forward-looking statements/ use of non-GAAP financial measures In order to utilize the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, Hydro is providing the following cautionary statement: This presentation contai
Slide 65: Norsk Hydro ASA – Second quarter 2005
Norsk Hydro ASA – Second quarter 2005 54377E 07 2005 65 Hydro Media