Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q4 2013 Earnings Presentation
52 slides from Norsk Hydro Asa's earnings presentation, February 2014
Slide 1: Alunorte improvements, seasonality and lower power production
Alunorte improvements, seasonality and lower power production Fourth quarter presentation (1)
Slide 2: 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 3: Svein Richard Brandtzæg, President and CEO
Svein Richard Brandtzæg President and CEO (3)
Slide 4: Q4 highlights
Q4 highlights • Underlying EBIT NOK 483 million • USD 300-program completed, yielding NOK 1.5 billion improvements • Alunorte production rising, offset by ICMS charges • Primary Metal lifted by Qatalum insurance proceeds • Downstream seasonality, lower power production • Proposed 2013 dividend NOK 0
Slide 5: Standard ingot premiums rise to record levels
Standard ingot premiums rise to record levels Regional standard ingot premiums • Proposed changes to LME warehousing USD per mt 450 rules with effect from April 1, 2014 400 • US and European standard ingot 350 premiums gained strength in end-2013, 300 rose sharply in January 250 200 • US premiums ~4
Slide 6: Aluminium prices weakening through the quarter
Aluminium prices weakening through the quarter • Aluminium price continued trading in USD per mt 3 400 range of USD 1 750 - 1 900 per mt in Q4 3 000 • Minor decrease in average USD/mt price, 2 600 offset by weaker NOK 2 200 Primary aluminium LME USD/mt NOK/mt 1 800 Q4 2013 average 1 815 10 981 Q4 20
Slide 7: All-in metal price shows moderate rise
All-in metal price shows moderate rise Further strengthened when taking currency movements into account USD per mt 2 400 2 300 2 200 2 100 2 000 1 900 1 800 1 700 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 LME (cash) LME (cash) + US Mid West LME (cash)
Slide 8: Stable inventories due to largely balanced market
Stable inventories due to largely balanced market Slight reduction in unregistered inventories in 2013 World outside China reported primary aluminium inventories 1 000 mt Days 8 000 120 7 000 100 6 000 80 5 000 4 000 60 3 000 40 2 000 20 1 000 0 0 Q1 00 Q1 01 Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 0
Slide 9: Demand expected to slightly exceed production in 2014
Demand expected to slightly exceed production in 2014 World outside China World outside China (quarterly annualized) • 2014 aluminium demand expected to 1 000 mt 30 000 grow 2-4 % in world outside China 25 000 • Demand back at pre-crisis levels 20 000 • New curtailments and delays announced 15 000 1
Slide 10: Alumina price strengthening through the quarter
Alumina price strengthening through the quarter Platts alumina index (PAX) USD per mt • PAX increased both in USD/mt and 450 Percent 20 percent of LME − Average price 323 USD/mt, up 6 USD/mt from Q3 400 18 − Alumina as % of LME increased to 18.5 % at year end, the highest ratio since 350 16 introduc
Slide 11: China bauxite imports rise considerably in 2013
China bauxite imports rise considerably in 2013 Preparing for Indonesian export restrictions Annualized aluminium equivalents*, million mt 2011 2012 2013 • Bauxite and alumina 25 − Increased bauxite imports, preparing for Indonesian export China import 20 restrictions that came into force in January
Slide 12: Indonesia introduces ban on bauxite exports
Indonesia introduces ban on bauxite exports • Complete ban on bauxite exports from Chinese bauxite import by origin (monthly) Million mt mid-January 2014 8 7 • Uncertainty around possibility of getting 6 export license for those with plans to 5 build alumina capacity in Indonesia 4 3 • Indonesia exp
Slide 13: Alunorte production increasing during the quarter
Alunorte production increasing during the quarter Production, annualized million mt • Maintenance progressing as planned • Increased power self-sufficiency 5.8 • Improved preparedness in organization 5.5 • “From B to A” improvement program 5.2 ambitions remain unchanged 5.0 − Target NOK 1 billion by
Slide 14: ICMS tax impacts Bauxite & Alumina
ICMS tax impacts Bauxite & Alumina • Continued and increased dialogue on ICMS taxes and framework conditions • Alunorte subject to ICMS tax on fuel oil, started February 1 2014 • ICMS charges on electricity purchase − Settlement relating to period since closing of Vale transaction − Increases cost f
Slide 15: Primary Metal delivered USD 300 improvement program
Primary Metal delivered USD 300 improvement program Implied primary cost and margin, USD/mt 1) • USD 300 program concluded on plan 475 475 − Exploring new areas for improvements 300 425 400 2 000 • Joint venture USD 180 improvement 1 775 program on track 1 500 • Cash cost continued downward trend −
Slide 16: Rolled Products sales increased compared to 2012
Rolled Products sales increased compared to 2012 Rolled Products sales by segment Q4 2013 vs Q3 2013 2013 vs 2012 Foil & Can Litho & Auto General engineering Total Rolled Foil & Can Litho & Auto General engineering Total Rolled & Other Products & Other Products 8% 4% 4% 2% 1% 0% (3%) (14%) (16)
Slide 17: Continued Sapa JV restructuring amid mixed markets
Continued Sapa JV restructuring amid mixed markets • North America demand increased in Q4 2013 compared to last year − Improvement in automotive and building − Stable in transport and industrial segment • Stable European demand − Automotive segment improved − Transport, renewable energy and building
Slide 18: Improved reservoir levels, softer prices at end of quarter
Improved reservoir levels, softer prices at end of quarter Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 600 100 2012 2013 2014 90 500 80 400 70 60 300 50 40 200 30 20 2012 100 2013 10 2014 10 year average 0 0 1 4 7 10 13 16 19 22 25 28 31 34
Slide 19: Eivind Kallevik, Executive Vice President and CFO
Eivind Kallevik Executive Vice President and CFO (19)
Slide 20: Underlying EBIT
Underlying EBIT 1 077 659 578 531 518 483 172 16 NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Bauxite & Alumina (144) (188) (386) (73) (63) (244) (370) (379) Primary Metal 36 245 (4) 58 364 237 337 484 Metal Markets 88 45 8 70 146 147 111 190 Rolled Products 150 203 21
Slide 21: High-level quarterly result development
High-level quarterly result development NOK billion 0.3 (0.1) (0.2) 0.7 (0.2) 0.5 Underlying EBIT Q3 2013 Volumes and margins Energy volume and price Fixed and variable costs Sapa and other Underlying EBIT Q4 2013 (21)
Slide 22: Key financials
Key financials NOK million Q4 2013 Q3 2013 Q4 2012 2013 2012 Revenue 16 571 16 146 15 585 64 880 64 181 Underlying EBIT 483 659 172 2 737 1 297 Items excluded from underlying EBIT (485) (62) 532 (1 063) (725) Reported EBIT (3) 597 704 1 674 571 Financial income (expense) (766) (246) (152) (2 550) (6
Slide 23: Financial income (expense)
Financial income (expense) Finance NOK million Q4 2013 Q3 2013 Interest income 65 53 Dividends received and net gain (loss) on 58 31 securities Financial income 123 84 Interest expense (118) (105) Net foreign exchange gain (loss) (688) (152) Net interest on pension liability (47) (39) Other (36) (34
Slide 24: Items excluded from underlying EBIT
Items excluded from underlying EBIT NOK million Q4 2013 Q3 2013 Q4 2012 2013 2012 Underlying EBIT 483 659 172 2 737 1 297 Unrealized effects on power and raw material contracts 14 (7) 168 (107) 937 Unrealized derivative effects on LME related contracts (78) 34 346 (202) 109 Metal effect, Rolled Prod
Slide 25: Bauxite & Alumina
Bauxite & Alumina Q4 Q3 Q4 Key figures 2013 2013 2012 Alumina production, kmt 1 452 1 316 1 397 Total alumina sales, kmt 1 959 1 879 1 880 Realized alumina price, USD/mt 263 267 285 Apparent alumina cash cost, USD/mt 245 265 239 Bauxite production, kmt 2 080 1 513 2 378 Underlying EBITDA, NOK millio
Slide 26: Primary Metal
Primary Metal Q4 Q3 Q4 Key figures 2013 2013 2012 Primary aluminium production, kmt 492 491 485 Total sales, kmt 515 540 505 Realized LME price, USD/mt 1 802 1 822 1 940 Realized LME price, NOK/mt 10 916 10 938 11 069 Underlying EBITDA, NOK million 940 802 528 Underlying EBIT, NOK million 484 337 58
Slide 27: Qatalum result lifted by insurance settlement
Qatalum result lifted by insurance settlement Key figures – Qatalum (50%) Q4 2013 Q3 2013 Q4 2012 • Stable sales volumes Revenue, NOK million 1 072 1 074 1 034 • Underlying net income up NOK 172 million from Q3 2013 Underlying EBITDA, NOK million 504 331 250 − Insurance settlement in Q4 2013 related
Slide 28: Metal Markets
Metal Markets Q4 Q3 Q4 Key figures 2013 2013 2012 Remelt production, kmt 123 127 119 Metal products sales, kmt 653 673 661 Underlying EBITDA, NOK million 214 149 92 Underlying EBIT excl currency and inventory 144 73 40 valuation effects, NOK million Underlying EBIT, NOK million 190 111 70 Underlying
Slide 29: Rolled Products
Rolled Products Q4 Q3 Q4 Key figures 2013 2013 2012 External sales volumes, kmt 226 234 226 Underlying EBITDA, NOK million 244 304 189 Underlying EBIT, NOK million 111 182 70 Underlying EBIT NOK million 637 627 Q4 results • Seasonally lower volumes 203 213 • Higher costs on seasonal maintenance 181
Slide 30: Energy
Energy Q4 Q3 Q4 Key figures 2013 2013 2012 Power production, GWh 2 411 2 838 2 448 Net spot sales, GWh 1 089 1 673 1 099 Southwest Norway spot price (NO2), 287 267 268 NOK/MWh Underlying EBITDA, NOK million 420 522 363 Underlying EBIT, NOK million 383 485 322 Underlying EBIT Q4 results NOK million •
Slide 31: Sapa joint venture
Sapa joint venture Key figures – Sapa (50%) Q4 2013 • Seasonally weaker quarter Revenue, NOK million 5 066 • Impairments of inventories and Underlying EBITDA, NOK million (22) accounts receivables Underlying EBIT, NOK million (170) • Restructuring agenda progressing according to plan Underlying Net
Slide 32: Net cash/(debt) development Q4 2013
Net cash/(debt) development Q4 2013 NOK billion Net cash flow from operations NOK 2.5 billion 1.4 (0.5) (0.9) 1.6 (0.4) 0.7 (0.5) Net debt Q3 2013 Underlying EBITDA Operating Capital Other adjustments Investments Other and minorities Net cash Q4 2013 (32)
Slide 33: Cash neutral after dividend at LME ~1 900 USD/mt
Cash neutral after dividend at LME ~1 900 USD/mt NOK billion 7.1 (2.5) (2.5) (2.0) 0.6 (1.8) 1.7 1.8 0.7 Net cash Q4 Underlying Other Investments Dividends Net cash after Operating Currency Net cash Q4 2012 EBITDA adjustments divestments dividend capital translation & 2013 other (33)
Slide 34: Increased net pension liability
Increased net pension liability December December • Defined benefit obligation up NOK billion 31, 2012 31, 2013 NOK ~1.6 billion Defined benefit obligation (15.5) (17.1) − New mortality rate table (K2013) − Currency translation effects Fair value of plan assets 10.9 11.9 − Somewhat offset by transit
Slide 35: Proposed 2013 dividend NOK 0.75 per share
Proposed 2013 dividend NOK 0.75 per share • Strong commitment to return cash to shareholders • Solid financial position • Uncertain market outlook • Average five-year payout ratio* of ~90% − Dividend policy is 30% payout over the cycle • Represents payout of ~NOK 1.5 billion * Dividend paid divided
Slide 36: 2013 and 2014 summary
2013 • Challenging markets • Concluding USD 300-program • Strong Qatalum performance 2014 • Stabilize Alunorte production • Continued forceful improvement programs • Capitalize on commercial opportunities (36)
Slide 37: Additional information
Additional information (37)
Slide 38: Items excluded from underlying results - 2013
Items excluded from underlying results - 2013 NOK million (+=loss/()=gain) Q1 2013 Q2 2013 Q3 2013 Q4 2013 2013 Unrealized derivative effects on LME related contracts Bauxite & Alumina 13 (3) - 3 12 Legal settlements Bauxite & Alumina - - - 109 109 Total impact Bauxite & Alumina 13 (3) - 112 121 Unr
Slide 39: Items excluded from underlying results - 2012
Items excluded from underlying results - 2012 NOK million (+=loss/()=gain) Q1 2012 Q2 2012 Q3 2012 Q4 2012 2012 Unrealized derivative effects on LME related contracts Bauxite & Alumina (8) 11 1 (11) (8) Total impact Bauxite & Alumina (8) 11 1 (11) (8) Unrealized derivative effects on LME related con
Slide 40: Operating segment information
Operating segment information Underlying EBIT NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Year 2012 Year 2013 Bauxite & Alumina (144) (188) (386) (73) (63) (244) (370) (379) (791) (1 057) Primary Metal 36 245 (4) 58 364 237 337 484 335 1 422 Metal Markets 88 45 8 70 1
Slide 41: Operating segment information
Operating segment information EBIT NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Year 2012 Year 2013 Bauxite & Alumina (136) (199) (387) (62) (76) (241) (370) (491) (783) (1 178) Primary Metal (91) (1 227) (48) 112 19 122 338 377 (1 254) 855 Metal Markets 156 17 (246) 2
Slide 42: Operating segment information
Operating segment information Total revenue NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Year 2012 Year 2013 Bauxite & Alumina 3 195 3 573 3 032 3 465 3 304 3 147 3 354 3 546 13 265 13 350 Primary Metal 7 458 7 578 6 169 5 485 5 945 5 896 5 884 5 554 26 690 23 279 Meta
Slide 43: Operating segment information
Operating segment information Internal revenue NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Year 2012 Year 2013 Bauxite & Alumina 1 241 1 356 1 111 1 098 1 322 1 253 1 277 1 375 4 806 5 226 Primary Metal 6 331 6 341 5 097 4 442 5 132 4 856 4 860 4 566 22 210 19 413 Met
Slide 44: Operating segment information
Operating segment information Depreciation, amortization and impairment NOK million Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Year 2012 Year 2013 Bauxite & Alumina 475 439 428 409 429 448 417 424 1 750 1 718 Primary Metal 542 1 645 482 356 470 472 461 452 3 026 1 855 Metal Mark
Slide 45: Income statements
Income statements NOK million Q4 2013 Q3 2013 Q4 2012 Year 2013 Year 2012 Revenue 16 571 16 146 15 585 64 880 64 181 Share of the profit (loss) in equity accounted investments (164) (77) (95) (312) (450) Other income, net 100 245 257 790 853 Total revenue and income 16 507 16 314 15 747 65 358 64 58
Slide 46: Balance sheets
Balance sheets NOK million Dec 31 2013 Sep 30 2013 Jun 30 2013 Mar 31 2013 Dec 31 2012 Cash and cash equivalents 8 412 8 396 7 399 6 410 7 034 Short-term investments 2 480 1 433 1 273 3 572 4 343 Accounts receivable 9 719 10 949 10 009 10 228 8 761 Inventories 9 929 9 613 9 523 10 125 9 685 Other cu
Slide 47: Operational data
Operational data Pro forma Bauxite & Alumina Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Year 2012 Year 2013 Alumina production (kmt) 1 464 1 491 1 441 1 397 1 361 1 248 1 316 1 452 5 792 5 377 Sourced alumina (kmt) 324 332 399 335 476 427 711 395 1 390 2 009 Total alumina sales
Slide 48: Operational data
Operational data Metal Markets Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Year 2012 Year 2013 Remelt production (1 000 mt) 152 142 136 119 135 132 127 123 548 517 Third-party metal products sales (1 000 mt) 76 82 81 85 84 78 76 78 323 317 Metal products sales excl. ingot trading
Slide 49: Sapa joint venture information
Sapa joint venture information Sapa JV (100 % basis), underlying (unaudited) NOK million, except sales volumes Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Sales volume (1000 mt) 343 311 346 360 346 314 Revenues 10 414 9 654 10 367 10 974 10 797 10 132 Underlying EBITDA 365 154 304 508 328 (43) U
Slide 50: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10%* Currency sensitivities +10%* NOK million EBIT NOK million EBIT Financial items Aluminium 2 530 USD 2 080 (1 050) Oil (185) BRL (840) 820 Pet coke (190) EUR (155) (915) • Annual sensitivities based on normal annual business volumes, L
Slide 51: Investor Relations in Hydro
Investor Relations in Hydro Rikard Lindqvist Head of Investor Relations t: +47 417 51 199 Next events e: rikard.lindqvist@hydro.com First Quarter Results April 30, 2014 Pål Kildemo Investor Relations Officer For more information see t: +47 970 96 711 e: pal.kildemo@hydro.com www.hydro.com/ir (51)
Slide 52: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO