Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (December 2000)
31 slides from Norsk Hydro Asa's investor day presentation, Dec 14, 2000
Slide 1: Capital Markets Day: Hydro Agri
&DSLWDO0DUNHWV'D\ +\GUR$JUL Executive Vice President Thorleif Enger Norsk Hydro ASA December 14, 2000 20683_3-12.00 * 1 - Hydro Media
Slide 2: Agri highlights
2 $JULKLJKOLJKWV Hydro Agri Turnaround successful so far Simplified organization and business processes Successful restructuring in Europe Cost reductions ahead of plan Safety improved Strong start of new fertilizer season in Europe continues sentiment from first half of 2000 Continued good results
Slide 3: What we said and what we have done
3 :KDWZHVDLGDQGZKDWZHKDYHGRQH Objectives announced Oct 1999: Actions taken: Reduce nitrate capacity Closure of 1 million tons Reduce NPK capacity Closure of 0.5 million tons Reduce fixed cost by 1,350 Reduced by 1,400 MNOK per 3q MNOK vs. 1998 level 2000, variable costs reduced by 500 MNOK relative
Slide 4: Increased improvement ambitions
4 ,QFUHDVHGLPSURYHPHQWDPELWLRQVIRU Accumulated cost reduction targets and results HPN + HGC vs. 1998 actual MNOK 3.000 2,400 - 2,700 2.500 2.000 1,862 1.500 1.000 765 500 0 1999 Per 3q 2000 2001 plan Manning reduction 1,106 2,007 2,700 - 3,000 20683_3-12.00 * 4 - Hydro Media
Slide 5: Plant Nutrition investments reduced and shifted towards emerging markets
3ODQW1XWULWLRQLQYHVWPHQWVUHGXFHG 5 DQGVKLIWHGWRZDUGVHPHUJLQJPDUNHWV Investments MNOK 2,200 2000 Overseas 1500 1,270 1,200 Overseas 1,000 1000 Europe Overseas 500 Europe Europe 0 Average 1999 Budget Plan 2001 1996-1998 2000 20683_3-12.00 * 5 - Hydro Media
Slide 6: Hydro Plant Nutrition has main strengths
6 +\GUR3ODQW1XWULWLRQKDVPDLQVWUHQJWKV World leader in ammonia, the foundation for all nitrogen fertilizer World leader in nitrates, the most important fertilizer in Europe Strong position in balanced fertilization - NPK - the fastest growing volume fertilizer Unique specialty product, CN, provides a
Slide 7: Strong position in ammonia
7 6WURQJSRVLWLRQLQDPPRQLD Captive use for 80-90% of production High proportion of global trade, market leader Fast response to trade opportunities due to fully controlled shipping fleet Low requirement for future investment Energy and environmentally efficient plants 20683_3-12.00 * 7 - Hydro Media
Slide 8: Nitrates capacity utilization in Western Europe high after closures
1LWUDWHVFDSDFLW\XWLOL]DWLRQLQ 8 :HVWHUQ(XURSHKLJKDIWHUFORVXUHV million tons product Capacity utilization rate (%) 25 100% 90% 20 80% 70% WE capacity nitrates 15 60% 50% Capacity utilization rate % 10 40% Overcapacity 30% 5 20% 10% 0 0% 93/94 95/96 97/98 99/00 Est. 94/95 96/97 98/99 2000/01 Forec. 3
Slide 9: Hydro sales development and fertilizer sourcing
9 +\GURVDOHVGHYHORSPHQWDQGIHUWLOL]HUVRXUFLQJ Overseas increasing, Third party sourcing increasing Europe stagnating mill tons mill tons 12 Europe 25 10 20 Third Party Products/Spot 8 15 Joint Ventures/Contract 6 Overseas 10 4 Self produced products 2 5 0 0 1991 1993 1995 1997 1999 2001P 1991 1993 19
Slide 10: Hydro Plant Nutrition uniquely positioned from producer to grower
+\GUR3ODQW1XWULWLRQXQLTXHO\ 10 SRVLWLRQHGIURPSURGXFHUWRJURZHU Global sourcing and trade Domestic sourcing and marketing "Fertilizer Supplier Importer/ Retailer/ Production Concept" wholesaler cooperatives Growers 2ZQ SURGXFWLRQ 6RXUFLQJ -RLQW DOORFDWLRQ YHQWXUHV DQG WUDGH 7KLUG SDUW\ SURGXFHUV +\GUR
Slide 11: External fundamentals improving
11 ([WHUQDOIXQGDPHQWDOVLPSURYLQJ Increased global fertilizer consumption Improved supply/demand balance, actions in European nitrate and NPK markets CIS nitrogen industry capacity utilization believed to be high Anti-dumping measures in the US and EU Impact of WTO on China But: Energy prices at reco
Slide 12: Increasing energy costs and fertilizer prices
12 ,QFUHDVLQJHQHUJ\FRVWVDQGIHUWLOL]HUSULFHV Indexed to Jan 1998 250 Oil Brent blend 200 Ammonia cif Western Europe 150 Urea fob Middle East 100 CAN cif Germany 50 Jan 98 July 98 Jan 99 July 99 Jan 00 Nov 00 Source: Average of international publications (Fertecon, Fertilizer Week, FMB, The Market) 20
Slide 13: Strong position in selected niches for Gas and Chemicals
6WURQJSRVLWLRQLQVHOHFWHG 13 QLFKHVIRU*DVDQG&KHPLFDOV A market leader in industrial gases in Norway and Denmark A market leader and lowest cost producer of liquid CO2 in Europe Leading position in Europe for nitrogen chemicals for environmental process applications Strong position in technical nitrat
Slide 14: Gas and Chemicals: Profitable growth in environmental products
*DVDQG&KHPLFDOV 14 3URILWDEOHJURZWKLQHQYLURQPHQWDOSURGXFWV Revenues in MNOK 600 Product concepts: Nutriox: Prevention and 500 removal of septicity from wastewater and sludge 400 Reduktan: Reduction of 300 NOx emissions from power plants and ships 200 100 Further growth 0 expected due to increased 19
Slide 15: Turnaround initiated in KFK
15 7XUQDURXQGLQLWLDWHGLQ.). Unsatisfactory results in recent years Overcapacity in Danish feed and grain market Restructuring of KFK Reductions in fixed and variable cost Focus on performance 20683_3-12.00 * 15 - Hydro Media
Slide 16: Medium term improvement targets for Plant Nutrition
0HGLXPWHUP 16 LPSURYHPHQWWDUJHWVIRU3ODQW1XWULWLRQ Medium term EBITDA target* 4,000 MNOK Normalized EBITDA 1999** 1,000 MNOK Agri Turnaround 3,000 MNOK Cost improvements business plan 2000 1,000 Restructuring Europe (cost and price***) 1,200 Overhead productivity project 300 Identified additional cos
Slide 17: Long term improvement targets Agri
17 /RQJWHUPLPSURYHPHQWWDUJHWV$JUL Have an average profitability across the cycle which is higher than Hydro's general requirement and in line with the other two core areas in the best quartile of chemical industry peers leading among plant nutrient companies 20683_3-12.00 * 17 - Hydro Media
Slide 18: Additional information: Agri
18 $GGLWLRQDO LQIRUPDWLRQ Agri 20683_3-12.00 * 18 - Hydro Media
Slide 19: Hydro Agri mission
19 +\GUR$JULPLVVLRQ Be a global plant nutrition company supporting sustainable food production to the world Be a niche player in gas and chemicals where we have competitive advantages 20683_3-12.00 * 19 - Hydro Media
Slide 20: Hydro the only global fertilizer company
20 +\GURWKHRQO\JOREDOIHUWLOL]HUFRPSDQ\ 1999 fertilizer revenue Hydro Europe (62%) Overseas (38%) IMC Global, USA PCS, Canada Agrium, Canada Kali & Salz, Germany Kemira, Finland 0 500 1000 1500 2000 2500 3000 3500 Million USD Source: www.sec.gov, annual reports 20683_3-12.00 * 20 - Hydro Media and ww
Slide 21: World fertilizer consumption expected to increase per year
:RUOG IHUWLOL]HU FRQVXPSWLRQ 21 H[SHFWHG WR LQFUHDVH E\ SHU \HDU Million tons nutrient (N+P+K) 87,5 75,7 20,520,6 4,1 5,6 21,923,2 99 04 99 04 99 04 99 04 4,0 4,6 11,013,6 99 04 99 04 3,0 3,3 99 04 Source: IFA 20683_3-12.00 * 21 - Hydro Media
Slide 22: Hydro has a critical share of the world's fertilizer trade
+\GURKDVDFULWLFDOVKDUH 22 RIWKHZRUOG VIHUWLOL]HUWUDGH Ammonia: Total trade 14.5 mill.tons Urea: Total trade 22.4 mill.tons Hydro trade Hydro trade 11% 26% 74% 89% Other trade Other trade Ammonia Urea Hydro trade 15% 85% Other trade NPK NPK: Total trade 5.9 million tons * Ammonia trade is all ammonia
Slide 23: Million tons of European nitrate closures
23 PLOOLRQWRQVRI(XURSHDQQLWUDWHFORVXUHV Company Capacity (000 mt) Time of closure Fertiberia 300 Closed BASF 400 Closed Hydro 1000 Immingham closed Montoir (nitrate) closed Landskrona Dec 2000 Grande Paroisse 300 Closed PCK Schwedt 400 2001 Kemira 600 Dec 2000 Total 3000 Previously estimated Europea
Slide 24: Million tons of European NPK closures
24 PLOOLRQWRQVRI(XURSHDQ13.FORVXUHV Company Capacity (000 mt) Time of closure Kemira, Pernis 300 Closed Cedest 200 Closed Hydro 500 Hurel Arc Aunay closed Socadour closed Socofer La Pallice closed Total 1000 Previously estimated European overcapacity 2.5-3.0 mill. tons 20683_3-12.00 * 24 - Hydro Med
Slide 25: Fertilizer prices improving
25 )HUWLOL]HUSULFHVLPSURYLQJ USD/mt 300 CAN cif Germany 250 DAP fob US Gulf Ammonia cif 200 Western Europe 150 100 Urea fob Middle East 50 0 -DQ -DQ -DQ -DQ -DQ 1RY Source: Average of international publications (Fertecon, Fertilizer Week, FMB, The Market) 20683_3-12.00 * 25 - Hydro Media
Slide 26: What sort of business are we in?
26 :KDWVRUWRIEXVLQHVVDUHZHLQ" Plant nutrition in the form of nitrogen and NPK (balanced fertilization) is our core business Mainstream products are supported by plant nutrition specialities Domestic marketing in key regions is supported by international trade Added value from industrial gases and ch
Slide 27: Hydro Plant Nutrition is a nitrogen NPK company
27 +\GUR3ODQW1XWULWLRQLVDQLWURJHQ13.FRPSDQ\ Production and trade of ammonia is the foundation for our competitive advantages in the production and marketing of nitrogen fertilizers like nitrates and urea NPK is a natural extension of the nitrogen business and a response to the world's demand for bal
Slide 28: International trade vs domestic marketing
28 ,QWHUQDWLRQDOWUDGHYVGRPHVWLFPDUNHWLQJ International trade Domestic marketing Centralized Decentralized Dollar business/hard currency Local business/currency risk Sold in bulk Sold in bags (and bulk) Mainstream products Mainstream products and specialities Sea transport Land transport Focus on sup
Slide 29: Hydro Agri's foundation is the joint production and market infrastructure
+\GUR$JUL VIRXQGDWLRQLVWKHMRLQW 29 SURGXFWLRQDQGPDUNHWLQIUDVWUXFWXUH Hydro Gas and Chemicals uses the infrastructure shared with Hydro Plant Nutrition in an optimal way Gas and Chemicals operates in selected niches based on unique skills and assets giving Hydro a competitive advantage Added value th
Slide 30: Actions going forward
30 $FWLRQVJRLQJIRUZDUG Continued contribution to improve fertilizer market balance in Western Europe Further streamline the organization in order to reduce costs and increase productivity Improve profitability of existing marketing network by adding volumes from alliances and joint ventures Concentr
Slide 31: Safe harbour statement
6DIHKDUERXUVWDWHPHQW Certain statements in this presentation are or may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not in the nature of historical facts may be deemed to be forward-looking statements and may