Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q1 2019 Earnings Presentation
58 slides from Norsk Hydro Asa's earnings presentation, 2019
Slide 1: First quarter results 2019
First quarter results 2019
Slide 2: Cautionary note
Cautionary note Certain statements included in this announcement contain forward-looking information, including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objectives and strategies, such as planned expan
Slide 3: Driving sustainability, Lifting profitability
Driving sustainability Lifting profitability
Slide 4: Strong foundation
Strong foundation • Strong company culture and competence • Efficient operations and quality products • Attractive assets across the value chain • Leading position in sustainability and innovation 4
Slide 5: We believe in aluminium
We believe in aluminium Building block of modern society Transportation and Packaging and Buildings and Applications and automotive recycling construction end-user products 5
Slide 6: Challenging period for Hydro and the industry
Challenging period for Hydro and the industry Extraordinary events Industry and Hydro not delivering Increasing political unpredictability satisfactory returns LME in USD 2500 2400 2300 2200 2100 2000 1900 1800 1700 1600 1500 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Nasdaq 6
Slide 7: Immediate actions to improve performance and cash generation
Immediate actions to improve performance and cash generation • Safe and efficient operations - always key priority • Return Alunorte, Paragominas and Albras to full production and operational excellence • Rolled Products restructuring and strategic review • New improvement efforts across all busines
Slide 8: Results down on volume, price and raw material cost
Results down on volume, price and raw material cost Hilde Merete Aasheim, President and CEO 8
Slide 9: First quarter highlights
First quarter highlights • Underlying EBIT of NOK 559 million • Production embargos at Alunorte lifted by Federal Court – Alunorte, Paragominas and Albras resuming production • Financial impact of cyber attack NOK 300-350 million in Q1 – main impact in Extruded Solutions • Strong performance in Extr
Slide 10: Operations in Pará moving towards normal production
Operations in Parà moving towards normal production Status • Federal court in Belem, Brazil, lifted production embargoes May 15 and 20 – allowing full value chain in Pará to move towards normal production • Federal court decision to keep embargos on the new bauxite residue disposal area (DRS2) Opera
Slide 11: Going forward
Going forward • Safe ramp-up of Alunorte, Albras and Paragominas key priority • Fully committed to deliver on obligations under technical and social agreement (TAC and TC) • Continued dialogue with state environmental agency SEMAS and Ministerio Público on creating common platform – timing for embar
Slide 12: Status update cyber attack
Status update cyber attack Operational and financial impact • Overall financial impact for Q1 NOK 300-350 million • Of which Extruded Solutions NOK 250-300 million • Production running close to normal in Extruded Solutions, with value creation approaching 100% • Production running as normal in other
Slide 13: Global market expected in deficit for 2019
Global market expected in deficit for 2019 China largely balanced, world outside China in deficit World ex. China 2019 Estimated primary market balance 2019 (mill t.) 0-2 % (‘000t) 1 000 2-3 % ~29.7 – 30.2 Production ~28.2 – 28.5 Demand 0 China 2019 (mill t.) -1 000 1-3 % 2-4 % Production ~36.5 – 37
Slide 14: Competitive advantage China
Inventories gradually trending downwards, increasing Chinese semis exports Global reported and unreported, in thousand tonnes Inventory days Semis exports from China, in thousand tonnes Comp. adv (USD/mt) 16000 140 600 1 000 120 800 500 Competitive advantage China 12000 100 600 400 80 400 8000 300 6
Slide 15: Q1 vs Q4: upstream costs down, stable margins
Q1 vs Q4: upstream costs down, stable margins Implied alumina cost and margin All-in implied primary cost and margin USD/mt 1) USD/mt 4) 54 50 50 375 2 350 62 2 200 2 075 84 287 409 311 1 7255) 2 0005) 1 8505) Q1 2018 Q4 2018 Q1 2019 Q1 2018 Q4 2018 Q1 2019 371 463 373 Price 2) 2 435 2 403 2 256 All
Slide 16: Rolled Products: Stable sales volumes Q1 2019 vs Q1 2018
Rolled Products: Stable sales volumes Q1 2019 vs Q1 2018 Lower foil sales offset by higher sales in automotive and general engineering Q1 2019 vs Q1 2018 Q1 2019 vs Q4 2018 Sales volume 14% 13% Growth in % 12% 9% 4% 4% 0% -6% Can & foil Special products Can & foil Special products Lithography & Tota
Slide 17: Extruded Solutions: Continued improvements in net added value
Extruded Solutions: Continued improvements in net added value Net added value* per kg (NOK**, indexed to 2016) 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Extrusion Europe Extrusion North America Building Systems Precision Tubing Extruded Solutions 2016 2017 2018 Roll 12m (Q1 2019) * Net Added Value: calculated as
Slide 18: Financial update
Financial update Eivind Kallevik, Executive Vice President and CFO
Slide 19: Results down on volume, price and raw material cost
Results down on volume, price and raw material cost Q1 2019 vs Q1 2018 NOK billion 3.1 (1.2) (0.9) (0.6) 0.6 (0.5) 0.6 UEBIT Q1 2018 Raw material Realized Upstream volume Currency Other incl. Energy UEBIT Q1 2019 and fixed costs aluminium price 19
Slide 20: Results flat as lower raw material costs offset lower prices
Results flat as lower raw material costs and downstream seasonality offset lower prices Q1 2019 vs Q4 2018 NOK billion (0.3) 0.5 0.6 0.6 (1.0) 0.6 UEBIT Q4 2018 Realized aluminium Raw material costs Downstream seasonality Other incl. Energy UEBIT Q1 2019 and alumina price 20
Slide 21: Key financials
Key financials Year NOK million Q1 2019 Q1 2018 Q4 2018 2018 Revenue 37 583 39 971 38 386 159 377 Underlying EBIT 559 3 147 534 9 069 Items excluded from underlying EBIT 539 (155) 356 547 Reported EBIT 20 3 301 178 8 522 Financial income (expense) 6 (475) (721) (2 060) Income (loss) before tax 26 2
Slide 22: Items excluded from Underlying EBIT
Items excluded from Underlying EBIT Excluded a loss of 539 MNOK from Underlying EBIT Year NOK million Q1 2019 Q1 2018 Q4 2018 2018 Underlying EBIT 559 3 147 534 9 069 Unrealized derivative effects on LME related contracts (200) 114 (22) (39) Unrealized derivative effects on power and raw material co
Slide 23: Bauxite & Alumina
Bauxite & Alumina Results down on production restrictions and higher raw material costs Key figures Q1 2019 Q1 2018 Q4 2018 Alumina production, kmt 805 1 277 786 Total alumina sales, kmt 1 423 2 071 1 983 Realized alumina price, USD/mt 373 371 463 Implied alumina cost, USD/mt 311 287 409 Bauxite pro
Slide 24: Primary Metal
Primary Metal Results down on lower prices and higher raw material costs Key figures Q1 2019 Q1 2018 Q4 2018 Primary aluminium production, kmt 485 514 490 Total sales, kmt 534 578 503 Realized LME price, USD/mt 1 912 2 140 2 041 Realized LME price, NOK/mt 16 291 16 929 17 038 Realized premium, USD/m
Slide 25: Metal Markets
Metal Markets Results up on stronger performance from remelters and commercial activities Key figures Q1 2019 Q1 2018 Q4 2018 Remelt production, kmt 131 150 135 Metal products sales, kmt 1) 683 745 682 Underlying EBITDA, NOK million 219 201 301 Underlying EBIT excl currency and inventory valuation 2
Slide 26: Rolled Products
Rolled Products Lower results mainly due to negative Neuss contribution Key figures Q1 2019 Q1 2018 Q4 2018 External sales volumes, kmt 246 245 220 Underlying EBITDA, NOK million 384 456 133 Underlying EBIT, NOK million 138 232 (113) Results Q1 19 vs Q1 18 • Stable results from the rolling mills: Un
Slide 27: Extruded Solutions
Extruded Solutions Strong performance negatively affected by the cyber attack Key figures Q1 2019 Q1 2018 Q4 2018 External sales volumes, kmt 333 362 318 Underlying EBITDA, NOK million 1 099 1 155 645 Underlying EBIT, NOK million 593 734 202 Results Q1 19 vs Q1 18 • Estimated negative effect of the
Slide 28: Energy
Energy Results up on higher prices and improved commercial performance Key figures Q1 2019 Q1 2018 Q4 2018 Power production, GWh 2 553 2 433 2 822 Net spot sales, GWh 770 763 1 166 Southwest Norway spot price (NO2), NOK/MWh 468 361 455 Underlying EBITDA, NOK million 583 339 566 Underlying EBIT, NOK
Slide 29: Other and Eliminations
Other and Eliminations Underlying EBIT, NOK million Q1 2019 Q1 2018 Q4 2018 Other (307) (207) (299) Eliminations 46 368 154 Other and Eliminations (261) 161 (145) 29
Slide 30: Net debt increased in Q1 2019
Net debt increased in Q1 2019 Affected by the new IFRS16 Leases standard NOK billion Net cash flow from operations NOK 0.8 billion (8.7) 0.1 (3.1) (1.9) 2.6 (1.6) (11.7) 0.5 (12.1) End Q4 2018 IFRS16-Leases* End Q4 2018 Underlying EBITDA Operating capital Taxes and other Investments/divestments Othe
Slide 31: Adjusted net debt up in Q1
Adjusted net debt up in Q1 Driven by increased net debt position Mar 31 Dec 31 Dec 31 Sep 30 NOK billion 2019 2018 2018 2018 Restated1) Cash and cash equivalents 6.1 6.0 6.0 6.8 Short-term investments 1.3 1.0 1.0 1.2 Short-term debt (8.9) (9.4) (8.5) (6.6) Long-term debt (10.6) (9.3) (7.1) (7.9) Net
Slide 32: 2019 priorities
2019 priorities • Safe and efficient operations • Ramp up Alunorte, Paragominas and Albras, resume DRS2 operations • Rolled Products restructuring and strategic review • New improvement drive • Focus on cash 32
Slide 33: Additional information
») Hydro Additional information
Slide 34: Prudent financial framework
Prudent financial framework Managing industry cyclicality, driving long-term shareholder value Lifting cash flow Financial strength Disciplined Predictable dividend Effective risk potential and flexibility capital allocation policy management Improving efficiency, Investment grade credit Long-term s
Slide 35: Hydro's aspiration underpinned by firm financial targets
Hydro’s aspiration underpinned by firm financial targets Medium and long-term Ambition Timeframe 2018 status Better improvement ambition 3.0 BNOK 2016-2019 (0.6) BNOK 2018 Dividend payout ratio 40% of net income Over the cycle ~57%1) 2014-2018 FFO/adjusted net debt 2) > 40% Over the cycle 44% 20185)
Slide 36: Shareholder and financial policy; Hedging policy
Shareholder and Hedging policy financial policy • Hydro aims to give its shareholders competitive returns compared to • Hedging strategy alternative investments in comparable companies • Fluctuating with the market: primarily exposed to LME and USD • Dividend policy • Volatility mitigated by strong
Slide 37: Maintaining a solid balance sheet and investment-grade credit rating
Maintaining a solid balance sheet and investment-grade credit rating Funds from operations determine the balance sheet structure Adjusted net debt Adjusted net debt / Equity BNOK <55% 32 % 33 % 24 % 26 % 26 % 22 % 20 % 19 % Sep 30, 2018 (6.5) (5.5) (5.6) (6.4) (24.0) 14 % 11 % 3) 2009 2010 2011 2012
Slide 38: Growth capex focused on incremental growth and productivity improvements
Growth capex focused on incremental growth and productivity improvements Majority of sustaining capex allocated upstream NOK billion ~10-10.5 • Sustaining projects for 2018-2021: • Pipeline replacement in B&A 8.8 ~8.5-9.5 • PM rectifiers and asset integrity Albras 7.9 7.8* • Smelter relining 7.2 • A
Slide 39: Significant exposure to commodity and currency fluctuations
Significant exposure to commodity and currency fluctuations Sensitivities affected by the Alunorte and Albras curtailments Sensitivities with full production Sensitivities with 50% production Aluminium price sensitivity +10%, NOK million Aluminium price sensitivity +10%, NOK million 3 640 3 270 2 55
Slide 40: Bauxite & Alumina sensitivities
Bauxite & Alumina sensitivities Sensitivities affected by the Alunorte curtailment Sensitivities with full production Sensitivities with 50% production Annual sensitivities on underlying EBIT if +10% in price Annual sensitivities on underlying EBIT if +10% in price NOK million NOK million 1 630 570
Slide 41: Primary Metal sensitivities
Primary Metal sensitivities Sensitivities affected by the Albras curtailment Sensitivities with full production Sensitivities with 50% production Annual sensitivities on underlying EBIT if +10% in price Annual sensitivities on underlying EBIT if +10% in price NOK million NOK million 3 200 2 830 250
Slide 42: Business area sensitivity parameters
Business area sensitivity parameters Bauxite & Alumina Primary Metal Revenue impact Revenue impact • ~14% of 3-month LME price per tonne alumina with one month lag • Realized price lags LME spot by ~1-2 months • Realized alumina price lags PAX by one month • Realized premium lags market premium by ~
Slide 43: Items excluded from underlying results - 2019
Items excluded from underlying results - 2019 NOK million (+=loss/()=gain) Q1 2019 Alunorte agreements - provision Bauxite & Alumina 35 Total impact Bauxite & Alumina 35 Unrealized derivative effects on LME related contracts Primary Metal 122 Unrealized effects on power contracts Primary Metal 27 To
Slide 44: Items excluded from underlying results - 2018
Items excluded from underlying results - 2018 NOK million (+=loss/()=gain) Q1 2018 Q2 2018 Q3 2018 Q4 2018 Year 2018 Alunorte agreements - provision Bauxite & Alumina - - 519 - 519 Total impact Bauxite & Alumina - - 519 - 519 Unrealized derivative effects on LME related contracts Primary Metal (114)
Slide 45: Operating segment information
Operating segment information Underlying EBIT NOK million Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Year 2017 Year 2018 Bauxite & Alumina 756 662 413 1 872 741 364 685 493 153 3 704 2 282 Primary Metal 900 1 486 1 298 1 377 823 755 861 (677) (771) 5 061 1 762 Metal Mark
Slide 46: Operating segment information
Operating segment information EBIT NOK million Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Year 2017 Year 2018 Bauxite & Alumina 756 662 413 1 872 741 364 166 493 118 3 704 1 763 Primary Metal 797 1 538 1 282 1 112 917 776 954 (524) (919) 4 729 2 123 Metal Markets (13) 28
Slide 47: Operating segment information
Operating segment information Total revenue NOK million Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Year 2017 Year 2018 Bauxite & Alumina 5 911 5 858 5 612 8 040 6 309 6 877 6 749 8 613 4 866 25 421 28 548 Primary Metal 8 641 9 575 8 958 9 291 10 170 10 083 9 984 9 196 9
Slide 48: Operating segment information
Operating segment information Internal revenue NOK million Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Year 2017 Year 2018 Bauxite & Alumina 2 528 2 441 2 320 2 944 2 800 3 237 3 733 4 381 2 496 10 234 14 152 Primary Metal 6 941 7 631 7 093 7 223 8 152 8 090 7 672 7 691 7
Slide 49: Operating segment information
Operating segment information Return on average capital employed 1) (RoaCE) Reported RoaCE Underlying RoaCE 2018 2017 2016 2015 2014 2013 2012 2018 2017 2016 2015 2014 2013 2012 Bauxite & Alumina 4.3% 8.5% 2.7 % 5.3 % (0.1) % (2.5) % (1.5) % 5.5% 8.5% 2.8 % 5.3 % (0.1) % (2.2) % (1.6) % Primary Meta
Slide 50: Operating segment information
Operating segment information Depreciation, amortization and impairment NOK million Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Year 2017 Year 2018 Bauxite & Alumina 577 586 644 679 630 573 509 384 605 2 486 2 095 Primary Metal 492 505 504 526 546 575 583 548 619 2 026 2
Slide 51: Income statements
Income statements NOK million Q1 2019 Q1 2018 Q4 2018 Year 2018 Revenue 37 583 39 971 38 386 159 377 Share of the profit (loss) in equity accounted investments 3 221 30 765 Other income, net 183 155 264 772 Total revenue and income 37 769 40 346 38 680 160 913 Raw material and energy expense 25 136
Slide 52: Balance sheets
Balance sheets NOK million Mar 31, 2019 Dec 31 20181) Sep 30 2018 Jun 30 2018 Mar 31 2018 Dec 31 20171) Cash and cash equivalents 6 099 5 995 6 846 5 682 9 371 11 828 Short-term investments 1 274 975 1 176 1 136 1 031 1 311 Accounts receivable 23 542 20 744 21 727 23 442 22 785 19 983 Inventories 25
Slide 53: Operational data
Operational data Bauxite & Alumina Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Year 2017 Year 2018 Alumina production (kmt) 1 523 1 576 1 605 1 693 1 277 829 821 786 805 6 397 3 712 Sourced alumina (kmt) 600 645 667 610 900 985 907 1 163 711 2 522 3 954 Total alumina sale
Slide 54: Operational data
Operational data Metal Markets Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Year 2017 Year 2018 Remelt production (1 000 mt) 143 152 136 137 150 153 126 135 131 568 563 Third-party Metal Products sales (1 000 mt) 79 80 74 86 70 77 83 73 70 319 304 Metal Products sales excl
Slide 55: Extruded Solutions, information by business area
Extruded Solutions, information by business area Historical Sapa information (100% basis) Q1 2017 – Q3 2017 Extruded Solutions, fully consolidated in Hydro in 2018 and Q4 2017 1) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Precision Tubing 2017 2017 2017 2017 2018 2018 2018 2018 2018 2019
Slide 56: Historical information for Sapa
Historical information for Sapa Sapa JV (100 % basis), underlying (unaudited) NOK million, except sales volumes Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Year 2015 Year 2016 Sales volume (1000 mt) 359 367 350 322 353 358 3
Slide 57: Investor Relations in Hydro
Investor Relations in Hydro Next events Second quarter results Stian Hasle Head of Investor Relations July 23, 2019 t: +47 97736022 e: stian.hasle@hydro.com Olena Lepikhina Investor Day Investor Relations Officer t: +47 96853035 September 24, 2019 e: olena.lepikhina@hydro.com Aud Helen Halvorsen Inv
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