Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Merger or Acquisition (July 2017)
31 slides from Norsk Hydro Asa's merger presentation, Jul 10, 2017
Slide 1: Hydro acquires Sapa
Hydro acquires Sapa Creating a global aluminium champion July 10, 2017 Svein Richard Brandtzæg, President and CEO
Slide 2: Creating the leading force in the global aluminium industry
Creating the leading force in the global aluminium industry Global #1 in aluminium products, solutions, applications and innovations • Binding agreement for Orkla’s 50% interest in Sapa • Sapa enterprise value BNOK 27 Transaction • Accretive to earnings and strong cash generation details from Sapa f
Slide 3: Connecting the world of infinite aluminium
Connecting the world of infinite aluminium 1 2 3 Global Growth Infinite leadership solutions Worldwide production and Capability and freedom to grow Responsible operations and customer offering, with unparalleled in the most attractive areas of sustainable solutions for the future technological capa
Slide 4: Fully integrated across the aluminium value chain and markets
Fully integrated across the aluminium value chain and markets Broad products and solutions offering from bauxite to end-user products Recycling Extrusion Rolled Products Transport & Building & Electronics & Machinery & Consumer Primary Metal Packaging automotive construction electrical equipment dur
Slide 5: Acquiring the global leader in innovative aluminium solutions
Acquiring the global leader in innovative aluminium solutions 5
Slide 6: The global extrusion champion – worldwide reach, local presence
The global extrusion champion – worldwide reach, local presence Clear leader in a fragmented industry where closeness to customers and markets are key success factors Strong global Customers in diversified end-markets positions (Share of Sapa’s sales volumes) 22,400 people Present in 40 countries Bu
Slide 7: Unique market positions, built on European and US strongholds
Unique market positions, built on European and US strongholds 22,400 highly competent people across the world, with total turnover of BNOK 53 Extrusion Europe Extrusion North America Precision Tubing Building Systems • Market leader focusing on • Uniquely positioned as the • Technology leader in sel
Slide 8: Targeting the high-tech, high-competence segments of extrusion
Targeting the high-tech, high-competence segments of extrusion Sapa with increased focus on value-add, specialized and advanced product niches Tailored solutions Finished products Service • Custom high-quality extrusions • Sapa offers a wide range of finished • Sapa provides packaging, assembly of p
Slide 9: Proven track-record of value creation with further potential
Proven track-record of value creation with further potential Successful value-over-volume strategy Last 12 months underlying EBITDA Net added value* per kg • BNOK 1 restructuring on annual basis After-tax ROCE (100%) (NOK, indexed) delivered ahead of plan EBITDA in MNOK ROCE in % 135 • Further poten
Slide 10: Strategic fit and rationale
Strategic fit and rationale 10
Slide 11: Stronger together
Stronger together Complementing each other, connecting the world of infinite aluminium Hydro’s contribution • Upstream performance leader • Technology, R&D & process innovation • Strong commercial positions mid and downstream • High-quality asset and resource base Sapa’s contribution 1 2 3 • Global
Slide 12: Product service offering and quality throughout the value chain
1 Product service offering and quality throughout the value chain Global leadership Built on market understanding, customer closeness and competence Europe The complete aluminium company Strong ~22% North America presence in the Nordic market share in • High-quality bauxite and alumina production in
Slide 13: Unmatched in technology, innovation and product development
1 Unmatched in technology, innovation and product development Global leadership Superior capability and competence to enhance customer value-creation Driving technology, R&D and Leading in process innovation across the value chain technology and innovation = • Primary aluminium technology + • Alloy
Slide 14: Growth and optionality through full value chain exposure
Growth and optionality through full value chain exposure 2 Growth Alumina Energy • High-quality assets from bauxite to products and market insight across global markets Bauxite Primary Metal • Increased differentiation and risk diversification in combination with lower relative LME exposure Recyclin
Slide 15: Strengthening Hydro's ability to grow in most attractive markets
Strengthening Hydro’s ability to grow in most attractive markets 2 Growth Competitive advantage based on product development and innovative edge Strong overall semis demand growth Positioned for growth in a range of high-margin segments Transport Packaging Cooperating with automotive brands Substitu
Slide 16: Global leader in offering full range of lightweighting solutions
Global leader in offering full range of lightweighting solutions 2 Growth Car makers utilizing aluminium to reduce weight and increase fuel-efficiency Automotive and transport representing significant share of High-growth automotive segment with substantial further Hydro’s total portfolio potential
Slide 17: Strengthening the industry's most ambitious climate strategy
3 Strengthening the industry’s most ambitious climate strategy Infinite solutions Lightweighting the future, circular solutions for the circular economy Promoting responsible aluminium Maintaining Hydro’s lead also within Exceeding customer expectations as the metal of the future sustainability and
Slide 18: Synergy and optimization possibilities in remelt and recycling
3 Synergy and optimization possibilities in remelt and recycling Infinite solutions • Increases remelt capacity from ~1 million tonnes to Best practice Procurement Scrap loop ~2* million tonnes per year sharing scale benefits optimization • Strong platform to further grow post-consumer scrap recycli
Slide 19: Transaction details
Transaction details 19
Slide 20: Overview of the transaction
Overview of the transaction Transaction Summary Transaction • Binding agreement for Orkla’s 50% interest in Financing • Financed through cash and bond issue in details Sapa & capital Norwegian and international markets, temporarily • Sapa enterprise value BNOK 27 structure funded by committed undraw
Slide 21: Solid earnings across the entire aluminium value chain
Solid earnings across the entire aluminium value chain Increasing relative share of capital employed downstream Hydro after transaction, underlying EBITDA 2016 Hydro after transaction, capital employed end-2016 BNOK 14.2 BNOK ~97 Downstream up from 24% to ~35% of capital employed Downstream up from
Slide 22: Sapa contributes to more balanced value chain and reduced market price exposure
Sapa contributes to more balanced value chain and reduced market price exposure Estimated pro-forma production 2016, in million tonnes primary equivalents 4.5 4 3.5 3 2.5 2 Sapa 1.5 1 0.5 Rolled 0 Bauxite* Alumina Primary Downstream * Incl. evergreen contract Vale MRN 22
Slide 23: Acquisition funded by debt and strong balance sheet
Acquisition funded by debt and strong balance sheet In BNOK • Transaction financed through cash positions and bond 8 issue in Norwegian and international markets 6 • Temporarily funded by committed undrawn credit lines 4 • Hydro reiterates commitment to retain investment grade credit ratings and rob
Slide 24: Indicative timeline and summary
Indicative timeline and summary 24
Slide 25: Sapa to be included in existing structure of Hydro
Sapa to be included in existing structure of Hydro Sapa to maintain operational and commercial freedom Indicative transaction timeline Technology President Corporate Board** & CEO strategy** July 10 Share purchase agreement signed Within 30 working days Publication of Information Memorandum from sig
Slide 26: Positioning Hydro for the future
Positioning Hydro for the future Customers seeking increasingly Technology driving The future is running responsible complex solutions solutions for the future and sustainable businesses 1 2 3 Global Growth Infinite leadership solutions 26
Slide 27: Additional information
Additional information HYDRO
Slide 28: Sapa historical key figures
Sapa historical key figures Sapa JV (100 % basis), underlying (unaudited) Year Year NOK million, except sales volumes Q1 2013 Q2 2013 Q3 2013 Q4 2013 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 2015 2016 Sales volume (1000 mt) 346 360 346 3
Slide 29: Sapa historical key figures – per segment
Sapa historical key figures – per segment Sapa JV (100 % basis), information by business area Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Precision Tubing 2015 2016 Extrusion Europe 2015 2016 2016 2016 2016 2016 2017 2016 2016 2016 2016 2017 Volume (kmt) 145 150 Volume (kmt) 563 577 37 40 37 35 36 148 157 142 130
Slide 30: Acquisition price below analyst estimates and at a favourable multiple
Acquisition price below analyst estimates and at a favourable multiple Sell-side analyst estimates of Sapa enterprise value, in BNOK Enterprise value/EBITDA multiple last twelve months Q1 2017 40 15 Acquisitions1 Current trading2 14 35 13 Analyst average enterprise value Sapa 12 30 11 Sapa acquisiti
Slide 31: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO