Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (January 2000)
53 slides from Norsk Hydro Asa's investor presentation, January 2000
Slide 1: Norsk Hydro Update January 2000
1RUVN+\GUR 8SGDWH-DQXDU\ Executive Vice President Eivind Reiten 11571_1 01/00 * 1 Hydro Media 11571_1pd.prz
Slide 2: Key areas of Norsk Hydro
1 .H\DUHDV1RUVN+\GUR Relative size of core areas Other Agri Light Metal Oil and Energy Percent 100 80 60 40 20 0 Non-current assets External sales 11571_1 01/00 * 2 Hydro Media 11571_1pd.prz
Slide 3: The organization
2 7KHRUJDQL]DWLRQ &25325$7( 0$1$*(0(17 &25325$7( 67$))6 2,/$1'(1(5*< $*5, /,*+70(7$/6 27+(5$&7,9,7,(6 Exploration and Production Hydro Agri Hydro Aluminium Norway Production Metal Products Petrochemicals Exploration and Production Hydro Agri Hydro Aluminium International Markets Extrusion Hydro Seaf
Slide 4: Focused portfolio, selected growth
3 )RFXVHGSRUWIROLRVHOHFWHGJURZWK Oil & Gas/ Light Metals Agri Others Energy Profitable growth Turnaround Reduce engagement 11571_1 01/00 * 4 Hydro Media 11571_1pd.prz
Slide 5: Divestment of Non-core Businesses
4 'LYHVWPHQWRI1RQFRUH%XVLQHVVHV NOK 2.6 billion realized so far* in 1999, total gains NOK 1.4 billion Main transactions: Pronova Biopolymers Mabo Hydro Coatings Divestment target: NOK 10 billion over the next two-three years 11571_1 01/00 * 5 * Sale of Dyno would give an estimated sales income ot NO
Slide 6: Share price performance
5 6KDUHSULFHSHUIRUPDQFH Index 600 Norsk Hydro 500 FTSE Eurotop 300 400 300 200 100 0 89 90 91 92 93 94 95 96 97 98 99 11571_1 01/00 * 6 Hydro Media 11571_1pd.prz
Slide 7: Main Financial Targets
6 0DLQ)LQDQFLDO7DUJHWV 1999 1996 Profitability: Return on Capital Employed 15% Total shareholder returns* 15-20% Debt/equity ratio** 0.5 0.5 Internal rate of return for investment projects (real, after tax) 10% 10% Dividends, pay-out ratio 30% 30% * Annual average over the long term 11571_1 ** Long-
Slide 8: Hydro European network
7 +\GUR(XURSHDQQHWZRUN Agriculture Oil and Energy Light Metals Petrochemicals Hydro Seafood Head office 11571_1 01/00 * 8 Hydro Media 11571_1pd.prz
Slide 9: Hydro Global network
8 +\GUR*OREDOQHWZRUN Agriculture Oil and Energy Light Metals Petrochemicals Head office 11571_1 01/00 * 9 Hydro Media 11571_1pd.prz
Slide 10: New improvement target
9 1HZLPSURYHPHQWWDUJHW Close Agenda 99 "gap" of NOK 5 billion NOK 1 billion improvement realized in 1999 Additional NOK 4 billion improvement by the end of 2001 Realize synergies from Saga integration of NOK 500 million 11571_1 01/00 * 10 Hydro Media 11571_1pd.prz
Slide 11: Hydro - strong financial position
10 +\GUR²VWURQJILQDQFLDOSRVLWLRQ Long-term interest-bearing debt/equity 1,5 1 0,5 0 1985 1987 1989 1991 1993 1995 1997 1999 * 1986 1988 1990 1992 1994 1996 1998 Long-term interest-bearing debt divided by equity plus minority interests 11571_1 * as per 30.9.99 01/00 * 11 Hydro Media 11571_1pd.prz
Slide 12: A year of change
11 D\HDURIFKDQJH Acquisition of Saga Petroleum Brazilian aluminium agreements Restructuring og the Agri business initiated Agenda '99 targets being reached Value Based Management concept introduced 11571_1 01/00 * 12 Hydro Media 11571_1pd.prz
Slide 13: Oil and Energy
12 2LODQG(QHUJ\ 11571_1 01/00 * 14 Hydro Media 11571_1pd.prz
Slide 14: Historical price and cost reductions in the oil industry
+LVWRULFDOSULFH 13 DQGFRVWUHGXFWLRQVLQWKHRLOLQGXVWU\ 40 World- wide(2) 35 full- 30 cycle up- 25 stream Brent price development 20 costs (USD/bbl) 15 10 Production 5 Finding & Development 0 (1) 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 Source: Cambridge Energy Research (1) BCG estimate As
Slide 15: Hydro Oil and Energy
14 +\GUR2LODQG(QHUJ\ Oil and Energy central in Hydro's strategy Oil and Energy Strategy geared towards Future growth Improved profitability 11571_1 01/00 * 15 Hydro Media 11571_1pd.prz
Slide 16: Saga integration
15 6DJDLQWHJUDWLRQ A first step of a growth strategy Proven reserves 1998 Production 1000 boe/d Saga - 800 Saga International 700 Hydro Int. Saga - 96 600 Hydro Norway Norway 500 471 Hydro Norway 400 1,316 300 200 100 Hydro 0 International 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Slide 17: Growth strategy
16 *URZWKVWUDWHJ\ Estimated undiscovered Norwegian Continental Shelf 3.2 5.1 Barents Hydro has a strong Sea position 1.0 Norwegian Sea High potential for 0.02 undiscovered 1.5 resources 0.03 Probabilities: 2.2 North High Sea 1.4 Expected Low 0.5 Natural gas (Source: NPD) 11571 Oil 01/00 *17 All numb
Slide 18: Norwegian Continental Shelf
17 1RUZHJLDQ&RQWLQHQWDO6KHOI competence as basis for international growth $PDMRUSOD\HU ZLWKDKLJKWHFK UHSXWDWLRQ Substantial offshore operated production with 900,000 boed NCS Global Presence Large operator presence Activities in 36 countries, Premium explorer High tech development skills Low cost op
Slide 19: Hydro's international petroleum activities
18 +\GUR VLQWHUQDWLRQDOSHWUROHXPDFWLYLWLHV Increased international focus Northwest Russia UK/Ireland - Kharyaga - Britannia - TPC - Alba - Shtokman - Gryphon - Development licenses - Development licenses Norway Iran Well positioned in emerging area - Abadan Plains / Canada Anaran exploration - Hiber
Slide 20: Increased profitability
19 ,QFUHDVHGSURILWDELOLW\ through improvements reach target in finding and development of USD 5 per barrel Good Poor Good NCS finding cost 1991-1997 1) $/boe 1) :RUOGZLGHSURGXFWLRQFRVWV 86'EEO ($/boe of tech. resource) 7 Hydro 0,4 14 Peer 1 Hydro 6 Peer 2 12 Peer 3 Peer 4 5 10 Peer 5 Peer 6 8 4 Peer
Slide 21: Unit lifting cost Norway
20 8QLWOLIWLQJFRVW1RUZD\ Troll Oseberg Top 25 % Lifting cost on the performers Troll oil field: USD 0.75 bbl. Median 0 20 40 60 80 100 120 140 160 Unit lifting cost (NOK/boe) 11571_1 01/00 * 21 Source: McKinsey Hydro Media 11571_1pd.prz
Slide 22: Saga integration
21 6DJDLQWHJUDWLRQ Cost efficiencies and synergies Total synergies Employees cost efficiencies Expected May 1999 - 800 NOK 1.0 bill To be realised -1,050 NOK 1.4 bill (June 1999 - Jan. 2000) 11571_1 01/00 * 22 Hydro Media 11571_1pd.prz
Slide 23: Saga integration
22 6DJDLQWHJUDWLRQ An illustration of Hydro's scale effiency 1RRI (PSOR\HUV SODWIRUPV 3000 No. of employers: 13 Offshore 12 Onshore 11 2500 10 2000 9 8 7 1500 6 5 1000 4 3 500 2 1 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2VH$% 2VH& %UDJH 7UROO% 1MRUG +HLPGDO 9LVXQG 2VH6RXWK 2VH( 6Q
Slide 24: Technological innovation record
23 7HFKQRORJLFDOLQQRYDWLRQUHFRUG The Troll story Continued technology development Troll Oil Subsea separator Basis for international growth Separator Oil Oil reserves to platform mboe Wellstream Water injection well 1500 "The majors" said it was Troll C 1000 impossible... we did it! Troll B 500 1990
Slide 25: Grane under development
24 *UDQHXQGHUGHYHORSPHQW ,QYHVWPHQWVWDUWXS 'HFHPEHU 7RWDOLQYHVWPHQW HVWLPDWH 12.ELOO 3URGXFWLRQVWDUWXS 2FWREHU 2LOUHVHUYHV PLOOEEO 3ODWHDXSURGXFWLRQ EEOG 1RRIZHOOV 11571_1 01/00 * 25 Hydro Media 11571_1pd.prz
Slide 26: Ormen Lange Norwegian gas giant
25 2UPHQ/DQJH1RUZHJLDQJDVJLDQW Reserves and ownership Estimated reserves: 13 500 bcf Proposed operator-development: Hydro Poposed operator-operations: Shell Investments NOK 30 bill ex. gas pipeline to the European continent Production start-up expected 2006 Ownership Norsk Hydro SDFI 18.7% 36.4% Mai
Slide 27: Angola priorities
26 $QJRODSULRULWLHV Portfolio development and exploration Negotiating strategic alliance Hydro - Sonangol, comprising block 34 Exploration drilling: 9 wells on block 17 Exploration on block 1, 5 and 9 Development of block 17 Girassol, production start-up 2001 Dalia - under development Appraisal of 5
Slide 28: Increased production
27 ,QFUHDVHGSURGXFWLRQ Hydro wishes to negotiate acquisition of SDFI1) shares Hydro has as an ambition of continued growth as an oil company Hydro seeks a strengthened position in its operating fields Hydro's strong financial position gives opportunities for growth in the oil and energy segment thro
Slide 29: Effective integration with Saga
28 (IIHFWLYHLQWHJUDWLRQZLWK6DJD Created a "fit-for-purpose" organization using zero-based dimensioning and benchmarking targets Rapid integration process started in August. New organization fully operational from January 2000 Strong efforts to ensure a smooth staff reduction process Going forward, i
Slide 30: Canada
29 &DQDGD A new significant E&P area Portfolio development and exploration Exploration offshore Newfoundland and Nova Scotia Tendering for participation offshore Newfoundland Hibernia Hebron Development and operations Terra Nova Start-up of Terra Nova (Dec. 2000) Mature the Hebron and Ben Nevis pros
Slide 31: Exploiting energy market opportunities
30 ([SORLWLQJHQHUJ\PDUNHWRSSRUWXQLWLHV Development of energy market provides new opportunities Hydro is well positioned in converging European power and gas markets Hydro's position as buyer and seller provides arbitrage opportunities Gas 5.3 Bcm Gas 3.4 Bcm Norsk Hydro Norsk supply Hydro Power 9.2
Slide 32: Hydro Oil and Energy
31 +\GUR2LODQG(QHUJ\ At the start of a new millennium Focus on increased profitability through performance as leading NCS operator and materialize potential resulting from this year's turn-around Realize international E&P ambitions through profitable growth Build on existing position for exploiting
Slide 33: Light Metals
32 /LJKW0HWDOV 11571_1 01/00 * 33 Hydro Media 11571_1pd.prz
Slide 34: Strategic direction Light Metals
33 6WUDWHJLFGLUHFWLRQ/LJKW0HWDOV Building on our position as a leading player in primary metal, extrusions and automotive Securing Alumina supply Exploiting opportunities in recycling Maintaining global leadership in magnesium Maintaining and further developing attractive niche positions in European
Slide 35: Aluminium growth above the industrial production rate
$OXPLQLXPJURZWK 34 DERYHWKHLQGXVWULDOSURGXFWLRQUDWH Index 100 in 1985 190 Al-consumption 180 Industrial production 170 160 150 140 130 120 110 100 90 80 1980 1984 1988 1992 1996 2000 2004 1982 1986 1990 1994 1998 2002 Aluminum growth expected to continue at 2.5 to 3% p.a. 11571_1 01/00 * 35 Source:
Slide 36: New aluminium industry structure Europe
35 1HZDOXPLQLXPLQGXVWU\VWUXFWXUH(XURSH Capacity figures 1998 '000 mt 2500 Primary Extrusion 2000 Rolled 1500 1000 500 0 APA AR Hydro VAW Hoogovens Updated 16.09.99 11571_1 01/00 * 36 Hydro Media 11571_1pd.prz
Slide 37: Hydro increased business volume through limited asset investments
+\GUR,QFUHDVHGEXVLQHVV 36 YROXPHWKURXJKOLPLWHGDVVHWLQYHVWPHQWV '000 mt 2200 Commercial agreements 2000 Alliances Remelt 1800 Primary production 1600 1400 1200 1000 800 600 400 200 0 1992 1994 1996 1998 2000 From asset-driven to commercially-driven metal supplier 11571_1 01/00 * 37 Hydro Media 11571_
Slide 38: Business positions in aluminium extrusions
37 %XVLQHVVSRVLWLRQVLQDOXPLQXPH[WUXVLRQV Tons Total Extrusion Heat Transfer Building Systems (Worldwide) (Worldwide) (Europe) Alcoa 830,000 14,000 53,000 Reynolds Norsk Hydro 400,000 50,000 45,000 Alcan, Pechiney 240,000 5,000 7,000 and Alusuisse 11571_1 01/00 * 38 Hydro Media 11571_1pd.prz
Slide 39: Hydro Automotive
38 +\GUR$XWRPRWLYH High growth area - potential for differentiation $OXPLQXP 0DJQHVLXP Primary foundry Die casting alloys, extrusions Structural alloys & sheet Components Heat Transfer products Mg castings Current turnover NOK 7 billion 11571_1 01/00 * 39 Hydro Media 11571_1pd.prz
Slide 40: Hydro Agri - going forward
39 +\GUR$JUL JRLQJIRUZDUG 11571_1 01/00 * 40 Hydro Media 11571_1pd.prz
Slide 41: Fluctuating ROCE Hydro Agri
40 )OXFWXDWLQJ52&( +\GUR$JUL Percent 20 15 10 Average 9% 5 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 1983 1985 1987 1989 1991 1993 1995 1997 30-09-1999 * ROCE = (Operating income + Share net income in non-cons. investees + Financial income** - Other expenses, net) / (Total assets - Current inte
Slide 42: Agri improvement program Summary
41 $JULLPSURYHPHQWSURJUDP6XPPDU\ Next two years Restructuring Europe Nitrate overcapacity NPK phos acid plants Ammonia/urea economics Technical urea/nitrate Cost reduction Overhead and other fixed costs Variable costs Revised investment policy Longer term Gradual transfer of product sourcing Allianc
Slide 43: Agri improvement targets
42 $JULLPSURYHPHQWWDUJHWV General fixed cost reductions NOK 1,350 million reduction in 2000 compared to 1998 Manning reduction of 1200 employees 1 million tons of nitrate capacity closures Additional fixed cost reductions expected Manning reduction of 500-600 employees Variable cost reductions of NO
Slide 44: Million tons of European nitrate closures recently announced
PLOOLRQWRQVRI(XURSHDQ 43 QLWUDWHFORVXUHVUHFHQWO\DQQRXQFHG Capacity to be closed Time of announcement Company (tons) Nov 1999 Fertiberia 260 Nov 1999 BASF 400 Dec 1999 Hydro 1,000 Dec 1999 Grande Paroisse 250 Total as of Jan 1, 2000 1,910 Large share of previously estimated overcapacity of 2.5-3.0 mi
Slide 45: Sales development emerging markets
44 6DOHVGHYHORSPHQWHPHUJLQJPDUNHWV Mill tons 7 6 5 4 3 2 1 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999E 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000B CIS Latin America Asia Africa 11571_1 01/00 * 45 Hydro Media 11571_1pd.prz
Slide 46: World fertilizer production
45 :RUOGIHUWLOL]HUSURGXFWLRQ Hydro Agri's share of trade Ammonia: Total trade 13.1 mill.tons Nitrogen: Total trade 21.2 mill.tons Hydro trade Hydro trade 15% 32% 68% 85% Other trade Other trade Hydro trade Hydro trade 3% 11% 89% 97% Other trade Other trade P205: Total trade 12.4 mill.tons K20: Total
Slide 47: Global fertilizer markets oversupplied
46 *OREDOIHUWLOL]HUPDUNHWVRYHUVXSSOLHG FSU (Former Soviet Union) China Mill tons nitrogen mill tons product 14 30 12 Consumption 25 10 20 Production 8 Export 15 6 10 Import 4 2 5 0 0 1987 1989 1991 1993 1995 1997 1987 1989 1991 1993 1995 1997 1988 1990 1992 1994 1996 1998 1988 1990 1992 1994 1996 19
Slide 48: Fertilizer prices are now at a historical low
47 )HUWLOL]HUSULFHVDUHQRZDWDKLVWRULFDOORZ Urea, CAN and DAP prices USD/mt 250 250 DAP 200 200 CAN cif Germany 150 150 100 100 Urea fob Middle East 50 50 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Source: Fertecon 11571_1 01/00 * 48 Hydro Media 11571_1pd.prz
Slide 49: Western European market structure
48 :HVWHUQ(XURSHDQPDUNHWVWUXFWXUH European nitrogen fertilizer market shares 1998 Imports Hydro ~20% ~25% ~20% Others (~10 companies) ~35% Next 4 companies (Kemira, GP, BASF, Fertiberia) 11571_1 01/00 * 49 Hydro Media 11571_1pd.prz
Slide 50: Accelerated Agri fixed cost improvement program being implemented
$FFHOHUDWHG$JULIL[HGFRVW 49 LPSURYHPHQWSURJUDPEHLQJLPSOHPHQWHG Targets vs. 1998 actual MNOK 1.500 1.350 1.000 600 500 0 1999 total 2000 total Manning reduction 470 1,200 (all employees) 11571_1 01/00 * 50 * Not including potential closures Hydro Media 11571_1pd.prz
Slide 51: Establishing a strong position in important emerging markets
(VWDEOLVKLQJDVWURQJ 50 SRVLWLRQLQLPSRUWDQWHPHUJLQJPDUNHWV Kynoch - South Africa Hydro acquires 50 % + 1 share of South Africa's leading fertilizer company - Kynoch Fertilizer in December 1999 ~ 40 % market share USD ~ 200 million revenues Kynoch's former nitrogen plants will be closed by the previou
Slide 52: More information
51 0RUHLQIRUPDWLRQ http://www.hydro.com ..or contact Investor Relations directly Telephone +47 2243 2313 E-mail ir@hydro.com 11571_1 01/00 * 52 Hydro Media 11571_1pd.prz
Slide 53: Norsk Hydro Safe Harbor Statement
52 1RUVN+\GUR6DIH+DUERU6WDWHPHQW The nature of the Company's operations and the environment in which it operates is subject to changing economic, competitive, regulatory and technological conditions, risks and uncertainty. In connection with the United States Private Securities Litigation Reform Act