Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (July 2012)
106 slides from Norsk Hydro Asa's investor presentation, July 2012
Slide 1: Investor presentation July/August 2012
Investor presentation 2012 July/August 2012
Slide 2: Table of contents / Cautionary note
Table of contents 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 pl
Slide 3: Company overview
Company overview HYDRO
Slide 4: Hydro: resource rich and fully integrated
Hydro: resource rich and fully integrated Hydro underlying EBIT quarterly, NOK million 9 930 6 009 (2 555) 3 551 6 133 1 106 • Based in Norway with 3,200 operations in 40 countries 2,800 • 23 000 employees 2,400 2,000 • Operating revenues 1,600 • 2008: NOK 89 billion 1,200 • 2009: NOK 67 billion • 2
Slide 5: Hydro's value proposition
Hydro’s value proposition • Capturing full potential of attractive long bauxite and alumina position • Continuing unparalleled USD 300 per mt improvement program • Strengthening portfolio robustness with world-class Qatalum smelter • Securing solid financials through high-value hydropower assets • A
Slide 6: Strong positions across aluminium value chain
Strong positions across aluminium value chain Raw materials processing Primary aluminium production, Aluminium in products and energy marketing and recycling Bauxite Primary Metal Rolled Extruded & Alumina Energy Metal Markets Products Products • Bauxite capacity • Long-term power • 2.4 million tonn
Slide 7: Aluminium is the metal of the future
Aluminium is the metal of the future • Lightweight • Formability • 1/3 density of steel • Extrusion, rolling, casting • Low melting point vs. steel • Recyclability • 5% of original energy consumption • Excellent conductivity • 75% of all aluminium produced still in use • Thermal – electrical • Corro
Slide 8: Hydro - a first tier aluminium company
Hydro - a first tier aluminium company Production in 2011 in aluminium equivalents excl. China, thousand mt 9,000 Alumina Aluminium 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 A lc oa Rio T into A lc an U C Rus al N ors k H ydro BH P Billiton D ubal A luminium C entury V edanta Bahrain Source:
Slide 9: Raw material is key to our aluminium future
Raw material is key to our aluminium future Aluminium equivalent consolidated capacity, million tonnes End-2010 End-2011 Post-CAP • Long position in bauxite and alumina 4.3 creates flexibility • Strategically attractive 3.4 3.3 assets 2.4 2.4 • New business 2.3 opportunities 1.9 1.4 • Resource const
Slide 10: Strategy for further value creation
Strategy for further value creation Bauxite & Alumina Primary Metal Energy Mid- and downstream • Excellence in • Reposition • Increase value of • Adjust capacity and operations • Keep solid cash flow in energy business cost base to market • Commercialize current assets • Develop current base • Conti
Slide 11: Ideally positioned for future growth
Ideally positioned for future growth Hydro power Alouette Norway Metal Paragominas Qatalum 2 Bauxite Metal Acro CAP Suzhou Alumina Extrusion (11)
Slide 12: Safe operations is a top priority
Safe operations is a top priority TRI rate 10.3 7.0 6.0 5.4 4.0 4.1 3.9 3.7 3.8 3.4 2.9 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD2012 (12)
Slide 13: Market outlook
Market outlook < (13)
Slide 14: Aluminium is part of the solution
Aluminium is part of the solution Global trends Demand for semis Share of semis consumption Million mt 2011 – 62 million mt 120 Consumer 5-7% annual growth Electrical durables 100 12% 6% Packaging 49 9% Machinery 80 & equipment 10% 36 Foil stock 8% 60 Other 6% Capabilities 23 Transport 25% 40 53 45
Slide 15: Marginally higher sales quarter-on-quarter
Marginally higher sales quarter-on-quarter Hydro’s fabricated product sales Total fabricated Q2 2012 vs Q1 2012 product sales Foil Litho Can Packaging Auto General Extrusion Building Extrusion Precision Q2 12 vs beverage & building & heat engineering Eurasia Systems Americas Tubing Q1 12 exchanger 8
Slide 16: Weaker year-on-year demand
Weaker year-on-year demand Total fabricated Hydro’s fabricated product sales product sales Q2 2012 vs Q2 2011 Rolled Rolled Products Extrusion Building Extrusion Precision Q2 12 vs Products adjusted* Eurasia Systems Americas Tubing Q2 11 8% 0% -3% -5% -6% -6% -12% *Rolled Products sales adjusted for
Slide 17: Higher Q2 primary aluminium demand
Higher Q2 primary aluminium demand World outside China (quarterly annualized) • Seasonal demand increase 1 000 mt 30 000 • Lower aluminium production 25 000 due to curtailments • ~1.2 million tonnes announced 20 000 curtailments 15 000 • ~2% aluminium demand growth 10 000 expected in world outside C
Slide 18: Ingot premiums continue to rise
Ingot premiums continue to rise Inventories remain tied up in financial deals World reported primary aluminium inventories Regional ingot premiums 1 000 mt Days USD per mt 8,000 80 250 225 7,000 70 200 6,000 60 175 5,000 50 150 4,000 40 125 100 3,000 30 75 2,000 20 50 1,000 10 25 0 0 0 Q1 Q1 Q1 Q1 Q
Slide 19: China continues to increase net imports
China continues to increase net imports Annualized aluminium equivalents*, million mt 20 2006 2007 2008 2009 2010 2011 2012 • Bauxite and alumina ** • Strong increase in imports 15 to China Import • Primary aluminium • Expected to remain 10 broadly balanced in 2012 • Fabricated and semis 5 • Exports
Slide 20: Aluminium price falls further in Q2
Aluminium price falls further in Q2 USD per tonne 3 400 • Low aluminium price • Reflecting weak macro-economic 3 000 outlook • High inventories from long period 2 600 of oversupply 2 200 • Industry profitability challenge 1 800 Primary aluminium LME USD/mt NOK/mt 1 400 Q2 2012 average 2 019 11 888 Q
Slide 21: 66% of available bauxite in 3 countries
66% of available bauxite in 3 countries Billion mt Guinea 14.9 China 2.1 Mali 0.9 1.2 0.0 Jamaica 4.0 India Vietnam Venezuela 1.1 1.8 1.6 2.3 0.5 0.4 0.0 0.3 Indonesia Cameroon 1.0 0.1 1.2 0.0 Brazil 8.2 Australia 9.5 2.0 5.9 Big-league (Top- 3) Total bauxite, billion tonnes: reserves, mine site res
Slide 22: Alumina market is consolidating
Alumina market is consolidating Net long alumina position, million tonnes Alcoa 4.3 Alcoa 8.8 Vale 3.0 Hydro 2.1 Glencore 2.4 BHP Billiton 1.7 BHP Billiton 1.9 Rio Tinto Alcan 1.6 Kaiser 1.0 UC Rusal -0.8 Alcan 0.8 Vedanta -1.1 Sual 0.7 Century -1.1 Rio Tinto 0.5 Alba -1.7 Pechiney 0.4 China -1.9 VA
Slide 23: Absolute alumina prices remain low
Absolute alumina prices remain low Significant increase as percentage of LME Platts index in USD USD per mt Percent 500 18.0 • Alumina market outside China in balance, Alumina price % of LME supported by imports to China 450 17.0 • Strong increase in Chinese alumina imports • Supported by uncertaint
Slide 24: Commodity prices drive industry costs
Commodity prices drive industry costs Fuel oil A1 (USD/mt) Steam coal (USD/mt) Petroleum coke FOB USG (USD/mt) 900 180 600 750 150 500 600 120 400 450 90 300 300 60 200 150 30 100 0 0 0 2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012 Power – E
Slide 25: Energy: low prices, high reservoir levels
Energy: low prices, high reservoir levels Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 700 100 2011 2012 2011 2012 90 600 80 500 70 400 60 50 300 40 200 30 20 100 10 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22
Slide 26: Second quarter results 2012
Third quarter results 2011 (26)
Slide 27: Softening macro-economic environment; corrective measures
• Softening macro-economic environment • Corrective measures and operational improvements (27)
Slide 28: Q2 highlights
Q2 highlights • Underlying EBIT NOK 549 million • Realized prices and sales volumes largely unchanged • Results positively influenced by reduced operating cost • Lower power prices and production in Energy • Closure of Kurri Kurri, NOK 1.5 billion in charges (28)
Slide 29: Weak result in Bauxite & Alumina
Weak result in Bauxite & Alumina Driven by higher raw material cost and weaker LME Indexed cash cost and realized alumina price* (Cash cost 1H 2011 = 100) 143 • Results negatively affected by cost and price squeeze -15% 122 • Cost increase driven by increase in raw 108 material cost 100 -9% • Bauxit
Slide 30: Improvement efforts in Bauxite & Alumina
Improvement efforts in Bauxite & Alumina NOK 1 billion improvement potential next 2-3 years Alunorte – Towards 6.3 Mtpy ● Stabilize performance and availability ● Increase productivity ● Improve logistics efficiency ● Optimize efficiency and rightsizing Paragominas – Towards 9.9 Mtpy ● Boost product
Slide 31: Improved cash cost position
Improved cash cost position Estimated primary aluminium cash cost and margin ● Cash cost down ~USD 175 per mt USD/mt 1) from 2011 475 475 425 325 ● Cash cost down on lower alumina cost, 375 2 000 cost improvements and currency 1 825 ● Qatalum EBITDA included in 1H 2012 - 1 375 further reducing cash
Slide 32: Primary Metal improvement program continues
Primary Metal improvement program continues USD 235 per mt by end-2012 ● Additional USD 35 per mt New measures targeted realized in 2012 • Closure of Kurri Kurri aluminium plant ● Weak markets put pressure • Primary Metal and Metal Markets on casthouse margins combined under one management • Aiming
Slide 33: Strong performance in Qatalum
Strong performance in Qatalum • Continued strong production • Firm progress in reconstruction after fire in seawater cooling tower • Final insurance settlement relating to power outage verifies robust coverage • One steam turbine expected back during third quarter 2012 (33)
Slide 34: Raised improvement target in Extruded Products
Raised improvement target in Extruded Products EUR 80* million improvement in 2013 vs 2011 Achieved In million EUR • >50 distribution sites/sales offices 80 closed • 3 presses idled / 2 presses closed • Manning reduced by 770 60 Way forward • Operational initiatives 40 • Restructure logistics • Redu
Slide 35: Underlying EBIT
Underlying EBIT 1 906 1 646 1 448 1 110 1 133 965 688 588 557 549 NOK million Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Bauxite & Alumina 1) 162 288 71 113 155 272 302 159 (144) (188) Primary Metal 1) (169) 382 318 86 583 765 653 484 30 240 Metal Markets 65 31 1
Slide 36: High-level quarterly result development
High-level quarterly result development NOK billion 0.1 (0.2) 0.1 0.55 0.55 Underlying EBIT Q1 2012 Alumina and aluminium C ost & other Energy volume and price Underlying EBIT Q2 2012 price (36)
Slide 37: Key financials
Key financials First half First half NOK million Q2 2012 Q1 2012 Q2 2011 2012 2011 Revenue 21 604 21 748 24 728 43 351 45 867 Underlying EBIT 549 557 1 906 1 106 3 354 Items excluded from underlying EBIT (1 269) 108 206 (1 161) 4 613 Reported EBIT (720) 665 2 111 (54) 7 967 Financial income (expense
Slide 38: Tax and financial expense
Tax and financial expense Tax Finance NOK million Q2 2012 NOK million Q2 2012 Income before tax (1 688) Interest income 68 Equity accounted investments 16 Dividends received and net loss on securities (16) Impairment of PP&E and rationalization charges 1 583 Financial income 52 Adjusted income (loss
Slide 39: Items excluded from underlying EBIT
Items excluded from underlying EBIT First half First half NOK million Q2 2012 Q1 2012 Q2 2011 2012 2011 Underlying EBIT 549 557 1 906 1 106 3 354 Unrealized effects on power and raw material contracts 335 252 142 588 166 Unrealized derivative effects on LME related contracts (35) 55 124 20 4 Metal e
Slide 40: Bauxite & Alumina
Bauxite & Alumina Q2 Q1 Q2 Key figures 2012 2012 2011 Alumina production, kmt 1 491 1 464 1 448 Total alumina sales, kmt 1 888 1 776 2 087 Realized alumina price, USD/mt 296 293 349 Apparent alumina cash cost, USD/mt 268 269 272 Bauxite production, kmt 2 115 2 290 1 928 Underlying EBITDA, NOK millio
Slide 41: Primary Metal
Primary Metal Q2 Q1 Q2 Key figures 2012 2012 2011 Primary aluminium production, kmt 502 514 505 Total sales, kmt 615 627 668 Realized LME price, USD/mt 2 167 2 155 2 509 Realized LME price, NOK/mt 12 637 12 404 13 803 Underlying EBITDA, NOK million 736 577 1 313 Underlying EBIT, NOK million 240 30 7
Slide 42: Improved result for Qatalum
Improved result for Qatalum Positive effect from one-off items Q2 Q1 • High and stable production volumes Key figures – Qatalum (50%) 2012 2012 Revenue, NOK million 1 166 1 018 • Underlying net income up NOK 79 million from Q1 2012 Underlying EBITDA, NOK million 343 226 • Results positively affected
Slide 43: Metal Markets
Metal Markets Q2 Q1 Q2 Key figures 2012 2012 2011 Remelt production, kmt 142 152 151 Metal products sales, kmt 777 785 753 Underlying EBITDA, NOK million 69 113 269 Underlying EBIT excl currency and 117 116 140 inventory valuation effects, NOK million Underlying EBIT, NOK million 44 87 244 Q2 operat
Slide 44: Rolled Products
Rolled Products Q2 Q1 Q2 Key figures 2012 2012 2011 External sales volumes, kmt 228 227 242 Underlying EBITDA, NOK million 316 263 339 Underlying EBIT, NOK million 204 151 232 Underlying EBIT NOK million 673 355 Q2 operating results • Stable sales volumes 232 232 204 • Improved result from lower cos
Slide 45: Extruded Products
Extruded Products Q2 Q1 Q2 Key figures 2012 2012 2011 External sales volumes, kmt 137 133 142 Underlying EBITDA, NOK million 165 125 222 Underlying EBIT, NOK million 53 14 96 Underlying EBIT NOK million 151 68 Q2 operating results • Volumes up in seasonally stronger quarter • Stable product margins,
Slide 46: Energy
Energy Q2 Q1 Q2 Key figures 2012 2012 2011 Power production, GWh 2 513 3 190 1 830 Net spot sales, GWh 1 284 1 879 600 Southwest Norway spot price (NO2), 203 272 410 NOK/MWh Underlying EBITDA, NOK million 391 584 392 Underlying EBIT, NOK million 362 556 363 Underlying EBIT Q2 operating results NOK m
Slide 47: Net cash/(debt) development Q2 2012
Net cash/(debt) development Q2 2012 NOK billion Net cash flow from operations NOK 0.8 billion 0.7 (1.7) 1.8 (0.8) 1.5 (1.7) (0.2) (0.4) Net cash Q1 2012 Underlying Operating capital Other Investments Dividends C urrency Net cash Q2 2012 EBITDA adjustments translation & other (47)
Slide 48: Robust financial position
Robust financial position • Cash position of NOK 7.2 billion • Net debt position of NOK 0.4 billion • Re-entered bond market • NOK 1.5 billion bond issued • Maturity: 2019 • Revolving credit facility • USD 1.7 billion • Maturity: 2014 (48)
Slide 49: Taking action in challenging times
Taking action in challenging times Weaker markets Corrective measures • European debt crisis • Ambitious improvement programs • Softening Chinese growth • Capacity adjustments • Increased global uncertainty • Financial discipline (49)
Slide 50: Business overview
Business overview (50) NV HYDRO
Slide 51: Bauxite & Alumina
Bauxite & Alumina (51)
Slide 52: High-quality asset portfolio
High-quality asset portfolio MRN Paragominas Alunorte alumina CAP alumina bauxite mine bauxite mine refinery refinery project • 5% ownership • 60% ownership, 100% by • 91% ownership • 81% ownership • Volume off-take agreement 2015 • World’s largest alumina • CAP refinery (Phase I) is for Vale’s 40%
Slide 53: Paragominas
Paragominas One of the world’s largest bauxite mines • 2011 production: 8.2 million mt • Target to stabilize and continue to deliver production increases • Possible expansion: up to 15 million mt • Current reserve life: 30 years • ~300 million mt • Long-life resource (53)
Slide 54: Paragominas – production process
Paragominas – production process Reclaimer Silo SAG mill Pumping station Classification to pipeline Tailings dam/recovered Classification water Ball mill Recrusher Vibrating screen (54)
Slide 55: Bauxite mining costs in Paragominas
Bauxite mining costs in Paragominas • Energy cost – power and fuel Paragominas bauxite mining costs 2011 • Labor cost • Influenced by Brazilian wage level 15% 19% • Productivity improvements 16% • Maintenance and consumables 21% • Influenced by Brazilian inflation 9% • Large fixed cost base 20% • Im
Slide 56: Alunorte
Alunorte World’s largest alumina refinery • 2011 production: 5.8 million mt • Targeting stable production above 6 million tonnes • World-class conversion cost position • Modern technology • Bauxite supplied from Paragominas and MRN (56)
Slide 57: Alunorte - production process
Alunorte - production process Bauxite dewatering Steam Alumina Al2O3 Powerhouse Bauxite Caustic soda Evaporation Test tank Calcination Digestion Hydrate Classification (Al(OH)3) Precipitation Decanters Mud residue (57)
Slide 58: Favorable integrated alumina cash cost position
Favorable integrated alumina cash cost position • Integrated alumina cash cost position 2011 Integrated alumina cash cost position 2011 • USD 266 per mt • Alunorte, Paragominas and sourced alumina 5% • Bauxite • Cash cost to be improved as Paragominas 11% increase production and pipeline is fully ut
Slide 59: External alumina sourcing
External alumina sourcing • 2 million mt of external alumina sourcing in 2011 • Long term off-take agreement with Rio Tinto • Increasing with 400 000 mt annually when Yarwun expansion is in operation • Short- and medium term contracts • To balance and optimize position geographically • Various prici
Slide 60: Alumina pricing shifting from LME-link to market fundamentals
Alumina pricing shifting from LME-link to market fundamentals • Future pricing should reflect fundamentals of bauxite and alumina value chain • Spot market activity is important • New norm for the industry • Index pricing and short to medium-term contracts • Getting wider acceptance in the market •
Slide 61: Business model – volume flows
Business model – volume flows 1 000 tonnes, pro forma 2011 External sourcing 2 000 alumina External 1) 2 000 3 700 alumina sales Paragominas 8 200 Commercial Prod (100%) 8 200 operations Alunorte Internal 2) Hydro availability Prod (100%) 5 300 Hydro 3 600 alumina sales 100% 5 800 availability Alumi
Slide 62: Primary Metal
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Slide 63: World-wide production network
World-wide production network Primary aluminium annual production capacity Norway, 880 000 tonnes • Sunndal (100%) : 375 000 tonnes • Årdal (100%): 190 000 tonnes Canada, 115 000 tonnes • Karmøy (100%): 170 000 tonnes • Alouette (20%): 115 000 tonnes 42% • Høyanger (100%): 60 000 tonnes • Expansion
Slide 64: Primary Metal improvement program continues
Primary Metal improvement program continues USD 235 per mt to be realized within 2012 300 Operational improvements • Improved current efficiency • Reduced power consumption 65 • Reduced anode consumption Fixed cost reductions 35 and lean operations 200 Further operational improvements Technology cos
Slide 65: Robust power coverage
Robust power coverage Power coverage (%), based on consolidated production in 2011 100% • 80% of current production has power coverage until 2020 or beyond 75% • ~2/3 based on hydro-power 50% • Renewal of power contracts • Tomago – contract signed • Alouette – MoU signed for expansion 25% and prolon
Slide 66: Qatalum – 1st quartile cost position
Qatalum –1st quartile cost position Further creep potential beyond 2012 • On track to exceed nameplate 600 capacity first year of full production • 1st quartile cost position 400 established • Cash cost around USD 1400-1500 per mt at 2010 market conditions 200 • Operational excellence and cost optim
Slide 67: Develop technology to fulfill ambitions
Develop technology to fulfill ambitions Next- generation smelter HAL 300 HAL4e R&D portfolio • Operating for several years • Benchmark technology – • HAL4e optimization – to in Sunndal process parameters and be ready for next project • Ramping up in Qatar environment • HAL Ultra – future vision • Qa
Slide 68: Metal Markets
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Slide 69: Preferred partner in casthouse products
Preferred partner in casthouse products • Capitalizing on value-added casthouse products portfolio • Enhancing value of market Extrusion ingot 1.6 million mt system through margin management • Growing market positions in US and Asia with Qatalum volumes Foundry alloys 0.6 million mt • Utilizing prod
Slide 70: Significant system flexibility from remelting
Significant system flexibility from remelting Metal product capacities Europe 2011* 2000 • Geographical flexibility • 26 casthouses at 20 locations across 1750 4 continents 1500 • Product flexibility 1250 • 6 plants with multiple product casthouses 1000 • Sourcing system flexibility 750 500 250 • Co
Slide 71: Metal Markets earnings drivers
Metal Markets earnings drivers • Remelters Underlying EBIT excluding currency effects and ingot stock valuation effect, NOK million • Revenue impact – volume and product premiums above LME 300 • Cost impact 250 • Scrap and standard ingot premiums above LME 200 • Raw material mix • Freight cost – pro
Slide 72: Rolled Products
Rolled Products (72)
Slide 73: No. 1 flat rolled products producer in Europe
No. 1 flat rolled products producer in Europe External sales in tonnages • World leader in high-end products Litho Foil 13% foil and litho 17% • Strategy of high-grading product portfolio • Margin management and cash generation • Focus production system on core assets • Alunorf (JV 50%) - world’s la
Slide 74: Attractive market position and customers
Attractive market position and customers More than 50% of products with global reach Our products Our customers Our position Litho World market leader Global reach Foil Can Leading position in Europe Auto Regional reach Leading position in Europe GE/ Building (74)
Slide 75: Rolled Products earnings drivers
Rolled Products earnings drivers Underlying EBIT per tonne, NOK 1,400 • Contract structure • Margin business based on conversion price 1,200 • LME element passed on to customers • Medium-term contracts 1,000 • Range from spot contracts to multi-year contracts 800 • High share of fixed costs - volume
Slide 76: Extruded Products
Extruded Products (76)
Slide 77: European extrusion leader with global presence
European extrusion leader with global presence • Leading position in Europe External sales in tonnages • 17% market share Transport Other • Strong position in US and Brazil 11% 9% • Global leader in precision tubing • Strategy of solidifying leading positions Domestic & office • Reinforce European e
Slide 78: Copper substitution represents major potential
Copper substitution represents major potential • Substitution to aluminium in Making heat-exchanger technology cars: 12.5 kg/car leap from automotive… …into broad range of non-automotive • Weight reduction: products and applications about 50% vs. copper • Worldwide potential: about 875 000 mt annual
Slide 79: Hydro innovation drives product demand
Hydro innovation drives product demand Foil packaging Automotive Beverage cans Solar parks Building & construction Consumer electronics Lithographic plates (79)
Slide 80: Extruded Products earnings drivers
Extruded Products earnings drivers • Contract structure Underlying EBIT per tonne*, NOK • Mainly short-term contracts 2,000 • Large number of small orders to 1,750 small/medium-sized customers • Produce to order - limited share 1,500 of commodity type products 1,250 • Strong cost focus 1,000 • Margi
Slide 81: Energy
Energy (81)
Slide 82: Aiming to lift power production to 10 TWh
Aiming to lift power production to 10 TWh Power production capacity (TWh), per region and reversion year • Power producing assets and ongoing projects • Maintain cost control in operations and projects Telemark • Holsbru project concluded, production start April 1 3.0 0.5 • Vasstøl and Rjukan upgrad
Slide 83: Hydro is a global energy player
Hydro is a global energy player Energy consumption in alumina refineries, smelters and rolling mills Europe Power 14.8 TWh Natural gas 2.4 TWh North America Power 1.6 TWh Middle East Power 4.6 TWh South America Power 4.2 TWh Australia/Asia Coal 5.6 TWh Power 3.8 TWh Fuel oil 7.4 TWh Natural gas 0.1
Slide 84: Reversion regime secures Hydro's values
Reversion regime secures Hydro’s values • Pursue value enhancement strategy • Develop and enhance value of power assets • Power assets remain an integrated part of aluminium production in Norway • Power and smelter portfolio will be reviewed concurrently • Participate in restructuring of power secto
Slide 85: Energy earnings drivers
Energy earnings drivers Underlying EBIT* and spot price • Production and market prices strongly NOK million NOK/MWh linked to hydrological conditions 2 000 500 1 500 400 • Relatively stable annual EBIT contribution 300 1 000 • Large quarterly variations due to volatile spot 200 sales and spot prices
Slide 86: Additional information
Additional information (86)
Slide 87: Shareholder and financial policy
Shareholder and financial policy • Hydro aims to give its shareholders competitive Dec 31, Dec 31, Dec 31, Mar 31, returns compared to alternative investments in NOK billion 2009 2010 2011 2012 peers Cash and cash equivalents 2.5 10.9 8.4 8.8 Short-term investments 1.5 1.3 1.8 1.5 • Maintained divid
Slide 88: Hedging policy
Hedging policy Upstream • Primarily remain exposed to LME prices • Partly off-setting effects through raw material prices and negative currency correlations with LME • Majority of 2011 LME exposure in Vale transaction hedged • Operational LME hedging • Three months forward sales to manage customers’
Slide 89: Capital allocation mainly upstream
Capital allocation mainly upstream NOK billion 10.2 Debt-financed investments Qatalum • Sustaining capex NOK 3.5 billion Investments Qatalum annually including Vale assets Growth and improvement projects Sustaining capex • Growth projects in 2012 6.2 • Hydropower developments • Extruded Products exp
Slide 90: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10% Currency sensitivities +10% NOK Financial Income Net NOK million EBIT EBIT million items before tax income* Aluminium 2 600 USD 2 200 (800) 1 400 1 000 Oil (220) BRL (800) 750 (50) (50) Pet coke (210) EUR (150) (1 200) (1 350) (1 000)
Slide 91: Items excluded from underlying results - 2012
Items excluded from underlying results - 2012 NOK million (+=loss/()=gain) Q1 2012 Q2 2012 Unrealized derivative effects on LME related contracts Bauxite & alumina (8) 11 Total impact Bauxite & alumina (8) 11 Unrealized derivative effects on LME related contracts Primary metal 113 (84) Unrealized de
Slide 92: Items excluded from underlying results - 2011
Items excluded from underlying results - 2011 NOK million (+=loss/()=gain) Q1 2011 Q2 2011 Q3 2011 Q4 2011 2011 Unrealized derivative effects on currency contracts (Alunorte) Bauxite & alumina (1) - - - (1) Derivative effects on LME related contracts (Vale Aluminium) Bauxite & alumina 16 (67) (24) 3
Slide 93: Operating segment information
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina 162 288 71 113 155 272 302 159 (144) (188) 633 887 Primary Metal (169) 382 318 86 583 765 653 484 30 240 617 2 486 Metal Mar
Slide 94: Operating segment information
Operating segment information Pro forma underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina 205 448 348 223 237 272 302 159 (144) (188) 1 225 969 Primary Metal (203) 481 306 230 592 765 653 484 30 240 816 2
Slide 95: Operating segment information
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina* 139 574 43 91 4 561 339 326 620 (136) (199) 847 5 846 Primary Metal* (8) 645 (378) 355 525 826 675 (760) (96) (1 232) 615 1 265 Metal
Slide 96: Operating segment information
Operating segment information Pro forma reported EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina 205 768 47 140 213 339 326 620 (136) (199) 1 161 1 498 Primary Metal (41) 723 (368) 499 622 826 675 (760) (96) (1 23
Slide 97: Operating segment information
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina* 1 631 2 426 1 735 2 090 2 183 4 271 4 227 3 790 3 195 3 573 7 882 14 471 Primary Metal* 6 607 7 448 6 558 6 979 8 234 9 627 9
Slide 98: Operating segment information
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina* 1 003 1 241 1 076 1 199 1 168 1 688 1 587 1 433 1 241 1 356 4 518 5 876 Primary Metal* 6 210 6 992 6 166 6 620 7 582 8 283
Slide 99: Operating segment information
Operating segment information Depreciation, amortization and impairment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Bauxite & Alumina* - 1 1 1 178 482 470 450 475 439 2 1 580 Primary Metal* 416 430 428 462 467 543 548 1 577 542 1 64
Slide 100: Income statements
Income statements Q2 Q1 Q2 First half First half Year NOK million 2012 2012 2011 2012 2011 2011 Revenue 21 604 21 748 24 728 43 351 45 867 91 444 Share of the profit (loss) in equity accounted investments (16) (115) (88) (131) (107) (260) Other income, net 159 268 179 427 4 732 6 222 Total revenue a
Slide 101: Balance sheets
Balance sheets Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 NOK million 2012 2012 2011 2011 2011 Cash and cash equivalents 7 234 8 786 8 365 6 863 3 831 Short-term investments 1 743 1 568 1 780 1 573 1 744 Accounts receivable 14 320 14 524 13 217 15 742 16 715 Inventories 12 411 13 201 14 157 14 343 14 254 Ot
Slide 102: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year Pro forma Bauxite & Alumina 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Alumina production (kmt) 1 394 1 521 1 442 1 448 1 336 1 448 1 553 1 490 1 464 1 491 5 805 5 827 Sourced alumina (kmt) 539 557 488 556 436 523 581 418 324
Slide 103: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year Pro forma Primary Metal 1) 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Realized aluminium price LME, USD/mt 2 039 2 200 2 137 2 131 2 366 2 509 2 592 2 439 2 155 2 167 2 128 2 478 Realized aluminium price LME, NOK/mt 11 826 13
Slide 104: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year Metal Markets 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2010 2011 Remelt production (1 000 mt) 143 156 141 147 150 151 133 131 152 142 586 565 Third-party metal products sales (1 000 mt) 19 31 38 32 38 47 59 73 76 82 121 217 Metal prod
Slide 105: Investor Relations in Hydro
Investor Relations in Hydro t: +47 417 51 199 Rikard Lindqvist Head of Investor Relations e: rikard.lindqvist@hydro.com t: +47 977 36 022 Stian Hasle Investor Relations Officer e: stian.hasle@hydro.com Irene Alyanakian Investor Relations Assistant t: +47 414 02 174 Kristiansen e: irene.alyanakian.kr
Slide 106: www.hydro.com
www.hydro.com