Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Debt Investor Presentation (October 2017)
37 slides from Norsk Hydro Asa's debt investor presentation, Oct 25, 2017
Slide 1: Norsk Hydro company presentation
Norsk Hydro company presentation October 2017
Slide 2: Credit Highlights
Credit Highlights • A world leading and fully integrated aluminum producer • Proven track record – Norway's first industrial giant established in 1905 • Consistent delivery on operational improvement programs • Government ownership 34% • Positive macro outlook for aluminum products • Conservative fi
Slide 3: Hydro at a glance
Hydro at a glance About the company Revenues* • Based in Norway • 2015: NOK 88 billion • Present in more than 40 countries • 2016: NOK 82 billion • >35,000 employees, incl. Extruded Solutions 34% • 2017 Q3 YTD: NOK 71 billion • Fully integrated through the value chain Market capitalization 59% ~NOK
Slide 4: Sapa acquisition
Sapa acquisition The final piece to become a fully integrated company Stronger together Hydro broadens product offering by acquiring Sapa + Building & construction Hydro’s contribution Sapa’s contribution Transport & Machinery • Upstream performance leader • Global leader in extruded aluminium & aut
Slide 5: Financing of the Sapa-transaction
Financing of the Sapa-transaction • Sapa preliminary purchase price NOK 11.9 billion, paid on October 2 Bilde change − NOK 7.9 billion from cash − NOK 4 billion drawn on Revolving Credit Facility (RCF) − NOK 2.9 billion drawn on RCF to refinance Sapa’s outstanding RCF debt • Plan for bond issuances
Slide 6: Company overview, Market outlook, Business overview, Financial policy
Company overview Market outlook Business overview Financial policy 6
Slide 7: Hydro - a first tier aluminium company with solid cost positions relative to peers
Hydro - a first tier aluminium company with solid cost positions relative to peers Production in 2016 in aluminium equivalents, thousand mt 8 000 Alumina Aluminium 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 Weiqao Alcoa/AWAC Rio Tinto UC Rusal Chalco Xinfa Norsk Hydro South32 Glencore/Century Hinda
Slide 8: Full value chain approach for higher value creation
Full value chain approach for higher value creation Dedicated business models in each area combined within an overall company framework Benefits of Hydro’s integrated model Bauxite Primary aluminium mining production Operations and technology Customers and markets Alumina production Energy • Operati
Slide 9: Product service offering and market positions
Product service offering and market positions Built on market understanding, customer closeness and competence Europe The complete aluminium company Strong ~22% North America presence in the Nordic market • High-quality bauxite and alumina production in Brazil share in power extruded • Primary produ
Slide 10: For Hydro, responsibility is the license to operate
For Hydro, responsibility is the license to operate Key to comply with our values and for strengthening our competitiveness Safety Social Responsibility & Environment Safety performance (TRI) at industry benchmark Among the best on safety performance Lowest CO2 emissions Incidents per 1 mill hrs wor
Slide 11: Ambitious mid-term strategic goals within the Hydro aspiration
Ambitious mid-term strategic goals within the Hydro aspiration Ambitions Target Timeframe Progress¹ Status 20161 • Improve safety performance, strive for injury free environment TRI<2 2020 2.62 • Realize ongoing improvement efforts Better BNOK 2.9 2019 1.4 BNOK • Secure new competitive sourcing cont
Slide 12: Company overview, Market outlook, Business overview, Financial policy
Company overview Market outlook Business overview Financial policy 12
Slide 13: Aluminium is the metal of the future due to its attractive properties
Aluminium is the metal of the future due to its attractive properties Substitution continues to be a key driver for aluminium Aluminium’s properties make it part of the solution Solid demand growth drives across many segments Transport Packaging Formability Corrosion Extrusion, Lightweighting Urbani
Slide 14: Healthy demand growth for aluminium
Healthy demand growth for aluminium Aluminium continues to be the fastest growing base metal Demand and production (quarterly annualized) 1 000 mt primary aluminium Global demand base metals Index 2000=100 70 000 270 65 000 60 000 55 000 220 50 000 45 000 170 40 000 Global primary Global product 35
Slide 15: Company overview, Market outlook, Business overview, Financial policy
Company overview Market outlook Business overview Financial policy 15
Slide 16: Business segment overview
Business segment overview Fully-integrated value chain Primary aluminium production, Raw materials processing and energy Aluminium in products Marketing and recycling Bauxite & Extruded Energy Primary Metal Metal Markets Rolled Products Alumina Solutions Share of 22% 11% 29% 4% 10% 24% UEBITDA* Shar
Slide 17: Bauxite & Alumina
Bauxite & Alumina Operations above nameplate capacity Key figures 2014 2015 2016 2017 YTD Bauxite production, kmt 9 481 10 061 11 131 8 386 Alumina production, kmt 5 933 5 963 6 341 4 704 Total alumina sales, kmt 7 942 8 871 8 844 6 576 Paragominas Underlying EBITDA, NOK million 1 747 4 404 3 221 3
Slide 18: Energy
Energy Stable underlying EBIT contribution, predictable cost base Key figures 2014 2015 2016 2017 YTD Power production capacity (TWh), Power production, GWh 10 206 10 894 11 332 7 747 per region and reversion year Net spot sales, GWh 4 820 4 989 6 063 3 573 1 360 1 300 1 553 1 237 Sogn Underlying EB
Slide 19: Primary Metal
Primary Metal1) World-wide production network of ~2.1 million tonnes Key figures 2014 2015 2016 2017 YTD Primary aluminium production, kmt 1 958 2 046 2 085 1 566 Casthouse production, kmt 2 088 2 059 2 146 1 072 Metal products sales, kmt 2) 2 852 2 722 2 893 2 201 Underlying EBITDA, NOK million 6 4
Slide 20: Karmøy Technology Pilot on track for first metal in Q4 2017
Karmøy Technology Pilot on track for first metal in Q4 2017 World’s most climate friendly and energy-efficient aluminium production Energy consumption in Hydro smelters*, kwh/kg al • Verifying next-generation technology 17.5 18 • Primary metal capacity 75 000 tons 15.0 16 14.8 14.4 13.7 13.5 • On ti
Slide 21: Rolled Products
Rolled Products Europe’s largest producer of flat rolled products Key figures 2014 2015 2016 2017 YTD External sales volumes, kmt 946 948 911 716 Underlying EBITDA, NOK million 1 398 1 873 1 507 916 Underlying EBIT, NOK million 698 1 142 708 285 Overview • ~ 1 million tonnes Automotive Foil Beverage
Slide 22: Extruded Solutions
Extruded Solutions Clear leader in a fragmented industry where closeness to customers and markets are key success factors Key figures (100%) 2014 2015 2016 2017 YTD Customers in diversified end-markets Sales volume, kmt 1 399 1 364 1 365 1 054 (Share of Sapa’s sales volumes) Underlying EBITDA, NOK m
Slide 23: Company overview, Market outlook, Business overview, Financial policy
Company overview Market outlook Business overview Financial policy 23
Slide 24: Prudent financial framework
Prudent financial framework Managing industry cyclicality, driving long-term shareholder value Reliable Financial Disciplined Lifting cash flow shareholder Effective risk strength capital potential remuneration management and flexibility allocation policy Improving efficiency, Investment grade Long-
Slide 25: Overview of financial debt
Overview of financial debt Proceeds from the new bonds will be general corporate purposes and refinancing of debt NOK billion Bond 1,5 NOK bond, maturity July 2019 Other long-term debt 0,9 USD bank loan, last installment Q4 2020 Short-term debt Competitively priced, export related short-term USD 4,5
Slide 26: Strong financial position with low level of debt, also post acquisition
Strong financial position with low level of debt, also post acquisition Sep 30 Dec 31 Sep 30 2017 incl NOK billion 2016 2017 Sapa3) Cash and cash equivalents 8.0 17.9 6.9 Short-term investments 4.6 2.0 2.0 Short-term debt (3.3) (9.1) (12.7) Long-term debt (3.4) (3.1) (3.2) Net cash/(debt) 6.0 7.7 (6
Slide 27: Maintain investment-grade credit rating
Maintain investment-grade credit rating Acquisition deemed credit positive by Moody’s • Maintain investment-grade rating Key financial ratios (2017*) − Currently: BBB (S&P), Baa2 (Moody’s), both with stable outlook 180% • Financial ratio ambitions over business cycle 160% 160% − Funds from operation
Slide 28: Capex outlook
Capex outlook Growth capex focused on high-grading, recycling and technology • Karmøy technology pilot 2015-2018: NOK billion 9 − Hydro investment 2.7 BNOK, net of Enova support ~1.6 8 BNOK 7.4 7.4 7 • Other ongoing organic growth projects: 6.0 6 − Automotive line (AL3) 5 − Alunorte debottlenecking
Slide 29: Hydro's underlying exposures
Hydro’s underlying exposures Historical correlations between commodities and currencies indicate a natural earnings hedge Underlying EBIT commodity and currency sensitivities +10%1) Cross-correlations between currencies and commodities (NOK million) Monthly correlations 1994-2016 3,4 3,2 USD/NOK 0,3
Slide 30: Summary
Summary • Highly competitive positions, strong cash generation • Proven track record of operational improvements • Conservative financial policy and strong balance sheet • Investment grade credit rating • Among the best on safety in the industry • Robust towards low price scenarios 30
Slide 31: Appendix
Appendix 31
Slide 32: Ambitious mid-term strategic goals within the Hydro aspiration
Alternative #2 Ambitious mid-term strategic goals within the Hydro aspiration Proven track record of operational improvements Hydro’s improvement drive until 2015 Improvement ambition Total improvements 2009-2015: Better 2016-19 BNOK 4.5 Bauxite & Alumina BNOK 1.0 ‘Energy Better Sapa JV Aspiration’
Slide 33: Main shareholders in Hydro
Main shareholders in Hydro The Norwegian Government is the largest owner Investor Number of shares % of total Type Country NÆRINGS- OG FISKERIDEPARTEMENTET 708 865 253 34.26% Comp. NOR FOLKETRYGDFONDET 141 657 794 6.85% Comp. NOR CLEARSTREAM BANKING S.A. 51 296 722 2.48% Nom. LUX HSBC BANK PLC 36 61
Slide 34: Exposure to commodity and currency fluctuations
Exposure to commodity and currency fluctuations Aluminium price sensitivity +10%* UEPS Currency sensitivities +10%* NOK million +1.06 NOK/share Sustainable effect: 3 400 NOK million USD BRL EUR 2 500 UEBIT 3 170 (1 080) (290) One-off reevaluation effect: UEBIT Underlying Net Income Financial items (
Slide 35: World-wide production network
World-wide production network Primary Metal and Metal Markets 49% Norway, 1 040 000 tonnes • Sunndal (100%): 405 000 tonnes 7 stand-alone remelters: • Årdal (100%): 195 000 tonnes 6% • 2 in the US • Karmøy (100%): 190 000 tonnes Canada, 120 000 tonnes • 5 in Europe (UK, Luxemboug, France, • Høyanger
Slide 36: Important Information and Disclaimer
Alternative #2 IMPORTANT INFORMATION AND DISCLAIMER This company presentation (the "Presentation") has been produced by Norsk Hydro ASA (the "Issuer") solely for use in connection with a contemplated offering of bonds (the "Bonds" and the "Bond Issue") by the Issuer as described herein. For the purp
Slide 37: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO
Norsk Hydro — Debt Investor Presentation (October 2017) on 6ix