Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q4 2023 Earnings Presentation
61 slides from Norsk Hydro Asa's earnings presentation, Feb 14, 2024
Slide 1: Fourth quarter 2023 Investor presentation
Fourth quarter 2023 Investor presentation February 14, 2024
Slide 2: Table of contents and cautionary note
Table of contents Fourth quarter results 2023 3 Cautionary note Certain statements included in this announcement contain forward-looking information, Appendix 27 including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concer
Slide 3: Changing the aluminium game: Strengthening position in challenging markets
Changing the aluminium game: Strengthening position in challenging markets Pål Kildemo Chief Financial Officer February 14, 2024
Slide 4: Q4 2023 Adjusted EBITDA NOK 3,737 billion
Q4 2023 Adjusted EBITDA NOK 3,737 billion Free cash flow NOK (1.5) billion, adjusted RoaCE 7.1% Weaker results in challenging markets, managing short term volatility and freeing up cash Exceeding 2023 improvement targets and commercial ambitions Growing in recycling by increasing capacity and post-
Slide 5: Challenging alumina markets in Q4
Challenging alumina markets in Q4 Tightening at year-end on industry curtailments Three key events impacting alumina Platts alumina index (PAX) Regional alumina market balances USD/t Million mt market dynamics 450 20% 1,0 01 Chinese bauxite sourcing 18% • Domestic bauxite sourcing constraints causin
Slide 6: Rangebound aluminium prices, slower decline in demand
Rangebound aluminium prices, slower decline in demand Expected improved market balance in 2024 Rangebound all-in metal Growing Russian % of metal Tightening estimated global Large demand drop in B&C prices in LME warehouses balance drives down billet demand LME Share of Russian metal, % Primary prod
Slide 7: Margin pressure and challenging demand impact recycling profitability
Margin pressure and challenging Capacity utilization demand impact recycling profitability % production vs capacity, recyclers in Metal Markets 110 100 90 Average CU 80 70 Margin pressure 60 Monthly CU 50 USD/mt, Europe 40 Oct-23 Oct-20 Oct-21 Oct-22 Apr-20 Jul-20 Apr-21 Jul-21 Apr-22 Jul-22 Apr-23
Slide 8: Managing short-term volatility, freeing up cash
Managing short-term volatility, freeing up cash Large NOC release in Q4 Short and medium-term mitigation NOK 7 billion cash effective NOC release in 2023 2024 • Electrolysis production curtailed (~130kt Net operating capital, NOK billion Norwegian smelters) guiding 34 NOK 1 billion Aluminium • Volum
Slide 9: Exceeding 2023 improvement targets
Exceeding 2023 improvement targets 2030 ambitions strengthened through greener premiums and digitalization Improvement program Ambitions extended with additional NOK 1 billion until 2030 New digitalization Key achievements 2023: Digitalization initiatives ~1.0 ~1 • 2023 NOK 0.4 billion above target
Slide 10: Hydro 2030: Pioneering the green aluminium transition
Hydro 2030: Pioneering the green aluminium transition, powered by renewable energy Key priorities towards 2030 Step up growth investments in Recycling and Step up ambitions within 1 Extrusions to take lead in the market opportunities emerging from the green transition 2 renewable power generation Ex
Slide 11: Growing recycling capacity, and securing scrap, supports 2030 targets
Growing recycling capacity, and securing scrap, supports 2030 targets Recycling targets 20301) PCS usage capacity Tonnes (‘000) 850-1,200 Growing and extracting value from Increasing green field capacity post-consumer scrap 520-670 560 280 2020 2023 2025 2030 Recycling EBITDA NOK billion 5-8 Product
Slide 12: Executing on ambitious decarbonization roadmap
Executing on ambitious decarbonization roadmap 2018 2025 2030 2050 (or earlier) 10% carbon emission 30% carbon emission Zero carbon reduction reduction emissions HalZero test facility at Herøya, Testing emission-free plasma Hydro CIRCAL, from 2.3 to 1.9 Alunorte fuel switch Norway approved technolog
Slide 13: Shaping the market for greener aluminium
Shaping the market for greener aluminium Joining the First Movers Coalition (FMC) Greener product capability from total aluminium portfolio1) Million tonnes capacity potential • Hydro and Volvo Group will Joining work together to accelerate forces with net-zero transportation through Volvo establish
Slide 14: Powering the green aluminium transition
Powering the green aluminium transition Project portfolio with robust return potential Positive development on Concession application for new Hydro Rein and Årdal Energi resource rent tax onshore wind hydropower plants collaboration • The Norwegian Parliament has reached • Hydro and Lyse have applie
Slide 15: Adj. EBITDA down on lower upstream prices
Adj. EBITDA down on lower upstream prices Marginally offset by FX, lower raw material cost and Extrusions margins 2023 vs 2022 39.7 16.2 1.6 3.1 0.7 0.3 2.1 3.5 1.6 3.4 22.3 -3.8 Slovalco effects Power sales Other & eliminations Adj. EBITDA 2022 Realized aluminium Raw material cost Extrusion and Ext
Slide 16: Adj. EBITDA down on lower prices and Extrusions results
Adj. EBITDA down on lower prices and Extrusions results Partially offset by lower raw material cost, CO2 compensation adjustment and TerPaz Q4 2023 vs Q3 2023 0.9 3.9 0.5 3.7 0.7 0.6 0.5 0.8 0.7 0.3 0.4 CO2 compensation TerPaz program Other & eliminations Adj. EBITDA Q3 2023 Realized aluminium Raw m
Slide 17: Key financials
Key financials NOK million Q4 2023 Q4 2022 Q3 2023 Year 2022 Year 2023 Revenue 46 754 44 075 44 702 207 929 193 619 Reported EBITDA 4 673 3 930 1 975 39 536 23 291 Adjusting items to EBITDA (936) 3 254 1 923 128 (1 033) Adjusted EBITDA 3 737 7 184 3 899 39 664 22 258 Reported EBIT (2 256) 1 405 (323
Slide 18: Hydro Bauxite & Alumina
Hydro Bauxite & Alumina Implied alumina cost and margin USD/mt1) 18 4 4 Results up, mainly driven by lower raw material prices, partly offset by currency effects, lower bauxite production and higher fixed costs 331 337 345 Key figures Q4 2023 Q4 2022 Q3 2023 Q4 23 Q4 22 Q3 23 Alumina production, kmt
Slide 19: Hydro Aluminium Metal
Hydro Aluminium Metal All-in implied primary cost and margin USD/mt1,4) 350 575 350 Results down on lower all-in metal prices, reduced contribution from power sales and lower sales volume, partly 2 1259) 2 2759) 2 2509) 2 450 2 2259) 2 2509) offset by reduced raw material cost, adjusted CO2 1 775 1
Slide 20: Metal Markets
Metal Markets Increased results from sourcing and trading activities, and positive inventory valuation and currency effects, partly offset by lower results from recyclers Key figures Q4 2023 Q4 2022 Q3 2023 Recycling production, kmt 166 115 176 Metal products sales, kmt 1) 645 614 652 Adjusted EBITD
Slide 21: Softer extrusion demand in industrial and transport segments
Softer extrusion demand in industrial and transport segments Expected demand improvement in second half of 2024 in both Europe and North America External market forecasts* Extrusion sales volumes Year over Year Q4 2023 vs Q4 2022 Extrusion market growth per quarter and annually Hydro Extrusions segm
Slide 22: Hydro Extrusions
Hydro Extrusions Stable results, lower sales volume and higher costs, offset by higher sales margins and currency Key figures Q4 2023 Q4 2022 Q3 2023 External sales volumes, kmt 236 265 260 Adjusted EBITDA, NOK million 923 939 1 322 Adjusted EBIT, NOK million 90 168 548 Adjusted RoaCE, % LTM1) 8.8%
Slide 23: Hydro Energy
Hydro Energy Lower results due to lower prices and lower gain on price area differences, partly offset by higher production and no loss from internal contract Key figures Q4 2023 Q4 2022 Q3 2023 Power production, GWh 2 440 2 002 2 216 Net spot sales, GWh 3) 101 511 24 Southwest Norway spot price (NO
Slide 24: Net debt decrease driven by sale of shares in Alunorte
Net debt decrease driven by sale of shares in Alunorte Negative FCF due to taxes and investments offsetting EBITDA contribution and NOC release NOK billion 8.4 BNOK in proceeds from sale of shares in Alunorte to Glencore Free cash flow: Excludes hedging collateral (LT/ST restricted cash) and net pur
Slide 25: Board of Directors propose higher distribution than guided
Board of Directors propose higher distribution than guided, on large NOC release in Q4 Healthy working capital release and a robust balance sheet Dividend 3.2% 3.8% 3.1% 9.9% 7.7% 3.7% enables another year of solid shareholder distribution yield1) Shareholder distribution proposal 240% 15 250 • NOK
Slide 26: Our priorities
Our priorities 1 2 3 4 5 Deliver on Seize Maintain Recycling, Execute on opportunities in Health and robustness and Extrusions, and decarbonization greener safety first mitigate weaker Renewable and technology aluminium at markets growth road map premium ambitions pricing Pioneering the green alumin
Slide 27: Appendix
») Hydro Appendix
Slide 28: Key figures – Outlook Q1 2024
Key figures – Outlook Q1 2024 Note that the information on this page is based on forward looking information from current point in time and changes might occur during the coming quarter Bauxite and Alumina Aluminium Metal Metal Markets • Expected positive contribution from sourcing • Raw materials d
Slide 29: Key performance metrics Q4 2023
Key performance metrics Q4 2023 Adjusted EBITDA Free cash flow1) Adjusted RoaCE2) NOK million NOK billion 12-month rolling % 7 184 5.8 22.2% 3 899 3 737 8.5% 7.1% 4Q22 3Q23 4Q23 -1.4 -1.5 4Q22 3Q23 4Q23 4Q22 3Q23 4Q23 Upstream costs3,4) Extrusion volumes Improvement program status USD per tonne Thou
Slide 30: Capital return dashboard 2023
Capital return dashboard 2023 Capital employed1) 11 % Bauxite & Alumina Capital returns Balance sheet Free cash flow 27 % 22 % Aluminium Metal adj. RoaCE adj. ND/EBITDA 2023 Metal Markets Extrusions 4) 23 % ~115 BNOK Energy 7.1% 2) 0.73) (0.2) BNOK 13 % 8% 36 % 11% last 5 years vs adj. ND/EBITDA < 2
Slide 31: Revenue drivers through Q4 2023
Revenue drivers through Q4 2023 Source: Bloomberg, Norges Bank, LME, Fastmarkets, Platts LME aluminium price Regional standard ingot premiums Platts alumina index (PAX) USD/mt USD/mt USD/mt % of LME 4,000 35,000 1,600 600 24,0 1,400 550 22,0 3,500 30,000 500 1,200 20,0 450 3,000 1,000 18,0 25,000 40
Slide 32: Market raw material costs in Q4 2023
0.5 1.0 1.5 2.0 2.5 3.0 3.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 0.0 Q4-19 Q4-19 Q1-20 Q1-20 Q2-20 Q2-20 Q3-20 Q3-20 Q4-20 Q4-20 Q1-21 Q1-21 Q2-21 Q2-21 Q3-21 Q3-21 Q4-21 Q4-21 Q1-22 Q1-22 Indication of current market prices Q2-22 Q2-22 Q3-22 Q3-22 Caustic soda (indexed) Q4-22 Q4-22 Q1-23 Q1-23 Source: Thoms
Slide 33: Strategic hedging status
2025 hedge position increased by 20 kt during the quarter Aluminium hedges of 320-460 kt/yr 2024-25 in place Strategic hedging status NOK Billions • 2024: 440 kt hedged at a price of ~2500 USD/t • 2025: 320 kt hedged at a price of ~2500 USD/t • Pricing mainly in NOK, with USD hedges converted to NOK
Slide 34: Significant exposure to commodity and currency fluctuations
Significant exposure to commodity and currency fluctuations Aluminium price sensitivity +10% Currency sensitivities +10% NOK million Sustainable effect: 3 220 NOK million USD BRL EUR 2 250 AEBITDA 4,250 (1,020) (100) One-off reevaluation effect: AEBITDA Adjusted Net Income Financial items (590) 1,39
Slide 35: Bauxite & Alumina sensitivities
Bauxite & Alumina sensitivities Annual sensitivities on adjusted EBITDA if +10% in price Revenue impact NOK million • Realized alumina price lags PAX by one month 1 900 Cost impact Bauxite • ~2.45 tonnes bauxite per tonne alumina • Pricing partly LME-linked Caustic soda (10) (70) (60) • ~0.1 tonnes
Slide 36: Aluminium Metal sensitivities
Aluminium Metal sensitivities Annual sensitivities on adjusted EBITDA if +10% in price Revenue impact NOK million • Realized price lags LME spot by ~1-2 months • Realized premium lags market premium by ~2-3 months 3 230 Cost impact Alumina 420 • ~1.9 tonnes per tonne aluminium • ~ 2-3 months lag (40
Slide 37: Energy EBITDA development
Energy EBITDA development • Production and market prices strongly linked to hydrological Adjusted EBITDA and NO2 spot price NOK million conditions NOK/MWh 4 926 5 000 2 500 • Seasonal market variations in demand and supply. Gains or losses 3 791 4 000 3 146 2 000 may occur from delink between area p
Slide 38: Metal Markets earnings drivers
Metal Markets earnings drivers • Recyclers • Revenue impact – volume, LME and product premiums Adjusted EBITDA excluding currency effects and inventory valuation effect, • Cost impact NOK million1) • Scrap and standard ingot premiums above LME 750 700 • Raw material mix 650 • Freight cost – proximit
Slide 39: Extrusions earnings drivers
Extrusions earnings drivers Adjusted EBITDA per tonne1), NOK 7,500 • Contract structure 7,000 • Margin business based on conversion price 6,500 6,000 • LME element passed on to customers 5,500 • Mostly short-term contract, typically ranging from spot to 12 months, few 5,000 longer term contracts wit
Slide 40: Capital return dashboard for Bauxite & Alumina
Capital return dashboard for Bauxite & Alumina Returns below the cost of capital reflecting challenging markets, embargo and operational issues during the early years Capital employed in B&A 12 % 22 % 6% 6% 1.8 BNOK 10-11% 3% 2% ~26 BNOK (31 Dec ‘23) -2 % 2018 2019 2020 2021 2022 2023 Adjusted EBITD
Slide 41: Capital return dashboard for Energy
Capital return dashboard for Energy Returns above the cost of capital reflecting the depreciated asset base Capital employed in Energy 30 % 25 % 11 % 19 % 3.1 BNOK 13 % 12 % ~13 BNOK 9% 6-7% (31 Dec ‘23) 2018 2019 2020 2021 2022 2023 Adjusted EBITDA FY 2023 Return requirement 2018-2023 ~18% average
Slide 42: Capital return dashboard for Aluminium Metal & Metal Markets
Capital return dashboard for Aluminium Metal & Metal Markets Investments in recycling capacity to support growth Capital employed in AM (MM) 35 % 28 % 14 % 10%-11% 10.5 (1.5) BNOK 5% 3% (7-8%) ~43 (9) -3 % BNOK 2018 2019 2020 2021 2022 2023 (31 Dec ‘23) Adjusted EBITDA FY 2023 8% 36 % ~14% (~22%) Re
Slide 43: Capital return dashboard for Extrusions
Capital return dashboard for Extrusions Returns in line with the cost of capital reflecting leading market positions in high value segments and portfolio optimization Capital employed in Extrusions 11 % 10 % 9% 7% 6% 6% 23 % ~27 BNOK 6.5 BNOK 7-8% 2018 2019 2020 2021 2022 2023 (31 Dec ‘23) Adjusted
Slide 44: Safe and responsible operations is a top priority
Safe and responsible operations Continuing efforts within ESG performance2) is a top priority • Transparent and consistent reporting approach for more than three decades Leadership in health and safety, social responsibility • Sustainability is fully integrated in Hydro’s strategy and compliance as
Slide 45: Why invest in Hydro
Why invest in Hydro Portfolio of profitable growth projects Pathway to net-zero aluminium Greener earnings uplift potential 2030 products supported by partnerships as key enablers for the green transition 2030: NOK 2 billion Refurbishment of buildings Electrical vehicle transition Renewable Copper s
Slide 46: Additional information
») Hydro Additional information
Slide 47: Adj. EBITDA down on lower prices, Extrusion results and Slovalco effects
Adj. EBITDA down on lower prices, Extrusion results and Slovalco effects, partly offset by lower raw material cost Q4 2023 vs Q4 2022 7.2 0.2 0.6 1.6 1.5 0.8 0.5 0.1 1.2 1.4 3.7 -2.1 CO2 compensation Slovalco effects Other & eliminations Adj. EBITDA Realized aluminium Raw material cost Extrusion and
Slide 48: Income statements
Income statements NOK million Fourth quarter Fourth quarter Third quarter Year Year 2023 2022 2023 2022 2023 Revenue 46 754 44 075 44 702 207 929 193 619 Share of the profit (loss) in equity accounted investments 46 131 171 1 337 492 Other income, net 1 272 1 051 348 4 406 4 152 Total revenue and in
Slide 49: Balance sheet
Balance sheet NOK million December 31 September 30 June 30 March 31 December 31 September 30 June 30 March 31 2023 2023 2023 2023 2022 2022 2022 2022 Cash and cash equivalents 24 618 19 105 22 453 30 873 29 805 25 852 24 507 21 161 Short-term investments 2 641 2 101 1 158 2 696 4 173 2 511 1 882 8 5
Slide 50: Adjusting items to EBITDA, EBIT and net income
Adjusting items to EBITDA, EBIT and net income NOK million (+=loss/()=gain) Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Year 2022 Year 2023 Unrealized derivative effects on raw material contracts Hydro Bauxite & Alumina (376) (173) 157 353 177 94 (41) 182 (40) 412 Community contr
Slide 51: Operating segment information: Adjusted EBIT and EBITDA
Operating segment information Adjusted EBIT NOK million Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Year 2021 Year 2022 Year 2023 Hydro Bauxite & Alumina 556 383 466 1 913 718 484 10 (586) (221) 88 (610) (269) 3 318 626 (1 013) Hydro Energy 792 713
Slide 52: Operating segment information: EBIT and EBITDA
Operating segment information EBIT NOK million Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Year 2021 Year 2022 Year 2023 Hydro Bauxite & Alumina 583 467 407 1 830 1 094 657 (147) (1 133) (399) (30) (570) (4 223) 3 288 471 (5 222) Hydro Energy 851 7
Slide 53: Operating segment information: Total revenue
Operating segment information Total revenue NOK million Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Year 2021 Year 2022 Year 2023 Hydro Bauxite & Alumina 6 026 5 976 6 984 8 713 7 901 9 413 8 652 7 986 8 320 8 830 8 423 9 948 27 699 33 951 35 521 H
Slide 54: Operating segment information: Internal revenue
Operating segment information Internal revenue NOK million Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Year 2021 Year 2022 Year 2023 Hydro Bauxite & Alumina 2 479 2 438 2 452 3 242 2 848 3 549 3 011 2 895 3 031 3 260 3 019 3 141 10 610 12 303 12 54
Slide 55: Operating segment information: Return on average capital employed
Operating segment information Return on average capital employed 1) (RoaCE) Reported RoaCE Adjusted RoaCE 2023 2022 2021 2020 2019 2018 2017 2023 2022 2021 2020 2019 2018 2017 Hydro Bauxite & Alumina (12.7%) 1.3% 11.9% 5.4% 1.9% 4.6% 8.5% (2.5%) 1.8% 12.0% 5.9% 2.5% 6.0% 8.5% 2) Hydro Energy 10.4% 2
Slide 56: Operating segment information: Depreciation, amortization and impairment
Operating segment information Depreciation, amortization and impairment NOK million Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Year 2021 Year 2022 Year 2023 Hydro Bauxite & Alumina 443 472 589 514 553 633 624 687 659 729 703 4 523 2 018 2 496 6 61
Slide 57: Operational data
Operational data Hydro Bauxite & Alumina Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Year 2021 Year 2022 Year 2023 Alumina production (kmt) 1 540 1 586 1 579 1 600 1 519 1 536 1 579 1 559 1 550 1 542 1 522 1 571 6 305 6 193 6 185 Sourced alumina (k
Slide 58: Operational data
Operational data Hydro Aluminium Metal 1) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Year 2021 Year 2022 Year 2023 Realized aluminium price LME, USD/mt 1 994 2 210 2 419 2 675 2 662 3 031 2 497 2 246 2 291 2 273 2 146 2 129 2 317 2 599 2 218 Reali
Slide 59: Hydro Extrusions, information by business area
Hydro Extrusions, information by business area Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Precision Tubing 2021 2021 2021 2021 2021 2022 2022 2022 2022 2022 2023 2023 2023 2023 2023 Extrusion Europe 2021 2021 2021 2021 2021 2022 2022 2022 20
Slide 60: Investor Relations in Hydro
Investor Relations in Hydro Martine Rambøl Hagen Next event t: +47 91708918 First quarter results e: martine.rambol.hagen@hydro.com April 24, 2024 Elitsa Boyadzhieva t: +47 91775472 e: elitsa.boyadzhieva@hydro.com For more information see www.hydro.com/ir Frida Rongved Jacobsen t: +47 47860460 e: fr
Slide 61: Hydro
Hydro Industries that matter