Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q1 2009 Earnings Presentation
68 slides from Norsk Hydro Asa's earnings presentation, Apr 29, 2009
Slide 1: First quarter 2009
First quarter 2009 Q1 April 29, 2009 (1)
Slide 2: Highlights
Highlights • 20% drop in realized aluminium price vs Q4 • Steep fall in demand • Firm corrective measures taken • Cut in primary aluminium production: 500 000 tonnes • Workforce reductions: 4 500 • Qatalum 73% complete, on schedule for 2009/2010 start-up Hydro well positioned in demanding environmen
Slide 3: Market review & outlook
Market review & outlook (3)
Slide 4: Unprecedented fall in aluminium price
Unprecedented fall in aluminium price USD per tonne 3 400 Primary aluminium LME USD/tonne NOK/tonne 3 200 3 000 Q1 2009 average 1 397 9 593 2 800 Q1 2009 end 1 405 9 555 2 600 2 400 Q4 2008 average 1 882 12 690 Q4 2008 end 1 497 10 397 2 200 2 000 Average 2008 2 620 14 446 1 800 1 600 Average 2007 2
Slide 5: Declining upstream sales volumes
Declining upstream sales volumes Hydro’s sales Q1 2009 vs Q4 2008 Extrusion ingot Sheet ingot Foundry alloys Standard ingot Total 45% 0% -6% -15% -14% Hydro’s sales Q1 2009 vs Q1 2008 Extrusion ingot Sheet ingot Foundry alloys Standard ingot Total 65% -22% -27% -36% -45% (5)
Slide 6: Declining downstream sales volumes
Declining downstream sales volumes Hydro’s sales Q1 2009 vs Q4 2008 Automotive Rolled Products Extrusion Eurasia Building Systems Extrusion Americas Structures Precision Tubing Total 10% -6% -7% -9% -10% -10% -10% Hydro’s sales Q1 2009* vs Q1 2008 Automotive Rolled Products Extrusion Eurasia Buildin
Slide 7: Rapidly increasing inventories
Rapidly increasing inventories USD per tonne Days 3 500 110 100 3 000 90 2 500 80 70 2 000 60 50 1 500 40 1 000 30 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Aluminium inventories (days of consumption)* LME 3 month average *IAI and LME reported stocks.
Slide 8: China remains balanced
China remains balanced 1 000 tonnes Primary / alloyed Semis Fabricated Scrap Total • Swift response to drop in demand 250 • Production curtailments • Strategic government purchases 200 Net import 150 100 • Shanghai price currently significantly higher than LME 50 • Encourages primary aluminium impor
Slide 9: Significant curtailments announced
Significant curtailments announced Announced capacity curtailments in percent of 2008 production 35% 30% 29% 28% 25% 22% 21% 20% 15% 11% 10% 10% 5% 0% Hydro C entury Aluminium C halco Alcoa UC Rusal Rio Tinto Source: CRU / company reports / Hydro estimates (9)
Slide 10: Announced capacity curtailments
Announced capacity curtailments 12% China ~3.5* million tonnes 3% Alcoa C entury Rest of world ~3.4 million tonnes 7% Hydro Total ~6.9 million tonnes Rio Tinto 51% 6% UC Rusal Other C hina 7% 14% World production and consumption (excl. China), annualized 27 000 Production C onsumption 26 000 25 000
Slide 11: Commodity prices weakening
Commodity prices weakening Crude oil – Brent (USD/bbl) Coal – CIF ARA (USD/mt) Petroleum coke FOB USG (USD/tonne) 160 245 550 140 210 500 120 175 450 100 140 400 80 105 350 60 70 300 40 35 250 20 0 200 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Power – EEX Germany (EU
Slide 12: Hydro improves cost position
Hydro improves cost position Business operating cash cost USD/tonne 3 400 Dynamic cost curve 3 000 • Falling input costs 2 600 • Production curtailments and capacity closures 2 200 1 800 1 400 Accumulated tonnage (1 000 tonnes) 1 000 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 BOC Q1 20
Slide 13: 2009 outlook
2009 outlook • Aluminium prices to remain low • Limited forward visibility • Indication of slowing LME inventory build-up • No substantial pick-up in demand • Primary aluminium consumption excluding China could decline up to 15-20% from 2008 • Chinese consumption in line with 2008 • Industry input c
Slide 14: Corrective actions
Corrective actions (14)
Slide 15: Upstream production curtailments
Upstream production curtailments 1 000 tonnes 2 000 1 750 1 500 29% ~1 750 1 250 22% ~1 350 1 000 ~1 250 750 ~1 050 50% ~1 000 500 250 ~ 500 0 Alumina (metal equivalents) Primary aluminium Remelt End-2008 capacity Run rate Q3 2009 (15)
Slide 16: Significant manning reductions
Significant manning reductions 5 000 1 450 4 500 4 500 4 000 3 500 1 700 3 000 2 500 2 000 1 500 750 1 000 600 500 0 Q3 2008 Q4 2008 Q1 2009 Q2-Q4 2009E Total Reduction in number of permanent and temporary employees and contractors (16)
Slide 17: Hydro's cash cost to decline
Hydro’s cash cost to decline Cost* in USD per tonne indexed, 2008=100 • Production curtailments at high-cost smelters • Input costs decreasing into 2009 ~(30)% • Alumina 2-3 months lag • Carbon costs at high level into first half, decreasing in second half • Fuel oil, caustic soda, coal, freight and
Slide 18: Focus on preserving cash
Focus on preserving cash Capital expenditures*, NOK billion Capital expenditures reductions 7 • 2008-2009: 40% 5.9 6 • 2009-2010: 15% 5 4 3.5 3 3 CAP alumina project postponed, production 2 49% start-up in 2012 subject to market conditions 1 0 2008 2009E 2010E Tonnes of metal in inventory being redu
Slide 19: Financials & performance
Financials & performance (19)
Slide 20: Underlying EBIT per segment
Underlying EBIT per segment NOK million 2 032 399 1 619 1 490 270 475 370 535 868 1 255 322 81 592 953 932 (493) 435 416 (140) (239) (239) (476) (257) (176) 2008 2009 Aluminium Metal Aluminium Products Energy C orporate and eliminations (20)
Slide 21: Key financials
Key financials Year NOK million Q1 2009 Q4 2008 Q1 2008 2008 Revenue 16 854 21 368 21 529 88 643 Underlying EBIT (493) 868 2 032 6 009 Items excluded from underlying EBIT (1 105) (3 975) (853) (4 815) Reported EBIT (1 598) (3 106) 1 179 1 194 Financial income / (expense) 1 473 (4 487) 998 (5 026) In
Slide 22: Items excluded from underlying EBIT
Items excluded from underlying EBIT Year NOK million Q1 2009 Q4 2008 Q1 2008 2008 Underlying EBIT (493) 868 2 032 6 009 Unrealized effects power contracts 580 1 481 551 (768) Unrealized LME and other derivative effects (708) (2 249) (1291) (1 434) Metal effect, Rolled Products (662) (407) (113) (235
Slide 23: Bauxite & Alumina
Bauxite & Alumina Key figures Q1 operating results Q1 Q4 Q1 • Significantly lower alumina price 2009 2008 2008 due to low LME Alumina production, kmt 578 684 509 • 50% of Alpart production curtailed Alunorte, NOK million 1) (68) 225 30 Other, NOK million (69) (65) (20) in January Underlying EBIT, NO
Slide 24: Primary Aluminium
Primary Aluminium Key figures Q1 operating results Q1 Q4 Q1 • Lower realized LME price 2009 2008 2008 • Curtailments starting to affect volumes Primary production, kmt 397 442 433 Total casthouse production, kmt 433 494 556 • Lower alumina and carbon costs Total sales volumes, kmt 440 460 568 • Redu
Slide 25: Commercial
Commercial Key figures Q1 operating results Q1 Q4 Q1 • Weak sales volumes and low production 2009 2008 2008 • Significant negative currency effects Remelted production, kmt 89 93 141 Total metal products sales, kmt 573 610 788 Underlying EBIT, NOK million (421) (79) 409 Underlying EBIT Outlook NOK m
Slide 26: Rolled Products
Rolled Products Key figures Q1 operating results Q1 Q4 Q1 • Volumes significantly down 2009 2008 2008 • Declining margins External sales volumes, kmt 191 213 253 • Positive contribution from cost savings Underlying EBIT, NOK million (53) 89 147 Underlying EBIT Outlook NOK million 652 (53) • Continue
Slide 27: Extrusion
Extrusion Key figures Q1 operating results Q1 Q4 Q1 • Volumes further down 2009 2008 2008 • Building Systems less affected by downturn External sales volumes, kmt 96 103 130 • Positive contribution from cost savings Underlying EBIT, NOK million (88) (88) 225 Underlying EBIT Outlook NOK million 668 (
Slide 28: Automotive
Automotive Key figures Q1 operating results Q1 Q4 Q1 • Low volumes 2009 2008 2008 • Considerable cost improvement External sales volumes, kmt 17 18 31 Underlying EBIT, NOK million (115) (235) (2) Underlying EBIT Outlook NOK million (326) (115) • No signs of market recovery 2 • Additional demanning a
Slide 29: Energy
Energy Key figures Q1 operating results Q1 Q4 Q1 • Declining spot prices 2009 2008 2008 • High seasonal production Power production, GWh 2 477 2 813 2 850 Net spot sales, GWh 838 1 130 969 Southern Norway spot price (NO1), 341 433 289 NOK/MWh Underlying EBIT, NOK million 416 592 399 Underlying EBIT
Slide 30: Capital allocation
Capital allocation (30)
Slide 31: Cash flow development
Cash flow development Q1 Year NOK billion 2009 2008 Operations (1.1) 2.9 Investments* (0.7) (8.8) Divestments - 5.8 Dividends and share buybacks - (6.5) Financing 1.7 0.5 Net cash flow (0.2) (6.0) * Excluding investments debt financed directly in Qatalum (31)
Slide 32: Financial position
Financial position Net cash / (debt) in NOK billion Secured financing: ~NOK 20 billion 10.8 • New EUR 750 million in 3-year bank facility 8.7 • New NOK 1 billion in commercial paper • USD 1.7 billion in a multi-currency revolving facility maturing in 2014 3.5 1.7 • NOK 1.3 billion short-term • Curre
Slide 33: Firm corrective measures
Firm corrective measures • Production curtailments and capacity adjustments • Manning reductions • Cost improvement programs • Capital expenditures and operating capital reductions • Additional measures will be implemented according to market development (33)
Slide 34: Flexible production system
Flexible production system Primary aluminium Remelt 1 000 tonnes 1 000 tonnes 2 000 1 920 2 000 380 1 750 1 600 420 1 600 290 1 200 1 250 1 250 1 200 1 000 1 040 100 500 900 800 800 500 400 400 0 0 2008 Q1 2009* 2011 2008 Q1 2009* 2011 C urtailed primary capacity available for restart Available reme
Slide 35: Qatalum on target
Qatalum on target • 73% complete end-Q1 • 19 000 workers on site end-Q1 • Main ongoing activities • Construction of buildings • Installation of equipment • Development of operating organization • Investment • Estimate (100%) ~USD 5.6 billion • On schedule for start-up 2009/2010 • First-decile positi
Slide 36: Hydro: A focused aluminium and energy company
Hydro A focused aluminium and energy company Energy Primary Metal Metal Markets Rolled Products Extruded Products • Enhance value • World-class • Enhance value of • Cost focus and • Cost focus and of energy production system market system market/margin market/margin competence management management
Slide 37: Priorities in 2009
Priorities in 2009 • Proactive corrective measures • Cost reductions and margin management • Working capital and counterparty risk • Production curtailments • Cash focus – maintain financial flexibility • Operational excellence • Qatalum execution (37)
Slide 38: Cautionary note in relation to certain forward-looking statements
Cautionary note in relation to certain forward-looking statements 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
Slide 39: Additional information
Additional information (39)
Slide 40: Underlying income Q1 2009
Underlying income Q1 2009 NOK million Reported income Adjustments Underlying income Aluminium Metal (2 198) 1 723 (476) Aluminium Products (566) 309 (257) Energy 420 (4) 416 Corporate and other 746 (922) (176) Total EBIT (1 598) 1 105 (493) Financial income (expense), net 1 473 (1 478) (5) Income (l
Slide 41: Underlying income Q4 2008
Underlying income Q4 2008 NOK million Reported income Adjustments Underlying income Aluminium Metal (1 725) 2 160 435 Aluminium Products (2 946) 2 706 (239) Energy 276 315 592 Corporate and other 1 288 (1 207) 81 Total EBIT (3 106) 3 975 868 Financial income (expense), net (4 487) 4 629 142 Income (
Slide 42: Underlying income Q1 2008
Underlying income Q1 2008 NOK million Reported income Adjustments Underlying income Aluminium Metal 716 539 1 255 Aluminium Products 995 (625) 370 Energy 404 (5) 399 Corporate and other (936) 944 8 Total EBIT 1 179 853 2 032 Financial income (expense), net 998 (854) 144 Income continuing operations
Slide 43: Reported and underlying results
Reported and underlying results Hydro Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2007 2008 Reported EBIT 3 672 3 001 2 013 338 1 179 708 2 414 (3 106) (1 598) 9 025 1 194 Underlying EBIT 2 883 2 886 2 686 1 697 2 032 1 619 1 490 868 (493) 10 153 6 0
Slide 44: Items excluded from underlying results 2009
Items excluded from underlying results 2009 Q1 NOK million 2009 Unrealized derivative effects on currency contracts (Alunorte) Bauxite and Alumina (11) Rationalization charges and closure costs Bauxite and Alumina 210 Rationalization charges and closure costs Primary Aluminium 96 Unrealized derivati
Slide 45: Items excluded from underlying results 2008
Items excluded from underlying results 2008 Q1 Q2 Q3 Q4 Year NOK million 2008 2008 2008 2008 2008 Unrealized derivative effects on currency contracts (Alunorte) Bauxite and Alumina (16) (106) 203 271 352 Unrealized derivative effects on LME related contracts (Alunorte) Bauxite and Alumina 83 (8) (13
Slide 46: Items excluded from underlying results 2007
Items excluded from underlying results 2007 Q1 Q2 Q3 Q4 Year NOK million 2007 2007 2007 2007 2007 Equity accounted units – Monetary adjustments Alunorte Bauxite & Alumina (33) (64) (35) (35) (167) Equity accounted units - unrealized (gains)/losses on LME contracts Alunorte Bauxite & Alumina (13) 40
Slide 47: Operating segment information: Underlying EBIT
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2007 2008 Bauxite & Alumina 257 298 100 27 10 70 93 160 (137) 681 334 Primary Aluminium 1 901 1 790 1 720 1 142 872 628 909 257 123 6 552 2 666 Commercial 254 2
Slide 48: Operating segment information: Underlying EBITDA
Operating segment information Underlying EBITDA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2007 2008 Bauxite & Alumina 262 302 104 31 14 74 98 166 (131) 699 352 Primary Aluminium 2 396 2 266 2 190 1 628 1 328 1 114 1 398 797 592 8 479 4 637 Commerci
Slide 49: Operating segment information: EBIT
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2007 2008 Bauxite & Alumina 303 322 243 144 (57) 184 24 (585) (335) 1 011 (433) Primary Aluminium 1 710 1 921 1 621 1 030 479 712 1 254 (625) (304) 6 281 1 820 Commercial
Slide 50: Operating segment information: EBITDA
Operating segment information EBITDA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2007 2008 Bauxite & Alumina 308 326 247 148 (53) 188 29 (68) (330) 1 029 96 Primary Aluminium 2 205 2 397 2 091 1 516 935 1 198 1 743 760 165 8 208 4 635 Commercial 294
Slide 51: Operating segment information: Total revenue
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2007 2008 Bauxite & Alumina 1 108 1 192 929 948 698 931 1 281 1 500 785 4 176 4 411 Primary Aluminium 10 377 9 876 8 920 7 991 8 562 9 263 8 657 7 665 5 966 37 16
Slide 52: Operating segment information: External revenue
Operating segment information External revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2007 2008 Bauxite & Alumina - - - 3 - - - - - 3 - Primary Aluminium 594 684 602 670 574 582 546 387 328 2 551 2 090 Commercial 10 663 9 893 8 954 8 441 8 200 9
Slide 53: Operating segment information: Internal revenue
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2007 2008 Bauxite & Alumina 1 108 1 192 929 944 698 931 1 281 1 500 785 4 173 4 410 Primary Aluminium 9 782 9 192 8 318 7 321 7 988 8 680 8 111 7 278 5 637 34
Slide 54: Operating segment information: Equity accounted investments
Operating segment information Share of profit /(loss) in equity accounted investments Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2007 2008 Bauxite & Alumina 238 228 219 169 (37) 180 57 (520) (266) 854 (320) Primary Aluminium (3) 96 56 (28) (40) 92 3
Slide 55: Operating segment information: Depreciation, amortization and impairment
Operating segment information Depreciation, amortization and impairment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2007 2008 Bauxite & Alumina - - - - - - - - - - - Primary Aluminium 490 471 465 473 452 481 484 1 295 463 1 899 2 711 Commercial 40 17
Slide 56: Income statement
Income statement Q1 Q4 Q1 Year NOK million 2009 2008 2008 2008 Revenue 16 854 21 368 21 529 88 643 Share of the profit (loss) in equity accounted investments (413) (1 154) (94) (915) Other income, net 134 161 112 865 Total revenue and income 16 574 20 375 21 547 88 593 Depreciation, amortization and
Slide 57: Balance sheets
Balance sheets March 31, December 31, September 30, June 30, March 31, NOK million 2009 2008 2008 2008 2008 Cash and cash equivalents 3 128 3 333 3 583 7 985 11 735 Short-term investments 1 652 1 648 4 454 2 112 2 444 Receivables and other current assets 16 077 18 833 19 744 19 967 19 871 Inventorie
Slide 58: Financial policy
Financial policy Maintain investment-grade rating March 31, Dec 31, NOK billion 2009 2008 • Currently: BBB- (S&P), Baa2 (Moody’s), Cash and cash equivalents 3.1 3.3 both with negative outlook Short-term investments 1.7 1.6 • Competitive access to capital and important Short-term debt (2.0) (1.2) Lon
Slide 59: Capital employed – upstream focus
Capital employed – upstream focus Energy Bauxite & Alumina NOK million March 31, 2009 Automotive 6% 10% Bauxite & Alumina 5 597 3% Primary Aluminium 23 220 Commercial 6 319 Other and eliminations (1 105) Aluminium Metal 34 031 Extrusion Rolled Products 8 644 11% Extrusion 5 777 Automotive 1 781 Othe
Slide 60: Price and currency sensitivities
Price and currency sensitivities Aluminium price sensitivity +/- 100 USD per tonne NOK/USD sensitivity +/- 0.1 NOK 900 850 200 800 140 700 650 100 600 100 500 400 0 300 EBIT Net income 200 100 0 0 EBIT Net income Financial items Net income • Annual sensitivities (100) (70) • Aluminium price sensitiv
Slide 61: Primary aluminium production
Primary aluminium production 1 000 tonnes 1 472 1 720 1 826 1 799 1 742 1 750 397 457 461 464 449 451 449 450 441 446 444 433 435 435 439 433 437 439 442 415 418 397 381 388 360 343 2003 2004 2005 2006 2007 2008 2009 Slovalco consolidated from Q1 2004 (61)
Slide 62: Nordic power market – forward curves
Nordic power market – forward curves NOK/MWh 650 600 550 500 450 400 350 300 250 200 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 End Q4 2007 End Q1 2008 End Q2 2008 End Q3 2008 End Q4 2008 End Q1 2009 (62)
Slide 63: Power price and volume
Power price and volume Nordic System Price Hydropower production NOK/MWh TWh 600 12 11.4 11.0 10.7 500 10 10.3 9.4 400 8 8.3 8.0 7.5 300 6 200 4 100 2 2.5 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009 (63)
Slide 64: Aluminium Metal – operational data
Aluminium Metal – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Volumes and prices 2007 2007 2007 2007 2008 2008 2008 2008 2009 Realized premium above LME (USD/mt) 329 353 344 346 362 360 340 289 255 Realized premium above LME (NOK/mt) 2 056 2 143 2 001 1 934 1 973 1 868 1 822 1 964 1 752 Bauxite & Al
Slide 65: Aluminium Metal – operational data
Aluminium Metal – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Volumes and prices 2007 2007 2007 2007 2008 2008 2008 2008 2009 Commercial: Remelt production (1 000 mt) 190 179 163 153 141 145 121 93 89 Sale of metal products from 771 738 699 680 724 753 667 571 548 own production (1 000 mt) Sale of t
Slide 66: Aluminium Products and Energy – operational data
Aluminium Products – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2007 2007 2007 2008 2008 2008 2008 2009 Rolled Products external shipments (1 000 tonnes) 264 262 253 246 253 259 240 213 191 Extrusion external shipments (1 000 tonnes) 134 135 123 117 130 133 122 103 96 Automotive external shipm
Slide 67: Investor Relations in Hydro
Investor Relations in Hydro t: +47 22 53 92 80 Stefan Solberg Head of Investor Relations m: +47 917 27 528 e: stefan.solberg@hydro.com t: +47 22 53 25 22 Stian Hasle Investor Relations Officer m: +47 977 36 022 e: stian.hasle@hydro.com t: +47 22 53 92 24 Irene Raposo Investor Relations Assistant m:
Slide 68: www.hydro.com
www.hydro.com (68)