Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q2 2009 Earnings Presentation
58 slides from Norsk Hydro Asa's earnings presentation, Jul 22, 2009
Slide 1: Solid cash flow and cost savings, markets remain weak
Solid cash flow and cost savings, markets remain weak Q2 Second quarter 2009 July 22, 2009 (1)
Slide 2: (2)
(2)
Slide 3: Svein Richard Brandtzæg, President and CEO
President and CEO Svein Richard Brandtzæg (3)
Slide 4: Highlights
Highlights • Firm execution of corrective measures – significant cost-savings achieved • Strong cash flow from operations • Demand apparently flattening out at low level • Underlying EBIT down 25% from Q1 • Weak upstream result - 28% drop in realized aluminium price vs Q1 • Improved downstream resul
Slide 5: Sales volumes at low level
Sales volumes at low level Hydro’s downstream sales Q2 2009 vs Q1 2009 Total downstream sales Rolled Extrusion Building Extrusion Automotive Precision Products Eurasia Systems Americas Structures Tubing Q2 09 vs Q1 09 H1 09 vs H1 08 29% 19% 9% 1% 3% 1% -2% -27% Hydro’s upstream sales Q2 2009 vs Q1 2
Slide 6: 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 Q2 2009 average 1 524 9 883 Q2 2009 end 1 651 10 611 2 800 2 600 Q1 2009 average 1 397 9 593 Q1 2009 end 1 405 9 555 2 400 2 200 Average 2008 2 620 14 453 2 000 1 800 Average 2007 2 662 15
Slide 7: Inventories still increasing
Inventories still increasing USD per tonne Days 3 500 120 110 3 000 100 90 2 500 80 70 2 000 60 1 500 50 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 currently net importer
China currently net importer 1 000 tonnes Primary / alloyed Semis Fabricated Scrap Total • Swift response to drop in demand in Q4/Q1 600 • Production curtailments 550 500 • Strategic government purchases Net import 450 400 350 • 1-2 million tonnes of capacity being 300 restarted due to increased dem
Slide 9: Announced capacity curtailments
Announced capacity curtailments Unchanged from Q1 12 % 3% Alcoa 7% C entury Hydro China ~3.5 million tonnes* Rio Tinto 6% Rest of world ~3.4 million tonnes 51 % UC Rusal Other Total ~6.9 million tonnes C hina 7% 14 % Source: CRU / company reports / Hydro estimates. *Not adjusted for reports of resta
Slide 10: Substantial supply/demand imbalance
Substantial supply/demand imbalance World production and consumption (excl. China) Annualized • Majority of curtailments executed end-Q2 30 000 Production C onsumption • Imports to China of 750 000 tonnes of 25 000 primary aluminium during 2009 • Increased demand end-Q2 20 000 15 000 10 000 5 000 0
Slide 11: Power spot prices stabilize
Power spot prices stabilize South Norway price (NO1) Water reservoir levels in South Norway (NO1) NOK/MWh Percent 600 100 2008 2009 2008 2009 90 500 80 70 400 60 300 50 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 25 28 31 34 37 40 43 46 49 52 Price
Slide 12: 2009 outlook
2009 outlook • Aluminium prices to remain low • Limited forward visibility • Still increasing LME inventory • No substantial pick-up in demand • Primary aluminium consumption ex-China could decline up to 15-20% from 2008 • Chinese consumption in line with 2008 • Input costs further down (12)
Slide 13: Firm corrective measures taken
Firm corrective measures taken Initiative Result/target 2008-2009: 40% reduction, NOK 2.5 billion Capital expenditure cuts 1) 2009-2010: 15% reduction, NOK 0.5 billion Operating capital reduction NOK 5 billion during first half 2009 Production curtailments Primary aluminium 26% reduction from 2008 l
Slide 14: Upstream capacity curtailments completed
Upstream capacity curtailments completed Primary aluminium Closed production Curtailment Curtailment Smelter capacity in tonnes announced completed Comment Karmøy (Søderberg line) 120 000 Q4 2008 Q1 2009 Permanent closure Temporary closure, currently operating Neuss 180 000 Q1 2009 Q2 2009 50 000 ou
Slide 15: Significant cash cost improvements achieved
Significant cash cost improvements achieved Cost* in USD per tonne indexed, 2008=100 • Production curtailments at high-cost smelters • Reduced input costs in first half 2009 ~(25)% • Alumina 2-3 months lag • Petroleum coke • Fuel oil, caustic soda, coal, freight and alloys • Further cost improvement
Slide 16: Curtailments executed in flexible system
Curtailments executed in flexible system Primary aluminium Remelt 1 000 tonnes, production rate per year 1 000 tonnes, production rate per year 2 000 2 000 1 920 1 750 330 1 588 1 600 1 600 290 1 352 1 200 1 300 1 200 1 000 1 000 1 000 1 040 100 496 264 900 800 800 736 504 400 400 0 0 2008 Q1 2009 Q
Slide 17: Innovation and improvements downstream
Innovation and improvements downstream Hydro opens energy-neutral building Avg. German energy consumption: 180 kWh/m²a (primary) Energy consumption: 50 kWh/m²a (primary) Solar energy production: 30 000 kWh/a (17)
Slide 18: Qatalum nearing completion
Qatalum nearing completion Power plant Heat recovery units Paste plant Casthouse building (18)
Slide 19: Qatalum on target
Qatalum on target • 84% complete end-Q2 • 21 500 workers on site end-Q2 • Main ongoing activities • Construction of buildings • Installation of equipment • Development of operating organization • Investment • Updated estimate (100%) ~USD 5.7 billion • On schedule for start-up 2009/2010 • First-decil
Slide 20: Jørgen C. Arentz Rostrup, Executive Vice President and CFO
Executive Vice Jørgen C. Arentz President and CFO Rostrup (20)
Slide 21: New reporting structure
New reporting structure Until Q1 2009 Q2 2009 and onwards Aluminium Metal Primary Metal Bauxite & Alumina Primary Aluminium Metal Markets Commercial 1) Aluminium Products Rolled Products Rolled Products Extrusion Extruded Products Automotive Energy Energy 2) Other and eliminations Other and eliminat
Slide 22: Underlying EBIT
Underlying EBIT 2 032 1 619 1 490 868 (493) (618) NOK million Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Primary Metal 938 795 906 93 (185) (895) Metal Markets 363 139 (41) 242 (245) 196 Rolled Products 147 240 170 93 (53) (28) Extruded Products 223 296 152 (332) (204) (26) Energy 421 302 460 6
Slide 23: Key financials
Key financials First half First half NOK million Q2 2009 Q1 2009 Q2 2008 2009 2008 Revenue 17 123 16 854 23 980 33 976 45 510 Underlying EBIT (618) (493) 1 619 (1 111) 3 651 Items excluded from underlying EBIT 1 029 (1 105) (911) (77) (1 764) Reported EBIT 410 (1 598) 708 (1 188) 1 887 Financial inc
Slide 24: Items excluded from underlying EBIT
Items excluded from underlying EBIT First half First half NOK million Q2 2009 Q1 2009 Q2 2008 2009 2008 Underlying EBIT (618) (493) 1 619 (1 111) 3 651 Unrealized effects power contracts (118) 580 (1 997) 463 (3 287) Unrealized LME and other derivative effects 1 427 (708) 450 719 1 000 Metal effect,
Slide 25: Primary Metal
Primary Metal Q2 Q1 Q2 Key figures 2009 2009 2008 Alumina production, kmt 494 578 506 Primary aluminium production, kmt 338 397 437 Total sales volumes, kmt 447 440 584 Realized LME price, USD/mt 1 468 1 996 2 610 Realized LME price, NOK/mt 9 598 13 393 13 553 Underlying EBIT, NOK million (895) (185
Slide 26: Metal Markets
Metal Markets Q2 Q1 Q2 Key figures 2009 2009 2008 Remelt production, kmt 111 89 145 Total metal products sales, kmt 602 573 801 Underlying EBIT, NOK million 196 (245) 139 Underlying EBIT, NOK million Q2 operating results 703 (48) • Neutral currency effects vs significant negative 363 effects in Q1 2
Slide 27: Rolled Products
Rolled Products Q2 Q1 Q2 Key figures 2009 2009 2008 External sales volumes, kmt 187 191 259 Underlying EBIT, NOK million (28) (53) 240 Underlying EBIT, NOK million Q2 operating results 651 (82) • Positive contribution from cost savings 240 • Stable volumes in a weak market 170 147 93 Outlook • Uncer
Slide 28: Extruded Products
Extruded Products Q2 Q1 Q2 Key figures 2009 2009 2008 External sales volumes, kmt 120 113 164 Underlying EBIT Extrusion, 5 (88) 292 NOK million Underlying EBIT Automotive, (37) (115) 2 NOK million Underlying EBIT, NOK million (26) (204) 296 Underlying EBIT, NOK million Q2 operating results 338 (230)
Slide 29: Energy
Energy Q2 Q1 Q2 Key figures 2009 2009 2008 Power production, GWh 1 809 2 477 3 021 Net spot sales, GWh 413 838 1 331 Southern Norway spot price (NO1), 297 341 171 NOK/MWh Underlying EBIT, NOK million 281 447 302 Underlying EBIT, NOK million Q2 operating results 1 865 728 • Low production 683 • Lower
Slide 30: Strong cash flow from operations
Strong cash flow from operations • Significant reductions in operating Q2 Q1 Q2 NOK million 2009 2009 2008 capital Net income (loss)* 282 (280) 902 Depreciation 805 827 819 • Capital discipline – investments at Operating capital 2 907 2 199 (449) low level Other adjustments (1 984) (3 857) 1 634 Net
Slide 31: Financial position
Financial position Net cash / (debt) in NOK billion Secured financing: ~NOK 20 billion 8.7 • EUR 750 million in 3-year bank facility • NOK 1 billion in commercial paper • USD 1.7 billion in a multi-currency revolving 3.5 1.7 3.0 facility maturing in 2014 • NOK 1.3 billion short-term June 30, 2008 De
Slide 32: Priorities in 2009
Priorities in 2009 Proactive corrective measures • Cost reductions and margin management • Working capital and counterparty risk Cash focus • Maintain financial flexibility Solid operations Qatalum execution Stay close to markets (32)
Slide 33: 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 34: Underlying income Q2 2009
Underlying income Q2 2009 NOK million Reported income Adjustments Underlying income Primary Metal (537) (357) (895) Metal Markets 472 (275) 196 Rolled Products 438 (466) (28) Extruded Products 87 (114) (26) Energy 321 (40) 281 Other and eliminations (370) 224 (146) Total EBIT 410 (1 029) (618) Finan
Slide 35: Underlying income Q1 2009
Underlying income Q1 2009 NOK million Reported income Adjustments Underlying income Primary Metal (1 837) 1 652 (185) Metal Markets (315) 70 (245) Rolled Products (379) 325 (53) Extruded Products (187) (17) (204) Energy 451 (4) 447 Other and eliminations 669 (922) (253) Total EBIT (1 598) 1 105 (493
Slide 36: Underlying income Q2 2008
Underlying income Q2 2008 NOK million Reported income Adjustments Underlying income Primary Metal 1 343 (548) 795 Metal Markets 106 33 139 Rolled Products 504 (264) 240 Extruded Products 285 10 296 Energy 307 (6) 302 Other and eliminations (1 838) 1 685 (153) Total EBIT 708 911 1 619 Financial incom
Slide 37: Reported and underlying results
Reported and underlying results Hydro Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2007 2008 Reported EBIT 3 672 3 001 2 013 338 1 179 708 2 414 (3 106) (1 598) 410 9 025 1 194 Underlying EBIT 2 883 2 886 2 686 1 699 2 032 1 619 1 490 868 (493
Slide 38: Items excluded from underlying results - 2009
Items excluded from underlying results - 2009 NOK million Q1 2009 Q2 2009 Unrealized derivative effects on currency contracts (Alunorte) Primary Metal (11) (222) Rationalization charges and closure costs Primary Metal 305 62 Unrealized derivative effects on power contracts Primary Metal 338 57 Unrea
Slide 39: Items excluded from underlying results - 2008
Items excluded from underlying results - 2008 NOK million Q1 2008 Q2 2008 Q3 2008 Q4 2008 2008 Unrealized derivative effects on LME related contracts (Alunorte) Primary Metal 83 (8) (134) (37) (96) Unrealized derivative effects on LME related contracts Primary Metal 263 (350) (586) 112 (560) Unreali
Slide 40: Items excluded from underlying results - 2007
Items excluded from underlying results - 2007 NOK million Q1 2007 Q2 2007 Q3 2007 Q4 2007 2007 Unrealized derivative effects on LME related contracts (Alunorte) Primary Metal (13) 40 (108) (82) (163) Unrealized derivative effects on LME related contracts Primary Metal (263) (110) (100) (49) (425) Un
Slide 41: Operating segment information - Underlying EBIT
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2007 2008 Primary Metal 2,289 2,172 1,941 1,245 938 795 906 93 (185) (895) 7,646 2,732 Metal Markets 135 186 252 65 363 139 (41) 242 (245) 196 639 703 R
Slide 42: Operating segment information - Underlying EBITDA
Operating segment information Underlying EBITDA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2007 2008 Primary Metal 2,789 2,652 2,416 1,735 1,398 1,285 1,399 638 290 (372) 9,591 4,720 Metal Markets 175 221 285 101 388 162 (15) 274 (212) 226 7
Slide 43: Operating segment information - EBIT
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2007 2008 Primary Metal 2 407 2 437 2 033 1 136 215 1 343 1 768 (1 647) (1 837) (537) 8 012 1 679 Metal Markets 176 12 150 35 546 106 (142) (178) (315) 472 373 332
Slide 44: Operating segment information - Total revenue
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2007 2008 Primary Metal 11 321 10 766 9 894 8 780 8 858 9 837 9 256 8 478 6 471 6 365 40 761 36 428 Metal Markets 15 700 14 712 12 576 12 536 12 781 14 50
Slide 45: Operating segment information - Internal revenue
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2007 2008 Primary Metal 9 862 9 269 8 388 7 384 7 988 8 680 8 111 7 278 5 640 5 290 34 904 32 057 Metal Markets 5 864 5 595 4 417 4 743 4 876 5 226 4 4
Slide 46: Operating segment information - Depreciation, amortization and impairment
Operating segment information Depreciation, amortization and impairment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2007 2008 Primary Metal 490 471 465 473 452 481 484 1 295 464 461 1 899 2 711 Metal Markets 40 179 33 36 24 23 26 67 32 30 287
Slide 47: Income statement
Income statement Q2 Q1 Q2 First half First half Year NOK million 2009 2009 2008 2009 2008 2008 Revenue 17 123 16 854 23 980 33 976 45 510 88 643 Share of the profit (loss) in equity accounted investments (42) (413) 256 (455) 162 (915) Other income, net 223 134 470 357 581 865 Total revenue and incom
Slide 48: Balance sheets
Balance sheets June 30, March 31, December 31, September 30, June 30, NOK million 2009 2009 2008 2008 2008 Cash and cash equivalents 4 860 3 128 3 333 3 583 7 985 Short-term investments 1 439 1 652 1 648 4 454 2 112 Receivables and other current assets 14 988 16 077 18 833 19 744 19 967 Inventories
Slide 49: Capital employed – upstream focus
Capital employed – upstream focus NOK million June 30, 2009 Energy, Primary Metal 28 683 7% Metal Markets 5 384 Rolled Products 7 915 Extruded Extrusion 5 594 Products, 14% Automotive 1 617 Other and eliminations 158 Extruded Products 7 369 Energy 3 419 Rolled Products, Primary Metal, 54% 15% Other
Slide 50: Price and currency sensitivities
Price and currency sensitivities Aluminium price sensitivity +/- 100 USD per tonne NOK/USD sensitivity +/- 0.1 NOK 900 850 200 800 700 650 150 600 130 500 100 90 400 300 200 50 100 0 0 EBIT Net income EBIT Net income • Annual sensitivities • Aluminium price sensitivity is net of aluminium price inde
Slide 51: Primary aluminium production
Primary aluminium production 1 000 tonnes 1 472 1 720 1 826 1 799 1 742 1 750 735 457 461 464 449 451 449 450 441 446 444 433 435 435 439 433 437 439 442 415 418 397 381 388 360 343 338 2003 2004 2005 2006 2007 2008 2009 Slovalco consolidated from Q1 2004 (51)
Slide 52: Nordic power market – estimated based on forward curves
Nordic power market – estimated based on forward curves NOK/MWh 650 600 550 500 450 400 350 300 250 200 Apr 08 Oct 08 Apr 09 Oct 09 Apr 10 Oct 10 End Q1 2008 End Q2 2008 End Q3 2008 End Q4 2008 End Q1 2009 End Q2 2009 (52)
Slide 53: Power price and volume
Power price and volume South-Norway (NO1) spot price Hydropower production NOK/MWh TWh 600 12 11.4 11.0 10.7 10.3 500 10 9.4 8.3 400 8.0 8 7.5 300 6 4.3 200 4 100 2 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009 (53)
Slide 54: Primary Metal – operational data
Primary Metal – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Volumes and prices 1) 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 Realized premium above LME (USD/mt) 1) 326 338 331 330 350 353 328 268 230 230 Realized premium above LME (NOK/mt) 1) 2 035 2 056 1 928 1 843 1 905 1 832 1 740 1 706
Slide 55: Metal Markets and Rolled Products – operational data
Metal Markets – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Volumes and prices 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 Remelt production (1 000 mt) 190 179 163 153 141 145 121 97 89 111 Sale of metal products from own production (1 000 mt) 771 772 699 680 724 753 667 571 548 577 Sale of
Slide 56: Extruded Products and Energy – operational data
Extruded Products – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Volumes and prices 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 Extrusion external shipments (1 000 mt) 134 135 123 117 130 133 122 103 96 99 Automotive external shipments (1 000 mt) 43 30 29 28 31 31 26 18 17 21 Extrusion – EBI
Slide 57: 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 58: www.hydro.com
www.hydro.com