Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (November 2012)
30 slides from Norsk Hydro Asa's investor day presentation, Nov 29, 2012
Slide 1: Bauxite & Alumina
Bauxite & Alumina Johnny Undeli Capital Markets Day 2012 (1)
Slide 2: Bauxite & Alumina – key priorities
Bauxite & Alumina – key priorities • Deliver on ambitious improvement program • Strengthen cash generation • Lift and stabilize production • Continue commercial focus • Focus on HSE and CSR (2)
Slide 3: Commercial
Commercial 01 (3)
Slide 4: Attractive alumina portfolio
Attractive alumina portfolio Alumina position Estimated index exposure in external sales portfolio Thousand mt 8 000 60% 7 000 6 000 Sourcing 40% 5 000 Equity 4 000 20% 3 000 Hydro smelter demand* 2 000 0% 2013 2017 2020 1 000 • Legacy contracts limiting index exposure next few years - 2012 2013 201
Slide 5: Index pricing gaining ground
Index pricing gaining ground Short/medium-term contract prices in % of LME Alumina price development 17% 450 18% 16% 17% 400 16% 15% 350 15% 14% Introduction of PAX 300 14% 13% 13% 250 12% 12% 200 11% 11% 10% 150 10% 1990-2000 2001-2005 2006-2010 2011-2012 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 J
Slide 6: Optimizing global bauxite and alumina positions
Optimizing global bauxite and alumina positions Estimated shipments 2012 • 7.3 million mt alumina • 2.6 million mt bauxite External sourcing and swapping • Saving logistical cost and improving margins • Ensuring global reach • Enabling market opportunities (6)
Slide 7: Commercial strategy
Commercial strategy Increasing alumina index exposure • All new contracts to be based on index pricing • Allowing alumina to be priced on own fundamentals Alumina marketing targets • Increase sales on CIF* basis • Establish premium for Alunorte quality Bauxite marketing targets • Improve margins on
Slide 8: Ambitious improvement program 'From B to A'
Ambitious improvement program ”From B to A” 02 (8)
Slide 9: Paragominas – one of the world's largest bauxite mines
Paragominas – one of the world's largest bauxite mines Million mt annually Paragominas production 12 Capacity 8 Estimate 4 0 2007 2008 2009 2010 2011 2012 • High-quality gibbsite bauxite • Efficient integrated system with mine, pipeline and refinery • Record production in 2012 (9)
Slide 10: Alunorte – world's largest alumina refinery
Alunorte – world's largest alumina refinery Million mt annually Alunorte production 8 Capacity Estimate 4 0 2007 2008 2009 2010 2011 2012 • Premium alumina quality • Benchmark energy consumption • Ambition to reach nameplate capacity • Continue to improve production stability (10)
Slide 11: Hydro's position – competitive compared to peers
Hydro’s position – competitive compared to peers Despite lower LME and weak EBITDA Underlying EBITDA per mt in USD for respective bauxite and alumina divisions 1H 2011 2H 2011 1H 2012 100 100 100 50 50 50 0 0 0 -50 -50 -50 Hydro Peers All figures based on public accounting data, not verified by Hydr
Slide 12: 'From B to A'
“From B to A” • Total contribution of NOK 1 billion − Full impact in 2015 − 50% in 2013 • Defined actions in Alunorte, Paragominas and Commercial • Production stability, volumes and costs • Focus on underlying performance improvements (12)
Slide 13: Target 20% demanning by end-2015
Target 20% demanning by end-2015 % demanning versus 2011 headcount • Baseline 6 000 employees, including contractors % 2012 2013 2014 2015 0 • Target reduction of 1 200, primarily contractors − Centralization of contract management − Major potentials in the area of transportation, 10 cleaning and ma
Slide 14: Paragominas cost ambition
Paragominas cost ambition Paragominas production cash costs Paragominas influencable costs % shares of costs % shares of costs Targeted reduction 20% reduction of influencable costs Influencable Materials (14)
Slide 15: Paragominas – improving productivity with surface miners
Paragominas – improving productivity with surface miners • Surface miner increasing productivity and reducing unit costs − Increasing productivity in the mining process, from 400 t/h to 800 t/h − Operating over wider mining areas − Reducing ore losses (15)
Slide 16: Paragominas – increasing mass recovery
Paragominas – increasing mass recovery Development of mass recovery since start-up Target % • Increase life of mine 70 • Increase production Target • Decrease tailing volumes and reduce investments 65 Actions • Installation of a “crossover” 60 − Allowing use of most suitable line • Increase of fines
Slide 17: Pipeline – installing second pump station
Pipeline – installing second pump station • Bauxite slurry flow currently provided through pump station in Paragominas • Construction of second pump station halfway to Alunorte • Improved operations − Availability − Flexibility − Prolonged lifetime − Safety and environment (17)
Slide 18: Raw materials represent significant share of total costs
Raw materials represent significant share of total costs Caustic soda, coal and fuel accounting for ~50% Cost split Bauxite & Alumina YTD September 2012 Caustic soda Coal Fuel Others (18)
Slide 19: Alunorte – reduction of influencable costs
Alunorte – reduction of influencable costs Alunorte production cash costs Alunorte influencable costs % shares of costs % shares of costs Targeted reduction 20% reduction of influencable costs Influencable Materials (19)
Slide 20: Alunorte – stabilizing hydrate production lines 1/2/3
Alunorte – stabilizing hydrate production lines 1/2/3 Hydrate production in mt per month • Alunorte hydrate production lines 1/2/3 with 210 production below design capacity Target • Identified actions − House-keeping of tanks and digesters 200 − Review of critical operational procedures − Overhaul o
Slide 21: Alunorte – emergency preparedness towards external power outage
Alunorte – emergency preparedness towards external power outage • Ensure 100% energy availability to avoid production losses • Identified actions − Install emergency generation in precipitation area − Implement rejection load system to keep operation during power grid system failure − Recovery tower
Slide 22: Alunorte – improving cost position
Alunorte – improving cost position 500 Business operating cash costs in USD per mt 2012 450 400 350 300 First quartile 250 Alunorte 200 0 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 100 000 110 000 Source: CRU (22)
Slide 23: Commercial – reducing demurrage costs
Commercial – reducing demurrage costs Annual demurrage cost savings in USD million • Identified actions 12 − “Bauxiteiro” vessels for transport from MRN to Alunorte Target 10 − Dredging in Alunorte port − Upgrade Alunorte port for rainy season 8 − Stabilize production volumes 6 4 2 0 2012 2013 2014
Slide 24: Ambitious improvement program 'From B to A'
Ambitious improvement program “From B to A” EBIT improvement of NOK 1 billion and 20% manning reduction Annual improvements versus 2011 “From B to A” improving result significantly NOK 1 bn Additional impact from inflationary pressure and EBIT (NOK billion) exchange rates 2011 2012 2013 2014 2015 Ma
Slide 25: HSE/CSR
HSE/CSR 03 (25)
Slide 26: Safety – The Hydro Way
Safety – The Hydro Way Improved transparency Cultural development (26)
Slide 27: Social and environmental commitment
Social and environmental commitment • Health, safety and environment culture is the foundation for excellent operations • Environment − Mining 1:1 ratio of opening and rehabilitating land in 2017 − Letter of intent with University of Oslo on biodiversity and climate − Supporting Para Green Municipal
Slide 28: Summary
Summary 04 (28)
Slide 29: Deliver on 'From B to A'
Deliver on "From B to A" Annual improvement versus 2011 NOK 1 bn 2011 2012 2013 2014 2015 20% reduction (29)
Slide 30: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO