Norsk Hydro ASA · OSL:NHY
Norsk Hydro ASA — Q2 2008 Earnings Presentation
57 slides from Norsk Hydro ASA's earnings presentation, Jul 22, 2008
Slide 1: Second quarter 2008
Second quarter 2008 1 2 3 4 July 22, 2008 (1)
Slide 2: Highlights
Highlights • Solid operational performance • Rising input costs in Aluminium Metal • Strong result in Aluminium Products • Qatalum on target, 26% complete by end Q2 (2)
Slide 3: Market review & outlook
1 Market review & outlook (3)
Slide 4: Industry-wide input cost pressure
Industry-wide input cost pressure Crude oil – Brent (USD/bbl) Coal – CIF ARA (USD/mt) Petroleum coke FOB – (USD/tonne) 160 220 450 140 200 180 400 120 160 100 350 140 80 120 300 100 60 80 250 40 60 20 40 200 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 Power – EEX Germany (EUR/MWh) Fr
Slide 5: Strong aluminium price
Strong aluminium price USD per tonne Primary aluminium LME USD/tonne NOK/tonne LME (3-month avg.) 3 400 LME forward Q2 2008 average 2 989 15 195 3 200 Q2 2008 end 3 122 15 882 Q1 2008 average 2 772 14 705 3 000 Q1 2008 end 2 987 15 218 2 800 Average first half 2008 2 881 14 952 2 600 Average 2007 2
Slide 6: Significant rise in forward curve
Significant rise in forward curve LME forward price, USD/tonne 3 400 3 000 2 600 2 200 1 800 1 400 2005 2007 2009 2011 2013 1-Jan-05 1-Jan-06 1-Jan-07 1-Jan-08 18-Jul-08 (6)
Slide 7: China net import/export of aluminium
China 1 000 tonnes • Export tax on metal and low value- 500 added products (non-alloyed) Net import 400 300 • Increased export of alloyed 200 primary aluminium 100 • No export tax 0 • SHFE vs LME Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 (100) 06 06 06 06 07 07 07 07 08 08* (200) • Majority of export to Asian m
Slide 8: 2008 outlook
2008 outlook Primary aluminium demand seen up 8% • Driven by China and despite weak US economy Moderate slowdown in market growth for semi-fabricated products in Europe • In addition to seasonal downturn Support for aluminium price at high level • High energy and raw material prices • Curtailment of
Slide 9: Financials & performance
2 Financials & performance (9)
Slide 10: Key financials
Key financials First half First half NOK million Q2 2008 Q1 2008 Q2 2007 2008 2007 Revenue 23 980 21 529 25 042 45 510 50 699 Underlying EBIT 1 619 2 032 2 886 3 651 5 768 Items excluded from underlying EBIT (911) (853) 116 (1 764) 905 Reported EBIT 708 1 179 3 001 1 887 6 674 Financial income/(expe
Slide 11: Items excluded from underlying EBIT
Items excluded from underlying EBIT First half First half NOK million Q2 2008 Q1 2008 Q2 2007 2008 2007 Reported EBIT 708 1 179 3 001 1 887 6 673 Unrealized effects power contracts 1 997 1 291 (362) 3 287 (2) Unrealized LME and other derivative effects (450) (551) (73) (1 000) (400) Metal effect, Ro
Slide 12: Underlying EBIT per segment
Underlying EBIT per segment NOK million Corporate and eliminations Energy 2 886 Aluminium Products 2 883 Aluminium Metal 369 266 2 686 498 493 207 288 2 375 2 374 2 032 2 182 1 699 399 1 619 341 270 370 535 1 333 1 255 953 2007 2008 (12)
Slide 13: Bauxite & Alumina
Bauxite & Alumina Key figures Q2 operating results Q2 Q1 Q2 • Higher alumina prices 2008 2008 2007 • Lower bauxite costs in Alunorte Alumina production, kmt 507 509 480 • High energy costs Alunorte, NOK million 1) 66 30 204 Other, NOK million 4 (20) 94 Underlying EBIT, NOK million 70 10 298 1) Under
Slide 14: Primary Aluminium
Primary Aluminium Key figures Q2 operating results Q2 Q1 Q2 • Production well maintained 2008 2008 2007 • Higher realized prices in NOK Primary production, kmt 437 433 435 • Lag in impact of rising realized LME price Realized LME price, USD/mt 1) 2 699 2 442 2 606 on liquid metal production on resul
Slide 15: Primary Aluminium cost development
Primary Aluminium cost development Underlying EBIT variance Q2 vs Q1 2008 Second half 2008 outlook • Variable cost increase approx. 30 NOK 200-250 million vs. Q2 level 80 ~ 870 40 • Carbon costs - significant increase • Alumina freight – increase • Power costs – stable 80 • Alumina indexed to alumin
Slide 16: Strong power position
Strong power position Indexation of power supplies 2008 • Estimated 2008 consumption ~27 TWh1) 12 % • Solid long-term coverage in captive power 28 % 9% • Indexation to LME and coal increase power costs if current prices prevail • Indexation factors have time lag • NOK and USD the dominant currency 1
Slide 17: Commercial
Commercial Key figures Q2 operating results Q2 Q1 Q2 • Higher sales volume and firm 2008 2008 2007 results in European remelters Remelted production, kmt 145 141 179 • Moderate contribution from Total metal products sales, kmt 801 788 823 trading and hedging Underlying EBIT, NOK million 251 409 278
Slide 18: Rolled Products
Rolled Products Key figures Q2 operating results Q2 Q1 Q2 • Increased volume and margin 2008 2008 2007 • Weak USD versus EUR External sales volumes, kmt 259 253 264 Underlying EBIT, NOK million 241 147 262 Underlying EBIT Outlook NOK million 562 388 • Softening demand in Europe 262 241 • Weak US mar
Slide 19: Extrusion
Extrusion Key figures Q2 operating results Q2 Q1 Q2 • Strong results in Europe, volume increase 2008 2008 2007 and stable margins External sales volumes, kmt 133 130 135 • Reduced costs in US Underlying EBIT, NOK million 292 225 227 • Continued positive development in South America Underlying EBIT O
Slide 20: Automotive
Automotive Key figures Q2 operating results Q2 Q1 Q2 • Improved margins offset increased costs 2008 2008 2007 • Lower volume in the US compensated by External sales volumes, kmt 31 31 30 growth in Europe and Asia Underlying EBIT, NOK million 2 (2) 1 • Overall result remain unsatisfactory Underlying
Slide 21: Aluminium Products seasonality
Aluminium Products seasonality Underlying EBIT (NOK million)* 1 000 991 905 800 765 600 529 400 361 200 0 H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 Volume (1 000 mt)* 900 872 871 850 833 837 798 800 750 700 H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 *Including EBIT and volumes from divested activities (2
Slide 22: Energy
Energy Key figures Q2 operating results Q2 Q1 Q2 • Low spot prices 2008 2008 2007 • High production and spot sales Power production, GWh 3 021 2 850 2 749 Net spot sales, GWh 1 331 969 1 069 Southern Norway spot price 171 289 176 (NO1), NOK/MWh Underlying EBIT, NOK million 270 399 369 Underlying EBI
Slide 23: Capital allocation
3 Capital allocation (23)
Slide 24: Solid financial position
Solid financial position • Q2 Cash flow in NOK billion Jun 30, Mar 31, NOK billion 2008 2008 • Operations 2.9 Cash and cash equivalents 8.0 11.7 • Investments (1.4) • Divestments 1.2 Short-term investments 2.1 2.4 • Dividends (6.3) Short-term debt (1.2) (1.2) • Net change in cash Long-term debt (0.2
Slide 25: Qatalum on target
Qatalum on target • 26% complete by end of Q2 • All main contractors on site • 8 000 workers • Challenges • Cost pressure • Performance of sub-contractors • Investment • Estimate (100%)~USD 5.6 billion (25)
Slide 26: 2008 priorities
2008 priorities • Operational excellence • Cost control • Margin management • Qatalum execution • Growth opportunities (26)
Slide 27: 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 28: Additional information
4 Additional information (28)
Slide 29: Underlying income Q2 2008
Underlying income Q2 2008 Reported Underlying NOK million income Adjustments income Aluminium Metal 1 468 (515) 953 Aluminium Products 789 (253) 535 Energy 276 (6) 270 Corporate and other (1 825) 1 685 (140) Total EBIT 708 911 1 619 Financial income (expense), net 443 (298) 145 Income continuing ope
Slide 30: Underlying income Q1 2008
Underlying income Q1 2008 Reported Underlying NOK million income Adjustments 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 31: Underlying income Q2 2007
Underlying income Q2 2007 Reported Underlying NOK million income Adjustments income Aluminium Metal 2 465 (91) 2 374 Aluminium Products 355 137 493 Energy 396 (27) 369 Corporate and other (214) (135) (349) Total EBIT 3 001 (116) 2 886 Financial income (expense), net 733 (517) 216 Income continuing o
Slide 32: Reported and underlying results
Reported and underlying results Hydro Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2006 2007 Reported EBIT 3 111 2 697 2 056 (664) 3 672 3 001 2 013 338 1 179 708 7 200 9 025 Underlying EBIT 2 455 2 937 2 538 2 235 2 883 2 886 2 688 1 697 2 03
Slide 33: Items excluded from underlying results 2008
Items excluded from underlying results 2008 NOK million Q1 2008 Q2 2008 Unrealized derivative effects on currency contracts (Alunorte) Bauxite & Alumina (16) (106) Unrealized derivative effects on LME related contracts (Alunorte) Bauxite & Alumina 83 (8) Unrealized derivative effects on power contra
Slide 34: Items excluded from underlying results 2007
Items excluded from underlying results 2007 Q1 Q2 Q3 Q4 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 (108)
Slide 35: Operating segment information: Underlying EBIT
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2006 2007 Bauxite & Alumina 92 274 288 244 257 298 100 27 10 70 898 681 Primary Aluminium 1 621 1 966 1 714 1 351 1 901 1 790 1 720 1 142 872 628 6 651
Slide 36: Operating segment information: Underlying EBITDA
Operating segment information Underlying EBITDA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2006 2007 Bauxite & Alumina 97 278 293 249 262 302 104 31 14 74 917 699 Primary Aluminium 2 072 2 407 2 161 1 913 2 396 2 266 2 190 1 628 1 328 1 114
Slide 37: Operating segment information: EBIT
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2006 2007 Bauxite & Alumina 134 263 315 119 303 322 243 144 (57) 184 831 1 011 Primary Aluminium 1 015 1 975 1 915 968 1 710 1 921 1 621 1 030 479 712 5 872 6 281
Slide 38: Operating segment information: EBITDA
Operating segment information EBITDA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2006 2007 Bauxite & Alumina 139 267 320 124 308 326 247 148 (53) 188 850 1 029 Primary Aluminium 1 466 2 416 2 362 1 530 2 205 2 397 2 091 1 516 935 1 198 7 774
Slide 39: Operating segment information: Total revenue
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2006 2007 Bauxite & Alumina 952 1 062 1 167 1 300 1 108 1 192 929 948 698 931 4 481 4 176 Primary Aluminium 9 620 9 545 8 927 8 815 10 377 9 876 8 920 7 9
Slide 40: Operating segment information: External revenue
Operating segment information External revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2006 2007 Bauxite & Alumina 1 - - - - - - 3 - - 1 3 Primary Aluminium 827 735 347 435 594 684 602 670 574 582 2 344 2 551 Commercial 10 419 11 012 9 53
Slide 41: Operating segment information: Internal revenue
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2006 2007 Bauxite & Alumina 951 1 062 1 167 1 300 1 108 1 192 929 944 698 931 4 480 4 173 Primary Aluminium 8 793 8 810 8 581 8 380 9 782 9 192 8 318 7
Slide 42: Share of profit in equity accounted investments
Operating segment information Share of profit in equity accounted investments Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2006 2007 Bauxite & Alumina 93 195 258 78 238 228 219 169 (37) 180 624 854 Primary Aluminium 140 56 126 (90) (3) 96 56 (
Slide 43: Operating segment information: Depreciation
Operating segment information Depreciation Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2006 2007 Bauxite & Alumina - - - - - - - - - - - - Primary Aluminium 447 437 441 557 490 471 465 473 452 481 1 882 1 899 Commercial 60 60 52 138 40 179 33
Slide 44: Income statement
Income statement Q2 Q1 Q2 First half First half NOK million 2008 2008 2007 2008 2007 Revenue 23 980 21 529 25 042 45 510 50 699 Share of the profit in equity accounted investments 256 (94) 326 162 574 Other income, net 470 112 62 581 911 Total revenue and income 24 706 21 547 25 430 46 253 52 185 De
Slide 45: Balance sheets
Balance sheets June 30, March 31, December 31, June 30, NOK million 2008 2008 2007 2007 Cash and cash equivalents 7 985 11 735 9 330 20 735 Short-term investments 2 112 2 444 2 742 6 273 Receivables and other current assets 19 967 19 871 16 531 19 942 Inventories 13 495 13 417 12 227 13 611 Assets h
Slide 46: Capital employed – upstream focus
Capital employed – upstream focus Energy; 8 % Bauxite & Alumina; 12 % NOK million June 30, 2008 Automotive; 4 % Bauxite & Alumina 6 192 Primary Aluminium 21 183 Extrusion; 9 % Commercial 2 884 Other and eliminations (47) Aluminium Metal 30 213 Rolled Products 9 664 Extrusion 4 799 Automotive 1 995 O
Slide 47: Price and currency sensitivities
Price and currency sensitivities Income NOK million before tax Net income Change Aluminium price per tonne 700 500 100 USD Aluminium price per tonne excl. strategic hedges 800 600 100 USD Income NOK million before tax Net income Change USD before financial items 3 800 2 700 1 NOK USD financial items
Slide 48: Primary aluminium production
Primary aluminium production 1 000 tonnes 1 472 1 720 1 826 1 799 1 742 870 457 461 464 449 451 449 450 441 446 444 433 435 435 439 433 437 415 418 381 388 360 343 2003 2004 2005 2006 2007 2008 Slovalco consolidated from Q1 2004 (48)
Slide 49: Primary aluminium market
Primary aluminium market USD per tonne days 3 400 Aluminium inventories (days of consumption)* 80 Aluminium price (LME 3 month) 3 000 2 600 60 2 200 1 800 40 1 400 1 000 20 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 *IAI and LME reported stocks, annualized western world consumption
Slide 50: Nordic power market – forward curves
Nordic power market – forward curves NOK/MWh 650 600 550 500 450 400 350 300 250 200 150 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 End Q4 2006 End Q3 2007 End Q4 2007 End Q1 2008 End Q2 2008 (50)
Slide 51: Power price and volume
Power price and volume Nordic System Price Hydropower production NOK/MWh TWh 600 12 11.0 500 10.7 10 10.3 9.4 400 8 8.3 8.0 7.5 300 6 5.9 200 4 100 2 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2001 2002 2003 2004 2005 2006 2007 2008 (51)
Slide 52: Aluminium Metal – operational data
Aluminium Metal – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Volumes and prices 1) 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 Realized premium above LME (USD/mt) 264 273 278 292 329 353 344 346 362 360 Realized premium above LME (NOK/mt) 1 758 1 725 1 760 1 887 2 056 2 143 2 001 1 934 1 9
Slide 53: Aluminium Metal – operational data
Aluminium Metal – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Volumes and prices 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 Commercial: Remelt production (1 000 mt) 186 191 177 165 190 179 163 153 141 145 Sale of metal products from 764 756 714 682 771 738 699 680 724 753 own production (1
Slide 54: Aluminium Products – operational data
Aluminium Products – operational data Q1 Q1 Q2 200 Q2 Q3 Q4 Q1 Q2 Q3 Q4 200 200 6 2006 2006 2006 2007 2007 2007 2007 8 8 Rolled Products external shipments 253 251 249 246 264 262 253 246 253 259 (1 000 tonnes) Extrusion external shipments 136 138 129 124 134 135 123 117 130 133 (1 000 tonnes) Autom
Slide 55: Energy – operational data
Energy – operational data Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 200 200 Volumes and prices 2006 2006 2006 2006 2007 2007 2007 2007 8 8 Power production, GWh 2 749 1 832 1 922 1 823 2 654 2 749 3 294 2 321 2 850 3 021 Net spot sales, GWh 1 311 345 675 367 815 1 070 1 996 748 969 1 331 Nordic spot electricity
Slide 56: 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 57: www.hydro.com
www.hydro.com (57)