Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q3 2013 Earnings Presentation
48 slides from Norsk Hydro Asa's earnings presentation, October 2013
Slide 1: Lower cost, higher power production
Lower cost, higher power production Third quarter presentation 2013 (1)
Slide 2: Cautionary note
Cautionary note 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 strategies for Hydro, such as planned expansions,
Slide 3: Svein Richard Brandtzæg, President and CEO
Svein Richard Brandtzæg President and CEO (3)
Slide 4: Q3 highlights
Q3 highlights • Underlying EBIT NOK 659 million • Lower cost offsets weaker alumina and aluminium prices • Low alumina production at Alunorte • Higher power production in Energy • Global leader in extruded products established (4)
Slide 5: Aluminium prices at low levels
Aluminium prices at low levels • Aluminium price continued trading in USD per mt 3 400 range of USD 1 800 - 1 900 per mt in Q3 3 000 • Stable average aluminium price 2 600 quarter-on-quarter 2 200 Primary aluminium LME USD/mt NOK/mt 1 800 Q3 2013 average 1 827 10 933 Q3 2013 end 1 850 11 116 1 400 Q
Slide 6: Curtailments offset ramp-ups
Curtailments offset ramp-ups World outside China World outside China (quarterly annualized) • 2013 aluminium demand growth 1 000 mt 30 000 expected at around 2 % in world outside China 25 000 • Demand at pre-crisis levels 20 000 • New curtailments and delays announced 15 000 • Largely balanced marke
Slide 7: Stable inventories due to balanced market
Stable inventories due to balanced market World outside China reported primary aluminium inventories 1 000 mt Days 8 000 120 7 000 100 6 000 80 5 000 4 000 60 3 000 40 2 000 20 1 000 0 0 Q1 00 Q1 01 Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 IAI Other LME World ex. China
Slide 8: Lower standard ingot premiums
Lower standard ingot premiums Regional standard ingot premiums • Proposed changes to LME USD per mt 350 warehousing rules 300 • US and European standard ingot premiums declined 17 and 19 %, 250 respectively, since 2013 peak level 200 150 100 50 0 Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-1
Slide 9: Stable alumina price throughout the quarter
Stable alumina price throughout the quarter Platts alumina index (PAX) USD per mt • Stable Platts alumina index (PAX) in the 450 Percent 20 quarter, representing 17% of LME 400 18 • Average PAX declined compared to second quarter 350 16 − Down to USD 317 per mt from USD 326 per mt in Q2 2013 300 14
Slide 10: China preparing for potential Indonesian bauxite export restrictions
China preparing for potential Indonesian bauxite export restrictions Annualized aluminium equivalents*, million mt 2011 2012 2013** • Bauxite and alumina 25 − Increased bauxite imports, preparing for potential China import 20 Indonesian export restrictions − Alumina imports at low levels 15 10 • Pri
Slide 11: Alunorte production to gradually increase
Alunorte production to gradually increase • Alunorte alumina production to gradually increase from low levels − Maintenance program showing result − Implementation of mitigating actions related to power outages on track • Maintain ambition to deliver NOK 1 billion in “From B to A” improvement progra
Slide 12: Qatalum consistently above nameplate capacity
Qatalum consistently above nameplate capacity • 607 000 mt annualized Q3 production, well above nameplate capacity • Improved cash cost − Lower fixed and variable cost • High premiums support casthouse margins • Generating solid cash despite low LME, first dividend received (12)
Slide 13: Primary Metal delivers on improvement efforts
Primary Metal delivers on improvement efforts Estimated primary aluminium cash cost and margin • USD 300 program to be concluded by USD/mt 1) end-2013, as planned 475 475 425 300 • Cash cost continued downward trend 2 000 375 1 775 − Improvement efforts throughout portfolio 1 550 − Positive exchange
Slide 14: Seasonally lower sales volumes in Rolled Products
Seasonally lower sales volumes in Rolled Products Rolled Products sales by segment Q3 2013 vs Q2 2013 YTD 2013 vs YTD 2012 Foil & Can Litho & Auto General engineering Foil & Can Litho & Auto General engineering & Other & Other 9% 7% (2%) (3%) (5%) (8%) (14)
Slide 15: Low precipitation impacts reservoirs, stable prices
Low precipitation impacts reservoirs, stable prices Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 700 100 2012 2013 90 600 80 500 70 400 60 50 300 40 200 30 20 2012 100 10 2013 10 year average 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46
Slide 16: Global leader in extruded products established
Global leader in extruded products established • Sapa joint venture established • Focus on integration and realization of September 1 synergies (16)
Slide 17: Eivind Kallevik, Executive Vice President and CFO
Eivind Kallevik Executive Vice President and CFO (17)
Slide 18: Underlying EBIT
Underlying EBIT 1 810 1 606 1 343 1 223 1 077 659 578 531 518 172 16 NOK million Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Bauxite & Alumina 155 272 302 159 (144) (188) (386) (73) (63) (244) (370) Primary Metal 583 765 653 484 36 245 (4) 58 364 237 337 M
Slide 19: High-level quarterly result development
High-level quarterly result development NOK billion 0.2 (0.1) (0.1) 0.2 0.7 0.5 Underlying EBIT Q2 2013 Energy Primary Metal Aluminium Bauxite & Alumina Underlying EBIT Q3 2013 volume and price costs volume and price volume, price and costs (19)
Slide 20: Key financials
Key financials First 9 months First 9 months NOK million Q3 2013 Q2 2013 Q3 2012 2013 2012 Revenue 16 146 16 053 14 722 48 309 48 596 Underlying EBIT 659 518 16 2 254 1 125 Items excluded from underlying EBIT 62 144 249 577 1 257 Reported EBIT 597 375 (232) 1 677 (132) Financial income (expense) (24
Slide 21: Financial income (expense)
Financial income (expense) Finance NOK million Q3 2013 Q2 2013 Interest income 53 54 Dividends received and net gain (loss) on 31 42 securities Financial income 84 96 Interest expense (105) (103) Net foreign exchange gain (loss) (152) (1 291) Net interest on pension liability (39) (41) Other (34) (2
Slide 22: Items excluded from underlying EBIT
Items excluded from underlying EBIT First 9 months First 9 months NOK million Q3 2013 Q2 2013 Q3 2012 2013 2012 Underlying EBIT 659 518 16 2 254 1 125 Unrealized effects on power and raw material contracts (7) 155 182 (121) 769 Unrealized derivative effects on LME related contracts 34 (129) (266) (1
Slide 23: Bauxite & Alumina
Bauxite & Alumina Q3 Q2 Q3 Key figures 2013 2013 2012 Alumina production, kmt 1 316 1 248 1 441 Total alumina sales, kmt 1 879 1 696 1 683 Realized alumina price, USD/mt 267 275 270 Apparent alumina cash cost, USD/mt 265 252 261 Bauxite production, kmt 1 513 1 765 2 439 Underlying EBITDA, NOK millio
Slide 24: Primary Metal
Primary Metal Q3 Q2 Q3 Key figures 2013 2013 2012 Primary aluminium production, kmt 491 483 484 Total sales, kmt 540 531 557 Realized LME price, USD/mt 1 822 1 926 2 022 Realized LME price, NOK/mt 10 938 11 217 11 856 Underlying EBITDA, NOK million 802 713 482 Underlying EBIT, NOK million 337 237 (4
Slide 25: Lower prices partly offset by lower cost at Qatalum
Lower prices partly offset by lower cost at Qatalum Key figures – Qatalum (50%) Q3 2013 Q2 2013 Q3 2012 • Stable sales volumes Revenue, NOK million 1 074 1 080 1 075 • Underlying Net income down NOK 13 million from Q2 2013 Underlying EBITDA, NOK million 331 338 179 • Lower sales price, somewhat offs
Slide 26: Metal Markets
Metal Markets Q3 Q2 Q3 Key figures 2013 2013 2012 Remelt production, kmt 127 132 136 Metal products sales, kmt 673 682 717 Underlying EBITDA, NOK million 149 165 33 Underlying EBIT excl currency and inventory 73 109 104 valuation effects, NOK million Underlying EBIT, NOK million 111 147 8 Underlying
Slide 27: Rolled Products
Rolled Products Q3 Q2 Q3 Key figures 2013 2013 2012 External sales volumes, kmt 234 245 228 Underlying EBITDA, NOK million 304 296 324 Underlying EBIT, NOK million 182 181 213 Underlying EBIT NOK million 637 516 Q3 results • Seasonally lower volumes 203 213 • Lower operating costs 181 182 150 153 70
Slide 28: Energy
Energy Q3 Q2 Q3 Key figures 2013 2013 2012 Power production, GWh 2 838 2 090 2 157 Net spot sales, GWh 1 673 829 989 Southwest Norway spot price (NO2), 267 296 131 NOK/MWh Underlying EBITDA, NOK million 522 302 250 Underlying EBIT, NOK million 485 268 220 Underlying EBIT Q3 results NOK million • Res
Slide 29: Extruded Products and Sapa joint venture
Extruded Products and Sapa joint venture Extruded Products Sapa JV (50 %) Discontinued operations – pre-closing Equity accounted – post-closing • Underlying income NOK 57 million • Reported net loss NOK 35 million • Reported income NOK 132 million • Underlying net income NOK 10 million − including t
Slide 30: Net cash/(debt) development Q3 2013
Net cash/(debt) development Q3 2013 NOK billion Net cash flow from operations NOK 1.1 billion 1.8 (0.5) (1.3) (0.1) (0.7) (0.5) 0.3 Net debt Q2 2013 Underlying EBITDA Operating capital Other adjustments Investments Other Net debt Q3 2013 (30)
Slide 31: Additional hedging of USD/BRL exposure
Additional hedging of USD/BRL exposure USD/BRL • Share of Alunorte and Albras USD/BRL 2.6 currency exposure hedged for second half 2013 and in full year 2014 2.4 • Securing cost position 2.2 − Mitigates risk of stronger BRL vs. USD − Creates stability and ensures focus on 2.0 improving operational p
Slide 32: Main priorities
Main priorities • Increase Alunorte production • Improve smelter competitiveness • Deliver on improvement efforts throughout the value chain (32)
Slide 33: Additional information
Additional information (33)
Slide 34: Items excluded from underlying results - 2013
Items excluded from underlying results - 2013 NOK million (+=loss/()=gain) Q1 2013 Q2 2013 Q3 2013 Unrealized derivative effects on LME related contracts Bauxite & Alumina 13 (3) - Total impact Bauxite & Alumina 13 (3) - Unrealized derivative effects on LME related contracts Primary Metal 72 55 (70)
Slide 35: Items excluded from underlying results - 2012
Items excluded from underlying results - 2012 NOK million (+=loss/()=gain) Q1 2012 Q2 2012 Q3 2012 Q4 2012 2012 Unrealized derivative effects on LME related contracts Bauxite & Alumina (8) 11 1 (11) (8) Total impact Bauxite & Alumina (8) 11 1 (11) (8) Unrealized derivative effects on LME related con
Slide 36: Operating segment information
Operating segment information Underlying EBIT NOK million Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Year 2011 Year 2012 Bauxite & Alumina 237 272 302 159 (144) (188) (386) (73) (63) (244) (370) 969 (791) Primary Metal 592 765 653 484 36 245 (4) 58 364 23
Slide 37: Operating segment information
Operating segment information EBIT NOK million Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Year 2011 Year 2012 Bauxite & Alumina 213 339 326 620 (136) (199) (387) (62) (76) (241) (370) 1 498 (783) Primary Metal 622 826 675 (760) (91) (1 227) (48) 112 19 12
Slide 38: Operating segment information
Operating segment information Total revenue NOK million Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Year 2011 Year 2012 Bauxite & Alumina 2 183 4 271 4 227 3 790 3 195 3 573 3 032 3 465 3 304 3 147 3 354 14 471 13 265 Primary Metal 8 234 9 627 9 148 7 711
Slide 39: Operating segment information
Operating segment information Internal revenue NOK million Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Year 2011 Year 2012 Bauxite & Alumina 1 168 1 688 1 587 1 433 1 241 1 356 1 111 1 098 1 322 1 253 1 277 5 876 4 806 Primary Metal 7 582 8 283 7 892 6 501
Slide 40: Operating segment information
Operating segment information Depreciation, amortization and impairment NOK million Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Year 2011 Year 2012 Bauxite & Alumina 178 482 470 450 475 439 428 409 429 448 417 1 580 1 750 Primary Metal 467 543 548 1 577 54
Slide 41: Income statements
Income statements First 9 months First 9 months NOK million Q3 2013 Q2 2013 Q3 2012 2013 2012 Year 2012 Revenue 16 146 16 053 14 722 48 309 48 596 64 181 Share of the profit (loss) in equity accounted investments (77) (90) (218) (147) (355) (450) Other income, net 245 211 194 690 596 853 Total reven
Slide 42: Balance sheets
Balance sheets NOK million Sep 30 2013 Jun 30 2013 Mar 31 2013 Dec 31 2012 Sep 30 2012 Cash and cash equivalents 8 396 7 399 6 410 7 034 8 654 Short-term investments 1 433 1 273 3 572 4 343 2 465 Accounts receivable 10 949 10 009 10 228 8 761 12 681 Inventories 9 613 9 523 10 125 9 685 12 140 Other
Slide 43: Operational data
Operational data Pro forma Bauxite & Alumina Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Year 2011 Year 2012 Alumina production (kmt) 1 336 1 448 1 553 1 490 1 464 1 491 1 441 1 397 1 361 1 248 1 316 5 827 5 792 Sourced alumina (kmt) 436 523 581 418 324 33
Slide 44: Operational data
Operational data Year Year Metal Markets Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 2011 2012 Remelt production (1 000 mt) 150 151 133 131 152 142 136 119 135 132 127 565 548 Third-party metal products sales (1 000 mt) 38 47 59 73 76 82 81 85 84 78 76 217
Slide 45: Pro-forma information Sapa joint venture
Pro-forma information Sapa joint venture Sapa JV pro-forma, underlying (unaudited) NOK million Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Sales volume (kt) 343 311 346 360 346 Revenues 10 414 9 654 10 367 10 974 10 797 Underlying EBITDA 365 154 304 508 328 Underlying EBIT 76 (142) 16 213 24 Sapa JV pro
Slide 46: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10%* Currency sensitivities +10%* NOK million EBIT NOK million EBIT Financial items Aluminium 2 480 USD 1 985 (1 100) Oil (200) BRL (760) 780 Pet coke (240) EUR (150) (675) • Annual sensitivities based on normal annual business volumes, L
Slide 47: Investor Relations in Hydro
Investor Relations in Hydro Next events Rikard Lindqvist Head of Investor Relations Capital Markets Day t: +47 417 51 199 e: rikard.lindqvist@hydro.com December 5, 2013 & Pål Kildemo Fourth Quarter Results Investor Relations Officer February 12, 2014 t: +47 970 96 711 e: pal.kildemo@hydro.com For mo
Slide 48: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO