Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (November 2019)
34 slides from Norsk Hydro Asa's investor presentation, Nov 7, 2019
Slide 1: Norsk Hydro Nordnet presentation
Norsk Hydro Nordnet presentation Stian Hasle, Head of Investor Relations November 7, 2019
Slide 2: Agenda
Agenda • Norsk Hydro - strong positions across the value chain • Market outlook • Lifting profitability, driving sustainability
Slide 3: The global and complete aluminium company
The global and complete aluminium company “…create a more viable society by innovative and efficient use of natural resources and products” More than 110 Aluminium Hydropower Engaged in the Global reach, Involved and years of industrial – metal of the – infinitely entire value chain local presence e
Slide 4: World class assets, high-end products and leading market positions globally
World class assets, high-end products and leading market positions globally Raw materials Primary aluminium production, Aluminium in products processing and energy marketing and recycling Bauxite & Alumina Energy Primary Metal Metal Markets Rolled Products Extruded Solutions • High quality Gibsite b
Slide 5: Strong positions across the value chain
Strong positions across the value chain Upstream Midstream Downstream Competitive cash cost position upstream Strong position in value added products1 Improving NAV1,2 in Extruded Solutions 1,2 Alumina BOC curve by company1 (2018) 100% 1,0 USD/mt 0,8 90% 0,6 80% 0,4 0,2 70% 0,0 Extrusion Extrusion B
Slide 6: Sustainability – key competitive advantage
Sustainability – key competitive advantage The Hydro Way Lowest CO2 emissions Net carbon-neutral from a ‒ a more viable society Emissions from electrolysis, life-cycle perspective by 2020 in tonne CO2/t Al, 2019 Net emissions (life-cycle) Million mt 18,0 Direct Indirect 2,5 16,0 2,0 14,0 1,5 1,0 12,
Slide 7: Robus balance sheet, competitive pay-out ratio
Robus balance sheet, competitive pay-out ratio Strongest balance sheet among aluminium peers Reliable dividend and payout ratio above the targeted Total debt/total equity 2014-2018 40% over the cycle 400 % Dividend 2,4% 3,0% 3,0% 2,8% 3,2% yield 300 % 1,75 1,25 1,25 200 % Dividend, 1,00 1,00 NOK/sha
Slide 8: Hydro: a resource rich global aluminium company
Hydro: a resource rich global aluminium company Hydro underlying EBIT quarterly, NOK billion 2 725 5 692 9 656 6 425 11 215 9 069 2 800 3.5 3.0 2.5 2.0 1.5 •1.0Based in Norway, • Operating revenues involved in activities in • 2016: NOK 82 billion • Operating revenues 0.5 • 2018: NOK 159 billion more
Slide 9: Market outlook
») Hydro Market outlook
Slide 10: Primary market in deficit last two years, expecting a largely balanced market in 2020
Primary market in deficit last two years, expecting a largely balanced market in 2020 Higher production growth and continued subdued demand Primary market balance 2017, 2018, E2019 and E2020 (‘000t) 2 500 2 000 1 500 1 000 500 0 - 500 -1 000 -1 500 -2 000 -2 500 2017 2019E 2020E 2018 China World ex.
Slide 11: Competitive advantage China
Inventories gradually trending downwards Chinese semis exports moderating Global reported and unreported, in thousand tonnes Inventory days Semis exports from China, in thousand tonnes Comp. adv (USD/mt) 16000 140 500 1 000 450 800 120 400 12000 Competitive advantage China 350 600 100 300 400 80 250
Slide 12: Aluminium and alumina prices down from 2018-highs
Aluminium and alumina prices down from 2018-highs LME and SHFE aluminium prices Platts alumina index (PAX) USD/mt NOK/mt In USD per tonne In percentage of LME 750 35% 2 600 22 000 2 400 650 20 000 30% 2 200 18 000 550 25% 2 000 16 000 450 1 800 20% 14 000 350 1 600 15% 12 000 250 1 400 1 200 10 000
Slide 13: Industry raw material costs down in Q3
Industry raw material costs down in Q3 Petroleum coke FOB USG (indexed) Pitch FOB USG (indexed) Alumina PAX index (indexed) 2,5 2,5 2,5 2,0 2,0 2,0 1,5 1,5 1,5 1,0 1,0 1,0 0,5 0,5 0,5 0,0 0,0 0,0 Q116 Q316 Q117 Q317 Q118 Q318 Q119 Q319 Q116 Q316 Q117 Q317 Q118 Q318 Q119 Q319 Q116 Q316 Q117 Q317 Q118
Slide 14: Negative extrusions demand in Europe and North America
Negative extrusions demand in Europe and North America Driven by weak macroeconomic development Extrusions – estimated market growth 2019 vs 2018 (%) Extrusions – estimated market growth 2019 vs 2018 (%) 0% Building & construcion -1% Transport & -2% automotive -3% Industrial -4% -5% Other -6% -7% To
Slide 15: Transport and packaging demand remains firm, overall rolled products demand weakening
Transport and packaging demand remains firm, overall rolled products demand weakening Rolled products – estimated market growth 2019 vs 2018 (%) Rolled products – Estimated market growth 2019 vs 2018 (%) 5% Building & construcion 4% Transport & automotive 3% Packaging 2% Industrial 1% Other 0% Total
Slide 16: We believe in aluminium
We believe in aluminium Solid demand growth across main segments and regions Solid demand growth across main segments Global demand increasingly supplied Transport Packaging by recycled material ~3% ~3% Semis 2-3% Primary Buildings and Electrical, consumer construction durables & industrial ~2% ~2%
Slide 17: Lifting profitability, driving sustainability
Lifting profitability, driving sustainability 17
Slide 18: Ramping up production at Alunorte
Ramping up production at Alunorte • Final embargo lifted on September 26, allowing Alunorte to resume installation and commissioning activities at DRS2 • 83% average capacity utilization in Q3, targeting 75-85% in Q4 • Commissioning of 9th press filter during November, expected to reach full utiliza
Slide 19: Status update cyber attack
Status update cyber attack Operational and financial impact • Limited financial impact in Q3 2019 • Overall financial impact for Q2 NOK 250-300 million • Of which Extruded Solutions NOK 150-200 million • Overall financial impact for Q1 NOK 300-350 million • Of which Extruded Solutions NOK 250-300 mi
Slide 20: Lifting profitability, driving sustainability
Lifting profitability, driving sustainability Mobilizing for change • BNOK 6.4 improvement ambition • Restructuring of Rolled Products • New capital allocation framework • 10% RoaCE target over the cycle • Cut CO2 emissions by 30% by 2030 10% target is Underlying Return on Average Capital Employed
Slide 21: Priorities
Priorities • Safe and efficient operations • Portfolio optimization, restructuring and compensating measures in challenging market • Delivering on improvement programs, including returning Brazilian assets to full production and operational excellence • Net operating capital release and strict capit
Slide 22: Profitability Sustainability
Profitability Sustainability ROACE > 10% CO2 - 30%
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Slide 24: Adjusted net debt up in Q3
Adjusted net debt up in Q3 Driven by increased net pension liability on lower discount rates Sep 30, Jun 30, Mar 31 NOK billion 2019 2019 2019 Cash and cash equivalents 10.6 10.6 6.1 Short-term investments 0.9 1.1 1.3 Short-term debt (6.1) (8.2) (8.9) Long-term debt (20.0) (18.6) (10.6) Net cash/(de
Slide 25: Maintaining a solid balance sheet and investment-grade credit rating
Maintaining a solid balance sheet and investment-grade credit rating Funds from operations determine the balance sheet structure Adjusted net debt Adjusted net debt / Equity BNOK <55% 32 % 33 % 24 % 26 % 26 % 22 % 20 % 19 % Mar 31, 2019 (12.1) (3.9) (5.7) (8.4) (30.1) 14 % 11 % 3) 2009 2010 2011 201
Slide 26: Project pipeline to be based on updated capital allocation framework and strategic priorities
Project pipeline to be based on updated capital allocation framework and strategic priorities Majority of sustaining capex allocated upstream NOK billion ~10.5 ~9.5-10 Main sustaining projects 8.8 ~9.0 • Alunorte robustness 7.9 7.8* • Pipeline replacement in B&A 7.2 • Smelter relining and asset inte
Slide 27: Capital return dashboard for Hydro Q3 2019
Capital return dashboard for Hydro Q3 2019 Hydro targets URoaCE above 10% over the cycle Capital employed1) 1% Bauxite & Alumina URoaCE FFO/aND Free cash flow 26 % 27 % Primary Metal Metal Markets Rolled Products 2.4% 24% 0.7 BNOK ~99 BNOK in Q319 Extruded Solutions LTM Q3 20193) LTM Q3 20194) YTD Q
Slide 28: Different strategic modes for the business areas, leading to differentiated capital allocation
Different strategic modes for the business areas, leading to differentiated capital allocation Safe, compliant and efficient operations – The Hydro Way Business area Bauxite & Alumina Primary / Metal Markets Energy Rolled Products Extruded Solutions Strategic mode Sustain and improve* Selective grow
Slide 29: Hydro's roadmap to targeted profitability
Hydro’s roadmap to targeted profitability Market scenarios 13 % RoaCE target >10% over the cycle 10 % 10 % 9% 7% 9% 4% 8% 7% 6% URoaCE 2018 adjusted 1 Improvement potential 2 URoaCE after URoacE@spot URoaCE@forward URoaCE@CRU improvements with LME 1900 USD/t 2018 adjusted margins 1 PAX 330 USD/t USD
Slide 30: Growing in recycling – expanding CIRCAL portfolio
Growing in recycling – expanding CIRCAL portfolio Competence, technology, integrated value chain Recycled post-consumer scrap 2014-2018* In ‘000 mt 400 350 300 250 200 150 100 50 0 2014 2015 2016 2017 2018 Primary Metal Rolled Products Extruded Solutions * Total post-consumer scrap – only a certain
Slide 31: Greener products: From REDUXA 4.0 to 2.0
Greener products: From REDUXA 4.0 to 2.0 New energy mix in Alunorte important enabler to reach 2.0 From REDUXA 4.0 Towards REDUXA 2.0 by 2030 <0.6 3.4 – 4.0 kg CO2e/kg AI 1.6 0.1 Other Casting Smelting 1.4 0.1 -0.3 Casting 0.1 Smelting 2.0 kg CO2e/kg AI 0.2 PCS 1.3 Power generation Anode Alumina 0.1
Slide 32: Restructuring and strategic review in Rolled Products
Restructuring and strategic review in Rolled Products • Improvement and restructuring • Organizational efficiency • Operational efficiency • Commercial excellence • Shifting volumes to more attractive market segments: automotive and can • BNOK 0.9 improvement targeted by 2023, in addition to BNOK 0.
Slide 33: Extruded Solutions taking firm measures in weak markets
Extruded Solutions taking firm measures in weak markets • Restructuring in Europe • Full closures: Pinto (Spain), Redditch (UK), Rotherham (UK), Wakefield warehouse (UK), Lodz warehouse (Poland), Dusseldorf office (Germany) • Divestments: Chisineu Cris (Romania) • Restructuring in North America • Fu
Slide 34: Upstream costs trending downwards
Upstream costs trending downwards Implied costs approaching pre-curtailment levels Implied alumina cost and margin All-in implied primary cost and margin USD/mt 1) USD/mt 4) 425 75 84 175 69 2 150 2 100 1 900 57 376 296 253 1 7505) 1 7755) 1 6005) Q3 2018 Q2 2019 Q3 2019 Q3 2018 Q2 2019 Q3 2019 460