Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q2 2013 Earnings Presentation
49 slides from Norsk Hydro Asa's earnings presentation, July 2013
Slide 1: Result down on lower aluminium prices and power production
Result down on lower aluminium prices and power production Second quarter presentation (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: Q2 highlights
Q2 highlights • Underlying EBIT NOK 518 million • Lower alumina and aluminium prices • Lower result in Energy, mainly from seasonally lower production • Production in Bauxite & Alumina affected by power outages • Increased volumes lift result in Rolled Products (4)
Slide 5: Solid aluminium demand growth, despite challenging global macroeconomy
Solid aluminium demand growth, despite challenging global macroeconomy Europe United States China • Continued weak markets • Modest 2013 growth expected • Growth slowing down from Macro high levels • High unemployment rates • Business and consumer sentiment resilient to federal • Economic rebalancin
Slide 6: Increased demand in seasonally stronger quarter
Increased demand in seasonally stronger quarter World outside China (quarterly annualized) • 2013 aluminium demand growth 1 000 mt expected at 2-4 % in world outside 30 000 China 25 000 • New and potential curtailments 20 000 announced 15 000 • Expect balanced market in 2013 10 000 5 000 0 Jan-08Jul
Slide 7: Aluminium prices reach lowest levels since 2009
Aluminium prices reach lowest levels since 2009 USD per tonne 3 400 • Aluminium prices trading in range of USD 1 750 – 2 000 per mt during Q2 3 000 • 8 % decrease, quarter-on-quarter, in 2 600 average USD prices 2 200 • LME decrease partly offset by weaker NOK and BRL vs. USD 1 800 Primary aluminium
Slide 8: Ingot premiums stable at historically high levels
Ingot premiums stable at historically high levels Regional ingot premiums USD per mt 350 300 250 200 150 100 50 0 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 US Mid West Japan Europe (duty-paid) Source: Metal Bulletin, MW/MJP: Platts (8)
Slide 9: Inventories remain at high levels
Inventories remain at high levels World reported primary aluminium inventories • Total inventories stable 1 000 mt Days 8 000 80 − Due to balanced global primary metal market in first half 2013 7 000 70 6 000 60 • Reported inventories increased, offset 5 000 50 by apparent decrease in unreported inv
Slide 10: Alumina price strengthening relative to LME
Alumina price strengthening relative to LME Platts alumina index (PAX)* • Average Platts alumina index (PAX) USD per mt Percent declined during second quarter 450 20 − Down to USD 326 per mt from USD 340 per mt in Q1 2013 400 18 • PAX decreased less than LME, increasing alumina price compared to 350
Slide 11: China bauxite imports at all-time-high
China bauxite imports at all-time-high Annualized aluminium equivalents*, million mt 2011 2012 2013** • Bauxite and alumina 20 − Increased bauxite imports, preparing for Indonesia export China import 15 restrictions − Declining alumina imports 10 • Primary aluminium 5 − No significant import or expo
Slide 12: Declining raw material prices, still high relative to LME
Declining raw material prices, still high relative to LME Indexed (Q1 2010=100) 3-month LME Caustic price Coal price Fuel oil price* Pet coke price +127% +120% +112% +87% +87% +84% +67% +50% +44% +44% +30% +15% +18% +17% +10% +9% +1% +4% -7% -15% Q1 Q1 Q1 Q1 Q2 Q1 Q1 Q1 Q1 Q2 Q1 Q1 Q1 Q1 Q2 Q1 Q1 Q1
Slide 13: Top priority: stabilizing and lifting Alunorte production
Top priority: stabilizing and lifting Alunorte production • Sequential power outages disrupt alumina production, driven by external factors − Resulting in reduced production levels in Paragominas • Mitigating actions − Strengthening existing and installing additional backup power systems − Increased
Slide 14: Strong Qatalum performance
Strong Qatalum performance • Continued strong production performance − Consistently above nameplate capacity • Cash cost position improved − Reduced fixed cost level − Further improvement efforts being executed − Supported by higher premiums • Attractive geographic position verified − Sales to US, A
Slide 15: 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 USD/mt 1) according to plan by end-2013 475 475 425 300 • Improvement efforts in joint ventures 375 2 000 contributing to improved cost level 1 775 1 600 1 375 • Decreasin
Slide 16: Foil and Can lift Rolled Products shipments
Foil and Can lift Rolled Products shipments Rolled Products sales by segment Rolled Products total sales Q2 2013 vs Q1 2013 Foil & Can Litho & Auto General engineering Q2 2013 Q2 2013 YTD 2013 & Other vs Q1 2013 vs Q2 2012 vs YTD 2012 13% 8% 6% 4% 1% -3% (16)
Slide 17: High precipitation lifts reservoirs, energy prices decline
High precipitation lifts reservoirs, energy prices decline Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 700 100 2012 2013 600 90 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
Slide 18: Acquisition of high-purity asset and hydropower plant
Acquisition of high-purity asset and hydropower plant • Integrated high-purity metal and power production • Hydro is the sole offtaker of metal from the metal refinery • Transaction closed 9 July Vigeland Metal Refinery • Annual capacity of 8 500 tonnes of high-purity aluminium Vigelands Brug • 180
Slide 19: Eivind Kallevik, Executive Vice President and CFO
Eivind Kallevik Executive Vice President and CFO (19)
Slide 20: Underlying EBIT
Underlying EBIT 1 810 1 606 1 343 1 223 1 077 578 531 518 172 16 NOK million Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Bauxite & Alumina 155 272 302 159 (144) (188) (386) (73) (63) (244) Primary Metal 583 765 653 484 36 245 (4) 58 364 237 Metal Markets 143 244 9
Slide 21: High-level quarterly result development
High-level quarterly result development NOK billion 1.1 0.3 0.2 0.1 0.5 Underlying EBIT Q1 2013 Energy volume and price Alumina and aluminium Other Underlying EBIT Q2 2013 price (21)
Slide 22: Key financials
Key financials NOK million Q2 2013 Q1 2013 Q2 2012 First Half 2013 First Half 2012 Revenue 16 053 16 111 16 829 32 163 33 873 Underlying EBIT 518 1 077 531 1 596 1 109 Items excluded from underlying EBIT 144 372 1 141 516 1 008 Reported EBIT 375 705 (610) 1 080 100 Financial income (expense) (1 367)
Slide 23: Financial income (expense)
Financial income (expense) Finance NOK million Q2 2013 Q1 2013 Interest income 54 62 Dividends received and net gain (loss) on 42 39 securities Financial income 96 102 Interest expense (103) (93) Net foreign exchange gain (loss) (1 291) (115) Net interest on pension liability (41) (32) Other (28) (3
Slide 24: Items excluded from underlying EBIT
Items excluded from underlying EBIT NOK million Q2 2013 Q1 2013 Q2 2012 First half 2013 First half 2012 Underlying EBIT 518 1 077 531 1 596 1 109 Unrealized effects on power and raw material contracts 155 (269) 335 (114) 588 Unrealized derivative effects on LME related contracts (129) (30) (13) (159
Slide 25: Bauxite & Alumina
Bauxite & Alumina Q2 Q1 Q2 Key figures 2013 2013 2012 Alumina production, kmt 1 248 1 361 1 491 Total alumina sales, kmt 1 696 1 874 1 888 Realized alumina price, USD/mt 275 296 296 Apparent alumina cash cost, USD/mt 252 257 268 Bauxite production, kmt 1 765 2 210 2 115 Underlying EBITDA, NOK millio
Slide 26: Primary Metal
Primary Metal Q2 Q1 Q2 Key figures 2013 2013 2012 Primary aluminium production, kmt 483 478 502 Total sales, kmt 531 541 615 Realized LME price, USD/mt 1 926 2 043 2 167 Realized LME price, NOK/mt 11 217 11 533 12 637 Underlying EBITDA, NOK million 713 838 741 Underlying EBIT, NOK million 237 364 24
Slide 27: Lower result for Qatalum, mainly due to lower prices
Lower result for Qatalum, mainly due to lower prices Key figures – Qatalum (50%) Q2 2013 Q1 2013 Q2 2012 • High and stable production volumes Revenue, NOK million 1 080 1 125 1 166 • Underlying net income down NOK 21 million from Q1 2013 Underlying EBITDA, NOK million 338 349 343 • Lower sales price
Slide 28: Metal Markets
Metal Markets Q2 Q1 Q2 Key figures 2013 2013 2012 Remelt production, kmt 132 135 142 Metal products sales, kmt 682 701 777 Underlying EBITDA, NOK million 165 163 70 Underlying EBIT excl currency and inventory 109 110 118 valuation effects, NOK million Underlying EBIT, NOK million 147 146 45 Underlyi
Slide 29: Rolled Products
Rolled Products Q2 Q1 Q2 Key figures 2013 2013 2012 External sales volumes, kmt 245 236 228 Underlying EBITDA, NOK million 296 265 315 Underlying EBIT, NOK million 181 153 203 Underlying EBIT NOK million 637 334 Q2 results • Seasonally higher shipments 203 213 • Somewhat lower margins, partly driven
Slide 30: Energy
Energy Q2 Q1 Q2 Key figures 2013 2013 2012 Power production, GWh 2 090 2 904 2 513 Net spot sales, GWh 829 1 518 1 284 Southwest Norway spot price (NO2), 296 311 203 NOK/MWh Underlying EBITDA, NOK million 302 557 391 Underlying EBIT, NOK million 268 517 362 Underlying EBIT Q2 results NOK million • R
Slide 31: Discontinued operations – Extruded Products
Discontinued operations – Extruded Products • Underlying income from discontinued operations NOK 112 million • Pro-forma underlying EBIT NOK 50 million1) • Higher volumes compared to Q1 2013, although below Q2 2012 levels • Weak European extrusion markets • Stand-alone financing secured for new comp
Slide 32: Net cash/(debt) development Q2 2013
Net cash/(debt) development Q2 2013 NOK billion Net cash flow from operations NOK 1.0 billion 0.5 (1.0) 1.6 (0.5) (1.7) 0.4 (1.3) (0.5) Net cash Q1 Underlying Operating capital Other Investments Dividends Other Net debt Q2 2013 2013 EBITDA adjustments (32)
Slide 33: Net USD/BRL exposure partly hedged
Net USD/BRL exposure partly hedged USD/BRL • Share of Alunorte and Albras USD/BRL 2.6 currency exposure hedged for second half 2013 and in 2014 2.4 • Securing cost position 2.2 − Mitigates risk of stronger BRL vs USD 2.0 − Creates stability and ensures focus on improving operational performance 1.8
Slide 34: Outlook priorities
• Stabilize and increase Alunorte production • Deliver on improvement efforts • Continued tight capital discipline • Macroeconomic uncertainty, regional differences • Balanced primary market (34)
Slide 35: Additional information
Additional information (35)
Slide 36: Items excluded from underlying results - 2013
Items excluded from underlying results - 2013 NOK million (+=loss/()=gain) Q1 2013 Q2 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 Unrealized deriv
Slide 37: 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 38: 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 Year 2011 Year 2012 Bauxite & Alumina 237 272 302 159 (144) (188) (386) (73) (63) (244) 969 (791) Primary Metal 592 765 653 484 36 245 (4) 58 364 237 2 495 335 Me
Slide 39: 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 Year 2011 Year 2012 Bauxite & Alumina 213 339 326 620 (136) (199) (387) (62) (76) (241) 1 498 (783) Primary Metal 622 826 675 (760) (91) (1 227) (48) 112 19 122 1 363 (1 254
Slide 40: 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 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 14 471 13 265 Primary Metal 8 234 9 627 9 148 7 711 7 458 7 578 6
Slide 41: 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 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 5 876 4 806 Primary Metal 7 582 8 283 7 892 6 501 6 331 6 341 5
Slide 42: 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 Year 2011 Year 2012 Bauxite & Alumina 178 482 470 450 475 439 428 409 429 448 1 580 1 750 Primary Metal 467 543 548 1 577 542 1 645 482
Slide 43: Income statements
Income statements NOK million Q2 2013 Q1 2013 Q2 2012 First half 2013 First half 2012 Year 2012 Revenue 16 053 16 111 16 829 32 163 33 873 64 181 Share of the profit (loss) in equity accounted investments (90) 19 (20) (70) (137) (450) Other income, net 211 234 145 444 402 853 Total revenue and incom
Slide 44: Balance sheets
Balance sheets NOK million Jun 30 2013 Mar 31 2013 Dec 31 2012 Sep 30 2012 Jun 30 2012 Cash and cash equivalents 7 399 6 410 7 034 8 654 7 234 Short-term investments 1 273 3 572 4 343 2 465 1 743 Accounts receivable 10 009 10 228 8 761 12 681 14 320 Inventories 9 523 10 125 9 685 12 140 12 411 Other
Slide 45: 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 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 5 827 5 792 Sourced alumina (kmt) 436 523 581 418 324 332 399 335 476
Slide 46: 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 2011 2012 Remelt production (1 000 mt) 150 151 133 131 152 142 136 119 135 132 565 548 Third-party metal products sales (1 000 mt) 38 47 59 73 76 82 81 85 84 78 217 323 Metal prod
Slide 47: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10%* Currency sensitivities +10%* NOK NOK Financial Income Net million EBIT million EBIT items before tax income** Aluminium 2 670 USD 2 130 (890) 1 240 900 Oil (180) BRL (760) 700 (60) (20) Pet coke (210) EUR (140) (1 100) (1 240) (880)
Slide 48: Investor Relations in Hydro
Investor Relations in Hydro Rikard Lindqvist Head of Investor Relations t: +47 417 51 199 Next event e: rikard.lindqvist@hydro.com Third Quarter Results October 23, 2013 Pål Kildemo Investor Relations Officer For more information see t: +47 970 96 711 e: pal.kildemo@hydro.com www.hydro.com/ir (48)
Slide 49: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO