Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (September 2006)
29 slides from Norsk Hydro Asa's investor day presentation, Sep 28, 2006
Slide 1: Capital Markets Day 2006
Capital Markets Day 2006 www.hydro.com 2006-09-28
Slide 2: Cautionary note in relation to certain forward-looking statements
Cautionary note in relation to certain forward-looking statements Certain statements contained in this announcement constitute “forward-looking information” within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as a
Slide 3: Use of non-GAAP financial measures / Cautionary note in relation to oil and gas reserves
Use of non-GAAP financial measures/ Cautionary note in relation to oil and gas reserves With respect to each non-GAAP financial measure Hydro uses in connection with its financial reporting and other public communications, Hydro provides a presentation of what Hydro believes to be the most directly
Slide 4: Aluminium – performance and perspectives
Aluminium – performance and perspectives 4
Slide 5: Aluminium highlights
Aluminium highlights z Strong results in Aluminium Metal, restructuring on plan and cost z Low returns in Aluminium Products, solid net cash flow z Finalize restructuring of Aluminium Products’ portfolio – selective growth in areas with leading edge z Pursue metal and alumina opportunities in attrac
Slide 6: Return on capital in line with peers
Return on capital in line with peers RoaCE 14% Peer range * Aluminium 12% 10% 8% 6% 4% 2% 0% 2003 2004 2005 2006 * Alcoa and Alcan Source: Bloomberg return on capital methodology. 12 month rolling Q1 2002-Q3 2006. Hydro figures are approximations to Bloomberg methodology. 6
Slide 7: Strong Aluminium cash flow
Strong Aluminium cash flow NOK billion 40 Accumulated EBITDA Accumulated investments 30 20 10 0 2003 2004 2005 2006 Jan-Sep 7
Slide 8: Strategic shift to ensure upstream repositioning and growth
Strategic shift to ensure upstream repositioning and growth RoaCE first nine months 2006 15.9% 0.9% Aluminium Metal Aluminium Products Figures are not annualized 8
Slide 9: Adjusted profitability 2006 and capital employed in Aluminium Products
Adjusted profitability 2006 and capital employed in Aluminium Products 10 percent RoaCE Share of capital employed (total NOK 19 billion) Extrusion 1) Rolled Products Automotive 2) Magnesium 1) Including Extrusion Europe, Extrusion Overseas, Building Systems and Precision Tubing 2) Including Automoti
Slide 10: Executing Aluminium Products strategy
Executing Aluminium Products strategy z Solid net cash generation – NOK 1.1 billion first nine months 2006 z Operational improvements in most areas, but overall profitability remains too low z Solid fundament for good returns in Extrusion z Rolled Products improving, market still challenging Net cas
Slide 11: Reduced engagement in Aluminium Products
Reduced engagement in Aluminium Products z Closures - Magnesium Porsgrunn, Magnesium Canada, extrusion capacity UK z Divestments - Aluminium Castings, enterprise value NOK 3.7 billion - Meridian magnesium casting, enterprise value NOK 0.6 billion z Divestments in process - Automotive Structures, Mag
Slide 12: China driving the demand for primary aluminium
China driving the demand for primary aluminium 4 percent annual growth rate 2005-2020 Million tonnes 70 China Other 60 35% 34% 50 31% 40 22% 30 13% 20 66% 65% 69% 78% 10 87% 0 2000 2005 2010E 2015E 2020E Source: CRU 2006 12
Slide 13: Production to grow outside the US and Europe
Production to grow outside the US and Europe 18.6 12.6 7.8 Europe Russia/CIS China North America Middle East Other Asia 2015 2010 2005 Africa South America Oceania Source: CRU / Hydro. Million tonnes 13
Slide 14: Torstein Dale Sjøtveit
Torstein Dale Sjøtveit Executive Vice President, Aluminium Metal 14
Slide 15: Highlights Aluminium Metal
Highlights Aluminium Metal z Strong focus on return on capital z Restructuring on track z Operational excellence and production creep z Long-term profitable growth 15
Slide 16: Restructuring executed – improved cost position
Restructuring executed – improved cost position z Restructuring on track – closing 180 000 tonnes z Restructuring costs below NOK 1 billion z Improving average cash cost 40-50 USD/tonne 16
Slide 17: Further production creep in existing plants
Further production creep in existing plants Increased primary production in tonnes per year* 200 000 z Low capital expenditures per tonne 150 000 z Strong profitability z EBITDA contribution in 2006 100 000 - NOK 500 million 50 000 0 2002-2006E 2006-2010E * All prebake lines excl. Stade 17
Slide 18: Production volumes 2004-2010
Production volumes 2004-2010* 1 000 tonnes Approx. 2 000 1 825 1 800 1 720 1 730 2004 2005 2006E 2007E 2010E * Including closed or to-be-closed capacity of Hamburg, Stade and Søderberg at Årdal, Høyanger. Qatalum in full production from mid-2010. 18
Slide 19: Industry costs rising – Hydro's position improved
Industry costs rising – Hydro’s position improved Significant shift in industry cost curve* Cost (USD/tonne) z Alumina 2 500 Hydro’s 2006 position 2006 - Two thirds of cost increase 2 250 Hydro’s 2003 position - Coming down from peak 2 000 2003 1 750 z Energy 2006 average 1 640 1 500 - Oil and gas p
Slide 20: Increase in smelting cost
Increase in smelting cost Cost per tonne for Hydro’s smelter capacity, 2005=100* z Cost development 2005-2006 - NOK 1.2 billion total power cost increase** 140 - New contracts and increased Other grid cost Norway and Germany Alumina 120 Power - Alumina cost increase - 60 percent equity position 100
Slide 21: Long-term power contracts ensure predictable cost levels going forward
Long-term power contracts ensure predictable cost levels going forward Contract portfolio 14 TWh Norway* z Power supply and price secured 3.5 TWh Australia z Norway: gradual increase in power price until 2010 as new contracts Canada 1.6 TWh replace old 1.0 TWh Slovakia z Germany: moderately increasi
Slide 22: Alunorte alumina refinery – key asset in repositioning
Alunorte alumina refinery – key asset in repositioning z Third expansion of 1.9 million tonnes started June 2006 z Targeting 6.5 million tonnes production by 2009 z Hydro stake 34 percent of world’s largest refinery z First-quartile investment costs and highly competitive conversion costs z Pursuing
Slide 23: Sunndal 4 – project execution and efficiency improvements
Sunndal 4 – project execution and efficiency improvements z Project completed ahead of plan and below budget z Production level 17 percent above target - From 230 000 tonnes to current level of 268 000 tonnes z Profitability above plan and well above Hydro hurdle rates 23
Slide 24: Preparing for Qatalum
Preparing for Qatalum z Total investment in the range of USD 4.5 billion (100 percent) - General cost increase for key materials and construction - Weaker USD/Euro exchange rate - Design changes z Final cost estimate and build decision summer 2007 24
Slide 25: Qatalum – profitable mega smelter in key region
Qatalum – profitable mega smelter in key region World production 2006, 1 000 tonnes z 50/50 Hydro/Qatar Petroleum Cost 2006* (USD/tonne) 2 500 z 585 000 tonnes per year, expansion potential to 1.2 million tonnes 2 000 z Low operating cost – captive power 1 500 z High efficiency and creep potential Q
Slide 26: Primary production will grow in new areas
Primary production will grow in new areas Metal opportunities Bauxite/alumina opportunities 26
Slide 27: Competence and technology provide basis for growth
Competence and technology provide basis for growth z Distinct project management skills z Proprietary technology opens doors for new business opportunities z Next-generation smelter cell technology being developed z Value-added primary products attractive to partners 27
Slide 28: An experienced international project developer
An experienced international project developer Metal opportunities Bauxite/alumina opportunities Business development office location 28
Slide 29: On track to reposition and grow
On track to reposition and grow z Strong return on capital z Focus on operational excellence z Delivering new profitable growth opportunities globally 29