Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Kepler Cheuvreux Swedbank Metals & Mining seminar 2019
25 slides from Norsk Hydro Asa's conference presentation, Aug 27, 2019
Slide 1: Norsk Hydro Metals & Mining seminar 2019
Norsk Hydro Kepler Cheuvreux Swedbank Metals & Mining seminar 2019 Stian Hasle, Head of Investor Relations
Slide 2: Agenda
Agenda 1) Hydro – a resource rich global aluminium company 2) Market update 3) Q2 highlights 4) Q&A 2
Slide 3: World class assets, high-end products and leading market positions
World class assets, high-end products and leading market positions 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 bauxite •
Slide 4: Strong global presence throughout the aluminium value chain
Strong global presence throughout the aluminium value chain Built on market understanding, customer closeness and competence The complete North America Europe Rolled Products aluminium company Primary Metal • High-quality bauxite and alumina 10 TWh in Energy #3 position #1 position #1 position produ
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 advantages
Sustainability – key competitive advantages Responsible, low-carbon products for a greener future Lowest CO2 emissions Tonnes CO2/tonne aluminium, 2018 18,0 16,0 Direct Indirect 14,0 12,0 10,0 8,0 6,0 4,0 2,0 0,0 Hydro Source: Republished under license from CRU International Ltd 6
Slide 7: Robust balance sheet, competitive pay-out ratio
Robus balance sheet, competitive pay-out ratio Debt/equity compared to peers* Dividend per share and payout ratio 300% 57% 300 % Average 1,75 250% payout ratio 250 % 2014-2018 200% 200 % 1,25 1,25 150 % 1,00 1,00 150% 100 % 100% 50 % 50% 0% 0% Hydro Dividend policy 40% of net income over the cycle,
Slide 8: Market Update
Market Update 8
Slide 9: Increasing geopolitical unpredictability
Increasing geopolitical unpredictability Continued macro uncertainty and competitive pressures 9
Slide 10: Softening downstream demand growth
Softening downstream demand growth Weak demand in Europe, reduced extrusion growth in North America Extrusions – estimated market growth 2019 vs 2018 (%) Rolled products – estimated market growth 2019 vs 2018 (%) Building & Building & Construction Construction Transport & Transport & automotive auto
Slide 11: Global market expected in deficit for 2019
Global market expected in deficit for 2019 China largely balanced, world outside China in deficit World ex. China 2019 Estimated primary market balance 2019 0-1 % (mill t.) (‘000t) 1 000 2-3 % ~29.6 – 29.9 Production Demand ~28.2 – 28.5 0 China 2019 (mill t.) -1 000 1-2 % 1-3 % Production ~36.4 – 36
Slide 12: Inventories gradually trending downwards, increasing Chinese semis exports
Inventories gradually trending downwards, increasing Chinese semis exports Global reported and unreported, in thousand tonnes Inventory days Semis exports from China, in thousand tonnes Comp. adv (USD/mt) 16000 140 500 1 000 450 120 800 400 12000 Competitive advantage China 100 350 600 300 80 400 80
Slide 13: LME aluminium prices trending downwards
LME aluminium prices trending downwards LME and SHFE aluminium prices Regional standard ingot premiums USD/mt NOK/mt USD/mt 2 600 22 000 500 2 400 20 000 400 2 200 18 000 2 000 300 16 000 1 800 200 14 000 1 600 100 1 400 12 000 1 200 10 000 0 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 J
Slide 14: Alumina prices down in Q2, continued volatility
Alumina prices down in Q2, continued volatility Platts alumina index (PAX) • Alumina prices trending downwards in 1H 2019 USD/t and into Q3 750 35% • Continued price volatility, impacted in Q2 by Chinese 650 30% environmental curtailments and Alunorte restart 550 25% • Refinery cost in general trend
Slide 15: Aluminium's reach is growing over the next decade
Aluminium’s reach is growing over the next decade in response to key long-term trends Substitution continues to be a key driver for aluminium Transport Packaging Building & construction Electrical Semis 3-4% 2-3% 2-3% 2-3% ~3 % Primary 2-3 % Urbanization Urbanization Substitution Light-weighting Sus
Slide 16: Q2 highlights
Q2 highlights 16
Slide 17: 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 YTD 1 434 3.5 3.0 2.5 2.0 1.5 1.0 • Based in Norway, • Operating revenues involved in activities in • 2016: NOK 82 billion • Based in Norway, • Operating revenues 0.5 inv
Slide 18: Upstream costs trending downwards
Upstream costs trending downwards Implied alumina cost and margin All-in implied primary cost and margin USD/mt 1) USD/mt 4) 375 50 75 63 2 175 2 200 2 100 62 69 367 311 296 1 7755) 1 8505) 1 775) Q2 2018 Q1 2019 Q2 2019 Q2 2018 Q1 2019 Q2 2019 430 373 365 Price 2) 2 547 2 256 2 184 All-in 6) 17.2 %
Slide 19: Raw material costs for the aluminium industry continue to trend downwards
Raw material costs for the aluminium industry continue to trend downwards 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 Q116 Q316 Q117 Q317 Q118 Q318 Q119
Slide 20: Ramp-up progressing successfully in Pará
Ramp-up progressing successfully in Pará Commissioning new press filter technology at Alunorte Ramp-up process Way forward Alunorte Alunorte production in ramp-up period, daily production annualized in million mt Alunorte production, annualized in million mt 6 6 85-95% 5 5 75-85% 4 4 3 3 2 Embargo 2
Slide 21: Brazil: key focus going forward
Brazil: key focus going forward CHANGE PICTURE • Safe ramp-up of Alunorte, Albras and Paragominas key priority • Fully committed to deliver on obligations under technical and social agreement (TAC and TC) • Continued dialogue with state environmental agency SEMAS and Ministerio Público on creating c
Slide 22: Status update cyber attack
Status update cyber attack Operational and financial impact • 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 million • At end-Q2 operations have larg
Slide 23: Økern Portal in Oslo chooses aluminium with low carbon footprint
Økern Portal in Oslo chooses aluminium with low carbon footprint Hydro’s Circal75R enabling builders and architects to meet demanding sustainability targets 23
Slide 24: Measures to improve performance and cash generation
Measures to improve performance and cash generation Lifting • Safe and efficient operations - always key priority profitability • Return Alunorte, Paragominas and Albras to full production and operational excellence • Rolled Products restructuring and strategic review • New improvement efforts acros
Slide 25: 25
25
Norsk Hydro — Kepler Cheuvreux Swedbank Metals & Mining seminar 2019 on 6ix