Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (December 2009)
28 slides from Norsk Hydro Asa's investor day presentation, Dec 2, 2009
Slide 1: Financial and performance update
Financial and performance update Jørgen C. Arentz Rostrup, Executive Vice President and CFO Capital Markets Day, December 2, 2009 (1)
Slide 2: Financial priorities 2009-10
Financial priorities 2009-10 ● Continuous improvements ● Proactive corrective measures ● Qatalum execution ● Operating cash flow & financial flexibility ● Shareholder returns (2)
Slide 3: Business model
Business model Primary aluminium production Midstream, recycling Aluminium in products Energy Primary Metal Metal Markets Rolled Products Extruded Products ● Revenue in NOK ● Revenue in USD ● EUR and USD ● Margin business ● Margin business ● Cost in NOK ● Cost in USD – alumina, business ● Regional b
Slide 4: Corrective measures
Corrective measures (4)
Slide 5: Capacity and cost reductions delivered on plan
Capacity and cost reductions delivered on plan Upstream production curtailments Remelt production adjustments 1 000 tonnes 1 000 tonnes Primary aluminium Alumina 1) Remelt production Available remelt capacity 1 750 100 496 264 1 300 1 350 1 050 900 1 000 736 504 2008 Q3 2009 2008 Q3 2009 2008 Q1 200
Slide 6: Downstream cost savings
Downstream cost savings In percentage of market downturn, Jan-Sep 2009 vs Jan-Sep 2008 100% Extruded Products ● Volumes down 24% ● Reduction of 2 160 FTE 75% ● Rate of FTE adoption to volume is 72% 50% Rolled Products ● Volumes down 22% ● Reduction of 560 FTE 25% ● Rate of FTE adoption to volume is
Slide 7: Further upstream improvements necessary
Further upstream improvements necessary Implicit primary aluminium production cash costs ● Current cost position is unsatisfactory In USD/tonne* 2 175 ● Aggravated by strong NOK and weak USD ● Apparent Q3 cash cost USD 1 600/ 1 750 NOK 10 000 1 575 1 600 ● Norwegian smelter system challenging in cur
Slide 8: Portfolio measures
Portfolio measures Automotive Structures Neuss ● Divested to Benteler Group ● Temporary closure of 180 000 tonnes ● Full mothballing under evaluation Adrian ● Closure of Precision Tubing plant in the US Alpart expected in Q1 2010 ● Alumina refinery temporary mothballed Inasa Other temporary closures
Slide 9: Going forward
Going forward Upstream ● Cost reduction Midstream ● Margin management Downstream ● Margin management ● Capture possibilities ● Cost control Working capital management Capital expenditures discipline (9)
Slide 10: Earnings drivers
Earnings drivers (10)
Slide 11: Price and currency sensitivities
Price and currency sensitivities Aluminium price sensitivity +/- 100 USD per tonne NOK/USD sensitivity +/- 0.1 NOK 700 250 600 600 200 200 500 450 150 400 150 300 100 200 50 100 0 0 EBIT Net income EBIT Net income ● Annual sensitivities ● Aluminium price sensitivity is net of aluminium price indexed
Slide 12: Hedging policy
Hedging policy Upstream ● Primarily remain exposed to LME prices ● Partly natural hedge through alumina contracts ● Operational LME hedging ● Three-months forward ● Manage customers’ pricing ● Currency exposure, mainly USD ● Policy of maintaining long-term debt in USD ● Partly natural hedge through
Slide 13: Power portfolio management
Power portfolio management Earnings affected by significant volatility in price and volume Quarterly production and spot price ● Norwegian power portfolio optimized versus market TWh ● Production and market prices strongly linked NOK/MWh 3.5 500 3.0 2.5 400 to hydrological conditions 2.0 1.5 300 ● ”
Slide 14: Market update
Market update In line with Q3 statements ● Increasing alumina costs and weak USD affect Primary Metal result ● Strong product demand midstream ● High remelt production ● Stable market for rolled and extruded products ● Energy prices currently above average Q3 prices (14)
Slide 15: Qatalum execution
Qatalum execution (15)
Slide 16: Qatalum financing
Qatalum financing Project economics ● First decile position on cash cost curve when in full operation Qatalum financing - USD 5.7 billion (100%) ● Equity from owners 54% ● Project financed 46% Project financing ● Term of loan is 16.5 years from August 2007 ● Installment profile adjusted for cash flo
Slide 17: Qatalum ramp-up schedule
Qatalum ramp-up schedule Production in 1 000 tonnes per month on 100% basis, annualized 600 500 400 300 200 100 0 1 2 3 4 5 6 7 8 9 10 11 12 (17)
Slide 18: Qatalum earnings
Qatalum earnings ● Build-up costs in 2009 and into 2010 Hydro’s share of underlying EBIT in NOK million ● Depreciated over ~20 years 2008 2009 ● Marginal tax implications -16 -16 ● At current forward prices - -35 -62 ● Earnings negative in 2010 -99 -91 ● No dividend expected short term -125 (18)
Slide 19: Financial flexibility
Financial flexibility (19)
Slide 20: Cash flow neutral first nine months 2009
Cash flow neutral first nine months 2009 ● Significant reductions in YTD 2009 in NOK billion operating capital 6 ~NOK 5.8 billion realized in 2009 5 2.5 ● Capital discipline – reduced 4 3.5 investments 3 ● No dividend payment in 2009 0.7 2 3.3 3.0 ● Qatalum investments 1 ● Project financed in first
Slide 21: Capital expenditures
Capital expenditures NOK billion ● ~80% of 2009-2010 investments upstream 12.2 ~10.2 ● Sustaining capex ~NOK 2.5-3 billion annually ● Qatalum ~5.3* ● Project financed in first half 2009 ● Equity contribution in Q3 – NOK 1.5 billion ● Equity contributions from partners and project financing in Q4 ● E
Slide 22: Sustaining capital expenditures
Sustaining capital expenditures Energy Extruded Products Primary Metal Rolled Products Metal Markets Primary Metal relining (22)
Slide 23: Financial position
Financial position NOK billion 10.8 8.7 Cash less interest-bearing debt 3.5 3.0 2.4 Dec 31, 2007 June 30, 2008 Dec 31, 2008 June 30, 2009 Sep 30, 2009 (0.8) (2.1) Adjusted net debt* (15.4) (19.2) (19.0) * Net interest-bearing debt in equity accounted investments, net pension liability, operating lea
Slide 24: Liquidity well covered
Liquidity well covered Available long-term credit facilities ● EUR 750 million in bank facility maturing in 2012 ● USD 1.7 billion in multi-currency revolving facility maturing in 2014 ● Currently ~NOK 16 billion undrawn Qatalum investments ● USD 5.7 billion project costs* (100%) ● USD 2.6 billion p
Slide 25: Credit quality policy
Credit quality policy Maintain investment-grade rating Financial ratios over the business cycle ● Currently: BBB- (S&P), Baa2 (Moody’s), both – Hydro’s ambitions with negative outlook ● Funds from operations to net adjusted debt > 40% ● Competitive access to capital and important ● Net adjusted debt
Slide 26: Shareholder policy
Shareholder policy ● Hydro aims to give shareholders competitive returns compared to alternative investments in peers ● Dividend payout ratio* will average 30% over the cycle ● Buyback of shares and extraordinary dividends ● When earnings, liquidity position and capital structure allow ● No dividend
Slide 27: Financial priorities 2009-10
Financial priorities 2009-10 ● Continuous improvements ● Proactive corrective measures ● Qatalum execution ● Operating cash flow & financial flexibility ● Shareholder returns (27)
Slide 28: www.hydro.com
www.hydro.com