Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q1 2011 Earnings Presentation
55 slides from Norsk Hydro Asa's earnings presentation, Apr 29, 2011
Slide 1: Results rise on higher aluminium prices and stronger sales
Results rise on higher aluminium prices and stronger sales April 29, 2011
Slide 2: Svein Richard Brandtzæg, President and CEO
President and CEO Svein Richard Brandtzæg (2)
Slide 3: Vale transaction completed, Qatalum ramp-up, positive outlook
• Vale transaction completed • Qatalum ramp-up on track • Positive market outlook (3)
Slide 4: Q1 highlights
Q1 highlights • Underlying EBIT NOK 1 448 million • Stronger sales supported by seasonally improved markets • Stable Bauxite & Alumina result, weak production performance • Primary Metal up on higher prices, partly offset by increased raw material costs • Down- and midstream lifted by higher sales a
Slide 5: Downstream sales seasonally higher
Downstream sales seasonally higher Hydro’s downstream sales Q1 2011 vs Q4 2010 Total downstream sales Foil Litho Can Packaging Auto & General Extrusion Building Extrusion Extrusion Precision Q1 11 vs Q1 11 vs beverage & building heat engineering Eurasia Systems North South Tubing Q4 10 Q1 10 exchang
Slide 6: Upstream sales seasonally higher
Upstream sales seasonally higher Hydro’s upstream sales Q1 2011 vs Q4 2010 Total upstream sales Extrusion ingot Sheet ingot Foundry alloys Q1 11 vs Q1 11 vs Q4 10 Q1 10 19 % 15 % 12 % 4% 2% Albras included from March 1, 2011 (6)
Slide 7: Encouraging aluminium price, weakening USD
Encouraging aluminium price, weakening USD USD per tonne 3 400 Primary aluminium LME USD/tonne NOK/tonne 3 200 Q1 2011 average 2 527 14 437 3 000 Q1 2011 end 2 632 14 502 2 800 Q4 2010 average 2 368 14 036 2 600 Q4 2010 end 2 468 14 368 2 400 2 200 Average 2010 2 199 13 257 2 000 Average 2009 1 702
Slide 8: Global inventory days trending down
Global inventory days trending down World reported primary aluminium inventories • Inventory days reduction driven by 1 000 tonnes Days increased consumption 7 000 80 6 000 70 • Q1 LME stocks increase believed to partly reflect unreported metal moved into 60 5 000 reported warehouses 50 4 000 • High
Slide 9: Ingot premiums remain high
Ingot premiums remain high USD per tonne 200 175 150 125 100 75 50 25 0 Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- 08 08 08 08 08 08 09 09 09 09 09 09 10 10 10 10 10 10 11 11 Source: Metal Bulletin, MW/MJP: Platts US Mid West Japan Europe (dut
Slide 10: China balanced in primary aluminium
China balanced in primary aluminium 1 000 tonnes 600 • Reduced production due to 500 Chinese New Year celebration 400 in February Net import 300 • Production resumed after 200 Chinese New Year 100 • China expected to be broadly 0 balanced in 2011 (100) • New capacity to be built in Net export (200)
Slide 11: Positive 2011 market outlook maintained
Positive 2011 market outlook maintained World outside China (quarterly annualized) • World outside China 1 000 tonnes • Annualized demand at 25.3 million tonnes in Q1 30 000 • Up 1% vs Q4 2010 28 000 26 000 • 7% demand growth expected in 2011 24 000 • Capacity development 22 000 • 1.2 million tonnes
Slide 12: Strong power prices, low reservoir levels
Strong power prices, low reservoir levels Hydro’s snow and water reservoir levels assumed better than market average Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 700 100 2010 2011 2010 2011 90 600 80 500 70 60 400 50 300 40 200 30 20 100 10
Slide 13: Ambitious cost improvement program on target
Ambitious cost improvement program on target Estimated primary aluminium cash cost and margin • USD 300 per tonne cost improvement USD/tonne 1) • USD 50 per tonne realized in 2010 475 475 • Further USD 125 per tonne targeted in 2011 425 475 375 375 2 175 25 • Cash cost up ~USD 125 from 2010 1 750 1
Slide 14: Qatalum in full production from June 2011
Qatalum in full production from June 2011 • 440 of 704 cells producing by end-Q1 • 80 000 tonnes produced in Q1 (100%) • Ramp-up is continuing towards full production from June • Final ramp-up dependent on commissioning of power plant steam turbines • Insurance expected to cover a majority of loss r
Slide 15: Albras – world-scale smelter in key region
Albras – world-scale smelter in key region • Industry average cash cost position • Long-term energy coverage with hydropower based LME-indexed contract until end-2024 • Alumina sourced from Alunorte located next to Albras • Majority owned by Hydro • Ownership structure: Hydro (51%) and Nippon Amazon
Slide 16: Historic Vale transaction completed
Historic Vale transaction completed • Platform for further growth as fully integrated resource-rich aluminium company • Positions Hydro as a leading global bauxite and alumina player • Integration process well under way • Key priority: increase production towards nameplate capacity • Weak production
Slide 17: Jørgen C. Arentz Rostrup, Executive Vice President and CFO
Executive Vice Jørgen C. President and CFO Arentz Rostrup (17)
Slide 18: Underlying EBIT
Underlying EBIT 1 448 1 110 965 688 588 (493) (618) (651) (793) NOK million Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Bauxite & Alumina 1) (228) (73) 21 (117) 162 288 71 113 155 Primary Metal 1) 3 (815) (780) (623) (169) 382 318 86 583 Metal Markets (245) 196 (15) (20)
Slide 19: Underlying EBIT development
Underlying EBIT development NOK billion 0.2 (0.2) 0.1 1.4 0.3 0.4 0.6 Q4 2010 LME price and Volume Equity accounted C ost smelters Other Q1 2011 currency investments (19)
Slide 20: Key financials
Key financials NOK million Q1 2011 Q4 2010 Q1 2010 Year 2010 Revenue 21 138 19 406 18 145 75 754 Underlying EBIT 1 448 588 688 3 351 Items excluded from underlying EBIT 4 408 180 297 (167) Reported EBIT 5 855 768 985 3 184 Financial income (expense) (93) 292 545 522 Income (loss) before tax 5 762 1
Slide 21: Tax and financial expense
Tax and financial expense Tax Finance NOK million Q1 2011 Q4 2010 NOK million Q1 2011 Q4 2010 Income before tax 5 762 1 060 Interest income 51 84 Dividends received and net gain on securities (10) 22 Equity accounted investments (19) 17 Financial income 41 107 Revaluation gain Alunorte and CAP 4 222
Slide 22: Items excluded from underlying EBIT
Items excluded from underlying EBIT NOK million Q1 2011 Q4 2010 Q1 2010 Year 2010 Underlying EBIT 1 448 588 688 3 351 Unrealized effects power contracts 40 (151) (272) (609) Unrealized LME and other derivative effects (136) 283 230 (117) Metal effect, Rolled Products 176 92 314 560 Rationalization c
Slide 23: Pro forma underlying EBIT & EBITDA
Pro forma underlying EBIT & EBITDA Underlying EBIT before transaction and contribution from acquired Vale assets NOK million 3 351 + 790 = 4 141 1 538 1 369 91 1 231 259 1 448 266 1 110 841 698 965 253 688 588 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Underlying EBITDA before transaction and contribut
Slide 24: Preliminary purchase price allocation
Preliminary purchase price allocation NOK billion Property, plant and equipment 44.8 Goodwill 2.7 Net other assets 9.2 Deferred tax liabilities (6.2) Net interest-bearing debt (6.4) Net assets acquired 44.1 Net assets acquired by Hydro 37.0 Minority interests 7.1 Net assets acquired 44.1 Considerati
Slide 25: Pro forma income statement Q1 2011
Pro forma income statement Q1 2011 Vale Pro forma Aluminium Pro forma Hydro after NOK million Hydro actual combined adjustments transaction Revenue 21 138 2 121 (444) 22 815 Share of the profit (loss) in equity accounted investments (19) - (27) (45) Other income, net 4 553 - (4 421) 132 Total revenu
Slide 26: Bauxite & Alumina
Bauxite & Alumina Pro forma Q1 Q4 Q1 Key figures 2011 2010 2010 Alumina production, kmt 1 336 1 448 1 394 Total alumina sales, kmt 1 762 2 018 1 843 Realized alumina price, USD/mt 329 311 293 Apparent alumina cash cost, USD/mt 266 251 231 Bauxite production, kmt 1 720 2 017 1 745 Underlying EBITDA,
Slide 27: Primary Metal
Primary Metal Pro forma Q1 Q4 Q1 Key figures 2011 2010 2010 Primary aluminium production, kmt 490 475 447 Total sales, kmt 627 624 601 Realized LME price, USD/mt 2 366 2 131 2 039 Realized LME price, NOK/mt 13 664 12 739 11 826 Underlying EBITDA, NOK million 1 137 808 320 Underlying EBIT, NOK millio
Slide 28: Metal Markets
Metal Markets Q1 Q4 Q1 Key figures 2011 2010 2010 Remelt production, kmt 150 147 143 Total metal products sales, kmt 772 688 670 Underlying EBITDA, NOK million 168 88 91 Underlying EBIT excl currency and 95 73 144 inventory valuation effects, NOK million Underlying EBIT, NOK million 143 62 65 Q1 ope
Slide 29: Rolled Products
Rolled Products Q1 Q4 Q1 Key figures 2011 2010 2010 External sales volumes, kmt 245 234 231 Underlying EBITDA, NOK million 342 226 335 Underlying EBIT, NOK million 232 105 223 Underlying EBIT NOK million 864 232 Q1 operating results 309 • Seasonally higher sales improve result 227 232 by NOK 80 mill
Slide 30: Extruded Products
Extruded Products Q1 Q4 Q1 Key figures 2011 2010 2010 External sales volumes, kmt 136 127 128 Underlying EBITDA, NOK million 237 162 252 Underlying EBIT, NOK million 105 24 117 Underlying EBIT NOK million 444 105 Q1 operating results • Weak European construction market 201 • Seasonally higher volume
Slide 31: Energy
Energy Q1 Q4 Q1 Key figures 2011 2010 2010 Power production, GWh 2 308 2 263 2 781 Net spot sales, GWh 955 827 1 323 Southwest Norway spot price (NO2), 520 469 430 NOK/MWh Underlying EBITDA, NOK million 600 502 623 Underlying EBIT, NOK million 573 482 588 Underlying EBIT Q1 operating results NOK mil
Slide 32: Net cash development Q1
Net cash development Q1 NOK billion Net cash flow from Net cash flow from operations NOK (0.6 billion) investing NOK (6.4 billion) 2.4 (1.9) (1.2) 11.0 (0.6) (5.7) (5.7) (2.0) (0.2) End-Q4 2010 Underlying Operating Other Investments / Net cash Debt increase Other End-Q1 2011 EBITDA capital adjustmen
Slide 33: Robust financial position
Robust financial position Net cash/(debt), NOK billion Dec 31, Dec 31, Mar 31, 11.0 NOK billion 2009 2010 2011 Cash and cash equivalents 2.6 10.9 3.7 Short-term investments 1.5 1.3 1.3 Short-term debt (2.0) (0.9) (2.5) Long-term debt (0.1) (0.3) (4.5) Net cash/(debt) 2.0 11.0 (2.0) Net int.-bearing
Slide 34: Priorities 2011
Priorities 2011 • Successful integration and improved performance in Bauxite & Alumina • Primary Metal repositioning through USD 300 program and Qatalum ramp-up • Solid operations with firm cost control and strong market focus (34)
Slide 35: 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 36: Additional information
Additional information (36)
Slide 37: Bauxite & Alumina
Bauxite & Alumina Q1 Q4 Q1 Key figures 2011 2010 2010 Alumina production, kmt 773 493 474 Underlying EBITDA, NOK million 340 118 172 Underlying EBIT, NOK million 155 113 162 Underlying EBIT NOK million 633 155 Q1 operating results 288 • Weak production performance in Alunorte • Higher realized alumi
Slide 38: Primary Metal
Primary Metal Q1 Q4 Q1 Key figures 2011 2010 2010 Primary aluminium production, kmt 415 360 339 Total sales volumes, kmt 577 503 504 Realized LME price, USD/mt 2 358 2 074 1 997 Realized LME price, NOK/mt 13 607 12 436 11 542 Underlying EBITDA, NOK million 1 055 553 252 Underlying EBIT, NOK million
Slide 39: Items excluded from underlying results - 2011
Items excluded from underlying results - 2011 NOK million (+=loss/()=gain) Q1 2011 Unrealized derivative effects on currency contracts (Alunorte) Bauxite & alumina (1) Derivative effects on LME related contracts (Vale Aluminium) Bauxite & alumina 16 Transaction related effects (Vale Aluminium) Bauxi
Slide 40: Items excluded from underlying results - 2010
Items excluded from underlying results - 2010 NOK million (+=loss/()=gain) Q1 2010 Q2 2010 Q3 2010 Q4 2010 Year 2010 Unrealized derivative effects on currency contracts (Alunorte) Bauxite & alumina 23 12 (65) (20) (50) Derivative effects on LME related contracts (Vale Aluminium) Bauxite & alumina -
Slide 41: Items excluded from underlying results - 2009
Items excluded from underlying results - 2009 NOK million (+=loss/( )=gain) Q1 2009 Q2 2009 Q3 2009 Q4 2009 Year 2009 Unrealized derivative effects on LME related contracts (Alunorte) Primary metal - - (16) 16 - Unrealized derivative effects on currency contracts (Alunorte) Primary metal (11) (222)
Slide 42: Operating segment information
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina (228) (73) 21 (117) 162 288 71 113 155 (397) 633 Primary Metal 3 (815) (780) (623) (169) 382 318 86 583 (2 215) 617 Metal Markets (2
Slide 43: Operating segment information
Operating segment information Pro forma underlying EBIT Q1 Q2 Q3 Q4 Q1 Year NOK million 2010 2010 2010 2010 2011 2010 Bauxite & Alumina 205 448 348 223 237 1 225 Primary Metal (203) 481 306 230 592 816 Metal Markets 65 31 163 62 143 321 Rolled Products 223 309 227 105 232 864 Extruded Products 117 2
Slide 44: Operating segment information
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina* (426) 117 142 (115) 139 574 43 91 4 561 (282) 847 Primary Metal* (1 451) (649) (294) (783) (8) 645 (378) 355 525 (3 177) 615 Metal Markets (31
Slide 45: Operating segment information
Operating segment information Pro forma reported EBIT Q1 Q2 Q3 Q4 Q1 Year NOK million 2010 2010 2010 2010 2011 2010 Bauxite & Alumina 205 768 47 140 213 1 161 Primary Metal (41) 723 (368) 499 622 813 Metal Markets (32) 59 18 115 151 160 Rolled Products 684 50 261 219 349 1 214 Extruded Products 172
Slide 46: Operating segment information
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina* 1 526 1 495 1 525 1 588 1 631 2 426 1 735 2 090 2 183 6 134 7 882 Primary Metal* 5 700 5 699 5 938 5 640 6 607 7 448 6 558 6 979 8 23
Slide 47: Operating segment information
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina* 1 042 746 974 869 1 003 1 241 1 076 1 199 1 168 3 631 4 518 Primary Metal* 5 344 5 365 5 379 5 260 6 210 6 992 6 166 6 620 7 582 2
Slide 48: Operating segment information
Operating segment information Depreciation, amortization and impairment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina* - - - - - 1 1 1 178 1 2 Primary Metal* 463 461 451 444 416 430 428 462 467 1 819 1 737 Metal Markets 32 3
Slide 49: Income statements
Income statements Q1 Q4 Q1 Year NOK million 2011 2010 2010 2010 Revenue 21 138 19 406 18 145 75 754 Share of the profit (loss) in equity accounted investments (19) 17 (236) (606) Other income, net 4 553 112 183 568 Total revenue and income 25 672 19 535 18 091 75 717 Depreciation, amortization and i
Slide 50: Balance sheets
Balance sheets March 31; December 30, September 30, June 30, March 31, NOK million 2011 2010 2010 2010 2010 Cash and cash equivalents 3 698 10 929 8 658 2 192 2 502 Short-term investments 1 319 1 321 1 316 1 311 1 554 Receivables and other current assets 20 440 13 597 15 939 17 338 15 576 Inventorie
Slide 51: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Year Pro forma Bauxite & Alumina 2010 2010 2010 2010 2011 2010 Alumina production (kmt) 1) 1 394 1 521 1 442 1 448 1 336 5 805 Sourced alumina (kmt) 539 557 488 556 453 2 141 Total alumina sales (kmt) 2) 1 843 2 056 2 023 2 018 1 762 7 941 Realized alumina price (USD)
Slide 52: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Year Pro forma Primary Metal 2010 2010 2010 2010 2011 2010 Realized aluminium price LME, USD/mt 2 039 2 200 2 137 2 131 2 366 2 128 Realized aluminium price LME, NOK/mt 11 826 13 192 13 226 12 739 13 664 12 758 Realized premium above LME, USD/mt 255 266 287 284 347 27
Slide 53: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year Metal Markets 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Remelt production (1 000 mt) 1) 89 111 123 133 143 156 141 147 150 455 586 Metal products sales, own production (1 000 mt) 550 594 608 596 651 702 656 657 734 2 351 2 666 Third-
Slide 54: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +/- 10% Currency sensitivities +/- 10% NOK Financial Income NOK million EBIT EBIT Net million items before tax income Aluminium 2 900 USD 2 450 (450) 2 000 1 300 Oil (280) BRL (700) 700 - 100 Pet coke (230) EUR (50) (1 100) (1 150) (850) C
Slide 55: Investor Relations in Hydro
Investor Relations in Hydro t: +47 22 53 80 99 Stefan Solberg Head of Investor Relations m: +47 917 27 528 e: stefan.solberg@hydro.com t: +47 977 36 022 Stian Hasle Investor Relations Officer e: stian.hasle@hydro.com t: +47 414 02 174 Irene Alyanakian Kristiansen Investor Relations Assistant e: iren