Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — BofA Merrill Lynch Metals and Mining Conference 2012
33 slides from Norsk Hydro Asa's conference presentation, May 16, 2012
Slide 1: Norsk Hydro: Resource rich and fully integrated
Norsk Hydro: Resource rich and fully integrated Svein Richard Brandtzæg, President & CEO 16 May, 2012
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: Strong positions across aluminium value chain
Strong positions across aluminium value chain Raw materials processing Primary aluminium production, Aluminium in products and energy marketing and recycling Bauxite Primary Metal Rolled Extruded & Alumina Energy Metal Markets Products Products • Bauxite capacity • Long-term power • 2.4 million tonn
Slide 4: Strong global positions
Strong global positions • Bauxite & Alumina Capital employed, as per March 31, 2011 • Alumina priced globally • Brazilian production portfolio Downstream • Primary Metal 17% • Aluminium is a global commodity (LME) • Regional premiums • Global production portfolio Raw materials • Downstream 45% • Maj
Slide 5: Global trends – future of aluminium
Global trends – 1 future of aluminium
Slide 6: The great challenges of our time
The great challenges of our time Growth must be sustainable Millions climb out of Increasing energy Climate change poverty demand
Slide 7: Aluminium – part of the solution
Aluminium – part of the solution We reduce energy consumption and emissions in our own processes We develop products and solutions that help our customers reduce energy consumption and emissions We recycle aluminium using only 5% of the initial energy consumption
Slide 8: Worth its weight in aluminium
”Worth its weight in aluminium”
Slide 9: Solid demand growth expected, driven by aluminium properties
Solid demand growth expected, driven by aluminium properties • Lightweight Demand for semis World outside China China Million mt • Recyclability 120 ~75% 100 49 • Corrosion resistant 80 36 60 • Formability 23 53 40 45 35 20 • Excellent conductivity 0 2010 2015 2020 • Alloying technology
Slide 10: Addressing the climate challenge
Addressing the climate challenge Significant reductions in CO2 emissions and energy consumption Lower emissions from Hydro plants Lower spesific energy use at Hydro plants Kg CO2e / Kg aluminium KWh / Kg Aluminium 7 16 6 5 -70% 15 4 14 3 13 2 12 1 0 11 1990 1995 2000 2005 2010 1993 1998 2003 2010 Qa
Slide 11: Aluminium market – trends and expectations
Aluminium market 2 – trends and expectations
Slide 12: Volatile prices, currently at unsustainable levels
Volatile prices, currently at unsustainable levels Aluminium price USD per tonne Platts index USD per tonne / % of LME 3 400 500 18.0 3 000 450 17.0 2 600 400 16.0 2 200 350 15.0 1 800 300 14.0 1 400 250 13.0 1 000 200 12.0 2001 2003 2005 2007 2009 2011 2013 2015 Aug-10 Dec-10 Apr-11 Aug-11 Nov-11 A
Slide 13: Raw material cost challenge
Raw material cost challenge Aluminium price lags important raw material prices LME 3 month, indexed (Q1 2010=100) Pet coke price, indexed (Q1 2010=100) Caustic price, indexed (Q1 2010=100) +127% +84% +87% +67% +15% +1% Q1 2010 Q1 2011 Q1 2012 Q1 2010 Q1 2011 Q1 2012 Q1 2010 Q1 2011 Q1 2012 Source: E
Slide 14: Trending towards a balanced market
Trending towards a balanced market World outside China (quarterly annualized) 1 000 mt 30 000 • Seasonal increase in demand, 25 000 while production declined from curtailments 20 000 15 000 • Improved supply-demand balance expected in 2012 10 000 • ~1 million mtpy announced curtailments 5 000 0 Jan-
Slide 15: Physical tightness and increasing premiums despite high inventories
Physical tightness and increasing premiums despite high inventories World reported primary aluminium inventories Regional ingot premiums 1 000 mt Days USD per mt 8,000 80 225 7,000 70 200 175 6,000 60 150 5,000 50 125 4,000 40 100 3,000 30 75 2,000 20 50 1,000 10 25 0 0 0 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1
Slide 16: A multi-speed world economy
A multi-speed world economy ~5% 44,9 Primary aluminium demand (million mt) ~0% ~9% ~5% 8,4 19,3 5,6 ~3% 25,6 North Europe America incl. Mexico ~4% 11,6 China 2011 Other Growth 2012 World ex. World China Source: CRU, Hydro analysis
Slide 17: China increased net imports
China increased net imports In terms of aluminium equivalents across the total value chain Annualized aluminium equivalents*, million mt 15 2006 2007 2008 2009 2010 2011 2012 • Bauxite and alumina ** • Increasingly dependant on imported bauxite to China Import • Trending towards lower 10 imports of
Slide 18: Alumina market is consolidating
Alumina market is consolidating Net long alumina position, million tonnes Alcoa 4.3 Alcoa 8.8 Vale 3.0 Hydro 2.1 Glencore 2.4 BHP Billiton 1.7 BHP Billiton 1.9 Rio Tinto Alcan 1.6 Kaiser 1.0 UC Rusal -0.8 Alcan 0.8 Vedanta -1.1 Sual 0.7 Century -1.1 Rio Tinto 0.5 Alba -1.7 Pechiney 0.4 China -1.9 VA
Slide 19: Hydro's position in the aluminium industry
Hydro’s position in 3 the aluminium industry
Slide 20: Significant capacity growth – mainly upstream
Significant capacity growth – mainly upstream Annual consolidated capacity in metal equivalents, in million mt 3.3 2.3 2.4 1.7 1.6 1.4 1.5 1.1 1.2 0.5 2007 2011 2007 2011 2007 2011 2007 2011 2007 2011 Bauxite Alumina Primary aluminium Remelt Downstream
Slide 21: Raw material is key to our aluminium future
Raw material is key to our aluminium future Aluminium equivalent consolidated capacity, million tonnes • Long position in End-2010 End-2011 Post-CAP bauxite and alumina 4.3 creates flexibility • Strategically attractive 3.3 3.4 assets • New business 2.4 2.4 2.3 opportunities 1.9 1.4 • Resource const
Slide 22: Attractive bauxite and alumina position
Attractive bauxite and alumina position Annualized production, million mt* 10 +31% • Integration progressing according to plan 9 • First priority to improve and stabilize 8 production 7 +10% 6 • Focus on improving cost position 5 • High-quality alumina – preferred by 4 customers 3 2 • CAP project po
Slide 23: Primary Metal improvement program on track
Primary Metal improvement program on track USD 235 per mt by end-2012 Estimated primary aluminium cash cost and margin • Additional USD 35 per mt expected realized USD/mt 1) in 2012, remaining USD 65 in 2013 475 475 • Progressing according to plan 475 425 250 2 175 375 375 25 2 000 • Cash cost down
Slide 24: Robust power coverage
Robust power coverage Power coverage (%), based on consolidated production in 2011 100% • 80% of current production has power coverage until 2020 or beyond 75% • ~2/3 based on hydro-power 50% • Renewal of power contracts • Tomago – contract signed • Alouette – MoU signed for expansion 25% and prolon
Slide 25: Aiming to lift power production to 10 TWh
Aiming to lift power production to 10 TWh Power production capacity (TWh), per region and reversion year • Power producing assets and ongoing projects • Maintain cost control in operations and projects Telemark • Holsbru project concluded, production start April 1 3.0 0.5 • Vasstøl and Rjukan upgrad
Slide 26: No. 1 flat rolled products producer in Europe
No. 1 flat rolled products producer in Europe External sales in tonnages • World leader in high-end products Litho Foil 13% foil and litho 17% • Strategy of high-grading product portfolio • Margin management and cash generation • Focus production system on core assets • Alunorf (JV 50%) - world’s la
Slide 27: European extrusion leader with global presence
European extrusion leader with global presence • Leading position in Europe External sales in tonnages • 17% market share Other Transport 11% 9% • Strong position in US and Brazil • Global leader in precision tubing • Strategy of solidifying leading positions Domestic & office • Reinforce European e
Slide 28: Copper substitution represents major potential
Copper substitution represents major potential • Substitution to aluminium in Making heat-exchanger technology cars: 12.5 kg/car leap from automotive… …into broad range of non-automotive • Weight reduction: products and applications about 50% vs. copper • Worldwide potential: about 875 000 mt annual
Slide 29: Sustaining capital expenditure reduction
Sustaining capital expenditure reduction Sustaining capital expenditure In NOK billion 4.2 ● Sustaining capex significantly down 3.5 from 2008 levels ● Increase in sustaining capex from Vale acquisition ● Additional NOK ~1-1.5 bn from growth and improvement capex expected in 2012 2008 2012E Sustaini
Slide 30: Robust financial position
Robust financial position Net cash/(debt), NOK billion Dec 31, Dec 31, Mar 31, NOK billion 2010 2011 2012 11.0 Cash and cash equivalents 10.9 8.4 8.8 Short-term investments 1.3 1.8 1.6 Short-term debt (0.9) (4.3) (5.1) Long-term debt (0.3) (4.2) (3.7) Net cash/(debt) 11.0 1.7 1.5 Net int.-bearing de
Slide 31: Adapting to a challenging market environment
Adapting to a challenging market environment • Stabilizing and improving production Bauxite & • Focus on improving cost position Alumina • Actively promoting index pricing • Targeting USD 235 per mt in 2012 within Primary USD 300 per mt cost improvement program Metal • Focus on optimizing production
Slide 32: Strategy for further value creation
Strategy for further value creation Bauxite & Alumina Primary Metal Energy Mid- and downstream • Excellence in • Reposition • Increase value of • Adjust capacity and operations • Keep solid cash flow in energy business cost base to market • Commercialize current assets • Develop current base • Conti
Slide 33: www.hydro.com
www.hydro.com
Norsk Hydro — BofA Merrill Lynch Metals and Mining Conference 2012 on 6ix