Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Hydro — Investor Day (November 2007)
31 slides from Norsk Hydro Asa's investor day presentation, Nov 27, 2007
Slide 1: Hydro - a resourceful aluminium company
Hydro - a resourceful aluminium company Stefan Solberg, Head of Investor Relations November 27, 2007 (1)
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: Company overview
1 Company overview 3
Slide 4: Restructuring the Hydro conglomerate has created significant value
Restructuring the Hydro conglomerate has created significant value NOK billion 400 350 300 250 Dividend and buybacks Yara 200 Oil and gas Aluminium 150 Hydro 100 50 0 1999* 2007** * 4 January 1999 close, nominal value ** 28 September 2007 close. Aluminium and Oil & Energy based on transaction equati
Slide 5: "New" Hydro well received
”New” Hydro well received Relative share price development NYSE 18 December 2006 – 1 May 2007 18 December 2006 – 23 November 2007 ”New” Hydro 51% ”New” Hydro 72% Alcan 20% Alcan 110% Alcoa 14% Alcoa 16% Oslo Stock Oslo Stock Exchange Exchange 9% 10% Benchmark Benchmark Index Index Source: Yahoo Fina
Slide 6: A resourceful aluminium company
A resourceful aluminium company Aluminium ● 25 000 employees1) Metal ● Operations in more than 30 countries ● Turnover Aluminium ● 2006: NOK 99 billion Products ● First nine months 2007: NOK 73 billion ● EBIT ● 2006: NOK 7.5 billion ● First nine months 2007: NOK 9.0 billion Energy ● Market capitaliz
Slide 7: Capital employed – upstream focus
Capital employed – upstream focus Total NOK 46 billion1) 30 September 2007 Energy, 9% Automotive, 3% Extrusion, 10% Metal, 59% Rolled Products, 19% 1) Including NOK 2.5 billion in negative capital employed in “Corporate and Other” not shown in graph 7
Slide 8: Upstream
2 Upstream 8
Slide 9: Aluminium Metal repositioned
Aluminium Metal repositioned ● Build decision Qatalum 1 – 50% in 585 000-tonne smelter ● Closures of high-cost smelters in Norway and Germany ● Alunorte expansion 3 in progress ● MoU with CVRD to build new alumina plant in Brazil 9
Slide 10: Strong growth in primary production
Strong growth in primary production CAGR 2001-07: 14% 2001 2007E Share of global production: 3.3% 4.5% Share of global production (ex. China) 3.7% 7.0% 1 000 tonnes 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 C losed production Primary production 0 2001 2002 2003 2004 2005 2006 2007E 2011E 1
Slide 11: Qatalum smelter
Qatalum smelter Largest greenfield capacity built in one step ● First-stage capacity ● Smelter: 585 000 tonnes per year ● 704 cells in 2 double-lined potrooms ● Hydro technology ● Anode plant and cast houses ● 1 250 MW power plant ● Possible expansion to 1 200 000 tonnes per year ● Technology design
Slide 12: Qatalum investment cost
Qatalum investment cost ● Estimate ~USD 5.6 billion (100%) ● Cost pressure for local sub-contractors ● Weakened USD ● Satisfactory project economics at LME 1 900 USD/tonne ● Production start-up late 2009 12
Slide 13: Competitive cost position
Competitive cost position Business operating cost 2007* Business operating cash cost USD/tonne 3 000 BOC Weighted average RioTintoAlcan Alcoa Hydro (CRU) 2 600 2 200 1 800 1 400 1 000 Accumulated tonnage (000 tonnes) 600 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 * Source: CRU, 2007. B
Slide 14: Growth and restructuring efforts
Growth and restructuring efforts Improved cost position Business operating cash cost USD/tonne 3 000 Business operating cost Weighted average Hydro (CRU) Qatalum Hydro CRU incl closed capacity Hydro CRU incl Qatalum ex closed cap 2 600 Closed 250 000 tonnes capacity 2 200 in Norway and Germany (2003
Slide 15: Hydro well covered with alumina
Hydro well covered with alumina New refinery positions Hydro for further growth in metal Alumina coverage Percent 140% 120% 100% LME-linked contracts 80% MoU new refinery equity 60% 40% Equity 20% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Based on existing smelter capacity and decided smelter
Slide 16: Strong growth in alumina production
Strong growth in alumina production Hydro’s equity alumina production 1 000 tonnes 3 500 MoU new refinery Alunorte 3 000 Alpart 2 500 2 000 1 500 1 000 500 0 2001 2002 2003 2004 2005 2006 2007E 2011E 16
Slide 17: Competitive power sourcing
Competitive power sourcing Critical for aluminium smelting Power coverage ● Power represents 30% of production costs 100% Neuss ● Long-term power sourcing ensures 75% predictable costs Contract Contracts ● Globalization of Hydro’s power 50% activities 25% Self Generated Self generated 0% 2007 2008 2
Slide 18: Norway's second largest power producer
Norway’s second largest power producer Production assets 2.7 0.5 ● 9 TWh/year (7-11) production Telemark ● 100 percent hydro power No reversion 2049 Røldal 2.7 ● Well-developed production assets Suldal provide stable cash flow 2022 3.0 Sogn ● Solar venture – attractive 2051-2057 prospects and potent
Slide 19: Downstream
3 Downstream 19
Slide 20: Turnaround in Aluminium Products
Turnaround in Aluminium Products ● Divestments and closures ● Sales of Castings, Meridian and smaller units ● Closure of magnesium plant in Becancour (Canada) and Ellenville extrusion (US) ● Improvement measures to offset weak US extrusion market ● Capacity adjustments ● 30% manning reduction in the
Slide 21: Distinct businesses with leading positions
Distinct businesses with leading positions Rolled Products Extrusion Automotive* (50% of revenues) (40% of revenues) (10% of revenues) Rolled Products Extrusion Eurasia Precision Tubing Extrusion Americas Automotive Structures Building Systems Reporting sub-segments and sectors *Casting and Magnesiu
Slide 22: Market outlook
4 Market outlook 22
Slide 23: Healthy demand for aluminium
Healthy demand for aluminium ● Properties give competitive edge ● Recyclability more important with high energy price ● Expected annual demand growth 4.0-4.5% coming 10 years ● China represents almost 2/3 of expected growth ● Main product segments expected to grow 4.0-5.0% annually 23
Slide 24: China striving for balance
China striving for balance 600 Primary / alloyed Semis Fabricated Scrap Net ● No current subsidies on export of 400 metal and low value added products 200 0 ● Majority of export to Asian markets (200) Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 est ● China expected to be balanced, (400) medium to long
Slide 25: Shift in forward curve
Shift in forward curve LME USD/tonne 2 900 31-Dec-2006 30-Jun-2007 23-Nov-2007 2 800 2 700 2 600 2 500 2 400 2 300 2 200 2 100 2 000 1 900 2007 2008 2009 2010 2011 2012 2013 25
Slide 26: Financials
5 Financials 26
Slide 27: Solid financial position
Solid financial position ”New” Hydro September 30 ● Demerger debt settled October 1 NOK billion 2007 Cash and cash equivalents 33.9 ● Redemption of State’s shares Short-term investments 2.2 ● NOK 2.8 billion in September Short-term debt (2.2) ● NOK 5.5 billion proceeds from Long-term debt (0.3) Poly
Slide 28: Capital allocation – upstream focus
Capital allocation – upstream focus NOK billion ~80 percent of 2008 investments are 11-12 upstream Qatalum: USD 2.8 billion ● ~55 percent project financed ● Completion Q4 2009 ~6.5 Alunorte 3: USD 300 million 1.2 ● Completion Q4 2008 3.9 1.0 New alumina project: USD 300 million ● Assumed completion
Slide 29: Price and currency sensitivities
Price and currency sensitivities Income NOK million before tax Net income Change Aluminium price per tonne 710 510 100 USD Aluminium price per tonne excl. strategic hedges 880 630 100 USD Income NOK million before tax Net income Change USD before financial items 3 210 2 280 1 NOK USD financial items
Slide 30: Hydro's competitive strengths
Hydro’s competitive strengths ● Power position ● Close to markets and customers ● Operational performance ● Reputable partner in joint ventures ● Technological leadership ● Distinct project management skills across value chain ● Financial capacity to grow 30
Slide 31: www.hydro.com
www.hydro.com