Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q2 2007 Earnings Presentation
65 slides from Norsk Hydro Asa's earnings presentation, July 2007
Slide 1: Second quarter 2007
Second quarter 2007 www.hydro.com
Slide 2: Highlights second quarter
Highlights second quarter z Strong results in all businesses z Favorable market conditions z Final approval of Qatalum z Agreement to develop new alumina refinery in Brazil z Ormen Lange 97 percent complete, on track for October start-up z Shareholders’ and regulatory approval of oil and gas merger
Slide 3: Net income from continuing operations
Net income from continuing operations 5 903 NOK million 5 769 5 456 US GoM impairment Gains from divestments 4 709 4 176 4 183 3 638 3 661 3 672 3 522 3 135 3 214 2 481 2 224 2004 2005 2006 2007 US GAAP* US GAAP* IFRS IFRS Accumulated US GAAP* 11 477 15 542 17 224 IFRS 17 364 11 360 * US GAAP figure
Slide 4: Consolidated income statements
Consolidated income statements NOK million Q2 2007 Q1 2007 Q2 2006 Revenue 46 529 46 865 48 026 Share of the profit in equity accounted investments 350 283 358 Other income, net 301 1 075 432 Revenues and income 47 180 48 224 48 816 Depreciation, amortization and impairment (4 651) (4 593) (4 000) O
Slide 5: Adjusted EBITDA
Adjusted EBITDA NOK million 20 849 20 161 19 645 19 268 18 878 17 002 16 820 16 241 15 733 15 379 13 546 13 210 12 266 12 094 2004 2005 2006 2007 US GAAP* US GAAP* IFRS IFRS Accumulated 51 116* 64 933* 76 895 38 146 * US GAAP figures are not adjusted for reclassification of Polymers as discontinued
Slide 6: Adjusted net debt/equity ratio
Adjusted net debt/equity ratio 0.50 0.31 0.23 0.15 0.11 2004 2005 2006 June 30 - 2007 US GAAP* US GAAP* IFRS IFRS Interest-bearing debt + net pension liability (tax adjusted) + operating lease commitments (discounted) – cash and cash equivalents – short term investments divided by shareholders’ equi
Slide 7: Oil & Energy highlights
Oil & Energy highlights z Oil and gas production 558 000 boed z Record-high international production z Ormen Lange phase I on time and budget z Vega and Vega South development plan approved z StatoilHydro preparation on schedule 7
Slide 8: Oil & Energy key figures
Oil & Energy key figures Operational data Q2 2007 Q1 2007 Q2 2006 Oil and gas production (1 000 boe/day) 558 610 537 Realized oil price, USD/boe 67.2 55.9 67.9 Realized oil price, NOK/boe 403.3 347.8 422.2 Realized gas price, NOK/Sm³ 1.62 1.90 1.79 Exploration expense, NOK million 653 786 618 EBIT,
Slide 9: Oil and gas production per quarter
Oil and gas production per quarter 1 000 boe/day Oil Gas 173 208 192 147 176 178 184 197 142 164 123 154 169 168 442 422 418 415 406 399 405 402 398 394 391 385 368 381 2004 2005 2006 2007 Average 572 563 573 584 9
Slide 10: Production costs per barrel
Production costs per barrel NOK/boe Gas injection costs Production costs excluding gas injection 34.1 32.2 5.5 25.3 7.9 20.7 5.4 2.8 28.6 24.3 17.9 19.9 2004 2005 2006 2007 YTD Production in million boe 209 206 209 106 10
Slide 11: Exploration activity
Exploration activity z Nine wells completed in Q2 z Seven new discoveries in Q2 - Four commercial – two in Norway, one in Libya and one in GoM - Three under evaluation - In addition one discovery in Norway from Q1 declared commercial z Activity of NOK 904 million 11
Slide 12: Oil & Energy prospects
Oil & Energy prospects z Continued high oil price z 2007 production target 585 000 boed maintained z High exploration activity z Merger with Statoil to be completed 1 October z Official opening of Ormen Lange 6 October 12
Slide 13: “New” Hydro
HYDRO “New” Hydro
Slide 14: Another strong quarter for “new” Hydro
Another strong quarter for “new” Hydro NOK million Q2 EBIT (est) Q2 EBITDA (est) Aluminium Metal 2 465 3 124 Aluminium Products 355 671 Power 395 415 Corporate and other (50) (35) Total 3 165 4 175 Special items (245) (389) Total after special items 2 920 3 786 14
Slide 15: Significant restructuring of Aluminium executed
Significant restructuring of Aluminium executed z 180 000 tons of high-cost primary capacity closed - Final cost NOK 900 million vs estimated NOK 1 000 million z Majority of automotive component business divested - New management in place to turn around Automotive Structures z Magnesium business exi
Slide 16: Aluminium Metal highlights
Aluminium Metal highlights z Record results in first half z Realized aluminium price USD 2 606 per ton in Q2 z Smelter production 435 000 tons in Q2 as projected z Impairment write-down US remelters NOK 144 million z Final Qatalum approval z New alumina growth initiative in Brazil 16
Slide 17: Qatalum – mega smelter in key region
Qatalum – mega smelter in key region z 50/50 joint venture between Qatar Petroleum and Hydro z 585 000 tons annually – expansion potential to 1.2 million tons annually z First quartile operating cost – captive gas power z Proprietary smelting technology z Investment cost USD 4.8 billion (100 percent
Slide 18: Hydro joins alumina project in Brazil
Hydro joins alumina project in Brazil z Agreement with Brazilian mining group CVRD, Hydro share 20 percent z Alumina refinery to be located 5 km from Alunorte - Bauxite supply from CVRD’s operation in Paragominas through existing pipeline - Hydro and CVRD already partners in Alunorte, the world’s la
Slide 19: Aluminium market price – 3 month LME
Aluminium market price – 3 month LME USD per mt Primary aluminium LME USD/ton LME (3-month avg.) Q2 2007 average 2 799 3 000 LME forward Q2 2007 end 2 725 2 800 2 600 Q1 2007 average 2 746 2 400 2 200 Q1 2007 end 2 780 2 000 Average 2007 (1st half) 2 772 1 800 Average 2006 (year) 2 594 1 600 1 400 1
Slide 20: Aluminium Metal EBIT
Aluminium Metal EBIT Adjusted for special items NOK million z Realized aluminium price 2 399 - USD 2 606 per ton 2 245 - +1% vs Q1 2007, +10% vs Q2 2006 2 120 - NOK 16 174 per ton 1 928 1 832 1 812 - -2% vs Q1 2007, +5% vs Q2 2006 z Reduced price in NOK main reason for lower Q2 EBIT z Primary produc
Slide 21: Aluminium Metal prospects
Aluminium Metal prospects z Continued high aluminum prices z 83 percent of Q3 production sold at 2 606 USD/ton end June - Including full effect of strategic hedges z Continued weak USD will have negative impact z European market conditions remain strong z 2007 production target 1 730 000 tons mainta
Slide 22: Aluminium Products highlights
Aluminium Products highlights z Underlying results remain strong z Solid markets for Extrusion and Rolled Products in Europe z Continued portfolio restructuring z Challenging US markets - Cost-improvement measures implemented 22
Slide 23: Aluminium Products EBIT
Aluminium Products EBIT Adjusted for special items NOK million z Rolled Products 498 492 - Margin and volume improvement z Extrusion 398 367 - Positive margin development - Volumes stable - Weak results in the US 269 260 z Automotive - Weak results - Divested activities (Castings) included in Q1 wit
Slide 24: Aluminium Products prospects
Aluminium Products prospects z Favorable outlook for main European markets z Weak US markets z Seasonal reduction in volumes in second half of 2007 z Ensure value creation from restructured portfolio 24
Slide 25: Priorities
Priorities z Operational excellence in all businesses z World-class project execution of Qatalum z Pursue new upstream growth initiatives z Build on leading downstream market positions z Final integration with Statoil z Launch “new” Hydro – Capital Markets Day 6 September 25
Slide 26: Cautionary note in relation to 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 27: Additional information
Additional information 27
Slide 28: Adjusted income Q2 2007
Adjusted income Q2 2007 NOK million Reported income Adjustments Adjusted income Exploration and Production 10 857 (323) 10 534 Energy and Oil Marketing 987 117 1 104 Eliminations (389) 390 1 Oil & Energy 11 455 184 11 639 Aluminium Metal 2 465 (220) 2 245 Aluminium Products 355 137 492 Other activit
Slide 29: Special items impacting income statement Q2 2007
Special items impacting income statement Q2 2007 NOK million Unrealized (gains)/losses on oil and gas derivatives, Spinnaker Exploration & Production (9) Unrealized (gains)/losses on gas contracts Exploration & Production (314) Unrealized (gains)/losses on gas contracts Energy and Oil Marketing 144
Slide 30: Adjusted income Q2 2006
Adjusted income Q2 2006 NOK million Reported income Adjustments Adjusted income Exploration and Production 11 675 125 11 800 Energy and Oil Marketing 1 178 (231) 947 Eliminations 344 (344) – Oil & Energy 13 196 (450) 12 746 Aluminium Metal 2 333 (213) 2 120 Aluminium Products 326 72 398 Other activi
Slide 31: Special items impacting income statement Q2 2006
Special items impacting income statement Q2 2006 NOK million Unrealized (gains)/losses on oil and gas derivatives, Spinnaker Exploration & Production 163 Unrealized (gains)/losses on gas contracts Exploration & Production (38) Unrealized (gains)/losses on gas contracts Energy and Oil Marketing (112)
Slide 32: Estimated EBIT and EBITDA for “new” Hydro 2007
Estimated EBIT and EBITDA for “new” Hydro 2007 Q1 Q2 Special Special EBIT (est) Reported Adjusted EBIT (est) Reported Adjusted items items Aluminium Metal 2 534 (135) 2 399 Aluminium Metal 2 465 (220) 2 245 Aluminium Products 1 315 (817) 498 Aluminium Products 355 137 492 Power 300 (22) 278 Power 39
Slide 33: Earnings before financial items and tax (EBIT)
Earnings before financial items and tax (EBIT) NOK million Q2 2007 Q1 2007 Q2 2006 Exploration and Production 10 857 10 146 11 675 Energy and Oil Marketing 987 1 310 1 178 Eliminations (389) (290) 344 Oil & Energy 11 455 11 166 13 196 Aluminium Metal 2 465 2 534 2 333 Aluminium Products 355 1 315 32
Slide 34: Variance analysis Hydro
Variance analysis Hydro NOK million First half Q2 2007 28 842 14 198 2006 32 404 15 620 Variance EBIT (3 562) (1 422) Prices and currency - Oil (624) (5) - Gas (691) (173) - LME 2 635 1 604 - Currency (1 514) (511) - Margin (1 865) (2 230) - Volume 1 175 1 579 - Strategic hedges (370) (109) - Deriva
Slide 35: Consolidated balance sheets
Consolidated balance sheets NOK million 30 June 2007 31 March 2007 30 June 2006 Cash and cash equivalents 20 896 21 881 7 725 Short-term investments 6 274 14 982 12 669 Receivables and other current assets 42 092 44 377 47 021 Inventories 15 639 16 564 15 985 Assets held for sale 7 167 – – Non-curre
Slide 36: Statement of cash flows
Statement of cash flows Six months ended Six months ended NOK million 30 June 2007 30 June 2006 Operating activities: Net income 11 654 10 715 Depreciation, amortization and impairment losses 9 245 7 860 Other adjustments (4 091) 4 405 Net cash provided by operating activities 16 808 22 980 Investin
Slide 37: High oil price driven by supply concerns
High oil price driven by supply concerns Million bbl/day USD per bbl 5 80 70 4 60 3 50 40 2 30 20 1 10 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 OPEC spare capacity Brent dated Brent forward Sources: Pira, Reuters, Platts 37
Slide 38: Oil & Energy – EBIT
Oil & Energy – EBIT NOK million Eliminations 14 140 Energy and Oil Marketing 12 696 13 196 Exploration and Production 11 629 12 186 11 455 11 166 9 877 9 501 9 109 8 692 7 880 7 558 7 229 2004 2005 2006 2007 US GAAP US GAAP IFRS IFRS Accumulated 31 359 43 703 48 632 22 622 38
Slide 39: Average realized gas prices
Average realized gas prices NOK/Sm3 1.03 1.09 1.52 1.93 1.77 2.16 1.97 1.90 1.85 1.79 1.73 1.62 1.47 1.36 1.31 1.20 1.10 1.07 1.03 1.01 1.06 0.99 0.98 2003 2004 2005 2006 2007 39
Slide 40: Average prices and exchange rates
Average prices and exchange rates Oil Oil Gas 450 80 USD/boe NOK/boe NOK/USD NOK/Sm3 NOK/boe USD/boe 400 70 Q1 2005 46.4 291.7 6.29 1.47 350 Q2 2005 49.8 317.9 6.39 1.31 60 Q3 2005 60.4 390.6 6.47 1.36 300 Q4 2005 55.6 368.8 6.63 1.85 50 Avg. 2005 53.1 342.2 6.44 1.52 250 40 Q1 2006 60.6 403.5 6.67
Slide 41: Operating costs per boe
Operating costs per boe 160 154.1 140 128.1 120 111.6 94.9 100 82.1 80 60 40 20 NOK/boe 0 2004 2005 2006 2007 YTD YTD excl GoM Exploration 6.0 8.9 23.9 13.6 8.4 Net transportation 8.3 9.4 12.4 10 10.1 Other cost/income 0.7 3 2.7 4.3 3.6 Deprec.& aband. 46.4 48.2 83.1 66.1 55.9 Gas for injection 2.8
Slide 42: Oil production per field – Q2
Oil production per field – Q2 1 000 boe/day oil and NGL/condensate Share Hydro Q2 2006 Hydro Q2 2007 Grane 38.00% 84 79 Oseberg incl. C & East 34.00% 48 39 Girasol/Jasmin/Dalia/Rosa 10.00% 7 30 Snorre 17.77% 19 25 Åsgard 9.61% 17 19 Troll 9.78% 21 18 Terra Nova 15.00% 3 18 Ekofisk 5.81-6.65% 24 16 O
Slide 43: Gas production per field – Q2
Gas production per field – Q2 1 000 boe/day Share Hydro Q2 2006 Hydro Q2 2007 Troll 9.78% 48 53 Sleipner Area 8.85-10.00% 18 23 Åsgard 9.61% 15 20 US Gulf of Mexico 11 13 Tune 40.00% 18 12 Kristin 14.00% 6 8 Gullfaks 9.00% 6 6 Oseberg incl C & East 34.00% 10 6 Visund 20.30% 2 5 Oseberg South 34.00%
Slide 44: Oil production per field – first half
Oil production per field – first half 1 000 boe/day oil and NGL/condensate Share Hydro 2006 Hydro 2007 Grane 38.00% 83 81 Oseberg incl C & East 34.00% 49 43 Snorre 17.77% 23 28 Girasol/Jasmin/Dalia/Rosa 10.00% 10 28 Åsgard 9.61% 18 20 Ekofisk 5.81-6.65% 23 19 Troll 9.78% 22 19 Oseberg South 34.00% 2
Slide 45: Gas production per field – first half
Gas production per field – first half 1 000 boe/day Share Hydro 2006 Hydro 2007 Troll 9.78% 51 57 Sleipner Area 8.85-10.00% 21 23 Åsgard 9.61% 16 20 Tune 40.00% 19 13 US Gulf of Mexico 10 13 Oseberg incl C & East 34.00% 22 10 Kristin 14.00% 5 8 Gullfaks 9.00% 7 7 Kvitebjørn 15.00% 16 6 Visund 20.30%
Slide 46: New fields on stream 2007 – 2010
New fields on stream 2007 – 2010 Hydro share at Start Field name peak production Country Type Operator year (boed) 2007 Ormen Lange 70 000 Norway Gas/condensate Hydro, Shell Rosa 14 000 Angola Oil Total Independence Hub Area 12 500 US GoM Gas Hydro, Dominion, Anadarko Vilje 10 000 Norway Oil Hydro N
Slide 47: Exploration activity and costs
Exploration activity and costs NOK million 2 400 2 200 2 000 1 800 1 600 1 400 1 200 1 000 Expensed 800 share 600 400 200 0 - 200 - 400 - 600 - 800 Capitalized 2003 2004 2005 2006 2007 share -1 000 Expensed Expensed old wells Refund insurance Iran Seismic Spinnaker 47
Slide 48: UK gas prices – NBP forward curves
UK gas prices – NBP forward curves Pence/th 105 95 85 75 65 55 45 35 25 15 5 End Q2 2006 End Q4 2006 End Q1 2007 End Q2 2007 48
Slide 49: Nordic power market – forward curves
Nordic power market – forward curves NOK/MWh 500 450 400 350 300 250 200 150 End Q2 2006 End Q4 2006 End Q1 2007 End Q2 2007 49
Slide 50: Variance analysis Oil & Energy
Variance analysis Oil & Energy NOK million First half Q2 2007 22 622 11 455 2006 27 337 13 196 Variance EBIT (4 715) (1 741) Prices and currency - Oil (624) (5) - Gas (691) (173) - Currency (1 514) (511) - Margin (262) (818) - Volume 1 091 1 283 - Derivatives (1 149) (79) - Associates and JCE (64) (
Slide 51: Variance analysis Exploration and Production
Variance analysis Exploration and Production NOK million First half Q2 2007 21 004 10 857 2006 24 601 11 675 Variance EBIT (3 598) (817) Prices and currency - Oil (624) (5) - Gas (691) (173) - Currency (1 514) (511) - Volume 453 613 - Derivatives 124 450 - Associates and JCE (3) (2) - Exploration co
Slide 52: Variance analysis Energy and Oil Marketing
Variance analysis Energy and Oil Marketing NOK million First half Q2 2007 2 297 987 2006 2 335 1 178 Variance EBIT (38) (191) - Margin (239) (654) - Volume 638 670 - Derivatives (219) 39 - Associates and JCE (61) (39) - Other operational costs, net (148) (200) - Depreciation (8) (5) Variance EBIT (3
Slide 53: Primary aluminium production per quarter
Primary aluminium production per quarter 1 000 tons 1 472 1 720 1 826 1 799 868 457 461 464 449 451 449 450 441 446 444 433 435 415 418 381 388 360 343 2003 2004 2005 2006 2007 Slovalco consolidated from Q1 2004 53
Slide 54: Primary aluminium market
Primary aluminium market USD per ton days Aluminium inventories (days of consumption) 3 000 80 Aluminium price (LME 3 month) 2 600 60 2 200 1 800 40 1 400 1 000 20 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 54
Slide 55: Aluminium Metal hedge programs
Aluminium Metal hedge programs 1) 2007 2008 2006-2008 program – volume ton 2) 163 800 167 100 2006-2008 program – LME price USD/ton 2 300 2 200 2003-2007 program (Sunndal) – volume ton 3) 108 900 – 2003-2007 program (Sunndal) – LME price USD/ton 1 500 – 2003-2007 program (Sunndal) – LME price NOK/to
Slide 56: Aluminium – operational data
Aluminium – operational data Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Volumes and prices 2007 2007 2006 2006 2006 2006 2005 2005 2005 Primary production (1 000 mt) 435 433 450 449 451 449 464 461 457 LME realized (USD/mt) including hedges 2 606 2 588 2 430 2 462 2 368 2 146 1 851 1 770 1 842 NOK/USD realized incl
Slide 57: Aluminium Metal – EBIT
Aluminium Metal – EBIT NOK million z Realized aluminium price - USD 2 606 per ton Closures costs and impairments - +1% vs Q1 2007, +10% vs Q2 2006 Unrealized effects on LME, power and currency contracts - NOK 16 174 per ton Aluminium Metal adjusted EBIT - -2% vs Q1 2007, +5% vs Q2 2006 2 534 2 465 z
Slide 58: Aluminium Products – EBIT
Aluminium Products – EBIT NOK million z Rolled Products - Margin improvement compared to Q1 - Volume stable compared to Q1 Rolled Products Extrusion - Negative metal effect NOK 28 million in Q2 Automotive Other and eliminations z Extrusion - Positive margin and volume development in 1 315 Europe - C
Slide 59: Variance analysis Aluminium Metal
Variance analysis Aluminium Metal NOK million First half Q2 2007 4 999 2 465 2006 4 039 2 333 Variance EBIT 960 132 - Price LME 2 635 1 604 - Margin (1 468) (1 182) - Volume (60) 66 - Strategic hedges (370) (109) - Derivatives 178 42 - Associates and JCE 77 74 - Other operational costs, net 194 (199
Slide 60: Variance analysis Aluminium Products
Variance analysis Aluminium Products NOK million First half Q2 2007 1 670 355 2006 813 326 Variance EBIT 858 29 - Margin (219) (251) - Volume 145 231 - Derivatives (192) (9) - Associates and JCE (3) (6) - Other operational costs, net 376 1 - Depreciation 212 186 - Portfolio 539 (123) Variance EBIT 8
Slide 61: Variance analysis Rolled Products
Variance analysis Rolled Products NOK million First half Q2 2007 577 234 2006 701 231 Variance EBIT (124) 2 - Margin (79) 50 - Volume 121 60 - Derivatives (2) 8 - Associates and JCE 3 (8) - Other operational costs, net (202) (114) - Depreciation 25 15 - Portfolio 10 (9) Variance EBIT (124) 2 61
Slide 62: Variance analysis Extrusion
Variance analysis Extrusion NOK million First half Q2 2007 409 164 2006 – 156 Variance EBIT 409 8 - Margin 22 (98) - Volume (42) 34 - Associates and JCE (6) (5) - Other operational costs, net 297 (50) - Depreciation 138 126 Variance EBIT 409 8 62
Slide 63: Variance analysis Automotive
Variance analysis Automotive NOK million First half Q2 2007 733 (15) 2006 (30) (49) Variance EBIT 763 34 - Margin (128) (189) - Volume 66 137 - Associates and JCE – 7 - Other operational costs, net 245 148 - Depreciation 49 45 - Portfolio 529 (115) Variance EBIT 763 34 63
Slide 64: Investor Relations in Hydro
Investor Relations in Hydro t: +47 22 53 84 83 Ada Christiane Rieker Vice President m: +47 951 82 718 e: ada.christiane.rieker@hydro.com t: +47 22 53 92 80 Stefan Solberg Investor Relations Officer m: +47 917 27 528 e: stefan.solberg@hydro.com t: +47 22 53 92 24 Irene Raposo Investor Relations Secre
Slide 65: hydro.com
hydro.com 65