Norsk Hydro Asa · OSL:NHY

Norsk Hydro Asa — Sapa — Investor Day (November 2016)

69 slides from Norsk Hydro Asa's investor day presentation, Nov 3, 2016

Slide 2: Today's presenters
2 Today’s presenters Egil Hogna Karl Eichinger John Thuestad Erika Ahlqvist President & CEO CFO Business Area President EVP CSR & Extrusion Europe Communication Copyright © 2016 Sapa Group
Slide 3: Today's agenda
3 Today’s agenda Building the Sapa of today and the future CEO presentation Leveraging the Sapa platform in practice Business area Extrusion Europe presentation Shifting focus from turnaround to profitable growth CFO presentation The journey ahead CEO concluding remarks Q&A Copyright © 2016 Sapa Gro
Slide 4: Building the Sapa of today and the future
4 • Egil Hogna Building the Sapa of today • President & CEO and the future Shaping a sustainable future through innovative aluminium solutions Copyright © 2016 Sapa Group
Slide 5: Unique position as world leading extrusion company
5 Unique position as world leading extrusion company • Aluminium and Extrusion is an attractive market • JV formation rationale proven with clear competitive advantages • Business model with high value added, flexibility and low commodity price risk • Clear strategy for growth and value creation • O
Slide 8: Sapa has driven consolidation in the extrusion industry
8 Sapa has driven consolidation in the extrusion industry • Building on knowledge base and rightsizing portfolio in Europe • Integrating and capitalizing on strong positions in North America • Developing attractive positions in high-growth markets • Flexibility and capability to meet challenging mar
Slide 9: #1 global extrusions producer
9 Sapa – more than 50 years of consolidation #1 global extrusions producer 54 NOK billion turnover** 22,200 people > 50% of production using recycled aluminium 14% ROCE* Present in ~ 40 countries * Pre tax rolling 12 months, year to date Q3 2016 Copyright © 2016 Sapa Group ** Rolling 12 months, year
Slide 10: Significant steps taken since last year
10 Significant steps taken since last year • NOK 1.35 billion vs NOK 1 billion target Integration and • Significant bottom line improvements, supported by Sapa delivering on restructuring synergy targets ahead of time Increased quality • Quality systems lifted to industry benchmark and value-added •
Slide 12: Business concentrated in Extrusion North America and Europe
12 Business concentrated in Extrusion North America and Europe Sales breakdown by business area (2015) Sales breakdown by geography (2015) 2% Extrusion Europe 4% 12 % Europe 13% 36 % Extrusion North North & Central America America Building System 42% 52% South America Precision Tubing Asia incl ME 3
Slide 13: Global trends drive the demand for aluminium
13 Global trends drive the demand for aluminium Environment & climate change Population growth Urbanization Reduced CO2 emissions targets New industrialized areas New concept of cities Higher fuel efficiency Higher mobility Durable material Lighter cars Transportation demand Energy efficient buildin
Slide 14: Aluminium is durable, infinitely recyclable and provides more efficient solutions
14 Aluminium is durable, infinitely recyclable and provides more efficient solutions Low weight Superior Corrosion Recyclable with high strength malleability resistance low energy input Copyright © 2016 Sapa Group
Slide 15: Well-positioned in downstream aluminium
15 Well-positioned in downstream aluminium Upstream Downstream Mining Refining Smelting & Casting Extrusion Casting Rolling What it does? What it Bauxite Alumina Foundry alloys, ingots Extruded products Cast products Plates, strip and foil produces? Commodity Who it price is pass- serves? through Co
Slide 16: Robust outlook for aluminium extrusion end markets
16 Robust outlook for aluminium extrusion end markets Extrusion Demand Volume CAGR 2015-2020 by Sector 6.0% 5.6% 4.3% 3.9% 3.5% 2.5% 0.9% Transportation & Consumer Machinery & Electrical Construction Other Weighted Average Automotive Durables Equipment % of 2015 14% 4% 12% 3% 63% 3% market demand Ex
Slide 17: We serve a broad range of end markets
17 We serve a broad range of end markets Building & Transportation Distribution Industrial Automotive HVAC&R* construction revenues (2015) Share of Sapa 37% 17% 11% 17% 17% 1% Copyright © 2016 Sapa Group * Heating, ventilation, air conditioning and refrigeration.
Slide 18: Sapa's vision guides our strategy and how we do business
18 Sapa’s vision guides our strategy and how we do business We are aluminium. Excelling in technology and innovation. Today and tomorrow. Sapa – Innovative aluminium solutions Copyright © 2016 Sapa Group
Slide 19: Competitive advantage: Unmatched technology competence
19 Competitive advantage: Unmatched technology competence • Unique R&D network close to customers • Leading competence in value-add activities 150 Annual customer 100,000 • Expanding world wide Sapa Academy concept academies and workshops Annual customer visits • More engineers than most of our comp
Slide 20: Competitive advantage: Value chain width and depth
20 Competitive advantage: Value chain width and depth • Unmatched wide range of solutions • Creating value with design, materials, and services • Complete customer solutions “Value added processing by the supplier reduces complexity for us and avoids the need to coordinate supply chain flows between
Slide 21: Global reach and local presence – plant-network
21 Competitive advantage: Global reach and local presence – plant-network • Number one globally • Close to local customers • Network of plants allows for flexibility and reliability • Dies can be switched and moved swiftly and at low cost to adapt to specific customer needs • Building Systems has a
Slide 22: Our strategy is to lead the aluminium extrusion industry
22 Our strategy is to lead the aluminium extrusion industry by offering the best value in innovative aluminium solutions 1. Increase value-added 2. Simplify and 3. Selective growth to our customers collaborate Copyright © 2016 Sapa Group
Slide 23: Extrusion Europe – market leader with strong focus on value added products
23 Extrusion Europe – market leader with strong focus on value added products • Be the European industry shaper Fast facts • Benefit from speed and proximity in building and construction 9,400 people • Outperform competition in vertical integration and material substitution 40 locations • Grow expos
Slide 24: Extrusion North America – uniquely positioned as the only coast-to-coast supplier
24 Extrusion North America – uniquely positioned as the only coast-to-coast supplier • Further develop strong position in transportation and distribution Fast facts • Increase position through superior “ease of doing business” model and unique new services and product offerings 6,300 people • Lead i
Slide 25: Building Systems – leading European player
25 Building Systems – leading European player with well recognized multi-brand portfolio • Become the market leader in Europe Fast facts • Grow business in Asia and enter North America 2,800 people • Lead in product design and energy efficient solutions through strong R&D capabilities Employees in •
Slide 26: Precision Tubing – technology leaders in selected niches
26 Precision Tubing – technology leaders in selected niches • Be in the forefront in precision aluminium solutions for heat Fast facts transfer and industrial applications • Lead the material substitution in the HVAC&R industry 3,100 people • Focus extrusion business in South America and Asia on sel
Slide 27: Key priorities for 2017
27 Key priorities for 2017 • Continuing improvements in safety and quality • Value over volume - increased share of value- added products in all business areas • Simplification and collaboration to further reduce costs and operate smarter • Continued focus on capital efficiency and strong cash gener
Slide 28: Leveraging the Sapa platform in practice
28 • John Thuestad Leveraging the Sapa platform • BA President in practice Extrusion Europe Shaping a sustainable future through innovative aluminium solutions Copyright © 2016 Sapa Group
Slide 29: What is extrusion?
29 What is extrusion? Aluminum alloy logs in 4-8.5 meters …cut to lengths (billets) adjusted for the lengths… press operation… …heated to about 500 degrees C… …the metal is extruded through the die and immediately cooled off Copyright © 2016 Sapa Group
Slide 30: Our journey since 2013
30 Our journey since 2013 People Capability Customers Created a European lead Develop plant footprint to team and culture Took leadership position in reflect the European European market market Copyright © 2016 Sapa Group
Slide 31: Setting the industry standard: Safety, Quality, Service
31 Setting the industry standard Safety Quality Service Foundation for success
Slide 32: Extrusion Europe's journey is paying off
32 Extrusion Europe’s journey is paying off Focus shift: Value over volume Volume (kmt) NAV/kg (EUR, indexed) 115 119 100 613 563 574 2014 2015 LTM Q3 2016 2014 2015 LTM Q3 2016 Underlying EBIT (NOK million) Highlights 705 475 • Value over volume – selective on segments to develop 224 • Improved pro
Slide 33: From extrusions to solutions
33 From extrusions to solutions 350 kmt of billet remelted in 8 Cast Houses >600 kmt of extrusions produced in 40 locations EUR 350 million of Fabrication 16 Locations for Surface Treatment Copyright © 2016 Sapa Group
Slide 35: Scale
35 1 Scale • 40 production locations in 20 countries with 24% market share • 10,000 employees with knowledge & experience unparalleled in the market • 20,000 customers (300-600 customers per plant) • Low dependence on individual customers, markets or segments Copyright © 2016 Sapa Group
Slide 36: Capability
36 2 Capability Customized design and tailored solutions Automotive B&C Rail Marine & Offshore • Light & strong structural parts • Exceptional quality and lead • Structural friction stir welded • Welded panels for structures times for large scale high end components and sub- below and above the wate
Slide 37: R&D and application development
37 3 R&D and application development • Copyright © 2016 Sapa Group • We have the Sapa Technology facility in Sweden focusing on process and product development • We have over 200 application engineers throughout Europe • We have an unparalleled ability to partner with our customers for advanced solu
Slide 39: Taking a leadership position going forward
39 Taking a leadership position going forward Engineering Rail Marine & Offshore Automotive Truck Building & Construction
Slide 40: Crash management systems for safer trucks
40 Crash management systems for safer trucks • Joint development with major truck manufacturers • Sapa in Tier 1 position, delivering 100% of the volume • 45% weight reduction • Value add based product including alloy development, bending, machining, welding, and assembly Copyright © 2016 Sapa Group
Slide 41: Delivering solutions to marine and offshore market
41 Delivering solutions to marine and offshore market • Working with Apply Leirvik, delivering parts to the housing quarters constructed with wide panels • Weight reduction, corrosion resistance, and lowered maintenance costs • Utilizing Sapa’s competence and capabilities in Magnor, Norway and Finsp
Slide 42: Driving high end building and construction solutions
42 Driving high end building and construction solutions • Supply a façade system designed by Gartner • Provides a one stop solution – project management, extrusion, thermal break & surface treatment • Uniquely positioned to provide profiles including big and wide shapes Copyright © 2016 Sapa Group
Slide 43: Our strategic priorities going forward
43 Our strategic priorities going forward • Increase solution development serving the high value markets • Outperform competition in vertical integration and material substitution • Shape the European aluminium extrusion Industry Copyright © 2016 Sapa Group
Slide 44: From turnaround to profitable growth
44 • Karl Eichinger From turnaround to • CFO profitable growth Shaping a sustainable future through innovative aluminium solutions Copyright © 2016 Sapa Group
Slide 45: Recap of financial priorities at JV formation
45 Recap of financial priorities at JV formation High •1 Retain business Level of urgency •2 Extract synergies •3 Improve margins Copyright © 2016 Sapa Group
Slide 46: Integration targets achieved well ahead of plan
46 Integration targets achieved well ahead of plan 1 2 3 Retain business  No significant loss of business due Initial synergies plan  EBIT margin improving 4  3.7 to customer overlap 3 2.5 NOK 1 billion* 2 1.4 Building system market share trend reversed 1 0 -1 Q4- Q4- Q4- Q3- 2013 2014 2015 13 14
Slide 47: 29 significant restructuring projects in the initial synergy programme
47 We went through 29 significant restructuring projects in the initial synergy programme Divestments (5) Bolzano Sweden I Full plant closure (10) Haticon II Sweden II Part closure / restructuring / downsizing (14) Autocar Koefem I Jiangyin Koefem II SCAP Trzcianca Guelph Ziar Hanover X-Docks France
Slide 48: Sapa Group: Cost position and portfolio mix improved
48 Sapa Group Cost position and portfolio mix improved Volume (kmt) NAV/kg (NOK, indexed) (2.3)% 125 134 1 399 100 1 363 1 366 2014 2015 LTM Q3 2016 2014 2015 LTM Q3 2016 Underlying EBIT (NOK million) Highlights 1 991 • Value over volume – selective on segments to develop 1 407 • Customer value focu
Slide 49: Extrusion Europe
49 Extrusion Europe Focus shift: Value over volume Volume (kmt) NAV/kg (EUR, indexed) 115 119 100 613 563 574 2014 2015 LTM Q3 2016 2014 2015 LTM Q3 2016 Underlying EBIT (NOK million) Highlights 705 475 • Value over volume – selective on segments to develop 224 • Improved product mix • Improving cos
Slide 50: Extrusion North America
50 Extrusion North America Robust performance in a strong market Volume (kmt) NAV/kg (USD, indexed) 100 101 105 577 598 590 2014 2015 LTM Q3 2016 2014 2015 LTM Q3 2016 Underlying EBIT (NOK million) Highlights • Strong market growth – Sapa selective on profitable 931 935 segments 705 • Increasing val
Slide 51: Building Systems
51 Building Systems Restructuring and stronger commercial offering improving results Volume (kmt) NAV/kg (EUR, indexed) 115 119 100 88 77 77 2014 2015 LTM Q3 2016 2014 2015 LTM Q3 2016 Underlying EBIT (NOK million) Highlights 297 • Improving results in weak market • Increasing value added 71 (1) • S
Slide 52: Precision Tubing
52 Precision Tubing Benefiting from restructuring and growing end-markets Volume (kmt) NAV/kg (NOK, indexed) +1.4% 124 132 100 147 145 149 2014 2015 LTM Q3 2016 2014 2015 LTM Q3 2016 Underlying EBIT (NOK million) Highlights • Underlying market improvement in automotive and 255 HVAC&R 181 124 • Restr
Slide 53: Steady trajectory of improving results
53 Steady trajectory of improving results LTM rolling underlying EBIT in NOK million, ROCE (pre-tax) 13.7% 13.0% 10.8% 1 907 1 991 9.5% 8.3% 1 586 7.1% 1 407 6.4% 1 224 4.8% 1 021 889 2.8% 1.4% 652 0.4% 367 190 52 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 LTM Underlying EBIT
Slide 54: Increased working capital efficiency
54 Increased working capital efficiency Last 12 months rolling working capital days 41.9 40.5 38.1 37.6 37.6 36.9 36.7 37.0 36.9 35.6 34.4 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Copyright © 2016 Sapa Group Working capital days are calculated as average working capital duri
Slide 55: All business areas contribute to the development
55 All business areas contribute to the development Working capital days Extrusion Europe Extrusion North America 31 29 27 28 27 26 2014 2015 LTM Q3 2016 2014 2015 LTM Q3 2016 Building Systems Precision Tubing 63 59 62 56 55 51 2014 2015 LTM Q3 2016 2014 2015 LTM Q3 2016 Copyright © 2016 Sapa Group
Slide 56: Sustaining and safety Capex below depreciation
56 Sustaining and safety Capex below depreciation Capex (NOK billion) 1.5 1.3 1.1 1.1 2013 2014 2015 LTM 2016 Capex as % of 94% 85% 112% 100% Depreciation Copyright © 2016 Sapa Group
Slide 59: Continued focus on capital efficiency
59 Continued focus on capital efficiency • Continued tight working capital management • Sustained and safety Capex below depreciation • Selective capability and capacity investments to support move towards more value-added solutions Copyright © 2016 Sapa Group
Slide 60: Net debt position development
60 Net debt position development Quarterly (NOK million) 1.8 x 3 654 1.6 x 1.4 x 1.7 x 2 836 1.6 x 2 368 2 432 2 275 2 119 2 137 1.2 x 1.2 x 1 995 1 744 1 750 0.9 x 1 144 0.6 x 0.7 x 478 0.4 x 0.1 x Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 NIBD NIBD/EBITDA NIBD / Under
Slide 61: Sapa has low exposure to aluminum price volatility
61 Sapa has low exposure to aluminum price volatility Pricing components • Spread: production, engineering, design -> value added Spread • Premium: premium above LME reflecting standard ingot and billet Price to premiums Premium Customer • London Metal Exchange (LME): price LME Pricing methods Catal
Slide 62: Key takeaways
62 Key takeaways • ROCE: 13.7% (up from 0.4% as of Q1-2014) • EBIT: NOK 2.0 billion LTM* (up from NOK 52 million as of Q1-2014) • NIBD/EBITDA: 0.1x (down from 1.8x as of Q1-2014) • Working capital days: 34.4 (down from 41.9 as of Q1-2014) • Sustaining capex: below depreciation Copyright © 2016 Sapa
Slide 64: Unique position as world leading extrusion company
64 Unique position as world leading extrusion company • Aluminium and Extrusion is an attractive market • JV formation rationale proven with clear competitive advantages • Business model with high value added, flexibility and low commodity price risk • Clear strategy for growth and value creation •
Slide 65: Shapes. The Aluminium Design Knowledge Hub.
Shapes. The Aluminium Design Knowledge Hub. www.shapes.al
Slide 67: Broad end-market exposure
67 Broad end-market exposure Sapa Group 100% Precision Tubing Extrusion Building System 8%* 79%* 13% 14% 13% 30% 100% 86% 22% 22% 13% HVAC&R Automotive Industrial1 Transport Distribution2 B&C 1% 17% 17% 17% 11% 37% Estimated share of revenues from each market segment in 2015. Copyright © 2016 Sapa G
Slide 68: The corporate management team
68 The corporate management team Egil Hogna Florian Krumbacher Katarina Nilsson Karl Eichinger Rafael Fuertes President & CEO EVP General EVP HR CFO EVP Strategy & Counsel Innovation Erika Ahlqvist Charlie Straface Salvador Biosca John Thuestad Sergio Vendrasco EVP Communication EVP Extrusion EVP Bu
Slide 69: Key financials by business area
69 Key financials by business area NOK million Extrusion Europe 2014 2015 LTM 2016 Extrusion North America 2014 2015 LTM 2016 Volume (kmt) 613 563 574 Volume (kmt) 577 598 590 Sales (NOKm) 17,877 20,031 19,774 Sales (NOKm) 16,437 21,694 20,641 Underlying EBITDA (NOKm) 763 1,016 1,223 Underlying EBIT

Sapa — Investor Day (November 2016) on 6ix

Norsk Hydro Asa — Sapa — Investor Day (November 2016)

Slide 1: Innovative aluminium solutions

Slide 2: Today's presenters

Slide 3: Today's agenda

Slide 4: Building the Sapa of today and the future

Slide 5: Unique position as world leading extrusion company

Slide 6: Shaping a sustainable future through innovative aluminium solutions

Slide 7: Safety is our top priority

Slide 8: Sapa has driven consolidation in the extrusion industry

Slide 9: #1 global extrusions producer

Slide 10: Significant steps taken since last year

Slide 11: Sapa operates in four business areas

Slide 12: Business concentrated in Extrusion North America and Europe

Slide 13: Global trends drive the demand for aluminium

Slide 14: Aluminium is durable, infinitely recyclable and provides more efficient solutions

Slide 15: Well-positioned in downstream aluminium

Slide 16: Robust outlook for aluminium extrusion end markets

Slide 17: We serve a broad range of end markets

Slide 18: Sapa's vision guides our strategy and how we do business

Slide 19: Competitive advantage: Unmatched technology competence

Slide 20: Competitive advantage: Value chain width and depth

Slide 21: Global reach and local presence – plant-network

Slide 22: Our strategy is to lead the aluminium extrusion industry

Slide 23: Extrusion Europe – market leader with strong focus on value added products

Slide 24: Extrusion North America – uniquely positioned as the only coast-to-coast supplier

Slide 25: Building Systems – leading European player

Slide 26: Precision Tubing – technology leaders in selected niches

Slide 27: Key priorities for 2017

Slide 28: Leveraging the Sapa platform in practice

Slide 29: What is extrusion?

Slide 30: Our journey since 2013

Slide 31: Setting the industry standard: Safety, Quality, Service

Slide 32: Extrusion Europe's journey is paying off

Slide 33: From extrusions to solutions

Slide 34: How do we leverage the strengths of Sapa?

Slide 35: Scale

Slide 36: Capability

Slide 37: R&D and application development

Slide 38: When we combine these, there is nothing we can't do

Slide 39: Taking a leadership position going forward

Slide 40: Crash management systems for safer trucks

Slide 41: Delivering solutions to marine and offshore market

Slide 42: Driving high end building and construction solutions

Slide 43: Our strategic priorities going forward

Slide 44: From turnaround to profitable growth

Slide 45: Recap of financial priorities at JV formation

Slide 46: Integration targets achieved well ahead of plan

Slide 47: 29 significant restructuring projects in the initial synergy programme

Slide 48: Sapa Group: Cost position and portfolio mix improved

Slide 49: Extrusion Europe

Slide 50: Extrusion North America

Slide 51: Building Systems

Slide 52: Precision Tubing

Slide 53: Steady trajectory of improving results

Slide 54: Increased working capital efficiency

Slide 55: All business areas contribute to the development

Slide 56: Sustaining and safety Capex below depreciation

Slide 57: Meeting strong demand in automotive in China

Slide 58: Select investments within e-mobility

Slide 59: Continued focus on capital efficiency

Slide 60: Net debt position development

Slide 61: Sapa has low exposure to aluminum price volatility

Slide 62: Key takeaways

Slide 63: The journey ahead

Slide 64: Unique position as world leading extrusion company

Slide 65: Shapes. The Aluminium Design Knowledge Hub.

Slide 66: Appendix

Slide 67: Broad end-market exposure

Slide 68: The corporate management team

Slide 69: Key financials by business area