Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (July 2010)
114 slides from Norsk Hydro Asa's investor presentation, July 2010
Slide 1: Investor presentation – July 2010
Investor presentation – July 2010
Slide 2: Cautionary note
Cautionary note This announcement is not an offer for sale of securities in the United Certain statements included within this announcement contain forward- States or any other country. The securities referred to herein have not looking information, including, without limitation, those relating to (
Slide 3: Table of contents
Table of contents Company overview 4 Market outlook 10 Second quarter results 2010 27 Hydro takes over Vale’s 45 aluminium business Business overview 62 Primary Metal 63 Metal Markets 73 Rolled Products 76 Extruded Products 79 Energy 86 Additional information 92 (3)
Slide 4: Company overview
Company overview (4)
Slide 5: Hydro
Hydro A leading integrated aluminium and energy company • 19 000 employees Primary Metal • Operations in 40 countries Metal Metal • Turnover Markets Markets • 2007: NOK 94 billion • 2008: NOK 89 billion Rolled • 2009: NOK 67 billion Products • Underlying EBIT • 2007: NOK 9.9 billion Extruded Extrude
Slide 6: Hydro's value proposition
Hydro’s value proposition • Leading integrated aluminium and energy company with global reach and attractive positions across the value chain • Upstream cost position to be improved by the world-class Qatalum smelter • Strong operational performance and cost focus • Financial discipline • Long-term
Slide 7: Strong aluminium industry position
Strong aluminium industry position Integrated Emerging Market Mining & Metal Manufacturing 7 353 Alumina Primary Rolled Extrusions 5 471 Production in 1 000 tonnes* Other 4 544 3946 3 752 3729 3564 3 046 2823 2686 2593 2 266 1865 1396 1234 1 078 794 785 729 686 700 645 527 401 230 234 127 163 163 90
Slide 8: Strong positions across aluminium value chain
Strong positions across aluminium value chain Lower break-even and robust cash generation 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 c
Slide 9: Capital employed – upstream focus
Capital employed – upstream focus NOK million June 30, 2010 Primary Metal 35 495 Energy, 7% Metal Markets 3 423 Rolled Products 7 222 Extruded Products, 11% Extruded Products 6 046 Energy 3 675 Other and eliminations (6 066) Rolled Products, 13% Total 49 795 Primary Metal, 63% Graph excludes NOK 6.1
Slide 10: Market outlook
Market outlook (10)
Slide 11: Indefinite ideas in aluminium
Indefinite ideas in aluminium Healthy long-term demand • Properties lead to increased market share • 1/3 the density of steel • Aluminium intensive urbanisation and infrastructure • Recyclability • Climate challenge – aluminium as part of the solution • 5% of original energy consumption • Recyclabil
Slide 12: High growth rates expected next 10 years
High growth rates expected next 10 years World semis consumption in important sectors: average annual growth rate 2009-2018 6.5% 1 000 tonnes / % annual growth 25 000 2009 8.1% 2018 20 000 6.9% 15 000 8.7% 10 000 7.2% 7.8% 2.4% 4.0% 5.6% 5 000 0 Transport C onstruction Packaging Foil Stock Electrica
Slide 13: Aluminium price softens
Aluminium price softens USD per tonne 3 400 Primary aluminium LME USD/tonne NOK/tonne 3 200 Q2 2010 average 2 121 13 197 3 000 Q2 2010 end 1 954 12 689 2 800 Q1 2010 average 2 197 12 862 2 600 Q1 2010 end 2 320 13 880 2 400 Average 2009 1 702 10 575 2 200 2 000 Average 2008 2 620 14 453 1 800 Averag
Slide 14: Downstream sales up on demand and seasonal effects
Downstream sales up on demand and seasonal effects Hydro’s downstream sales Q2 2010 vs Q1 2010 Total downstream sales* Q2 10 vs Q1 10 1H 10 vs 1H 09 24% Foil Litho Packaging Auto, heat Extrusion Building Extrusion Precision & building exchanger Eurasia Systems Americas Tubing & general engineering 1
Slide 15: Upstream sales up on demand and seasonal effects
Upstream sales up on demand and seasonal effects Hydro’s upstream sales Q2 2010 vs Q1 2010 Total upstream sales Extrusion ingot Sheet ingot Foundry alloys Standard ingot Q2 10 vs Q1 10 1H 10 vs 1H 09 17% 12% 11% 9% 4% 3% (15)
Slide 16: Reduced market imbalance outside China
Reduced market imbalance outside China World outside China (annualized), 1 000 tonnes 30 000 C onsumption Production • Annualized imbalance of 28 000 1.1 million tonnes in Q2 26 000 24 000 • Imbalance expected to 22 000 continue in 2010 20 000 • New capacity coming on 18 000 16 000 14 000 stream in
Slide 17: Stable inventory levels
Stable inventory levels 1 000 tonnes 7 000 • Reported inventories outside IAI stocks LME NYMEX/TOC OM/Japan China: ~6 million tonnes 6 000 5 000 • Large portion of inventories held by financial investors 4 000 • Unavailable to market • Time horizon depending on interest 3 000 rates, warehousing cost
Slide 18: Inventory days at high level
Inventory days at high level USD per tonne Days 3 300 130 120 2 800 110 100 2 300 90 80 1 800 70 60 1 300 50 40 800 30 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Aluminium inventories (days of consumption)* LME 3-month average *IAI and LME reported
Slide 19: Increased ingot premiums
Increased ingot premiums USD per tonne 200 US Mid West Japan Europe* 150 100 50 0 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 * Duty-paid Source: Metal Bulletin, MW/MJP: Platts (19)
Slide 20: China balanced in primary aluminium
China balanced in primary aluminium 1 000 tonnes 600 550 • Balanced supply and demand 500 during Q2 450 400 • Announced production cuts due Net import 350 to low prices and high costs 300 250 • New capacity coming on stream 200 150 100 50 • Modest primary production 0 surplus expected in 2010 (50) N
Slide 21: Share of semis consumption
Share of semis consumption 2009 – 46 million tonnes C onsumer durables Electrical 7% 13% Packaging 10% Machinery & equipment 10% Foil stock 8% Other 7% Transport 23% C onstruction 23% Source: CRU LT October 2009 (21)
Slide 22: Commodity prices stabilizing
Commodity prices stabilizing Crude oil – Brent (USD/bbl) Coal – CIF ARA (USD/mt) Petroleum coke FOB USG (USD/tonne) 160 245 550 140 210 500 120 175 450 100 140 400 80 105 350 60 70 300 40 35 250 20 0 200 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Power
Slide 23: 2010 market outlook unchanged
2010 market outlook unchanged • World outside China • Main markets estimated to increase ~12% to around 23 million tonnes • Supply/demand imbalance expected to continue • Main share of curtailed capacity unlikely to restart • Limited new capacity • China • Broadly balanced in primary aluminium (23)
Slide 24: Energy: low reservoir levels and production
Energy: low reservoir levels and production South Norway price (NO2)*) Water reservoir levels in South Norway (NO2) NOK/MWh Percent 600 100 2008 2009 2010 2008 2009 2010 90 500 80 70 400 60 300 50 40 200 30 20 100 10 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 3
Slide 25: Nordic power market – forward curves
Nordic power market – forward curves NOK/MWh 450 400 350 300 250 200 150 Oct 09 Apr 10 Oct 10 Apr 11 Oct 11 End Q4 2008 End Q2 2009 End Q4 2009 End Q1 2010 End Q2 2010 (25)
Slide 26: Climate policies – effects on aluminium
Climate policies – effects on aluminium Demand-effect • Changed semi’s and end-product prices • Aluminium vs. steel and plastics when CO2 emissions get a price tag • Regulatory measures Supply – effects on production cost and long-term prices • Cost per tonne CO2 increases over time • Direct carbon
Slide 27: Second quarter results 2010
Second quarter results 2010 (27)
Slide 28: Highlights
Highlights • Increased demand in seasonally strong quarter • Solid operations • Further improvement in results • Upstream up on higher realized aluminium prices and improved alumina performance • Downstream rises further with strong sales, firm margins and improved productivity • Energy falls on sig
Slide 29: Firm cost control in Rolled Products
Firm cost control in Rolled Products 1H 2010 vs 1H 2009* • Competitive cost base from 28.0% measures implemented in 2009 36% • 36% of volume gain retained 18.0% on bottom line: • Shipments rise 28% • Costs up 18% • Maintenance up 13% • Manning: full-time equivalents up 10% C ost development Increase
Slide 30: Firm cost control in Extruded Products
Firm cost control in Extruded Products 1H 2010 vs 2H 2009* • Competitive cost base from 23.0% measures implemented in 2009 • 78% of volume gain retained on bottom line: 78% • Shipments rise 23% • Costs up 5% • Manning: full-time equivalents up 7% 5.0% C ost development Increase in shipments Cost inc
Slide 31: Upstream repositioning continues
Upstream repositioning continues Cash cost up from 2009 on increased alumina cost and lower NOK/USD Estimated primary aluminium • Unsatisfactory cost position production cash costs • Estimated first half 2010 cash cost USD 1 775/ In USD/tonne* NOK 10 500 2 175 • Stronger USD positively influences US
Slide 32: Underlying EBIT
Underlying EBIT 2 032 1 619 1 490 1 110 868 688 -493 -618 -651 -793 NOK million Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Primary Metal 938 795 906 93 (185) (895) (760) (717) (49) 657 Metal Markets 363 139 (41) 242 (245) 196 (15) (20) 65 31 Rolled Products 147 2
Slide 33: Underlying EBIT earnings bridge
Underlying EBIT earnings bridge Q1 2010 to Q2 2010 NOK billion 0.3 (0.6) 0.3 0.6 (0.2) 1.1 0.7 Q1 2010 LME price and Aluminium volume Margin Power production Other Q2 2010 currency (33)
Slide 34: Key financials
Key financials First half First half NOK million Q2 2010 Q1 2010 Q2 2009 2010 2009 Revenue 19 779 18 145 17 617 37 924 34 186 Underlying EBIT 1 110 688 (618) 1 798 (1 111) Items excluded from underlying EBIT 47 297 1 029 344 (77) Reported EBIT 1 157 985 410 2 142 (1 188) Financial income (expense) (
Slide 35: Items excluded from underlying EBIT
Items excluded from underlying EBIT First half First half NOK million Q2 2010 Q1 2010 Q2 2009 2010 2009 Underlying EBIT 1 110 688 (618) 1 798 (1 111) Unrealized effects power contracts (211) (272) (118) (483) 463 Unrealized LME and other derivative effects (81) 230 1 427 149 719 Metal effect, Rolled
Slide 36: Primary Metal
Primary Metal Q2 Q1 Q2 Key figures 2010 2010 2009 Alumina production, kmt 518 474 494 Primary aluminium production, kmt 362 339 338 Total sales volumes, kmt 531 504 455 Realized LME price, USD/mt 2 200 1 997 1 468 Realized LME price, NOK/mt 13 302 11 542 9 598 Underlying EBIT Alumina, NOK million 28
Slide 37: Alumina and Raw Materials
Alumina and Raw Materials Q2 performance • Improved Alunorte result due to increased production • Strong results in commercial activities Outlook second half 2010 • Decreasing alumina revenues • Priced with 1 month lag to LME • Increasing bauxite costs • Partly linked to average LME with 3-12 months
Slide 38: Metal Markets
Metal Markets Q2 Q1 Q2 Key figures 2010 2010 2009 Remelt production, kmt 160 148 111 Total metal products sales, kmt 733 670 614 Underlying EBIT, NOK million 31 65 196 Underlying EBIT Q2 operating results NOK million • Negative currency effects of NOK 140 million vs (83) 96 negative effects of NOK 1
Slide 39: Rolled Products
Rolled Products Q2 Q1 Q2 Key figures 2010 2010 2009 External sales volumes, kmt 242 231 187 Underlying EBIT, NOK million 309 223 (28) Underlying EBIT Q2 operating results NOK million • Strong result on higher sales volume contributing 26 532 NOK 80 million 309 • Largest volume increase in beverage c
Slide 40: Extruded Products
Extruded Products Q2 Q1 Q2 Key figures 2010 2010 2009 External sales volumes, kmt* 141 128 112 Underlying EBIT, NOK million 201 117 (26) Underlying EBIT Q2 operating results NOK million • Increased volume in all market segments (67) 318 • Largest volume increase in Extrusion Eurasia and Extrusion Am
Slide 41: Energy
Energy Q2 Q1 Q2 Key figures 2010 2010 2009 Power production, GWh 1 621 2 781 1 809 Net spot sales, GWh 144 1 323 413 Southwest Norway spot price (NO2), 368 430 297 NOK/MWh Underlying EBIT, NOK million 177 588 281 Underlying EBIT Q2 operating results NOK million • Low production reducing result by NO
Slide 42: Cash flow
Cash flow • NOK 1.6 billion in cash flow from NOK million Q2 2010 Q1 2010 Q2 2009 operations Net income (loss) 598 924 282 Depreciation 740 721 805 Operating capital (338) (1 580) 2 907 • Qatalum investments Other adjustments 600 121 (1 984) • Equity contribution NOK 0.7 billion Net cash flow from o
Slide 43: Financial position
Financial position Net cash / (debt) in NOK billion Dec 31, Mar 31, Jun 30, NOK billion 2009 2010 2010 2.0 Cash and cash equivalents 2.5 2.5 2.2 Short-term investments 1.5 1.6 1.3 Short-term debt (1.9) (1.0) (1.5) Long-term debt (0.1) (2.6) (2.1) Net cash/(debt) 2.0 0.5 (0.1) Net int.-bearing debt i
Slide 44: Priorities
Priorities Priorities • Firm cost control • Qatalum ramp-up • Solid operations • Upstream repositioning • Capture market opportunities • Vale assets integration • Cash flow generation (44)
Slide 45: Hydro takes over Vale's aluminium business
Hydro takes over Vale’s aluminium business (45)
Slide 46: Transforming transaction and a stronger Hydro
Transforming transaction and a stronger Hydro • Full bauxite integration • New know-how • Long alumina position • Technology leadership • Premier assets across value chain • More financially robust • Lower break-even • Greater growth potential (46)
Slide 47: Takeover of Vale's aluminium business on track
Takeover of Vale’s aluminium business on track • NOK 10 billion rights issue successfully completed July 16 • Hydro’s integration planning well underway • All relevant regulatory applications submitted • Consent received from joint- venture partner Nippon Amazon Aluminium Company for transfer of own
Slide 48: World-class assets in resource-rich Brazil
World-class assets in resource-rich Brazil CAP alumina Alunorte refinery project alumina refinery Increasing stake from Increasing stake from 20% to 81% 34% to 91% • Bauxite licenses • Sales contract portfolio • Competence MRN bauxite mine Paragominas bauxite mine Albras aluminium smelter Current st
Slide 49: Transaction summary
Transaction summary • Hydro will take over from Vale: • Bauxite mining operations • Alumina refining operations • Aluminium smelting operations • Bauxite exploration portfolio and bauxite/alumina sales contracts portfolio • Initial consideration: USD 4.9 billion • 22% ownership in Hydro 2) after the
Slide 50: High-quality asset portfolio
High-quality asset portfolio Hydro’s Proforma proforma share Asset ownership 1) of capacity Highlights 2) 60% One of the world’s largest bauxite mines (initially) 9.9 million tonnes Potential bauxite supply in a 100-year Paragominas 100% (100%) perspective (by 2015) Expansion to 15 million ton
Slide 51: Assumed assets: production and capacity
Assumed assets: production and capacity Paragominas Alunorte Albras 60% ownership 57% ownership 51% ownership 3 722 3 370 2 867 2 642 2 425 2 246 1 134 233 233 232 230 0 2006 2007 2008 2009 2006 2007 2008 2009 2006 2007 2008 2009 5 900 4 000 3 600 3 600 2 500 2 500 2 000 0 235 235 235 235 2006 2007
Slide 52: Upstream earnings become more robust
Upstream earnings become more robust Average 2007-2008 EBITDA Assumed assets Hydro and assumed Hydro from Vale assets combined USD 2.0 billion USD 0.8 billion USD 2.8 billion 8% 11% 4% 20% 15% 39% 21% 61% 64% Bauxite & Alumina Primary Aluminium 57% Downstream Energy and other Hydro Underlying EBITDA
Slide 53: Hydro transformed to No 5 alumina producer
Hydro transformed to No 5 alumina producer Further upside from CAP greenfield project Alumina production in 2009, million tonnes 8.8 8.9 7.8 7.3 5.4 5.5 4.4 3.4 2.1 1.6 1.2 Glencore Nalco Hydro Vale BHP Billiton Alumina Pro forma Rusal Chalco Rio Tinto Alcoa Limited Hydro Source: Company information
Slide 54: Resource owners take rising share of profits
Resource owners take rising share of profits Significant shift in profit pool split in steel sector USD billion 1) 90 38 210 404 8% 15% 17% 11% 26% 7% Raw materials 22% 39% 81% 78% 61% 35% 1995 2000 2005 2008 Steel making Coking c oal Iron ore 1) Calculated based on EBITDA x demand/production, calcu
Slide 55: Alumina prices on upwards trend
Alumina prices on upwards trend Hydro estimates of average contract prices USD per tonne alumina % of LME per tonne alumina • 3 to 10 years contract prices 313 13.4-14.0% have moved upwards 13.0-13.8% 12.2-12.7% • Bauxite and alumina prices strongly affected by Chinese growth 211 184 • China bauxite
Slide 56: Bauxite ownership – a key strength
Bauxite ownership – a key strength • Paragominas has potential to supply bauxite in a 100-year perspective • Competitive position of Alunorte improved by largely captive bauxite • Current Paragominas capacity represents 5% of 2009 world bauxite production • Global bauxite sector highly concentrated
Slide 57: Long alumina and bauxite position
Long alumina and bauxite position Upstream position transformed Hydro end-2010 Pro forma end-2010 Pro forma 2016 (60% Paragominas) (100% Paragominas) 4.2 Aluminium equivalent equity 3.7 capacity in million tonnes 3.3 2.2 2.2 1.9 1.8 1.4 0.5 Bauxite Alumina Aluminium Bauxite Alumina Aluminium Bauxite
Slide 58: Rights issue preserves financial flexibility
Rights issue preserves financial flexibility Pro forma net debt development 1) • Strong commitment to maintain USD billion investment grade credit rating 0.0 1.60 (0.25) • Funds cash component in transaction (1.15) (0.70) • Significant expansion potential in Hydro net (debt)/cash Acquisition cash co
Slide 59: Mining: re-establishing natural ecosystems
Mining: re-establishing natural ecosystems Paragominas bauxite mine MRN bauxite mine Non-pristine rainforest • Selective commercial logging since 1970s • Large areas cleared for cattle-grazing • No conservation areas During rehabiliation in 1992 Rehabilitation areas in 1997 From reforested areas to
Slide 60: Attractively positioned, global reach
Attractively positioned, global reach Norway • 900 000 tonnes hydro-powered aluminium production Continental Europe • Technology centre, R&D for next-generation smelter • Leading mid and downstream position • Hydropower developments (Holsbru) • New recycling centre (Karmøy) North America Asia • Alou
Slide 61: World-class upstream growth pipeline
World-class upstream growth pipeline Strong track-record in project execution Qatalum Hydropower Paragominas CAP Aluminium aluminium plant developments bauxite mine alumina refinery and power Qatar Norway Brazil Brazil plant Angola • Potential for • Development potential • Brownfield expansion • Fir
Slide 62: Business overview
Business overview (62)
Slide 63: Primary Metal
Primary Metal (63)
Slide 64: Strong growth in alumina production
Strong growth in alumina production Alunorte, Brazil Hydro’s equity alumina production • World’s largest alumina refinery 1 000 tonnes • Third expansion completed in 2008 3 500 • Capacity: 6.3 million tonnes of Alpart Alunorte C AP alumina (100%) • 34% owned by Hydro 3 000 2 500 Alpart, Jamaica • Ca
Slide 65: Favorable alumina position
Favorable alumina position Alumina coverage 140% 120% 100% LME-linked contracts 80% Equity from CAP* 60% 40% Equity 20% 0% 2009 2011 2013 2015 2017 2019 Strategy Bauxite • Improve cost position Hydro’s share of Alunorte production covered by 17% • Grow with CAP project equity bauxite, remainder on l
Slide 66: Aluminium Metal Production System
Aluminium Metal Production System Standardized work processes Defined customer and supplier relationships Optimized flow A systemized method for development of operational excellence and continuous improvements • Product quality Dedicated teams • Cost • Safety Positive results • Process stability in
Slide 67: Strong performance culture
Strong performance culture TRI per million hours work1) Kg CO2e / kg aluminium2) 10 6 8 5 4 6 3 4 2 2 1 0 0 2005 2006 2007 2008 2009 1990 2005 2006 2007 2008 2009 2010E kwh / Kg aluminium3) Specific emissions kg fluorine / tonne aluminium4) 15.0 1.2 1.0 14.0 0.8 13.0 0.6 0.4 12.0 0.2 11.0 0.0 1998 2
Slide 68: Primary Metal production facilities
Primary Metal production facilities North America Europe: • 115 000 mt smelting capacity in 1 smelter • 1 270 000 mt primary smelting capacity in 8 smelters • 540 000 mt remelt capacity in 8 smelters Middle East: • Qatalum ramping up during 2010 • Hydro share: ~300 000 mt Australia: • 238 000 mt pri
Slide 69: Aiming for the next leap in primary technology
Aiming for the next leap in primary technology Next- generation smelter Future HAL 300 HAL4e technology vision • 13.3 kWh/kg • 12.8 kWh/kg • Significantly lower kWh/kg • 1.6 tonne CO2/tonne aluminium • 1.5 tonne CO2/tonne aluminium • 0 tonne CO2/tonne aluminium • Low diffuse emissions • Benchmark GH
Slide 70: Qatalum on schedule for full output in Q4-10
Qatalum on schedule for full output in Q4-10 • 48% of cells started by end-Q2 • 49 000 tonnes of liquid production in Q2 • Ramp-up focus • Completion of power plant • Safe and secure start-up of the electrolysis • Stable operations in carbon plant and casthouse • Q2 2010 financial performance • EBIT
Slide 71: Qatalum start-up
Qatalum start-up Earnings Ramp-up schedule 2010 • Build-up costs in 2009 and into 2010 Production in 1 000 tonnes on 100% basis, annualized per month • Depreciated over ~20 years 600 • Marginal tax implications • At current forward prices - 500 • Earnings negative in 2010 • No dividend expected shor
Slide 72: Qatalum facts
Qatalum facts Capacity • Smelter: 585 000 tonnes per year • 704 cells in 2 double-lined potrooms • Anode plant and cast houses • 1 350 MW power plant • Possible expansion to 1 200 000 tonnes per year • Hydro’s proprietary technology, designed for • Low specific energy consumption • High labor produc
Slide 73: Metal Markets
Metal Markets (73)
Slide 74: Strong midstream position
Strong midstream position Leading supplier in Europe – growing globally Primary Extrusion production ingot Remelting Primary Casthouse foundry & recycling alloys Commercial Sheet agreements ingot (74)
Slide 75: Extensive supply network Europe
Extensive supply network Europe • Capacity in Europe • 1.3 mill tonnes of primary metal 1) Product customer (illustration) • 1.0 mill tonnes of remelting and recycling 2) • 0.6 mill tonnes Qatalum (100%) 3) Primary casthouse • 0.2 mill tonnes of third party metal products Remelters • Capacity outsid
Slide 76: Rolled Products
Rolled Pfoducts \ - (76) QQ) HYDRO
Slide 77: Rolled Products
Rolled Products Focus on margin management and cash generation • Strong position in foil, litho and automotive • Underutilization and overcapacity is an industry challenge • Strategy • Margin management and cash generation • Focus production system on core assets • High grading product portfolio Mai
Slide 78: Rolled products consumption
Rolled products consumption 1) Western Europe North America Asia Pacific Million tonnes Million tonnes Million tonnes 7 14% 7 14% 7 14% 6 11% 6 11% 6 11% 8% 8% 8% 5 5% 5 5% 5 5% 4 2% 4 2% 4 2% -1% -1% -1% 3 3 3 -4% -4% -4% 2 -7% 2 -7% 2 -7% -10% -10% -10% 1 1 1 -13% -13% -13% 0 -16% 0 -16% 0 -16% 20
Slide 79: Extruded Products
Extruded Products (79)
Slide 80: Distinct businesses with leading positions
Distinct businesses with leading positions • Leading positions in Extrusion Eurasia Extrusion Eurasia and Building Systems • Strong entrepreneurial spirit, management culture and competence • Product quality and service excellence • Product innovation through strong Extrusion Americas customer relat
Slide 81: Extruded products consumption
Extruded products consumption 1) Europe North America Million tonnes % growth (RHS) Million tonnes Million tonnes 3.5 3.5 8% 8% 3.0 4% 3.0 4% 2.5 0% 2.5 0% 2.0 -4% -4% -8% 2.0 -8% 1.5 -12% 1.5 -12% 1.0 -16% 1.0 -16% -20% -20% 0.5 -24% 0.5 -24% 0.0 -28% 0.0 -28% 2002 2003 2004 2005 2006 2007 2008 200
Slide 82: Extrusion
Extrusion A true entrepreneurial driven enterprise • “Mastering” Europe/gaining market share in the US • Close to customers due to strong regional presence • More then 40 locations in 19 countries • Top product innovation and design Location (82)
Slide 83: Precision Tubing
Precision Tubing Winning in a demanding market • Competence - our proven resource • Strike a new path • Strong global presence (83)
Slide 84: Building Systems
Building Systems Our way to energy neutral & surplus buildings • Strong multi-brand market penetration • World wide sales organization • High performing products • Selective acquisitions • Buildings of tomorrow • Energy saving • Energy gaining • 100% recyclable • Interactive with the user (84)
Slide 85: Buildings of tomorrow
Buildings of tomorrow Hydro the market leader in Europe, worldwide presence Norddeutsche Landesbank, Hannover (Germany) Der Spiegel headquarters, Hamburg (Germany) Vodafone, Lisboa (Portugal) Museum of Art, Stuttgart Havila, Spjelkavik (Norway) Monte Rosa Hut, Switzerland (85)
Slide 86: Energy
Energy (86)
Slide 87: Strong power position
Strong power position – self-generated and renewable energy sources Share of self-generated power* Share of renewable energy Percent Percent 60% 80% 70% 50% 60% 40% 50% 30% 40% 30% 20% 20% 10% 10% 0% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2009E 2012E * Including normal production of eq
Slide 88: Long-term power sourcing at competitive prices
Long-term power sourcing at competitive prices Indexation of power supplies Percent 100% • Self-generation and long-term contracts 90% ensures predictability and robustness 80% 70% • Limited commodity exposure 60% • Indexation to LME and coal with time-lag 50% 40% 30% • NOK and USD the dominant curr
Slide 89: Norwegian power assets represent solid values
Norwegian power assets represent solid values Normal production capacity per region and terms Power production is an integrated part of aluminium production in Norway 3.0 0.5 Normal production today 9.4 Twh Telemark No reversion • Development potential 0.5 – 1 TWh by utilizing 2044- 2049 existing co
Slide 90: Power portfolio management
Power portfolio management – significant volatility in price and volume Quarterly production and spot price • Norwegian power portfolio TWh NOK/MWh optimized versus market 3.5 550 500 • Production and market prices strongly impacted by hydrological conditions 3.0 450 • ”Dry” versus ”wet” years 400 2
Slide 91: Solar
Solar NorSun (18%) – mono-crystalline wafers Ascent Solar (35%) – thin-film • Total investments NOK 550 million • Total investments NOK 260 million • Hydro largest industrial owner • Hydro largest owner • 155 MW production on Årdal, started 2008 • Produces thin-film solar cells for integration into
Slide 92: Additional information
Additional information (92)
Slide 93: Financial policy
Financial policy Maintain investment-grade rating Dec 31, Dec 31, Mar 31, Jun 30, NOK billion 2008 2009 2009 2010 • Currently: BBB- (S&P) positive outlook, Baa2 (Moody’s) stable outlook Cash and cash equivalents 3.3 2.5 2.5 2.2 • Competitive access to capital and important for Short-term investments
Slide 94: Capital expenditures
Capital expenditures NOK billion • ~80% of 2009-2010 investments upstream 12.2 • Sustaining capex ~NOK 2.5-3 billion annually • Qatalum 10.1 • Mainly equity contributions from partners in 2010 • Additional prospects not included • Holsbru power development • Selective growth in Extrusion and Buildin
Slide 95: Hedging policy
Hedging policy Upstream • Primarily remain exposed to LME prices • Partly natural hedge through alumina contracts • Operational LME hedging • Three-months forward • Manage customers’ pricing • Currency exposure, mainly USD • Policy of maintaining long-term debt in USD • Partly natural hedge through
Slide 96: Price and currency sensitivities
Price and currency sensitivities Aluminium price sensitivity +/- 100 USD per tonne NOK/USD sensitivity +/- 0.1 NOK 800 750 300 700 250 250 600 570 500 200 180 400 150 300 100 200 50 100 0 0 EBIT Net income EBIT Net income • Annual sensitivities • Aluminium price sensitivity is net of aluminium price
Slide 97: Underlying income
Underlying income Q2 2010 NOK million Reported income Adjustments Underlying income Primary Metal 1 206 (550) 657 Metal Markets 59 (28) 31 Rolled Products 50 259 309 Extruded Products 202 (1) 201 Energy 176 1 177 Other and eliminations (536) 271 (265) Total EBIT 1 157 (47) 1 110 Financial income (ex
Slide 98: Underlying income
Underlying income Q1 2010 NOK million Reported income Adjustments Underlying income Primary Metal 89 (138) (49) Metal Markets (32) 97 65 Rolled Products 684 (461) 223 Extruded Products 172 (55) 117 Energy 605 (16) 588 Other and eliminations (532) 277 (255) Total EBIT 985 (297) 688 Financial income (
Slide 99: Underlying income
Underlying income Q2 2009 NOK million Reported income Adjustments Underlying income Primary Metal (537) (357) (895) Metal Markets 472 (275) 196 Rolled Products 438 (466) (28) Extruded Products 87 (114) (26) Energy 321 (40) 281 Other and eliminations (370) 224 (146) Total EBIT 410 (1 029) (618) Finan
Slide 100: Reported and underlying results
Reported and underlying results Hydro Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2008 2009 Reported EBIT 1 179 708 2 414 (3 106) (1 598) 410 719 (938) 985 1 157 1 194 (1 407) Underlying EBIT 2 032 1 619 1 490 868 (493) (618) (793) (651) 688
Slide 101: Items excluded from underlying results - 2010
Items excluded from underlying results - 2010 NOK million (+=loss/()=gain) Q1 2010 Q2 2010 Unrealized derivative effects on currency contracts (alunorte) Primary metal 23 12 Derivative effects on LME related contracts (Vale Aluminium) Primary Metal - (320) Rationalization charges and closure costs P
Slide 102: Items excluded from underlying results - 2009
Items excluded from underlying results - 2009 NOK million (+=loss/( )=gain) Q1 2009 Q2 2009 Q3 2009 Q4 2009 2009 Unrealized derivative effects on LME related contracts (alunorte) Primary metal - - (16) 16 - Unrealized derivative effects on currency contracts (alunorte) Primary metal (11) (222) (105)
Slide 103: Items excluded from underlying results - 2008
Items excluded from underlying results - 2008 NOK million Q1 2008 Q2 2008 Q3 2008 Q4 2008 2008 Unrealized derivative effects on LME related contracts (Alunorte) Primary Metal 83 (8) (134) (37) (96) Unrealized derivative effects on LME related contracts Primary Metal 263 (350) (586) 112 (561) Unreali
Slide 104: Operating segment information
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2008 2009 Alumina and raw materials 67 184 2 (30) (236) (101) (21) (125) 170 289 223 (483) Primary Aluminium 870 611 905 123 52 (794) (739) (593) (219)
Slide 105: Operating segment information
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2008 2009 Primary Metal 215 1 343 1 768 (1 647) (1 837) (537) (153) (875) 89 1 206 1 679 (3 403) Metal Markets 546 106 (142) (178) (315) 472 207 39 (32) 59 332 403
Slide 106: Operating segment information
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2008 2009 Primary Metal 8 391 9 814 9 827 8 723 6 186 6 468 6 514 6 319 7 293 8 666 36 756 25 486 Metal Markets 12 432 14 101 12 977 11 702 7 945 8 921 8
Slide 107: Operating segment information
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2008 2009 Primary Metal 7 490 8 643 8 750 7 514 5 347 5 384 5 404 5 219 6 268 7 025 32 397 21 354 Metal Markets 4 384 4 844 4 581 4 616 2 616 2 191 2 8
Slide 108: Operating segment information
Operating segment information Depreciation, amortization and impairment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year NOK million 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2008 2009 Primary Metal 452 481 484 1 295 464 461 451 444 417 431 2 711 1 820 Metal Markets 24 23 26 67 32 30 29 27 26 28 140
Slide 109: Income statements
Income statements Q2 Q1 Q2 First half First half Year NOK million 2010 2010 2009 2010 2009 2009 Revenue 19 779 18 145 17 617 37 924 34 186 67 409 Share of the profit (loss) in equity accounted investments (83) (236) (42) (319) (455) (809) Other income, net 154 183 223 337 357 107 Total revenue and i
Slide 110: Balance sheets
Balance sheets June 30, March 31, December 31, September 30, June 30, NOK million 2010 2010 2009 2009 2009 Cash and cash equivalents 2 192 2 502 2 573 2 986 4 860 Short-term investments 1 311 1 554 1 519 1 477 1 439 Receivables and other current assets 17 338 15 576 13 679 14 776 14 988 Inventories
Slide 111: Primary Metal – operational data
Primary Metal – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year Volumes and prices 1) 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2008 2009 Realized premium above LME (USD/mt) 1) 350 353 328 268 230 230 260 272 294 307 327 246 Realized premium above LME (NOK/mt) 1) 1 905 1 832 1 740 1
Slide 112: Metal Markets – operational data Rolled Products – operational data
Metal Markets – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year Volumes and prices 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2008 2009 Remelt production (1 000 mt) 141 145 121 97 89 111 123 133 148 160 505 455 Sale of metal products from own production (1 000 mt) 724 753 667 571 548
Slide 113: Extruded Products – operational data Energy – operational data
Extruded Products – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Year Year Volumes and prices 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2008 2009 Extruded external shipments (1 000 mt) 1) 161 164 148 121 113 120 128 126 128 141 594 487 Extruded – underlying EBIT per tonne, NOK 1 385 1 805
Slide 114: 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 Raposo Investor Relations Assistant e: irene.raposo@hydro.c