Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Arctic Aluminium Seminar 2011
22 slides from Norsk Hydro Asa's conference presentation, Sep 28, 2011
Slide 1: Hydro - a resource rich and fully integrated aluminium company
Hydro - a resource rich and fully integrated aluminium company Jørgen C. Arentz Rostrup, Executive Vice President and CFO Arctic Aluminium Seminar, September 28, 2011
Slide 2: 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 • Long-term power • 2.4 million tonnes • 3.8 million to
Slide 3: 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 4: Vale transaction completed February 28, 2011
Vale transaction completed February 28, 2011 • Platform for further growth as fully integrated resource-rich aluminium company • Positions Hydro as a leading global bauxite and alumina player • Integration process well under way • Key priority: increase production towards nameplate capacity • improv
Slide 5: Hydro becomes long in bauxite and alumina
Hydro becomes long in bauxite and alumina Aluminium equivalent equity capacity, million tonnes • Hydro’s position Hydro end-2010 Pro forma end-2010 Pro forma 2016 transformed from large (Before Vale transaction) (60% Paragominas) (100% Paragominas) share of long-term 4.2 contract sourcing to full re
Slide 6: Shift towards shorter contract durations
Shift towards shorter contract durations % of LME per tonne alumina Contract durations Platts index in USD 1) for long-term contracts 500 <2000 2011 13.0- 13.25- 13.8% 14.75% 450 12.2- 12.7% 15% 400 25% 25% 45% 350 30% 60% 300 250 200 16-aug 15-sep 13-okt 11-nov 10-des 10-jan 09-feb 01-mar 21-mar 26
Slide 7: Attractive commercial foundation for alumina
Attractive commercial foundation for alumina Alumina market appears balanced • Scarcity of high-quality bauxite World outside China, million tonnes 70 • Large alumina and bauxite deficit 62 64 in China seems to continue 58 60 60 56 • Growth expectations for aluminium 50 requires new alumina capacity
Slide 8: Bauxite and alumina production improvements
Bauxite and alumina production improvements Annualized production million mt • Paragominas production up 12% from Q1 9.0 • Improved performance in beneficiation plant 8.0 • Alunorte production up 8% from Q1 7.0 • Improvement in older lines • Increased utilization in coal boilers 6.0 5.0 • Focus on h
Slide 9: Primary Metal improvement program on target
Primary Metal improvement program on target Estimated primary aluminium cash cost and margin • USD 300 per mt cost improvement USD/mt 1) • USD 50 per mt realized in 2010 475 • Further USD 125 per mt targeted in 2011 2 175 425 375 1 950 • Cash cost up ~USD 200 from 2010 on 1 675 1 750 raw material co
Slide 10: Qatalum in full production
Qatalum in full production • 704 of 704 cells producing from Sep 21 • 100 000 mt produced in Q2 (100%) • Annual capacity: 585 000 mt • 50/50 joint venture between Qatar Petroleum and Hydro • Fully integrated with casthouse, carbon plant, port, storage facilities and captive power plant • World-class
Slide 11: Strategy for further value creation
Strategy for further value creation Bauxite & Alumina • Integrate • Expand • Commercialize Primary Metal • Reposition • Keep solid cash flow in current assets • Expand in high-class assets Energy • Increase value of business and competence • Focus on operation and commercialization of current assets
Slide 12: Fabricated products sales stable
Fabricated products sales stable Hydro’s fabricated products sales Q2 2011 vs Q1 2011 Total fabricated products sales Foil Litho Can Packaging Auto General Extrusion Building Extrusion Extrusion Precision Q2 11 vs Q2 11 vs H1 11 vs beverage & building & heat engineering Eurasia Systems North South T
Slide 13: Global inventory days trending down
Global inventory days trending down World reported primary aluminium inventories • Inventory days reduction driven by 1 000 mt Days increased consumption 7 000 80 70 • High inventories well known in market 6 000 • Different views on unreported inventories 60 5 000 50 • Estimated total reported and u
Slide 14: 2011 market outlook unchanged
2011 market outlook unchanged World outside China (quarterly annualized) • Annualized demand at 25.1 million mt 1 000 mt in July/August 30 000 28 000 26 000 • ~7% demand growth estimated for 2011 24 000 22 000 • Capacity development 20 000 18 000 • 1.2 million mt curtailed capacity restarted 16 000
Slide 15: Situation in China
Situation in China Primary aluminium • Annualized demand at 20.2 million mt in Q2 • Up 20% vs Q1 2011 • Corresponding higher production • ~10% demand growth estimated for 2011 • China expected to be balanced in primary aluminium in short to medium term Bauxite and alumina • Quality of domestic bauxi
Slide 16: Aluminium weakest performer among base metals
Aluminium weakest performer among base metals Commodity prices, indexed Premium above 90th percentile cash cost Aluminium Copper Lead (1990-2005), percentage Nickel Tin Zinc 900 Copper 34 800 Iron Ore 33 700 Zinc 29 600 Gold 28 500 Uranium 27 400 Tin 26 300 Nickel 20 200 Bauxite 17 100 Coal 17 Alumi
Slide 17: Total shareholder returns for aluminium companies low compared to other industries
Total shareholder returns for aluminium companies low compared to other industries Average annual TSR, 2005–2009 () High 120 Industry weighted average 106 100 88 Low 81 80 71 67 67 62 60 51 50 41 42 39 40 33 30 16 20 18 12 12 10 9 7 4 4 4 4 0 1 0 -1 -2 -2 -2 -10 -7 -13 -10 -10 -20 -14 -14 -19 -17 -1
Slide 18: Low returns permeates the whole value chain
Low returns permeates the whole value chain EBITDA margin downstream businesses, percentage Low High Average 20% 15% 10% 5% 0% -5% -10% 2005 2006 2007 2008 2009 2010 Source: Company reports. 8 core companies
Slide 19: Supply and demand development
Supply and demand development Inventories, thousand tonnes Annualized supply/demand, thousand tonnes 15 000 45 000 Supply Demand Inventories 12 000 42 000 9 000 39 000 6 000 36 000 3 000 33 000 0 30 000 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Annualized supply, indexed 1.4 Aluminium Steel 1.3 1.2 1.1 1.
Slide 20: Encouraging developments
Encouraging developments • Development of more liquid bauxite and alumina markets • Bauxite, a fight for cost efficient resources going forward • Technology and application development • Continued strong demand in overseas market for advanced technology products
Slide 21: Priorities 2011
Priorities 2011 • Successful integration and improved performance in Bauxite & Alumina • Primary Metal repositioning through USD 300 program and Qatalum ramp-up • Solid operations with firm cost control and strong market focus
Slide 22: www.hydro.com
www.hydro.com HYDRO