Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Debt Investor Presentation (June 2012)
32 slides from Norsk Hydro Asa's debt investor presentation, Jun 11, 2012
Slide 1: Norsk Hydro Presentation 2012
Norsk Hydro Presentation 2012 June 11, 2012 (1) 2012-06-11
Slide 2: Contents
Contents • Company overview • Market outlook • Business overview • Financials and financial policies (2) 2012-06-11
Slide 3: Hydro - a first tier aluminium company
Hydro - a first tier aluminium company Production in 2011 in aluminium equivalents excl. China, thousand mt 9 000 Alumina Aluminium 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 Alcoa Rio Tint o Alcan UC Rusal Norsk Hydro BHP Billit on Dubal Aluminium Bahrain Century Vedant a Source: CRU, Hydro
Slide 4: Attractively positioned, global reach
Attractively positioned, global reach Norway Continental Europe • 900 000 tonnes (capacity) hydro-powered aluminium production • Leading mid and downstream position • Technology centre, R&D for next-generation smelter • Hydropower developments • New recycling centre North America • Alouette aluminiu
Slide 5: Capital employed – upstream focus
Capital employed – upstream focus Mar 31, NOK million 2012 Extruded Bauxite & Alumina 37 469 Products; 7 Energy; 3 % % Primary Metal 32 633 Rolled Products; 10 % Metal Markets 2 147 Metal 8 664 Markets; 2 Rolled Products Bauxite & % Alumina; 42 % Extruded Products 5 885 Primary Energy 2 909 Metal; 3
Slide 6: Highlights
Highlights • Delivery of main 2011 priorities Brazil integration Qatalum in full production Primary Metal cost cutting programme on schedule • Hydro has improved its competitive positions • Significant improvement programmes ongoing • Proactive attitude towards market downturn • Continuous focus on
Slide 7: Aluminium is the metal of the future
Aluminium is the metal of the future • Lightweight • Formability • Excellent conductivity • Recyclability • Corrosion resistant • Alloying technology Properties lead • Aluminium intensive urbanization and infrastructure to increased • Climate challenge – aluminium as part of the solution market shar
Slide 8: Aluminium is part of the solution
Aluminium is part of the solution Global trends Demand for semis Share of semis Million mt consumption 120 2011 – 62 million mt 5-7% annual growth Consumer 100 Electrical durables 12% 6% 49 Packaging 9% 80 Machinery & equipment 36 10% Foil stock 8% 60 Capabilities 23 Other 6% 40 53 Transport 25% 45
Slide 9: Seasonally higher Q1 primary demand
Seasonally higher Q1 primary demand World outside China (quarterly annualized) 1 000 mt 30 000 • Seasonal increase in demand, 25 000 while production declined from curtailments 20 000 15 000 • Improved supply-demand 10 000 balance expected in 2012 5 000 • ~1 million mtpy announced curtailments 0 Jan
Slide 10: Aluminium prices
Aluminium prices USD per tonne 3 400 3 000 2 600 2 200 1 800 1 400 1 000 2001 2003 2005 2007 2009 2011 2013 2015 LME (3-month avg.) LME forward June 6, 2012 Source: Reuters Ecowin (10) 2012-06-11
Slide 11: A multi-speed world economy
A multi-speed world economy ~5% 44,9 Primary aluminium demand (million mt) ~0% ~9% ~5% 8,4 19,3 5,6 ~3% 25,6 North Europe America incl. Mexico ~4% 11,6 China 2011 Other Growth 2012 World ex. World China Source: CRU, Hydro analysis (11) 2012-06-11
Slide 12: China increased net imports
China increased net imports In terms of aluminium equivalents across the total value chain Annualized aluminium equivalents*, million mt 15 2006 2007 2008 2009 2010 2011 2012 • Bauxite and alumina ** • Stable bauxite imports at high levels to China Import 10 • Increased alumina imports in early 2012
Slide 13: Strategy for further value creation
Strategy for further value creation Bauxite & Alumina Primary Metal Energy Mid- and downstream • Excellence in • Reposition • Increase value of • Adjust capacity and operations • Keep solid cash flow in energy business cost base to market • Commercialize current assets • Develop current base • Conti
Slide 14: Business model – volume flows Bauxite & alumina
Business model – volume flows Bauxite & alumina 1 000 tonnes, pro forma 2011 External sourcing 2 000 alumina External 1) 2 000 3 700 alumina sales Paragominas 8 200 Commercial Prod (100%) 8 200 operations Alunorte Internal 2) Hydro availability Prod (100%) 5 300 Hydro 3 600 alumina sales 100% 5 800
Slide 15: Primary Metal improvement program on track
Primary Metal improvement program on track USD 235 per mt by end-2012 Estimated primary aluminium cash cost and margin USD/mt 1) • Additional USD 35 per mt expected 475 475 realized 425 475 250 in 2012, remaining USD 65 in 2013 2 175 375 25 • Progressing according to plan 2 000 1 900 1 750 1 675 1 4
Slide 16: Solid production in Qatalum
Solid production in Qatalum • Qatalum production stable above nameplate capacity • 600 000 mt on annual basis • 1st quartile cost position established • Cash cost around USD 1400-1500 per mt at 2010 market conditions • Focus on optimizing operations • Fire in seawater cooling tower on March 17 (16)
Slide 17: Metal Markets earnings drivers
Metal Markets earnings drivers • Remelters Underlying EBIT excluding currency effects and ingot stock valuation effect, NOK million • Revenue impact – volume and product premiums above LME 300 • Cost impact 250 • Scrap and standard ingot premiums above LME 200 • Raw material mix • Freight cost – pro
Slide 18: Rolled Products earnings drivers
Rolled Products earnings drivers Underlying EBITDA, NOK million • Contract structure 700 • Margin business based on conversion price • LME element passed on to customers • Medium-term contracts 600 • Range from spot contracts to multi-year contracts 500 • High share of fixed costs - volume 400 sensi
Slide 19: European extrusion leader with global presence
European extrusion leader with global presence External sales in tonnages • Leading position in Europe • 17% market share Other Transport 11 % 9% • Strong position in US and Brazil • Global leader in precision tubing • Strategy of solidifying leading positions Domestic & office equipments • Reinforc
Slide 20: Extruded Products turnaround
Extruded Products turnaround Restructuring in mature markets Restructuring • Closure Karmøy press and Prague fabrication plant portfolio • Mothballed Spanish and Portuguese presses EUR 40 million cost reductions by end 2012 Building Systems cost improvement • Turnaround in Iberia and Italy • Closure
Slide 21: Highly attractive power portfolio
Highly attractive power portfolio Power production capacity (TWh), per region and reversion year • Power producing assets and ongoing projects Telemark • Maintain cost control in operations and projects 3,0 0,5 • Holsbru project concluded, production start 2044- April 1 No reversion 2049 • Vasstøl a
Slide 22: Energy
Energy Q1 Key figures 2012 2011 Power production, GWh 3 190 9 581 Net spot sales, GWh 1 879 4 624 Southwest Norway spot price (NO2), 272 330 NOK/MWh Underlying EBITDA, NOK million 584 2 019 Underlying EBIT, NOK million 556 1 883 Underlying EBIT Q1 operating results NOK million • Volatile prices due
Slide 23: Underlying EBIT
Underlying EBIT 1 906 1 646 1 448 1 110 1 133 965 688 588 557 NOK million Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Bauxite & Alumina 1) 162 288 71 113 155 272 302 159 (144) Primary Metal 1) (169) 382 318 86 583 765 653 484 30 Metal Markets 65 31 163 62 143 244 93 (39)
Slide 24: Net cash/(debt) development Q1 2012
Net cash/(debt) development Q1 2012 NOK billion Net cash flow from operations NOK 0.6 billion 1,9 (0.7) (0.6) (0.9) 1.7 0.1 1,5 Net cash Q4 2011 Underlying EBITDA Operating capital Other adjustments Investments/ C urrency Net cash Q1 2012 divestments translation & other (24) 2012-06-11
Slide 25: Sustaining capital expenditure reduction
Sustaining capital expenditure reduction Sustaining capital expenditure NOK billion 4,2 3,5 • Sustaining capital expenditure significantly down from 2008 • Lower level maintained • Below 2008 level with significantly larger company 2008 2012E Sustaining capex Vale assets (25) 2012-06-11
Slide 26: Hedging policy
Hedging policy Upstream • Remain primarily exposed to LME prices • Partly off-setting effects through raw material prices and negative currency correlations with LME • Operational LME hedging • Three months forward sales to manage customers’ pricing • Currency exposure, mainly USD and BRL • Policy o
Slide 27: Prepared for a challenging market environment
Prepared for a challenging market environment Summary • Strong balance sheet to face volatility • Hydro benefits from its strong competitive position in a market downturn • Step-up cost improvement programs • Margin management and remelt flexibility • Restructuring of non-competitive assets; no rest
Slide 28: Maintain financial flexibility
Maintain financial flexibility • Robust balance sheet • Strong focus on liquidity • NOK 8.8 billion in cash and cash equivalents end-Q1 2012 • USD 1.7 billion facility, currently undrawn • Reduction in sustaining Capex, focus on operating capital • Current rating • BBB/Baa2 • Intention to re-establi
Slide 29: Financial position
Financial position Dec 31, Dec 31, Mar 31, Net cash/(debt), NOK billion NOK billion 2010 2011 2012 11,0 Cash and cash equivalents 10.9 8.4 8.8 Short-term investments 1.3 1.8 1.6 Short-term debt (0.9) (4.3) (5.1) Long-term debt (0.3) (4.2) (3.7) Net cash/(debt) 11.0 1.7 1.5 Net int.-bearing debt in e
Slide 30: Shareholder and financial policy
Shareholder and financial policy Dividend payout ratio* • Hydro aims to give its shareholders competitive returns compared to alternative investments in 202% peers • Maintained dividend policy 81% • Ordinary dividend: 30% of net income over the cycle 69% • Average ordinary pay-out ratio 2007-2011 is
Slide 31: Main shareholders
Main shareholders (31) 2012-06-11
Slide 32: www.hydro.com
www.hydro.com