Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Q4 2009 Earnings Presentation
54 slides from Norsk Hydro Asa's earnings presentation, Feb 17, 2010
Slide 1: Upstream results weak, downstream and energy activities improve
Upstream results weak, downstream and energy activities improve Q4 Fourth quarter 2009 February 17, 2010 (1)
Slide 2: (2)
(2)
Slide 3: Svein Richard Brandtzæg, President and CEO
President and CEO Svein Richard Brandtzæg (3)
Slide 4: Highlights
Highlights • Stable demand, seasonal declines partly offset by restocking • Result slightly up • Upstream: Higher realized aluminium prices, but weak alumina and trading results • Downstream: Result improves for continued operations, boosted by Building Systems • Energy: Result up on higher producti
Slide 5: Qatalum start-up on time
Qatalum start-up on time ¥ WN\) = < 4 ~ — \ ES = & “ss HYDRO
Slide 6: Qatalum on schedule for full output by Q4 2010
Qatalum on schedule for full output by Q4 2010 • Production started December 20 • Project 95% complete end-2009 • On schedule for full output by Q4 2010 • Investment (100%) ~USD 5.7 billion • First-decile position on cash cost curve when in full production (6)
Slide 7: Downstream sales supported by restocking
Downstream sales supported by restocking Hydro’s downstream sales Q4 2009 vs Q3 2009 Total downstream sales Rolled Extrusion Building Extrusion Automotive Precision Products Eurasia Systems Americas Structures Tubing Q4 09 vs Q3 09 Year 09 vs Year 08 9% 5% 4% 3% 2% -2% -11% -18% (7)
Slide 8: Upstream sales seasonally lower
Upstream sales seasonally lower Hydro’s upstream sales Q4 2009 vs Q3 2009 Total upstream sales Sheet ingot Extrusion ingot Foundry alloys Standard ingot Q4 09 vs Q3 09 Year 09 vs Year 08 2% 0% -2% -2% -7% -17% (8)
Slide 9: Aluminium price rebounds, USD weakens
Aluminium price rebounds, USD weakens USD per tonne 3 400 Primary aluminium LME USD/tonne NOK/tonne 3 200 Q4 2009 average 2 035 11 567 3 000 Q4 2009 end 2 242 12 989 2 800 Q3 2009 average 1 837 11 209 2 600 Q3 2009 end 1 890 10 886 2 400 Average 2009 1 702 10 575 2 200 2 000 Average 2008 2 620 14 45
Slide 10: Inventories stabilized, at high level
Inventories stabilized, at high level 1 000 tonnes 7 000 LME IAI Nymex/TOC OM/Japan • Reported inventories outside China: ~6 million tonnes 6 000 5 000 • Large portion of LME inventories held by financial investors 4 000 • Unavailable to market • Time horizon depending on interest 3 000 rates, wareh
Slide 11: China returns to balance in primary aluminium
China returns to balance in primary aluminium 1 000 tonnes 600 550 • Swift response to drop in demand 500 • Production curtailments 450 400 • Strategic government purchases Net import 350 • Demand incentives 300 250 200 • Production up in 2009 150 100 • Restart of curtailed capacity 50 • New capacit
Slide 12: Market imbalance continues outside China
Market imbalance continues outside China World outside China (annualized), 1 000 tonnes 30 000 C onsumption Production • Demand down 18% in 2009 28 000 against 2008 26 000 24 000 • Annualized imbalance of 22 000 2.3 million tonnes end-2009 20 000 18 000 • Imbalance expected to continue in 2010, but
Slide 13: 2010 market outlook
2010 market outlook • World outside China • Demand growth likely, but level uncertain • Supply/demand imbalance expected to continue • Curtailed capacity unlikely to restart • China • Balanced in primary aluminium • Increasing scrap imports • Limited new capacity • Partly offset by new curtailments
Slide 14: Strong power prices, reservoirs below normal
Strong power prices, reservoirs below normal South Norway price (NO1) Water reservoir levels in South Norway (NO1) NOK/MWh Percent 600 100 2008 2009 2008 2009 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 31 34 37 40
Slide 15: Solid measures executed in 2009
Solid measures executed in 2009 • Operating capital reduced by NOK 5.8 billion • Capital expenditure plans cut by 50% Hydro • Manning reduced by 4 500 • Redesigned and reduced staff and support functions • Cash costs reduced significantly Primary • Primary aluminium production curtailed by 26% Metal
Slide 16: Status curtailed upstream capacity
Status curtailed upstream capacity Curtailed capacity Curtailment Plant in 2009, tonnes completed Status • Restart unlikely due to current market Neuss balance and without long-term competitive Primary 180 000 of 230 000 Q2 2009 power prices aluminium • Outcome of German support scheme uncertain • T
Slide 17: Operational priorities going forward
Operational priorities going forward Primary Metal • Cost reductions • USD 100 per tonne reduction in primary aluminium conversion cost by end-2011 Metal Markets • Margin management Rolled Products and Extruded Products • Margin management • Capture possibilities • Cost control Hydro • Working capit
Slide 18: Jørgen C. Arentz Rostrup
Executive Vice Jørgen C. Arentz President and CFO Rostrup (18)
Slide 19: Underlying EBIT
Underlying EBIT 2 032 1 619 1 490 868 (493) (618) (651) (793) NOK million Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Primary Metal 938 795 906 93 (185) (895) (760) (717) Metal Markets 363 139 (41) 242 (245) 196 (15) (20) Rolled Products 147 240 170 93 (53) (28) 51 57 Extruded Pr
Slide 20: Key financials
Key financials NOK million Q4 2009 Q3 2009 Q4 2008 Year 2009 Year 2008 Revenue 16 427 16 795 20 665 67 409 88 455 Underlying EBIT (651) (793) 868 (2 555) 6 009 Items excluded from underlying EBIT (287) 1 512 (3 975) 1 148 (4 815) Reported EBIT (938) 719 (3 106) (1 407) 1 194 Financial income / (expe
Slide 21: Items excluded from underlying EBIT
Items excluded from underlying EBIT NOK million Q4 2009 Q3 2009 Q4 2008 Year 2009 Year 2008 Underlying EBIT (651) (793) 868 (2 555) 6 009 Unrealized effects power contracts (318) 54 1 481 198 (768) Unrealized LME and other derivative effects 747 1 508 (2 249) 2 975 (1 434) Metal effect, Rolled Produ
Slide 22: Primary Metal
Primary Metal Q4 Q3 Q4 Key figures 2009 2009 2008 Alumina production, kmt 504 514 685 Primary aluminium production, kmt 332 330 442 Total sales volumes, kmt 459 480 460 Realized LME price, USD/mt 1 804 1 523 2 654 Realized LME price, NOK/mt 10 452 9 480 16 905 Underlying EBIT, NOK million (717) (760
Slide 23: Bauxite, alumina and raw materials
Bauxite, alumina and raw materials Alunorte (34% ownership) Main effects on Q4 result • Alumina refinery, nameplate capacity • Alunorte of 6.3 million tonnes • Loss on hedges • Operational challenges Alpart (35% ownership) • Alumina refinery, nameplate capacity of 1.7 million tonnes - temporarily cu
Slide 24: Metal Markets
Metal Markets Q4 Q3 Q4 Key figures 2009 2009 2008 Remelt production, kmt 133 123 97 Total metal products sales, kmt 605 618 610 Underlying EBIT, NOK million (20) (15) 242 Underlying EBIT Q4 operating results NOK million • Neutral currency effects vs negative 703 (83) effects of NOK 150 million in Q3
Slide 25: Rolled Products
Rolled Products Q4 Q3 Q4 Key figures 2009 2009 2008 External sales volumes, kmt 211 205 213 Underlying EBIT, NOK million 57 51 93 Underlying EBIT Q4 operating results NOK million • Increased volumes in automotive and general engineering 651 26 • Positive impact from cost savings 240 • Seasonal maint
Slide 26: Extruded Products
Extruded Products Q4 Q3 Q4 Key figures 2009 2009 2008 External sales volumes, kmt 126 128 121 Underlying EBIT Extrusion, 122 89 (88) NOK million Underlying EBIT Automotive, (60) 9 (235) NOK million Underlying EBIT, NOK million 68 95 (332) Underlying EBIT Q4 operating results NOK million • Expected s
Slide 27: Energy
Energy Q4 Q3 Q4 Key figures 2009 2009 2008 Power production, GWh 1 929 1 682 2 813 Net spot sales, GWh 486 480 1 130 Southern Norway spot price (NO1), 296 249 433 NOK/MWh Underlying EBIT, NOK million 295 217 649 Underlying EBIT Q4 operating results NOK million • Higher spot prices 1 865 1 240 • High
Slide 28: Reduced operating capital supports cash flow
Reduced operating capital supports cash flow Q4 2009 NOK million Q4 2009 Year 2009 • Positively affected by realization Net income (loss) (587) 416 Depreciation 786 3 494 of LME-positions ~NOK 1 billion Operating capital 52 5 814 • Qatalum investments Other adjustments 1 780 (5 178) Net cash flow fr
Slide 29: Pensions
Pensions NOK million December 31, 2009 December 31, 2008 • Reduced benefit obligation Projected benefit obligation (17 922) (23 440) • Reduced rate of compensation Fair value of plan assets 12 234 12 386 • Divestment of businesses and settlements Termination benefits and other (626) (764) • Positive
Slide 30: Financial position
Financial position Net cash / (debt) in NOK billion • Net cash of NOK 2.0 billion end-2009 3.5 • Net pension liability after tax included in 3.0 adjusted debt reduced by NOK 4.0 billion due to updated actuarial assumptions 2.4 2.0 Dec 31, Jun 30, Sep 30, Dec 31, NOK billion 2008 2009 2009 2009 Net c
Slide 31: Proposed 2009 dividend NOK 0.50 per share
Proposed 2009 dividend NOK 0.50 per share • Strong commitment to cash return to shareholders • Increased market and earnings visibility compared to beginning of 2009 • Cash capacity • Average three year payout ratio is 46% • Dividend policy is 30% payout over the cycle • Represents payout of ~NOK 60
Slide 32: Priorities
Priorities • Solid operations • Stay close to markets • Reposition upstream • Financial flexibility business • Proactive corrective • Qatalum ramp-up measures (32)
Slide 33: Cautionary note in relation to certain forward-looking statements
Cautionary note in relation to certain forward-looking statements Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management’s plans, objectives and
Slide 34: Additional information
Additional information (34)
Slide 35: Underlying income Q4 2009
Underlying income Q4 2009 NOK million Reported income Adjustments Underlying income Primary Metal (875) 158 (717) Metal Markets 39 (59) (20) Rolled Products 642 (585) 57 Extruded Products (422) 490 68 Energy 297 (2) 295 Other and eliminations (619) 286 (334) Total EBIT (938) 287 (651) Financial inco
Slide 36: Underlying income Q3 2009
Underlying income Q3 2009 NOK million Reported income Adjustments Underlying income Primary Metal (153) (607) (760) Metal Markets 207 (222) (15) Rolled Products 484 (433) 51 Extruded Products 108 (14) 95 Energy 318 (101) 217 Other and eliminations (246) (135) (381) Total EBIT 719 (1 512) (793) Finan
Slide 37: Underlying income Q4 2008
Underlying income Q4 2008 NOK million Reported income Adjustments Underlying income Primary Metal (1 647) 1 740 93 Metal Markets (178) 420 242 Rolled Products (1 779) 1 872 93 Extruded Products (1 167) 834 (332) Energy 654 (5) 649 Other and eliminations 1 010 (886) 124 Total EBIT (3 106) 3 975 868 F
Slide 38: Reported and underlying results
Reported and underlying results Hydro Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2007 2008 2009 Reported EBIT 3 672 3 001 2 013 338 1 179 708 2 414 (3 106) (1 598) 410 719 (938) 9 025 1 194 (1 407) Underlying EBIT 2 883
Slide 39: 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 40: 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 41: Items excluded from underlying results - 2007
Items excluded from underlying results - 2007 NOK million Q1 2007 Q2 2007 Q3 2007 Q4 2007 2007 Unrealized derivative effects on LME related contracts (Alunorte) Primary Metal (13) 40 (108) (82) (163) Unrealized derivative effects on LME related contracts Primary Metal (263) (110) (100) 49 (425) Unre
Slide 42: Operating segment information
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2007 2008 2009 Primary Metal 2 289 2 172 1 941 1 245 938 795 906 93 (185) (895) (760) (717) 7 646 2 732 (2 556) Metal Markets 135 1
Slide 43: Operating segment information
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2007 2008 2009 Primary Metal 2 407 2 437 2 033 1 136 215 1 343 1 768 (1 647) (1 837) (537) (153) (875) 8 012 1 679 (3 403) Metal Markets 176 1
Slide 44: Operating segment information
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 20071) 20071) 20071) 20071) 2008 2008 2008 2008 2009 2009 2009 2009 2007 2008 2009 Primary Metal 11 321 10 766 9 894 8 780 8 391 9 814 9 827 8 723 6 186 6 468 6 514 6 319 40 761 36 756 25 486 M
Slide 45: Operating segment information
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 20071) 20071) 20071) 20071) 2008 2008 2008 2008 2009 2009 2009 2009 2007 2008 2009 Primary Metal 9 862 9 269 8 388 7 384 7 490 8 643 8 750 7 514 5 347 5 384 5 404 5 219 34 904 32 397 21 354
Slide 46: Operating segment information
Operating segment information Depreciation, amortization and impairment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year Year Year NOK million 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2007 2008 2009 Primary Metal 490 471 465 473 452 481 484 1 295 464 461 451 444 1 899 2 711 1 820 Metal Ma
Slide 47: Income statements
Income statements Q4 Q3 Q4 Year Year NOK million 2009 2009 2008 2009 2008 Revenue 16 427 16 795 20 665 67 409 88 455 Share of the profit (loss) in equity accounted investments (341) (14) (1 154) (809) (915) Other income, net (488) 238 161 107 865 Total revenue and income 15 598 17 019 19 672 66 706
Slide 48: Balance sheets
Balance sheets December 31, September 30, June 30, March 31, December 31, NOK million 2009 2009 2009 2009 2008 Cash and cash equivalents 2 573 2 986 4 860 3 128 3 333 Short-term investments 1 519 1 477 1 439 1 652 1 648 Receivables and other current assets 13 679 14 776 14 988 16 077 18 833 Inventor
Slide 49: Nordic power market – forward curves
Nordic power market – forward curves NOK/MWh 400 350 300 250 200 150 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 End Q4 2008 End Q2 2009 End Q3 2009 End Q4 2009 (49)
Slide 50: Power price and volume
Power price and volume Nordic System Price Hydropower production NOK/MWh TWh 600 12 11.4 11.0 10.7 500 10 10.3 9.4 400 8 8.3 8.0 7.9 7.5 300 6 200 4 100 2 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009 (50)
Slide 51: Primary Metal – operational data
Primary Metal – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Volumes and prices 1) 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 Realized premium above LME (USD/mt) 1) 326 338 331 330 350 353 328 268 230 230 260 272 Realized premium above LME (NOK/mt) 1) 2 035 2 056 1 928 1 843
Slide 52: Metal Markets and Rolled Products – operational data
Metal Markets – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Volumes and prices 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 Remelt production (1 000 mt) 190 179 163 153 141 145 121 97 89 111 123 133 Sale of metal products from own production (1 000 mt) 771 772 699 680 724 753
Slide 53: Extruded Products and Energy – operational data
Extruded Products – operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Volumes and prices 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 Extrusion external shipments (1 000 mt) 134 135 123 117 130 133 122 103 96 99 104 101 Automotive external shipments (1 000 mt) 43 30 29 28 31 31 26
Slide 54: 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