Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — SEB Enskilda Nordic Seminar 2012
30 slides from Norsk Hydro Asa's conference presentation, Jan 11, 2012
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 SEB Enskilda Nordic Seminar, January 11, 2012
Slide 2: Fully integrated throughout the value chain
Fully integrated throughout the value chain Recycling Rolling Bauxite Alumina Energy Primary Casting Products Extrusion Recycling
Slide 3: Aluminium is part of the solution
Aluminium is part of the solution Capabilities 5-7% annual growth in demand Global trends Capabilities Source: CRU
Slide 4: 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 5: World-class bauxite and alumina assets
World-class bauxite and alumina assets Paragominas and Alunorte • Integrated through pipeline • Technological frontrunner • Competitive cost position • Top quality alumina • Successful integration • Solid production improvement
Slide 6: Further improved bauxite and alumina production
Further improved bauxite and alumina production Annualized production million mt 10 • Alunorte production up 16% from Q1 to Q3 2011 9 8 • Paragominas production up 27% 7 from Q1 to Q3 2011 6 5 • Continued focus on implementing Hydro production system 4 3 • Focus on stabilizing production 2 in Q4 1 0
Slide 7: Qatalum streamlining in 2012
Qatalum streamlining in 2012 • All cells in production • Focus on production • 1350 MW power plant at full optimization capacity • Target annual production of 600 000 mt
Slide 8: Qatalum – 1st quartile cost position
Qatalum –1st quartile cost position Further creep potential beyond 2012 • On track to exceed nameplate 600 capacity first year of full production • 1st quartile cost position established 400 • Cash cost around USD 1400-1500 per mt at 2010 market conditions • Operational excellence and cost 200 optim
Slide 9: USD 300 cost improvement program on track
USD 300 cost improvement program on track 300 Operational improvements 200 Fixed cost reductions and lean operations Above plant level initiatives 100 Casthouse product margin 0 Realized 2010 Expected 2011 USD 300 per mt real term target for fully owned smelters excluding Neuss with 2009 as baseline
Slide 10: Aluminium industry facing cost pressure
Aluminium industry facing cost pressure Revenue and cost drivers • Increasing cost of Jan-Sep 2011 vs 2010 58% input factors 44% 41% • Fixed cost pressure 36% from inflation • Strong raw-material 17% 17% 14% driven currencies Realized Petroleum Caustic Fuel oil Coal Alumina Bauxite LME price coke so
Slide 11: Strategy for further value creation
Strategy for further value creation Bauxite & Alumina Primary Metal Energy Mid- and downstream • Excellence in • Reposition • Increase value of • Continue proven high- operations • Keep solid cash flow in energy business end product strategy • Expand capacity current assets • Develop current base •
Slide 12: Macro economic situation – global uncertainty
Macro economic situation – global uncertainty Europe United States China Sovereign debt concern Demand issue Reduced growth
Slide 13: Agenda 2010 and corrective actions successfully executed
Agenda 2010 and corrective actions successfully executed • Remelt production reduced by ~50% • 450 000 tonnes annual primary capacity Navigate the storm curtailed • CAPEX 2009* reduced ~50% • Net operating capital reduced by 5.8 Stay focused BNOK • Substantial cost cutting upstream and downstream Sh
Slide 14: Prepared for challenging period
Prepared for challenging period • Strong balance sheet to face volatility • Reduction in net operating capital days and sustaining capital expenditure • Margin management and remelt flexibility • No restart of idled capacity • Cost improvement programs
Slide 15: Aluminium cost curve lifted by cost pressure
Aluminium cost curve lifted by cost pressure Business operating cost aluminium USD per mt 3 000 2011 2 500 2 000 1 500 1 000 Accumulated world capacity, % 500 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: CRU, LME USD 2 100 per mt, NOK/USD 5.56
Slide 16: Healthy demand growth expected
Healthy demand growth expected Manageable supply/demand balance World excluding China, thousand mt 28 000 Supply Demand 27 000 26 000 Base case 25 000 3-5 % p.a. 24 000 23 000 Supply influences Demand influences 22 000 • New projects • Developing regions • Potential restarts • European debt crisis 2
Slide 17: Third party sales ~20% of global bauxite production
Third party sales ~20% of global bauxite production Bauxite production 2011: ~250 million mt China Rest of World Source: Antaike/Hydro
Slide 18: China highly dependent on bauxite import
China highly dependent on bauxite import China Rest of World Annualized aluminium equivalents*, million mt • Share of imported bauxite in China in 2011: ~43% 15 2006 2007 2008 2009 2010 2011 Import • Quality of domestic bauxite resources is to China 10 deteriorating 5 • Indonesia supplies 80% of imp
Slide 19: Third party sales ~35% of global alumina production
Third party sales ~35% of global alumina production Alumina production 2011: ~90 million mt China Rest of World Source: Antaike/Hydro
Slide 20: Chinese domestic alumina capacity increasing
Chinese domestic alumina capacity increasing China Rest of World Annualized aluminium equivalents*, million mt • ~65 % of smelter production in China is not integrated with alumina 15 2006 2007 2008 2009 2010 2011 Import • China has capacity to be balanced in to China 10 alumina 5 0 Export from Chin
Slide 21: Chinese trade barriers for primary aluminium
Chinese trade barriers for primary aluminium LME VAT Tolling Export duties SHFE Transport Premiums Annualized aluminium equivalents, million mt • Declared goal of self-sufficiency in primary aluminium 15 2006 2007 2008 2009 2010 2011 Import • Arbitrage opportunities between LME to China 10 and SHFE
Slide 22: China increasing exports of fabricated and semis
China increasing exports of fabricated and semis Rest of World China Annualized aluminium equivalents, million mt • Majority of exports to Asian markets 15 2006 2007 2008 2009 2010 2011 • Challenged by antidumping measures in Import the US and Europe to China 10 • Declared goal of exporting higher v
Slide 23: China – significant net importer of aluminium
China – significant net importer of aluminium Annualized aluminium equivalents*, million mt • Size of bauxite, alumina and scrap import reduces the influence of other 15 2006 2007 2008 2009 2010 2011 products along the value chain Import to China 10 5 0 Export *Bauxite/alumina to aluminium from Chin
Slide 24: Demand will increase substantially…
Demand will increase substantially… Demand for semis, China, million mt 60 50 40 China’s demand for semis expected to 49 30 increase substantially going forward… 36 20 23 10 0 2010 2015 2020 Source: CRU/Antaike/Hydro
Slide 25: …as a consequence, China will be increasingly short upstream
…as a consequence, China will be increasingly short upstream Demand for semis, China, million mt 60 50 40 China’s demand for semis expected to 49 30 increase substantially going forward… 36 20 23 10 0 2010 2015 2020 Annualized aluminium equivalents*, million mt 15 2006 2007 2008 2009 2010 2011 Illus
Slide 26: Long upstream positions give strategic flexibility
Long upstream positions give strategic flexibility Million mt 0,3 • Industry consolidation 1,5 • Long position creates flexibility • Growing smelter portfolio • Capturing commercial opportunities 3,3 2,3 2,4 • CAP and Paragominas projects will further strengthen alumina position Bauxite Alumina Alum
Slide 27: Alumina pricing shifting from LME-link to market fundamentals
Alumina pricing shifting from LME-link to market fundamentals Contract durations • Future pricing should reflect fundamentals of bauxite and <2000 2011 alumina value chain • Spot market activity is important 20% 20% 25% • New norm for the industry 45% 35% • Index pricing and shorter-term 55% contrac
Slide 28: Ideally positioned for future growth
Ideally positioned for future growth Holsbru Alouette Vasstøl Metal Hydro power Paragominas Qatalum 2 Bauxite Metal Acro CAP Suzhou Alumina Extrusion
Slide 29: Future value creation
Future value creation • Improve relative position • Focus on operational excellence • Develop commercial opportunities • Manage portfolio actively
Slide 30: www.hydro.com
www.hydro.com HYDRO