Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (June 2011)
123 slides from Norsk Hydro Asa's investor presentation, June 2011
Slide 1: Investor presentation May/June 2011
Investor presentation May/June 2011
Slide 2: Table of contents and cautionary note
Table of contents Cautionary note 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 strategies for Hydro, such as p
Slide 3: Company overview
Company overview (3)
Slide 4: Hydro: resource rich and fully integrated
Hydro: resource rich and fully integrated Hydro underlying EBIT quarterly, NOK million 9 930 6 009 (2 555) 3 551 1 448 • Based in Norway with 3 200 operations in 40 countries 2 800 • 23 000 employees 2 400 2 000 • Operating revenues 1 600 • 2007: NOK 94 billion 1 200 • 2008: NOK 89 billion 800 • 200
Slide 5: Hydro's value proposition
Hydro’s value proposition • Transforming bauxite and alumina acquisition enhances earnings robustness and provides long alumina position for decades to come • Repositioning of Primary Metal on track for USD 300 per tonne cost improvement by end-2013 • World-class Qatalum smelter in full production f
Slide 6: 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 • Bauxite capacity • Long-term power • 2.4 million tonn
Slide 7: Aluminium is the metal of the future
Aluminium is the metal of the future • Lightweight • Formability • 1/3 density of steel • Extrusion, rolling, casting • Low melting point vs. steel • Recyclability • 5% of original energy consumption • Excellent conductivity • 75% of all aluminium produced still in use • Thermal – electrical • Corro
Slide 8: Hydro becomes first tier aluminium company
Hydro becomes first tier aluminium company Production capacity for 2010 in aluminium equivalents, million tonnes 9 000 Alumina Aluminium 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 Alcoa Chalco Rusal Rio Tinto Hydro pro Chiping Weiqiao BHP Vale Hydro East Hope China Dubal Xinf a Yichuan Alumin
Slide 9: Responsible business is our license to operate
Responsible business is our license to operate Safety remains a top priority Commitment to sustainable operations TRI rate • Reducing specific energy consumption and climate gas emissions 10.3 • Helping our customers reduce their climate footprint • Responsible restructuring 7.0 • Welcoming new coll
Slide 10: 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 operations and commercialization of current asset
Slide 11: Market outlook
Market outlook (11)
Slide 12: Significant aluminium demand growth expected
Significant aluminium demand growth expected Demand for primary aluminium World outside China China Million tonnes 90 80 +80% 70 37 60 28 50 40 17 37 30 31 20 24 10 0 2010 2015 2020 Fight for raw materials to continue Resource-constrained world (12)
Slide 13: Aluminium price increase, strong premiums
Aluminium price increase, strong premiums Aluminium price USD per tonne Ingot premiums USD per tonne 3 400 200 175 3 000 150 2 600 125 100 2 200 75 1 800 50 1 400 25 0 1 000 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 2001 2003 2005 2007 2009 2011 2013
Slide 14: Volumes seasonally higher
Volumes seasonally higher Hydro’s downstream sales Q1 2011 vs Q4 2010 Total downstream sales* Rolled Products: +5% Extruded Products: +8% Foil Litho Can Packaging Auto & General Extrusion Building Extrusion Extrusion Precision beverage & building heat engineering Eurasia Systems North South Tubing e
Slide 15: Mid-term development scenario thinking
Mid-term development scenario thinking World outside China 1 000 tonnes 28 000 Supply Demand 27 000 26 000 25 000 3%–6% 24 000 5%–9% 23 000 22 000 Supply influences Demand influences 21 000 • New projects 19% • GDP growth • Potential restart • Further restocking • Supply disruptions • Emerging marke
Slide 16: Global inventory days trending down
Global inventory days trending down World reported primary aluminium inventories • Inventory days reduction driven by 1 000 tonnes Days increased consumption 7 000 80 6 000 70 • Q1 LME stocks increase believed to partly reflect unreported metal moved into 60 5 000 reported warehouses 50 4 000 • High
Slide 17: China balanced in primary aluminium
China balanced in primary aluminium 1 000 tonnes 600 • Reduced production due to 500 Chinese New Year celebration 400 in February Net import 300 • Production resumed after 200 Chinese New Year 100 • China expected to be broadly 0 balanced in 2011 (100) • New capacity to be built in Net export (200)
Slide 18: Positive 2011 market outlook maintained
Positive 2011 market outlook maintained World outside China (quarterly annualized) • World outside China 1 000 tonnes • Annualized demand at 25.3 million tonnes in Q1 30 000 • Up 1% vs Q4 2010 28 000 26 000 • 7% demand growth expected in 2011 24 000 • Capacity development 22 000 • 1.2 million tonnes
Slide 19: Downstream demand development
Downstream demand development Demand, million tonnes Share of semis consumption 27 2010 – 54 million tonnes Western Europe North America China & Mexico 22 Consumer Electrical durables 10% 7% Packaging 17 Machinery 9% & equipment 10% Foil stock 8% 12 Other 6% Transport 26% 7 Construction 24% 2 2008 2
Slide 20: 66% of bauxite reserves in 3 countries
66% of bauxite reserves in 3 countries Billion tonnes Guinea 14.9 China 2.1 Mali 0.9 1.2 0.0 4.0 India Vietnam Jamaica Venezuela 1.6 2.3 1.1 0.5 1.8 0.4 0.3 0.0 Indonesia Cameroon 1.0 0.1 1.2 0.0 Brazil Australia 8.2 9.5 5.9 2.0 Big-league (Top- 3) Total bauxite, billion tonnes: reserves, mine site
Slide 21: China dependent on bauxite imports
China dependent on bauxite imports Chinese bauxite sourcing • Domestic bauxite reserves estimated Million tonnes at 1.3-2.0 billion tonnes 115 Import 42 Domestic source • Quality of domestic bauxite resources 67 73 deteriorating 30 21 37 • Indonesia supplies ~75% of imported 19 bauxite 2005 2010 201
Slide 22: Significant alumina demand growth expected
Significant alumina demand growth expected Million tonnes 160 +80% Alumina demand 140 135 Production China 55 Production world outside China 118 120 48 100 81 80 29 80 70 60 52 40 20 0 2010 2015 2020 *2020 production world outside China includes 10 million tonnes of highly probable projects Source:
Slide 23: Alumina market expected to remain balanced
Alumina market expected to remain balanced Alumina balance world outside China, million tonnes 90 Alumina demand + export to China 6-10 80 Highly probable new capacity million Alumina production tonnes 70 60 50 40 30 20 10 0 2011 2012 2013 2014 2015 2020 Export to 3.5 3.5 4.0 4.5 4.5 5.0 China Idled
Slide 24: Alumina market is consolidating
Alumina market is consolidating Net long alumina position, million tonnes Alcoa 4.3 Alcoa 8.0 Vale 3.0 Chalco 2.8 Glencore 2.4 BHP Billiton 2.1 Chalco 2.0 Hydro 1.5 BHP Billiton 1.9 Glencore 1.5 Kaiser 1.0 Rio Tinto 0.7 Alcan 0.8 Klesch -0.5 Sual 0.7 Rusal -0.6 Rio Tinto 0.5 Tajik -0.8 Pechiney 0.4
Slide 25: Attractive cost position
Attractive cost position Global business operating cost curve 2010 USD per tonne Alunorte stand-alone 450 400 350 300 Average - USD 243 250 200 150 100 50 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Million tonnes Source: CRU (25)
Slide 26: Alumina price development
Alumina price development Historical alumina price Platts index in USD* Alumina price Alumina price USD per tonne % LME USD per tonne % LME % of LME % of LME 700 32 450 20 600 28 425 24 400 18 500 20 375 400 16 350 16 300 12 325 200 8 300 14 100 4 275 0 0 12 250 1998 2000 2002 2004 2006 2008 2010 09
Slide 27: Commodity prices drive industry costs
Commodity prices drive industry costs 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 0 200 20 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 20
Slide 28: Strong power prices, low reservoir levels
Strong power prices, low reservoir levels Hydro’s snow and water reservoir levels assumed better than market average Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 700 100 2010 2011 2010 2011 90 600 80 500 70 60 400 50 300 40 200 30 20 100 10
Slide 29: First quarter results 2011
First quarter results 2011 (29)
Slide 30: Vale transaction completed, Qatalum ramp-up, market outlook
• Vale transaction completed • Qatalum ramp-up on track • Positive market outlook (30)
Slide 31: Q1 highlights
Q1 highlights • Underlying EBIT NOK 1 448 million • Stronger sales supported by seasonally improved markets • Stable Bauxite & Alumina result, weak production performance • Primary Metal up on higher prices, partly offset by increased raw material costs • Down- and midstream lifted by higher sales a
Slide 32: Ambitious cost improvement program on target
Ambitious cost improvement program on target Estimated primary aluminium cash cost and margin • USD 300 per tonne cost improvement USD/tonne 1) • USD 50 per tonne realized in 2010 475 475 • Further USD 125 per tonne targeted in 2011 425 475 375 375 2 175 25 • Cash cost up ~USD 125 from 2010 1 750 1
Slide 33: Historic Vale transaction completed
Historic Vale transaction completed • 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 • Weak production
Slide 34: Underlying EBIT
Underlying EBIT 1 448 1 110 965 688 588 -493 -618 -651 -793 NOK million Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Bauxite & Alumina 1) (228) (73) 21 (117) 162 288 71 113 155 Primary Metal 1) 3 (815) (780) (623) (169) 382 318 86 583 Metal Markets (245) 196 (15) (20) 65 3
Slide 35: Underlying EBIT development
Underlying EBIT development NOK billion 0.2 (0.2) 0.1 1.4 0.3 0.4 0.6 Q4 2010 LME price and Volume Equity accounted C ost smelters Other Q1 2011 currency investments (35)
Slide 36: Key financials
Key financials NOK million Q1 2011 Q4 2010 Q1 2010 Year 2010 Revenue 21 138 19 406 18 145 75 754 Underlying EBIT 1 448 588 688 3 351 Items excluded from underlying EBIT 4 408 180 297 (167) Reported EBIT 5 855 768 985 3 184 Financial income (expense) (93) 292 545 522 Income (loss) before tax 5 762 1
Slide 37: Tax and financial expense
Tax and financial expense Tax Finance NOK million Q1 2011 Q4 2010 NOK million Q1 2011 Q4 2010 Income before tax 5 762 1 060 Interest income 51 84 Dividends received and net gain on securities (10) 22 Equity accounted investments (19) 17 Financial income 41 107 Revaluation gain Alunorte and CAP 4 222
Slide 38: Items excluded from underlying EBIT
Items excluded from underlying EBIT NOK million Q1 2011 Q4 2010 Q1 2010 Year 2010 Underlying EBIT 1 448 588 688 3 351 Unrealized effects power contracts 40 (151) (272) (609) Unrealized LME and other derivative effects (136) 283 230 (117) Metal effect, Rolled Products 176 92 314 560 Rationalization c
Slide 39: Pro forma underlying EBIT & EBITDA
Pro forma underlying EBIT & EBITDA Underlying EBIT before transaction and contribution from acquired Vale assets NOK million 3 351 + 790 = 4 141 1 538 1 369 91 1 231 259 1 448 266 1 110 841 698 965 253 688 588 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Underlying EBITDA before transaction and contribut
Slide 40: Preliminary purchase price allocation
Preliminary purchase price allocation NOK billion Property, plant and equipment 44.8 Goodwill 2.7 Net other assets 9.2 Deferred tax liabilities (6.2) Net interest-bearing debt (6.4) Net assets acquired 44.1 Net assets acquired by Hydro 37.0 Minority interests 7.1 Net assets acquired 44.1 Considerati
Slide 41: Pro forma income statement Q1 2011
Pro forma income statement Q1 2011 Vale Pro forma Aluminium Pro forma Hydro after NOK million Hydro actual combined adjustments transaction Revenue 21 138 2 121 (444) 22 815 Share of the profit (loss) in equity accounted investments (19) - (27) (45) Other income, net 4 553 - (4 421) 132 Total revenu
Slide 42: Bauxite & Alumina
Bauxite & Alumina Pro forma Q1 Q4 Q1 Key figures 2011 2010 2010 Alumina production, kmt 1 336 1 448 1 394 Total alumina sales, kmt 1 762 2 018 1 843 Realized alumina price, USD/mt 329 311 293 Apparent alumina cash cost, USD/mt 266 251 231 Bauxite production, kmt 1 720 2 017 1 745 Underlying EBITDA,
Slide 43: Primary Metal
Primary Metal Pro forma Q1 Q4 Q1 Key figures 2011 2010 2010 Primary aluminium production, kmt 490 475 447 Total sales, kmt 627 624 601 Realized LME price, USD/mt 2 366 2 131 2 039 Realized LME price, NOK/mt 13 664 12 739 11 826 Underlying EBITDA, NOK million 1 137 808 320 Underlying EBIT, NOK millio
Slide 44: Metal Markets
Metal Markets Q1 Q4 Q1 Key figures 2011 2010 2010 Remelt production, kmt 150 147 143 Total metal products sales, kmt 772 688 670 Underlying EBITDA, NOK million 168 88 91 Underlying EBIT excl currency and 95 73 144 inventory valuation effects, NOK million Underlying EBIT, NOK million 143 62 65 Q1 ope
Slide 45: Rolled Products
Rolled Products Q1 Q4 Q1 Key figures 2011 2010 2010 External sales volumes, kmt 245 234 231 Underlying EBITDA, NOK million 342 226 335 Underlying EBIT, NOK million 232 105 223 Underlying EBIT NOK million 864 232 Q1 operating results 309 • Seasonally higher sales improve result 227 232 by NOK 80 mill
Slide 46: Extruded Products
Extruded Products Q1 Q4 Q1 Key figures 2011 2010 2010 External sales volumes, kmt 136 127 128 Underlying EBITDA, NOK million 237 162 252 Underlying EBIT, NOK million 105 24 117 Underlying EBIT NOK million 444 105 Q1 operating results • Weak European construction market 201 • Seasonally higher volume
Slide 47: Energy
Energy Q1 Q4 Q1 Key figures 2011 2010 2010 Power production, GWh 2 308 2 263 2 781 Net spot sales, GWh 955 827 1 323 Southwest Norway spot price (NO2), 520 469 430 NOK/MWh Underlying EBITDA, NOK million 600 502 623 Underlying EBIT, NOK million 573 482 588 Underlying EBIT Q1 operating results NOK mil
Slide 48: Net cash development Q1
Net cash development Q1 NOK billion Net cash flow from Net cash flow from operations NOK (0.6 billion) investing NOK (6.4 billion) 2.4 (1.9) (1.2) 11.0 (0.6) (5.7) (5.7) (2.0) (0.2) End-Q4 2010 Underlying Operating Other Investments / Net cash Debt increase Other End-Q1 2011 EBITDA capital adjustmen
Slide 49: Robust financial position
Robust financial position Net cash/(debt), NOK billion Dec 31, Dec 31, Mar 31, 11.0 NOK billion 2009 2010 2011 Cash and cash equivalents 2.6 10.9 3.7 Short-term investments 1.5 1.3 1.3 Short-term debt (2.0) (0.9) (2.5) Long-term debt (0.1) (0.3) (4.5) Net cash/(debt) 2.0 11.0 (2.0) Net int.-bearing
Slide 50: 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 (50)
Slide 51: Business overview
Business overview (51)
Slide 52: Bauxite & Alumina
Bauxite & Alumina (52)
Slide 53: High-quality asset portfolio
High-quality asset portfolio MRN Paragominas Alunorte alumina CAP alumina Alpart alumina bauxite mine bauxite mine refinery refinery project refinery • 5% ownership • 60% ownership, 100% • 91% ownership • 81% ownership • 35% ownership • Volume off-take by 2015 • World’s largest alumina • CAP refiner
Slide 54: Integration process well underway
Integration process well underway • Solid management team • Global organization Successful • Headquarters, Rio de Janeiro, Brazil start • Operations, Para State, Brazil • Marketing, Lausanne, Switzerland • Workforce of 6 500 people in Brazil • Stakeholder relations well established • Authorities • C
Slide 55: Paragominas – production process
Paragominas – production process • Production process • Strip mining allows for quick environmental recovery • Bauxite found in 0.5-2.5 meter layers 4-18 meters below ground • 244 km pipeline from Paragominas to Alunorte • Only bauxite slurry pipeline in the world • 15 million tonnes annual capacity
Slide 56: Paragominas – production process
Paragominas – production process Reclaimer Silo SAG mill Pumping station Classification to pipeline Tailings dam/recovered Classification water Ball mill Recrusher Vibrating screen (56)
Slide 57: Paragominas bauxite mining costs
Paragominas bauxite mining costs • Labor largest cost factor Paragominas bauxite mining costs 2010 • Influenced by Brazilian wage level • Productivity improvements Sustaining capital; 9 % Other costs; 19 • Maintenance/consumables % • Influenced by Brazilian inflation Labor; 25 % • Energy cost – powe
Slide 58: Paragominas priorities
Paragominas priorities Bauxite production, million tonnes • Operational improvements 10 • Housekeeping and safety 9 • Improve performance stability 8 • Beneficiation plant • Dewatering filters in Alunorte 7 • Stripping ratio 6 • Recovery rate 5 • Improved production system 4 3 • Target significant p
Slide 59: Alunorte - production process
Alunorte - production process Bauxite dewatering Steam Alumina Al2O3 Powerhouse Bauxite Caustic soda Evaporation Test tank Calcination Digestion Hydrate Classification (Al(OH)3) Precipitation Decanters Mud residue (59)
Slide 60: Alunorte priorities
Alunorte priorities Alumina production, million tonnes • Operational improvements 7 • Housekeeping and safety • Improve plant efficiency 6 • Performance in older lines 5 • Availability of coal boilers • Dewatering filters 4 • Port costs • Improved production system 3 2 • Targeting stable production
Slide 61: Favorable integrated alumina cash cost position
Favorable integrated alumina cash cost position • Integrated alumina cash cost position 2010 Integrated alumina cash cost position 2010 • USD 238 per tonne • Alunorte, Paragominas and sourced alumina Sourced alumina; • Bauxite 8% • Cash cost to be improved as Paragominas increase production and pipe
Slide 62: Expansion projects - CAP and Paragominas III
Expansion projects - CAP and Paragominas III • Capacity • CAP alumina refinery I • 1.9 million tonnes • Paragominas bauxite mine expansion III • Up to 15 million tonnes • Time schedule • CAP refinery I planned to produce in 2015 • Paragominas expansion developed in parallel • Investment estimates an
Slide 63: Business model – volume flows
Business model – volume flows 1 000 tonnes, pro forma 2010 External sourcing 2 100 alumina External 1) 2 100 4 500 alumina sales Paragominas 7 500 Commercial Prod (100%) 7 500 operations Alunorte Internal 2) Hydro availability Prod (100%) 5 300 Hydro 2 900 alumina sales 100% 5 800 availability Alumi
Slide 64: Attractive alumina position
Attractive alumina position 1 000 tonnes 9 000 Open position not committed to sales contracts 8 000 Sourcing contracts 7 000 CAP equity 6 000 Alunorte equity 5 000 4 000 3 000 Smelter demand* 2 000 1 000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 *Sunndal 3 line assumed back in operation, N
Slide 65: Shift towards shorter contract durations
Shift towards shorter contract durations % of LME per tonne alumina for Contract durations long-term contracts <2000 2011 13.00-14.00% 13.25-15.25% 12.00-13.00% 20% 20% 25% 45% 35% 55% Long-term contracts (>6 years) Medium-term contracts (3-5 years) 1990-2000 2000-2005 2005-2010 Spot (< 2 years) Sou
Slide 66: Alumina pricing shifting from LME-link to market fundamentals
Alumina pricing shifting from LME-link to alumina market fundamentals • Future pricing should reflect the fundamentals of the bauxite and alumina value chain • Bauxite, a fight for cost efficient resources going forward • Index pricing and shorter term contracts (66)
Slide 67: Hydro's commercial strategy
Hydro’s commercial strategy • Move towards index pricing • Currently not offering medium/long-term LME linked contracts • Actively promote index pricing • Focus on contracts with 1-4 year duration • Focus on selling to end-users • Hydro’s existing combined sales portfolio • Average alumina price ~13
Slide 68: Strong social and environmental commitment
Strong social and environmental commitment • Strategic partnerships to establish basis for multi-party dialogue • Social program/community investments based on input from stakeholders • Reforestation • World-leading experts to review rehabilitation program • Health and safety top priority • Ambition
Slide 69: Primary Metal
Primary Metal (69)
Slide 70: World-wide production network
World-wide production network Primary aluminium annual production capacity Norway, 880 000 tonnes • Sunndal (100%) : 375 000 tonnes • Årdal (100%): 190 000 tonnes Canada, 115 000 tonnes • Karmøy (100%): 170 000 tonnes • Alouette (20%): 115 000 tonnes 42% • Høyanger (100%): 60 000 tonnes • Expansion
Slide 71: Strong focus to further improve cost position
Strong focus to further improve cost position Estimated primary aluminium production Estimated business operating cost 2014 by CRU cash costs USD/tonne Full year 2010, USD/tonne 2 800 2 800 Hydro Peer companies 2 400 2 400 2 000 2 000 1 600 1 600 Hydro 1 200 1 200 Accumulated world capacity, 1 000 t
Slide 72: Improvement program: USD 300 per tonne
Improvement program: USD 300 per tonne Cost reduction target from 2009 level for ~1 000 000 tonnes annual capacity 300 Operational improvements • Improved current efficiency • Reduced power consumption • Reduced anode consumption Fixed cost reductions and lean operations 200 125 Further operational
Slide 73: Attractive Qatalum fundamentals
Attractive Qatalum fundamentals Joint venture (50/50) between World-class smelter Qatar Petroleum and Hydro • Cash costs estimated around 1 400-1 500 USD per tonne at 2010 • Capacity: 585 000 tonnes market conditions when in full production 2011 focus Ideally located to serve all major • Ramp-up to
Slide 74: Qatalum in full production from June 2011
Qatalum in full production from June 2011 • 440 of 704 cells producing by end-Q1 • 80 000 tonnes produced in Q1 (100%) • Ramp-up is continuing towards full production from June • Final ramp-up dependent on commissioning of power plant steam turbines • Insurance expected to cover a majority of loss r
Slide 75: Qatalum facts
Qatalum facts • Capacity • Smelter: 585 000 tonnes per year • 704 cells in 2 double-lined potrooms • Anode plant, casthouse and 1 350 MW power plant • Possible expansion to 1 200 000 tonnes per year • Hydro’s proprietary smelting technology • Investment • ~USD 5.7 billion (100%) • 46% equity, 54% pr
Slide 76: Albras – world-scale smelter in key region
Albras – world-scale smelter in key region • Hydro is a majority owner • Owned 51% by Hydro and 49% by Nippon Amazon Aluminium Company • Industry average cash cost position • Long-term energy coverage with hydropower based LME-indexed contract until end-2024 • Alumina sourced from Alunorte located n
Slide 77: Develop technology to fulfill ambitions
Develop technology to fulfill ambitions Next- generation smelter HAL 300 HAL4e R&D portfolio • Operating for several years • Benchmark technology – • HAL4e optimization – to in Sunndal process parameters and be ready for next project • Ramping up in Qatar environment • HAL Ultra – future vision • Qa
Slide 78: Metal Markets
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Slide 79: Leading metal products supplier in Europe
Leading metal products supplier in Europe • Growing marketing position in U.S. and Asia through Qatalum volumes The preferred partner in casthouse • Enhance value of market system and products and services Extrusion ingot optimize value on top of LME price 1 550 000 tonnes • Strengthen margin manage
Slide 80: Flexible and extensive supply network Europe
Flexible and extensive supply network Europe • Capacity in Europe Product customer (illustration) • 1.3 mill tonnes of primary metal 1) Primary casthouse • 1.0 mill tonnes of remelting and recycling 2) Remelters • 0.6 mill tonnes Qatalum (100%) 3) Third-party & part-owned Sunndal • 0.2 mill tonnes o
Slide 81: 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 82: Rolled Products
e a RolledsProducts of
Slide 83: No. 1 flat rolled products producer in Europe
No. 1 flat rolled products producer in Europe • World leading positions in high-end Packaging products: foil, litho and automotive & building Revenues: • Solid cash generation NOK 11.3 billion • Record results in 2010 Automotive, heat • Technology leadership and innovation exchangers & general engin
Slide 84: Flat rolled products consumption
Flat rolled products consumption Western Europe North America Asia Pacific Million tonnes Million tonnes Million tonnes Million tonnes % growth (RHS) 8 23% 8 23% 8 23% 20% 20% 20% 7 17% 7 17% 7 17% 6 14% 6 14% 6 14% 11% 11% 11% 5 8% 5 8% 5 8% 4 5% 5% 4 5% 2% 4 2% 2% 3 -1% 3 -1% 3 -1% -4% -4% -4% 2 -
Slide 85: Hydro's Rolled Products operations
Hydro’s Rolled Products operations • 1 million tonnes flat rolled products annually Holmestrand • Operating revenues ~NOK 21.2 billion Karmøy • Hydro operates 7 rolling assets in 4 countries Hamburg Norf/ Grevenbroich • Operating world-class benchmark assets • Alunorf (JV 50%) • World’s largest roll
Slide 86: Attractive market position and customers
Attractive market position and customers More than 50% of products with global reach Our products Our customers Our position Litho World market leader Global reach Foil Can Leading position in Europe Auto Regional reach Leading position in Europe GE/ Building (86)
Slide 87: European producer with global reach
European producer with global reach 25% export share for high-end markets serving key global customers & markets Tonnes North America 56 000, 6% Asia-Pacific 79 000, 8% Middle East 76 000, 8% World Latin 943 000 Lamerica 100% 27 000, 3% Source: Hydro analysis; based on export sales by region 2010 (Y
Slide 88: Rolled Products earnings drivers
Rolled Products earnings drivers Underlying EBIT per tonne, NOK 1 400 • Contract structure • Margin business based on conversion price 1 200 • LME element passed on to customers • Medium-term contracts 1 000 • Range from spot contracts to multi-year contracts 800 • High share of fixed costs - volume
Slide 89: Extruded Products
Extruded Products (89)
Slide 90: Strong position in Europe, U.S. and Brazil
Strong position in Europe, U.S. and Brazil • Leading position in Europe in Extrusion and Building Systems • Strong position in the U.S. and Brazil Extrusion Eurasia Building Systems Revenues: NOK 8.8 billion Revenues: NOK 5.6 billion • Global leader in precision tubing • Strategy • Reinforce Europea
Slide 91: A true entrepreneurial driven enterprise
A true entrepreneurial driven enterprise Extrusion Eurasia, Extrusion North America and Extrusion South America Location • “Mastering” Europe/gaining market share in the US • Close to customers with strong regional presence • More then 40 locations in 19 countries • Top innovation and design • Main
Slide 92: Winning in a demanding market
Winning in a demanding market Precision Tubing • Competence - our proven resource • Strike a new path • Strong global presence • 2010 sales volume: 67 000 tonnes (92)
Slide 93: Building the future with aluminum
Building the future with aluminum Building Systems Aluminium used for Energy saving construction • Reduce materials to double by • High insulation 2020 The future Energy is energy- gaining neutral • Active buildings • Passive 100% recyclable • Design • Limited types of, and non-harming materials 201
Slide 94: Extruded products consumption
Extruded products consumption Europe North America Million tonnes % growth (RHS) Million tonnes Million tonnes 3.5 16% 3.5 16% 3.0 12% 12% 8% 3.0 2.5 8% 4% 2.5 4% 2.0 0% 2.0 0% -4% -4% 1.5 -8% 1.5 -8% 1.0 -12% 1.0 -12% -16% -16% 0.5 0.5 -20% -20% 0.0 -24% 0.0 -24% 2002 2003 2004 2005 2006 2007 2008
Slide 95: Extruded Products earnings drivers
Extruded Products earnings drivers • Contract structure Underlying EBIT per tonne*, NOK • Mainly short-term contracts 2 000 • Large number of small orders to 1 750 small/medium-sized customers • Produce to order - limited share of 1 500 commodity type products 1 250 • Strong cost focus 1 000 • Margi
Slide 96: Energy
Energy (96)
Slide 97: Solid long-term power coverage for Primary Metal
Solid long-term power coverage for Primary Metal 35 000 • 90% of power needs secured until 2020 30 000 • High share of renewable energy • More than 2/3 of power needs from 25 000 renewable sources • Albras smelter in Brazil has hydropower 20 000 based contracts through 2024 15 000 • High share of ge
Slide 98: Hydro is a global energy player
Hydro is a global energy player Energy consumption in smelters, rolling mills and alumina refineries Europe Power 14.8 TWh Natural gas 2.4 TWh North America Power 1.6 TWh Middle East Power 4.6 TWh South America Power 4.2 TWh Coal 5.6 TWh Fuel oil 7.4 TWh Australia/Asia Power 3.8 TWh Natural gas 0.1
Slide 99: Substantial values in long-term assets in Norway
Substantial values in long-term assets in Norway • Stable and solid cash generation Power production capacity (TWh) • Indicative annual EBITDA NOK 1.6 – 1.8 billion per region and reversion year • Hydro’s power balance, normal year Telemark 3.0 0.5 • Normal production ~9.4 TW • Sourcing on long-term
Slide 100: Reversion regime secures Hydro's values
Reversion regime secures Hydro’s values • Pursue value enhancement strategy • Develop and enhance value of power assets • Power assets remain an integrated part of aluminium production in Norway • Power and smelter portfolio will be reviewed concurrently • Participate in restructuring of power secto
Slide 101: Energy earnings drivers
Energy earnings drivers Underlying EBIT* and spot price • Production and market prices strongly NOK million NOK/MWh linked to hydrological conditions 2 000 500 1 500 400 • Relatively stable annual EBIT contribution 300 1 000 • Large quarterly variations due to volatile spot 200 sales and spot prices
Slide 102: Additional information
Additional information (102)
Slide 103: Shareholder and financial policy
Shareholder and financial policy • Hydro aims to give its shareholders competitive Dec 31, Dec 31, Dec 31, Mar 31, returns compared to alternative investments in NOK billion 2008 2009 2010 2011 peers Cash and cash equivalents 3.3 2.5 10.9 3.7 Short-term investments 1.6 1.5 1.3 1.3 • Maintained divid
Slide 104: Hedging policy
Hedging policy Upstream • Primarily remain exposed to LME prices • Partly off-setting effects through raw material prices and negative currency correlations with LME • Majority of 2011 LME exposure in Vale transaction hedged • Operational LME hedging • Three months forward sales to manage customers’
Slide 105: Capital allocation mainly upstream
Capital allocation mainly upstream NOK billion • Qatalum capital expenditure completed 10.2 in 2010 • Equity contribution ~NOK 3.5 billion • Sustaining capex NOK 3.5 billion annually ~6.21 from 2011 including Vale assets ~5.02 • Growth projects in 2011 • Holsbru hydro power development • Recycling c
Slide 106: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +/- 10% Currency sensitivities +/- 10% NOK Financial Income NOK million EBIT EBIT Net million items before tax income Aluminium 2 900 USD 2 450 (450) 2 000 1 300 Oil (280) BRL (700) 700 - 100 Pet coke (230) EUR (50) (1 100) (1 150) (850) C
Slide 107: Items excluded from underlying results - 2011
Items excluded from underlying results - 2011 NOK million (+=loss/()=gain) Q1 2011 Unrealized derivative effects on currency contracts (Alunorte) Bauxite & alumina (1) Derivative effects on LME related contracts (Vale Aluminium) Bauxite & alumina 16 Transaction related effects (Vale Aluminium) Bauxi
Slide 108: Items excluded from underlying results - 2010
Items excluded from underlying results - 2010 NOK million (+=loss/()=gain) Q1 2010 Q2 2010 Q3 2010 Q4 2010 Year 2010 Unrealized derivative effects on currency contracts (Alunorte) Bauxite & alumina 23 12 (65) (20) (50) Derivative effects on LME related contracts (Vale Aluminium) Bauxite & alumina -
Slide 109: Items excluded from underlying results - 2009
Items excluded from underlying results - 2009 NOK million (+=loss/( )=gain) Q1 2009 Q2 2009 Q3 2009 Q4 2009 Year 2009 Unrealized derivative effects on LME related contracts (Alunorte) Primary metal - - (16) 16 - Unrealized derivative effects on currency contracts (Alunorte) Primary metal (11) (222)
Slide 110: Operating segment information
Operating segment information Underlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina (228) (73) 21 (117) 162 288 71 113 155 (397) 633 Primary Metal 3 (815) (780) (623) (169) 382 318 86 583 (2 215) 617 Metal Markets (2
Slide 111: Operating segment information
Operating segment information Pro forma underlying EBIT Q1 Q2 Q3 Q4 Q1 Year NOK million 2010 2010 2010 2010 2011 2010 Bauxite & Alumina 205 448 348 223 237 1 225 Primary Metal (203) 481 306 230 592 816 Metal Markets 65 31 163 62 143 321 Rolled Products 223 309 227 105 232 864 Extruded Products 117 2
Slide 112: Operating segment information
Operating segment information EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina* (426) 117 142 (115) 139 574 43 91 4 561 (282) 847 Primary Metal* (1 451) (649) (294) (783) (8) 645 (378) 355 525 (3 177) 615 Metal Markets (31
Slide 113: Operating segment information
Operating segment information Pro forma reported EBIT Q1 Q2 Q3 Q4 Q1 Year NOK million 2010 2010 2010 2010 2011 2010 Bauxite & Alumina 205 768 47 140 213 1 161 Primary Metal (41) 723 (368) 499 622 813 Metal Markets (32) 59 18 115 151 160 Rolled Products 684 50 261 219 349 1 214 Extruded Products 172
Slide 114: Operating segment information
Operating segment information Total revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina* 1 526 1 495 1 525 1 588 1 631 2 426 1 735 2 090 2 183 6 134 7 882 Primary Metal* 5 700 5 699 5 938 5 640 6 607 7 448 6 558 6 979 8 23
Slide 115: Operating segment information
Operating segment information Internal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina* 1 042 746 974 869 1 003 1 241 1 076 1 199 1 168 3 631 4 518 Primary Metal* 5 344 5 365 5 379 5 260 6 210 6 992 6 166 6 620 7 582 2
Slide 116: Operating segment information
Operating segment information Depreciation, amortization and impairment Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year NOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina* - - - - - 1 1 1 178 1 2 Primary Metal* 463 461 451 444 416 430 428 462 467 1 819 1 737 Metal Markets 32 3
Slide 117: Income statements
Income statements Q1 Q4 Q1 Year NOK million 2011 2010 2010 2010 Revenue 21 138 19 406 18 145 75 754 Share of the profit (loss) in equity accounted investments (19) 17 (236) (606) Other income, net 4 553 112 183 568 Total revenue and income 25 672 19 535 18 091 75 717 Depreciation, amortization and i
Slide 118: Balance sheets
Balance sheets March 31; December 30, September 30, June 30, March 31, NOK million 2011 2010 2010 2010 2010 Cash and cash equivalents 3 698 10 929 8 658 2 192 2 502 Short-term investments 1 319 1 321 1 316 1 311 1 554 Receivables and other current assets 20 440 13 597 15 939 17 338 15 576 Inventorie
Slide 119: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Year Pro forma Bauxite & Alumina 2010 2010 2010 2010 2011 2010 Alumina production (kmt) 1) 1 394 1 521 1 442 1 448 1 336 5 805 Sourced alumina (kmt) 539 557 488 556 453 2 141 Total alumina sales (kmt) 2) 1 843 2 056 2 023 2 018 1 762 7 941 Realized alumina price (USD)
Slide 120: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Year Pro forma Primary Metal 2010 2010 2010 2010 2011 2010 Realized aluminium price LME, USD/mt 2 039 2 200 2 137 2 131 2 366 2 128 Realized aluminium price LME, NOK/mt 11 826 13 192 13 226 12 739 13 664 12 758 Realized premium above LME, USD/mt 255 266 287 284 347 27
Slide 121: Operational data
Operational data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year Metal Markets 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Remelt production (1 000 mt) 1) 89 111 123 133 143 156 141 147 150 455 586 Metal products sales, own production (1 000 mt) 550 594 608 596 651 702 656 657 734 2 351 2 666 Third-
Slide 122: 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 Irène A. Kristiansen Investor Relations Assistant e: irene.alyana
Slide 123: www.hydro.com
www.hydro.com