Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (August 2004)
26 slides from Norsk Hydro Asa's investor presentation, August 2004
Slide 1: Financial performance
Aluminium Peik Norenberg Senior Vice President Head of Finance and Strategy Financial performance
Slide 2: Presentation outline
Presentation outline z Financial performance key issues z Financial performance z Value chain z Progress on underperforming units z RoaCE development z Capital expenditures z Effects in Aluminium from LME hedging and trading 51145_6 08 2004 • 2 • H ydro M edia
Slide 3: Aluminium – operating income
Aluminium – operating income NOK million Metals Rolled Products Extrusion and Automotive Other and Eliminations 1 629 1 269 833 711 709 653 564 495 530 412 230 345 (146) (997) 2001 2002 2003 2004 Accumulated 185 1 698 2 456 2 898 51145_6 08 2004 • 3 • H ydro M edia
Slide 4: Segment split first half 2004
Segment split first half 2004 Revenues* EBITDA Total NOK 49.3 billion Total NOK 5 043 million 301 10.9 791 24.2 2883 1068 14.2 Metals (Primary Metals and Metal Products) Rolled Products Extrusion and Automotive * Including internal sales Eliminations 51145_6 08 2004 • 4 • H ydro M edia
Slide 5: Segment split
Segment split Gross Investment* Capital employed* Total NOK 70 billion Total NOK 45 billion 12 9 39 24 19 12 Metals (Primary Metal and Metal Products) Rolled Products Extrusion and Automotive * As per 31.12.2003 51145_6 08 2004 • 5 • H ydro M edia
Slide 6: A unique portfolio composition 2003 and development to 2007E
A unique portfolio composition 2003 and development to 2007E 1 000 tonnes Equity Medium/long term contracts Alumina * 820 650 1700E Equity Electrolysis metal 1470 1700E 3rd party Equity alliances Remelt Metal products 1470 260 1600 Extrusion & 4300 – 4700E Rolled Automotive Downstream 890 634 1600 –
Slide 7: A unique portfolio: Higher capital turnover
A unique portfolio: Higher capital turnover Revenues / gross investments EBITDA / Revenues Factor Percent 1,4 25 Pechiney 1,2 Hydro Aluminium 20 1,0 Alcoa Alcan 15 Hydro 0,8 Aluminium 0,6 Alcan 10 Alcoa 0,4 Pechiney 5 0,2 0,0 0 1998 1999 2000 2001 2002 2003 2004* 1998 1999 2000 2001 2002 2003 2004*
Slide 8: CROGI target of 10% reached in 2003 – ROACE will measure future progress
CROGI target of 10% reached in 2003 – ROACE will measure future financial progress Normalized Actual ROACE: 7.5 ~ 8.5 z Volume increases 6.8 5.7 z Internal improvement initiatives 4.7 2.3 z Capital discipline 2.7 0.9 2001 2002 2003 Hydro target 2006 Normalised prices: LME $ 1 500/tonne, NOK/USD 8 51
Slide 9: Sensitivities Hydro Aluminium
Sensitivities Hydro Aluminium NOK million Price sensitivity Pre tax Post tax Change LME price sensitivity 875 615 $100 increase USD sensitivity *) USD sensitivity 2 100 1 475 1 NOK increase EUR sensitivity EUR sensitivity 500 350 1 NOK increase All sensitivities are calculated using the normalized p
Slide 10: Focus on underperforming units
Focus on underperforming units z Efforts towards underperforming units has yielded significant results z Various groups of underperforming units z Production ramp-up z Investment phase z Temporary in difficulties z Longer term underperformance z Release financial and management resources to boost pe
Slide 11: Automotive: The Raufoss turnaround
Automotive The Raufoss turnaround 130% Uptime forming lines 119% z Strong focus on health, environment 120% and safety 110% z Continuous productivity improvement 100% z Better capacity utilization 100% z Cost focus 90% 80% 2001 2002 2003 2004P TRI* development 35 32 130% Press productivity 30 122% 2
Slide 12: Rolled Products: The Holmestrand turnaround
Rolled Products The Holmestrand turnaround Employees Cost focus 450 445 Competence sharing 440 Product optimisation – 435 higher margin segments 430 425 420 415 3Q 2003 Q4 2003 Q1 2004 Q2 2004 Thin gauge mill productivity Heat exchanger & foil – share of production meters/minute 35 % 1000 30 % 800 2
Slide 13: Delivering high quality investment projects
Delivering high quality investment projects Plannerd CAPEX 2004 z Capex level required to maintain current asset base is NOK 2-3 billion Extrusion z Level seen in 2003 and 2004 and is reflecting high investments Automotive in major developments z Major projects delivered and progressing according to
Slide 14: Information Sources
Information Sources Consensus Forecasting – industrial production Oxford Economic Forecasting – macro data, confidence indicators DnB – Focus on important macro data (housing starts, industry order intake, confidence indicators) for major countries. CRU Brook Hunt Metal Bulletin Forecasting Services
Slide 15: Effects in Aluminium from LME hedging and trading
Aluminium Effects in Aluminium from LME hedging and trading
Slide 16: Aluminium metal flow - more margin business – our exposure
Aluminium metal flow - more margin business – our exposure Sources Metal Downstream Own casthouses and products Electroslysis remelters Standard Ingot from Strategic Partners’ partners casthouses Scrap 51145_6 08 2004 • 16 • H ydro Media
Slide 17: LME price development
$/tonne 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 1900 02/01/2004 16/01/2004 30/01/2004 13/02/2004 51145_6 08 2004 • 17 • H ydro Media 27/02/2004 12/03/2004 26/03/2004 End Q1 09/04/2004 23/04/2004 07/05/2004 21/05/2004 LME price development 04/06/2004 18/06/2004 Daily aluminum LME - 3 months
Slide 18: Aluminium LME exposure
Aluminium LME exposure z The electrolysis production is fully exposed to swings in LME prices z Strategy to achieve average LME prices over time for this part of the value chain z Natural hedges from input material with prices linked to LME – Alumina contracts – Energy contracts z Other parts of the
Slide 19: Aluminium use of LME contracts
Aluminium use of LME contracts Operational hedging systems Strategic hedging (Mark to market) (Hedge accounting) Over time achieve average LME Long term hedges to lock in price for own electrolysis certain profitability production by daily sales on the (Sunndal hedges) LME Secure margins for mid and
Slide 20: Accounting treatment effects of LME contracts
Accounting treatment effects of LME contracts z Realised LME contracts are reported on sector level normally creating a match between physical contracts and LME contracts results for the sectors z At period end the actual open LME contracts have to be valuated and recorded at market value. This give
Slide 21: LME price development
$/tonne 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 1900 02/01/2004 16/01/2004 30/01/2004 13/02/2004 51145_6 08 2004 • 21 • H ydro Media 27/02/2004 12/03/2004 26/03/2004 End Q1 09/04/2004 23/04/2004 07/05/2004 21/05/2004 LME price development 04/06/2004 18/06/2004 Daily aluminum LME - 3 months
Slide 22: Inventory Effect Rolled Products
Inventory Effect Rolled Products Accumulated inventory effect, LME price and inventories since 15 March ‘02 INVENTOR Y LEVEL 1) ACCUMULATED IN VENTOR Y EFFECT & L ME 1 000 tonnes Million € Qtr. avg. €/ton 60 Acc. inventory effect 1700 LME 3m 1.5 qtr. delayed in € 160 152 50 1600 150 143 143 145 139
Slide 23: Forward-looking statements/ use of non-GAAP financial measures
23 Forward-looking statements/ use of non-GAAP financial measures In order to utilize the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, Hydro is providing the following cautionary statement: This presentation contains certain forward-looking statemen
Slide 24: Appendix
Aluminium Appendix
Slide 25: LME effects – Example to illustrate - midstream
LME effects – Example to illustrate - midstream Date Transaction Amount Level Aug 20 Daily sale of electrolysis production on LME (3 000 mt) Sold LME-futures at a price of $ 1,700 Aug 31 Mark-to-market valuation - $ 150 000 Other and LME – price $ 1,750 eliminations Unrealised loss Sept 10 Sold 3 00
Slide 26: Estimation of inventory effect in Rolled Products by simplified calculation
Estimation of inventory effect in Rolled Products by simplified calculation z Rolled Products’s inventory has the following pricing structure z 45% is priced LME m-2 z 45% is priced LME m-3 z 10% is priced LME m-4 z Applying the following formula allows to predict the likely metal effect For any giv