Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (May 2015)
113 slides from Norsk Hydro Asa's investor presentation, May 2015
Slide 1: Investor presentation May 2015
Investor presentation May 2015
Slide 2: Table of contents / Cautionary note
Table of contents First quarter results 2015 3 Cautionary note Certain statements included within this announcement contain forward- looking information, including, without limitation, those relating to (a) Market 34 forecasts, projections and estimates, (b) statements of management’s plans, objecti
Slide 3: Q1 2015
Q1 2015 (3)
Slide 4: Q1 highlights
Q1 highlights • Record-high quarterly underlying EBIT of NOK 3 208 million • Higher sales throughout the value chain • Positive currency developments • Acquisition of advanced sorting technology in Germany • Reduced market tightness due to Chinese semis exports (4)
Slide 5: Aluminium demand continues to exceed production
Aluminium demand continues to exceed production World ex-China Demand and production (quarterly annualized) Production less demand* 1 000 mt primary aluminium 1 000 mt primary aluminium 30 000 4 000 3 000 25 000 2 000 1 000 20 000 0 (1 000) 15 000 (2 000) Jan-08 May-09 Sep-10 Jan-12 May-13 Mar-15 Se
Slide 6: Reported inventories world ex-China decline further
Reported inventories world ex-China decline further Warehouse rules in effect as of 1st of February 2015 Reported primary aluminium inventories Stock levels Detroit and Vlissingen 1 000 mt Days Million tonnes Queue days 8 000 120 800 2.4 7 000 750 2.2 100 6 000 2.0 700 80 5 000 1.8 650 1.6 4 000 60
Slide 7: Global primary aluminium market slightly oversupplied
Global primary aluminium market slightly oversupplied Chinese overproduction exceeds World ex-China deficit Demand and production (quarterly annualized) Production less demand* 1 000 mt primary aluminium 1 000 mt primary aluminium 60 000 5 000 55 000 4 000 50 000 3 000 45 000 2 000 1 000 40 000 0 35
Slide 8: Chinese exports decline from high levels in December
Chinese exports decline from high levels in December amid reduced metal advantage Semis exports Comp. adv. (monthly, kmt) (USD/mt) 500 1 000 450 800 400 Improved comp. adv. China 350 600 300 400 250 200 200 150 0 100 ( 200) 50 0 ( 400) Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 O
Slide 9: Standard ingot premiums fall sharply
Standard ingot premiums fall sharply Regional standard ingot premiums USD per mt 600 • US Mid-West and EU duty-paid ingot premium falling to currently ~320 and 500 220 USD/mt, respectively 400 • Japan premium at 425 USD/mt in Q1, negotiations for Q2 at ~380 USD/mt 300 • Current Japanese spot ingot p
Slide 10: Value-added premiums come down with standard ingot
Value-added premiums come down with standard ingot Hydro realizes premiums on 1-2 month time lag USD per mt 900 800 700 600 500 400 300 200 100 0 Jan-08 Jul-09 Jan-11 Jul-12 Jan-14 Apr-15 EI over ingot Ingot DDP Premium Indicator Metal Bulletin Billet Premium Indicator Source: Metal Bulletin, Hydro
Slide 11: Aluminium cost curve shifts down on USD appreciation
Aluminium cost curve shifts down on USD appreciation Many aluminium-producing nations are also oil exporters Top 15 aluminium producers World ex-China USD appreciation Million tonnes; % of global 2014 primary aluminium production Against currencies of major aluminium producers March14 - March-15 3.5
Slide 12: Decline in all-in ingot price partly offset by weak NOK
Decline in all-in ingot price partly offset by weak NOK USD/mt NOK/mt • 3-month LME price traded between 3 100 18 000 1 747 and 1 890 USD/mt during Q1 2 900 17 000 2 700 Primary aluminium LME* USD/mt NOK/mt 16 000 Q1 2015 average 1 813 14 062 2 500 Q1 2015 end 1 790 14 425 2 300 15 000 Q4 2014 avera
Slide 13: Resilient alumina prices, bauxite source diversification continues
Resilient alumina prices, bauxite source diversification continues Platts alumina index (PAX) Chinese bauxite imports by origin USD/mt Percent Million tonnes 450 20% 80 19% 70 400 18% 60 17% 50 350 16% 40 300 30 15% 14% 20 250 13% 10 200 12% 0 Aug 2010 Apr 2012 Nov 2013 Mar 2015 2011 2012 2013 2014
Slide 14: Lower implied alumina cost on currency developments
Lower implied alumina cost on currency developments • USD 4 per mt reduction in implied Implied alumina cost and margin, USD/mt 1) alumina cost from fourth quarter 475 − BRL weakens 12% against USD from Q4 10 425 to Q1 − Lower Paragominas production driven by 259 extended ball mill maintenance 74 75
Slide 15: Stable all-in implied primary aluminium cost
Stable all-in implied primary aluminium cost All-in implied primary cost and margin, USD/mt 1) • Developments Q1 vs Q4 275 ‒ Improvement efforts 800 700 ‒ Positive currency development 1 900 ‒ Increasing raw material costs 1 775 1 800 1 400 2) 1 175 2) 1 150 2) • USD 180 JV program on track, to be c
Slide 16: Strengthening recycling position towards carbon neutrality
Strengthening recycling position towards carbon neutrality • WMR Recycling acquired April 1 ‒ World’s most advanced sorting technology ‒ 36 000 tonnes annual sorting capacity ‒ To supply Hydro remelters ‒ Located in Dormagen, Germany • Technology to be used in Hydro’s recycling facility for used bev
Slide 17: Seasonally higher shipments in Rolled Products
Seasonally higher shipments in Rolled Products YoY decline driven by weak building markets and Chinese exports Q1 2015 vs Q4 2014 Q1 2015 vs Q1 2014 10% 7% 7% 4% (3%) (6%) (6%) (10%) Packaging Litho, Auto & General Total Rolled Packaging Litho, Auto & General Total Rolled & building Heat exchanger e
Slide 18: Seasonally stronger demand for extruded products
Seasonally stronger demand for extruded products • Seasonally stronger demand − 10% increase in North America − 9% increase in Europe • Demand increased compared to same quarter last year − 11% in North America due to increased building activity and strong automotive demand − Stable in Europe, weak
Slide 19: Sapa JV delivers solutions to Ford F-150
Sapa JV delivers solutions to Ford F-150 World’s most selling vehicle • Partnership to supply structural aluminium tubing − Also provide ongoing development support for future extrusion applications • Ford F 150 2015 Model − Aluminium-alloy body − ~700 pounds lighter than 2014 model Picture with cou
Slide 20: Energy: High snow reservoirs, low power prices
Energy: High snow reservoirs, low power prices Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 600 100 500 80 400 60 300 40 200 MIN NO2 (2002-2013) MAX NO2 (2002-2013) 2013 2013 20 100 2014 2014 2015 2015 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37
Slide 21: Record results on higher sales and currency tailwinds
Record results on higher sales and currency tailwinds NOK billion (0.3) 0.9 (0.2) (0.3) 0.2 3.2 2.9 0.8 Underlying Underlying Volumes Net currency Cost Prices and Other Underlying EBIT Q1-2014 EBIT Q4-2014 margins EBIT Q1-2015 (21)
Slide 22: Key financials
Key financials Revenues up on higher sales and currency; 14% higher underlying EPS NOK million Q1 2015 Q4 2014 Q1 2014 2014 Revenue 23 290 21 656 18282 77 907 Underlying EBIT 3 208 2 886 772 5 692 Items excluded from underlying EBIT (2) (591) 50 (18) Reported EBIT 3 206 2 295 822 5 674 Financial inc
Slide 23: Items excluded from underlying EBIT
Items excluded from underlying EBIT Offsetting effects NOK million Q1 2015 Q4 2014 Q1 2014 2014 Underlying EBIT 3 208 2 886 772 5 692 Unrealized effects on power and raw material contracts 151 (261) 175 (72) Unrealized derivative effects on LME related contracts (140) - (5) 352 Metal effect, Rolled
Slide 24: Bauxite & Alumina
Bauxite & Alumina Higher alumina sales on index and currency developments lift results Q1 Q4 Q1 Key figures 2015 2014 2014 Alumina production, kmt 1 451 1 501 1 428 Total alumina sales, kmt 2 136 2 043 1 906 Realized alumina price, USD/mt 300 303 269 Implied alumina cost, USD/mt 225 229 258 Bauxite
Slide 25: Primary Metal
Primary Metal Higher realized all-in price partly offset by higher raw material cost Q1 Q4 Q1 Key figures 2015 2014 2014 Primary aluminium production, kmt 497 499 484 Total sales, kmt 534 527 593 Realized LME price, USD/mt 1 897 1 997 1 749 Realized LME price, NOK/mt 14 383 13 355 10 702 Realized pr
Slide 26: Qatalum results down on lower sales
Qatalum results down on lower sales Q1 Q4 Q1 Key figures – Qatalum (50%) 2015 2014 2014 Revenue, NOK million 1 492 1 510 1 087 Underlying EBITDA, NOK million 585 614 342 Underlying EBIT, NOK million 305 371 115 Underlying Net income (loss), 246 317 75 NOK million Primary aluminium production, kmt 76
Slide 27: Metal Markets
Metal Markets Weak sourcing and trading performance hides strong results at remelters Q1 Q4 Q1 Key figures 2015 2014 2014 Remelt production, kmt 145 130 139 Metal products sales, kmt 1) 626 654 776 Underlying EBITDA, NOK million 47 243 157 Underlying EBIT excl currency and inventory 60 130 156 valua
Slide 28: Rolled Products
Rolled Products Higher shipments, margins and currency gains lift results Q1 Q4 Q1 Key figures 2015 2014 2014 External sales volumes, kmt 227 213 243 Underlying EBITDA, NOK million 465 280 351 Underlying EBIT, NOK million 292 96 181 Underlying EBIT Q1 results NOK million • Seasonally higher shipment
Slide 29: Energy
Energy High production partly offset by lower market prices Q1 Q4 Q1 Key figures 2015 2014 2014 Power production, GWh 3 071 2 823 2 964 Net spot sales, GWh 1 610 1 339 1 581 Southwest Norway spot price (NO2), 238 248 249 NOK/MWh Underlying EBITDA, NOK million 429 402 474 Underlying EBIT, NOK million
Slide 30: Improvement in Sapa JV results beyond seasonality
Improvement in Sapa JV results beyond seasonality • Results improved compared to the previous Q1 Q4 Q1 Key figures – Sapa (50%) 2015 2014 2014 quarter as well as same quarter last year driven by: Revenue, NOK million 7 067 5 945 5 673 − Strong North-American market developments − Improvement and res
Slide 31: Other and Eliminations
Other and Eliminations Increased eliminations of internal inventories Q1 Q4 Q1 Other and Eliminations 2015 2014 2014 Sapa JV 119 (22) 35 Other (117) (118) (127) Eliminations (284) (168) 84 Other and Eliminations (281) (308) (8) (31)
Slide 32: Net cash(debt) development
Net cash(debt) development Above seasonal build-up in operating capital NOK billion Net cash flow from operations NOK 1.4 billion (2.9) 4.4 (0.1) (0.9) (0.7) (0.1) (0.3) End Q4-2014 Underlying Operating Taxes* Investments Currency End Q1-2015 EBITDA capital and other * Includes 600 MNOK reimbursemen
Slide 33: Priorities
Priorities • Deliver on improvement efforts • ICMS dialog • Strengthen competitiveness in uncertain markets (33)
Slide 34: Market
Market (34)
Slide 35: Aluminium is the metal of the future
Aluminium is the metal of the future • Lightweight • Corrosion resistant • Excellent conductivity − 1/3 density of steel − Oxide layer − Thermal – electrical • Recyclability • Formability • Alloying technology − 5% of original energy − Extrusion, rolling, casting − Gives wide range of physical consu
Slide 36: Aluminium demand accelerating in response to global needs
Aluminium demand accelerating in response to global needs Strong demand drivers in key aluminium segments Growth in automotive vehicle production Aluminium content in cars increasing Primary aluminium demand growth Transport Growth in other transport modes, e.g. railway Urbanization Construction Hou
Slide 37: Broad-based aluminium demand growth across segments and regions
Broad-based aluminium demand growth across segments and regions Global semis 2014 demand ~75 million tonnes Global aluminium semis demand, per segment Global aluminium semis demand, per region Million tonnes (2014) Million tonnes (2014) 5% 4% 3% 5% 1% 8% 27% 12% 8% 45% 15% 9% 13% 25% 19% CAGR per se
Slide 38: Infinite ideas in aluminium
Infinite ideas in aluminium More and more sectors “discover” new areas for aluminium applications Lightweight, non-corrosive Zero-emission electrical car ferry in 100% aluminium Floating aluminium bridge with a submerged offshore applications for light-weighting. In operation from 2015 floating tunn
Slide 39: Transport drives global flat rolled product growth of 5%
Transport drives global flat rolled product growth of 5% Total FRP 2014 consumption ~ 23 million tonnes Global FRP consumption by end-use 2014 CAGR 2014-2019, % Transport 12% 10% 14% Electrical 5% 9% 4% Construction 5% 12% Total consumption 5% Machinery & Equipment 5% 51% Consumer durables and other
Slide 40: Automotive demand growth outperforms all other segments
Automotive demand growth outperforms all other segments 40 years of uninterrupted growth – accelerating from 2015 to 2025 Aluminium vehicle penetration, North America Global Body-in-White demand – ‘000 mt Pounds per light vehicle 600 DUCKER WORLDWIDE 2 100 500 In 2015, aluminium penetration CAGR wil
Slide 41: Aluminium – a perfect fit for next-generation automotive
Aluminium – a perfect fit for next-generation automotive Lighter weight translates to lower fuel emissions C02 emissions C02 emissions • Tightening fuel economy regulations 327 g/100 km 194 g/100 km • 10% reduction in vehicle weight gives car manufacturers a 5-7% fuel saving • 1 kg of aluminium repl
Slide 42: Higher raw material imports and semis exports in 2014
Higher raw material imports and semis exports in 2014 Annualized aluminium equivalents*, million mt 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015** 20 15 to China Import 10 5 0 from China Export ( 5) ( 10) Bauxite Alumina Scrap Primary aluminium Fabricated Semis Net aluminium imports Source: CRU
Slide 43: Large and concentrated bauxite resources
Large and concentrated bauxite resources But many challenges for future developments Billion mt Guinea 41.0 China 4.1 2.9 India Vietnam Jamaica 3.0 4.7 6.2 1.1 0.5 1.0 Venezuela 0.5 1.8 0.3 Malaysia 1.0 Indonesia 0.2 4.0 1.5 Brazil 8.7 Australia 2.5 9.5 5.6 Bauxite suppliers Atlantic Pacific short/m
Slide 44: Alumina market is consolidating
Alumina market is consolidating Net long equity alumina position based on 2014 production, million tonnes Alcoa 4.3 Alcoa/AWAC 8.3 Vale 3.0 BHP Billiton 3.0 Glencore 2.4 Rio Tinto Alcan* 1.9 BHP Billiton 1.9 Hydro 1.8 Kaiser 1.0 Hindalco 0.4 Alcan 0.8 UC Rusal 0.3 Sual 0.7 Vedanta (0.4) Rio Tinto 0.
Slide 45: Business overview
Business overview (45)
Slide 46: Hydro - Group
Hydro - Group (46)
Slide 47: Hydro: a resource rich global aluminium company
Hydro: a resource rich global aluminium company Hydro underlying EBIT quarterly, NOK billion 3 551 5 982 1 297 2 725 5 692 3208 3.5 3.0 2.5 • Based in Norway, involved 2.0 in activities in more than 50 countries 1.5 • 13 000 employees 1.0 • Operating revenues − 2013: NOK 65 billion 0.5 − 2014: NOK 7
Slide 48: Strong positions across aluminium value chain
Strong positions across aluminium value chain Raw materials Primary aluminium production, Aluminium in products processing and energy marketing and recycling Bauxite Rolled Sapa JV (50%) Energy Primary Metal Metal Markets & Alumina Products • Bauxite capacity • Long-term power supply • 2.1 million t
Slide 49: Hydro - a first tier aluminium company
Hydro - a first tier aluminium company Equity production in 2014 in aluminium equivalents ex-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/AWAC Rio Tinto Alcan* UC Rusal Norsk Hydro BHP Billiton Glencore/Century Hindalco Vedanta Emirates Global Al
Slide 50: Hydro's path towards global leadership
Hydro’s path towards global leadership Curtailing 26% of USD 300 Climb From B to A JV-program primary metal capacity program 2009 2010 CCIP 1 2011 2012 CCIP 2 2013 Starting up Acquiring bauxite Establishing Qatalum and alumina assets Sapa JV (50)
Slide 51: Hydro's aspiration for higher value creation
Hydro’s aspiration for higher value creation • Further strengthen • Turn leading HSE/CSR • Continue improvements relative industry position position into competitive drive • Enhance market advantage • Capture commercial positions and high-grade • Deliver on fast-developing opportunities portfolio cu
Slide 52: Better: Hydro improvement drive continues at full pace
Better: Hydro improvement drive continues at full pace ‘Energy Aspiration’ Sapa JV Total contribution from Hydro’s improvement programs (excl. Sapa) ‘JV program’ ‘From B to A’ 2011*-2014 2015-2016** ‘Climb’ BNOK 3.7 BNOK 1.5 ‘USD 300 program’ CCIP II * USD 300 from 2009 ** Real 2014 terms Realized i
Slide 53: Bigger: A solid platform for building an even stronger Hydro
Bigger: A solid platform for building an even stronger Hydro Bauxite & Alumina Energy Primary Aluminium Rolled Products • Move beyond nameplate • Mature captive growth • Enhance position in • Expand automotive capacity opportunities high-margin segments capacity to 200,000 t/yr • Further improve bau
Slide 54: Greener: Hydro aims to be climate neutral by 2020
Greener: Hydro aims to be climate neutral by 2020 Energy and Electrolysis technology pilot primary production Developing the world’s most energy Reduce emissions, efficient electrolysis cells with the increase efficiency most limited CO2 footprint Aluminium in use Meeting consumer needs Maximize use
Slide 55: Safe and responsible operations is a top priority
Safe and responsible operations is a top priority TRI Rate* 10.3 7.0 6.0 5.4 4.0 4.1 3.9 3.7 3.8 3.4 3.4 3.2 2.9 2.7 2002 2004 2006 2008 2010 2012 2014 * TRI rate defined as cases per 1 million hours worked (55)
Slide 56: Hydro
Attractive Improvement Hydro positions throughout the culture and technological Financial strength value chain leadership (56)
Slide 57: Bauxite & Alumina
Bauxite & Alumina (57)
Slide 58: High-quality asset portfolio
High-quality asset portfolio MRN Paragominas Alunorte CAP alumina bauxite mine bauxite mine alumina refinery refinery project • 5% ownership • Full financial exposure, increase • 92% ownership • 81% ownership • Volume off-take agreement for ownership to 100% by 2016 • World’s largest alumina refiner
Slide 59: Strengthening the competitiveness of Bauxite & Alumina
Strengthening the competitiveness of Bauxite & Alumina From B to A Improvement categories Improvements in NOK million 1100 Alunorte 1000 • Increase productivity and rightsize organization • Stabilize performance at nameplate capacity 900 • Improve logistics efficiency 800 700 Paragominas 600 NOK 1 •
Slide 60: Paragominas – One of the world's largest bauxite mines
Paragominas – One of the world’s largest bauxite mines • 2014 production: 9.5 million mt • Target to deliver production increases and stabilize • Possible expansion: up to 15 million mt • Long-life resource base (60)
Slide 61: Bauxite operational mining costs in Paragominas
Bauxite operational mining costs in Paragominas • Energy cost - Power and fuel Paragominas bauxite mining costs 2014 • Labor cost 9% − Influenced by Brazilian wage level 26% − Productivity improvements 20% • Maintenance and consumables − Influenced by Brazilian inflation • Large fixed cost base 19%
Slide 62: Alunorte – World's largest alumina refinery
Alunorte – World’s largest alumina refinery • 2014 production: 5.9 million mt • Targeting stable production above 6 million tonnes • World-class conversion cost position • Modern technology • Bauxite supplied from Paragominas and MRN (62)
Slide 63: Favorable integrated alumina cost position
Favorable integrated alumina cost position • Implied alumina cost position 2014 Implied alumina cost* position 2014 − USD 250 per mt USD 250 per mt − Alunorte, Paragominas and sourced alumina • Bauxite 6% − Internal bauxite from Paragominas at cost, sourced 12% bauxite from MRN 31% • Energy − First-
Slide 64: External alumina sourcing
External alumina sourcing • ~ 2.0 million mt of external alumina sourcing in 2015 • Long term off-take agreement with Rio Tinto − 900 000 mt annually from Yarwun • Short- and medium term contracts − To balance and optimize position geographically − Various pricing mechanisms − Older contracts linked
Slide 65: Alumina pricing shifting from LME-link to market fundamentals
Alumina pricing shifting from LME-link to market fundamentals Index spot price exposure • Future pricing should reflect fundamentals 100% of bauxite and alumina value chain • New norm for the industry − Index pricing and short to medium-term contracts − Getting wider acceptance in the market • Hydro
Slide 66: Primary Metal
Primary Metal (66) QQ) HYDRO
Slide 67: World-wide production network
World-wide production network Primary aluminium annual production capacity 49% Norway, 1 015 000 tonnes • Sunndal (100%) : 390 000 tonnes • Årdal (100%): 190 000 tonnes 6% • Karmøy (100%): 190 000 tonnes Canada, 120 000 tonnes • Høyanger (100%): 65 000 tonnes • Alouette (20%): 120 000 tonnes • Husne
Slide 68: Delivering on ambitious USD 300 improvement program
Delivering on ambitious USD 300 improvement program Total annual improvement effect of NOK ~1.5 billion Improvement categories Improvements in USD per mt* Operational improvements 300 • Improved current efficiency • Reduced power consumption • Reduced anode consumption 250 Fixed cost reductions and
Slide 69: Primary Metal joint ventures improvement program
Primary Metal joint ventures improvement program USD 180 per mt improvements by end-2016, corresponding to NOK 1.2billion Improvement categories Improvements in USD per mt* 180 160 Fixed cost reductions 140 and lean operations 120 100 USD 180 Operational improvements 80 per mt • Improved current eff
Slide 70: Improvement drive yields results in primary production
Improvement drive yields results in primary production Underlying EBITDA per mt in USD for respective primary aluminium divisions 1H 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H 2014 700 700 700 700 700 700 500 500 500 500 500 500 300 300 300 300 300 300 100 100 100 100 100 100 -100 -100 -100 -100 -100 -
Slide 71: Develop technology to fulfill ambitions
Develop technology to fulfill ambitions HAL 300 HAL4e R&D portfolio • Operating for several years in • Benchmark technology on process • HAL 4e Ultra – future vision Sunndal and Qatar parameters and environmental − Significantly lower kWh/kg footprint − New materials and cell design • Operating at:
Slide 72: Metal Markets
Metal Markets (72)
Slide 73: Strong position in value-added casthouse products
Strong position in value-added casthouse products • Capitalizing on value-added casthouse Extrusion ingot products portfolio 1.3 million mt • Extensive multi-sourcing system including fully- and part-owned primary casthouses and stand-alone remelters Foundry alloys • Flexible sourcing system enablin
Slide 74: Pricing of value-added products
Pricing of value-added products Smelter Intermediate product Casthouse Aluminium Standard ingot Value added products Extrusion ingot Foundry alloy Sheet ingot Wire rod Traded on LME • US Midwest - 1020 • Extrusion Ingot – Priced above standard ingot (in cent per pound) • Foundry Alloy – Priced above
Slide 75: Metal Markets earnings drivers
Metal Markets earnings drivers • Remelters Underlying EBIT excluding currency effects and − Revenue impact – volume and product ingot inventory valuation effect, NOK million* premiums above LME 200 − Cost impact − Scrap and standard ingot premiums above LME 150 − Raw material mix − Freight cost – pr
Slide 76: Rolled Products
Rolled Products (76) QQ) HYDRO
Slide 77: No. 1 flat rolled products producer in Europe
No. 1 flat rolled products producer in Europe External sales in tonnages 2014 • World leader in high-end products foil and litho Total 946 kT − Alunorf (JV 50%) – world’s largest rolling mill 12% − Grevenbroich plant – world’s largest finishing mill 19% • High-grading product portfolio − Margin mana
Slide 78: 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 Leading position in Europe reach GE/ Building (78)
Slide 79: Hydro inside
Hydro inside Hydro supplies premium European carmakers with aluminium “Lightweight construction is a core element of Jaguar’s DNA and Jaguar is at the cutting-edge of aluminium technology in the automotive industry” BMW 7 series Peugeot 308 “Audi believes aluminium still offers abundant potential, e
Slide 80: Fulfilling customer and environmental needs
Fulfilling customer and environmental needs Through technological advancements Products − 5µm high-performance aluminium foil saves up to 16% in material − Light-weighting in automotive by replacing steel typically saves 15-20kg of CO2 per kg of aluminium used Process − Continuous improvement and st
Slide 81: Rolled Products earnings drivers
Rolled Products earnings drivers Underlying EBIT per tonne, NOK 1 400 • Contract structure 1 200 − Margin business based on conversion price − LME element passed on to customers 1 000 − Range from spot contracts to multi-year contracts 800 600 • High share of fixed costs - volume sensitive 400 200 •
Slide 82: Sapa joint venture
Sapa joint venture (82)
Slide 83: Sapa – global leader in extruded products
Sapa – global leader in extruded products Heavyweight company – lightweight material External sales of 1.4 million tonnes (2014) Precision Building Tubing System 7% 6% Extrusions Asia • 50/50 joint venture between Hydro and Orkla, 2% Extrusions established September 1, 2013, with 23,000 Europe emplo
Slide 84: Sapa JV delivers solutions to Ford F-150
Sapa JV delivers solutions to Ford F-150 World’s most selling vehicle • Partnership to supply structural aluminium tubing − Also provide ongoing development support for future extrusion applications • Ford F-150 2015 Model − Aluminium-alloy body − ~700 pounds lighter than 2014 model Picture with cou
Slide 85: Energy
Energy (85)
Slide 86: Power production increased to 10 TWh
Power production increased to 10 TWh Power production capacity (TWh), per region and reversion year Telemark • Power producing assets and ongoing projects Normal 3.1 0.5 − Maintain cost control in operations and projects production 2044- − Holsbru and Vasstøl power plants into operation in No revers
Slide 87: Hydro's energy map
Hydro’s energy map Energy consumption in alumina refineries, smelters and rolling mills Europe Power 16.7 TWh North America Natural gas 3.3 TWh Power 1.7 TWh Middle East Power 4.6 TWh South America Power 4.6 TWh Australia/Asia Coal 5.3 TWh Power 1.0 TWh Fuel oil 7.3 TWh Based on Hydro’s equity produ
Slide 88: 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 89: Energy earnings drivers
Energy earnings drivers Underlying EBIT* and spot price • Production and market prices strongly NOK million NOK/MWh 2000 500 linked to hydrological conditions 1500 400 • Stable annual EBIT contribution 300 1000 200 • Seasonal market variations in demand 500 100 and supply 0 0 2003 2004 2005 2006 200
Slide 90: Hydro's value proposition
Hydro’s value proposition • Improve relative industry position • Capitalize on raw material positions • Maintain financial strength and flexibility • Ensure competitive shareholder return (90)
Slide 91: Additional information
Additional information (91)
Slide 92: Shareholder and financial policy
Shareholder and financial policy • Hydro aims to give its shareholders competitive returns compared to alternative investments in peers • Maintained dividend policy − Ordinary dividend: 40% of net income over the cycle − Average ordinary pay-out ratio 2010-2014 is ~95%* − Share buybacks and extraord
Slide 93: Hedging policy
Hedging policy • Bauxite & Alumina, Primary Metal − Remain primarily exposed to LME prices − Operational LME hedging − One-month forward sales − Currency exposure, mainly USD, NOK and BRL − Policy of maintaining long-term debt in USD • Metal Markets, Rolled Products − Operational LME and currency he
Slide 94: Adjusted net debt development Q1 2015
Adjusted net debt development Q1 2015 Mar 31 Dec 31 Sep 30 NOK billion 2015 2014 2014 Cash and cash equivalents 7.2 9.3 6.0 Short-term investments 2.5 1.8 1.7 Short-term debt (4.2) (6.0) (5.0) Long-term debt (5.7) (5.1) (4.8) Net cash/(debt) (0.3) (0.1) (2.1) Net pension liability at fair value, net
Slide 95: Capital allocation mainly upstream
Capital allocation mainly upstream NOK billion Debt-financed investments Qatalum • Long-term sustaining capex NOK ~3.5 billion Investments Qatalum 10.2 annually Growth capex Sustaining capex • Sustaining projects for 2014-2016: - Red mud disposal area - Bauxite tailing dam - Smelter relining ~6.8 6.
Slide 96: Commodity prices drive industry costs
Commodity prices drive industry costs Fuel oil A1 (USD/mt) Steam coal (USD/mt) 750 180 600 150 120 450 90 300 60 150 30 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Caustic soda (USD/mt) Petroleum coke FOB USG (USD/mt) 900 600 750 500 600 40
Slide 97: Price and currency sensitivities
Price and currency sensitivities Commodity price sensitivity +10%* Currency sensitivities +10%* Hydro Group: Sustainable effect: NOK NOK million EBIT million USD BRL EUR EBIT 3 430 (750) (350) Aluminium 3 400 One-off reevaluation effect: Fuel oil (250) Financial (1 160) 700 (1 380) items Pet coke (2
Slide 98: Bauxite & Alumina sensitivities
Bauxite & Alumina sensitivities Sensitivities on underlying EBIT if +10% in price Revenue impact NOK million • ~14.5% of 3-month LME price per tonne alumina 835 • ~One month lag • Realized alumina price lags PAX by one month 525 Cost impact Bauxite • ~2.45 tonnes bauxite per tonne alumina • Pricing
Slide 99: Primary Metal sensitivities
Primary Metal sensitivities Sensitivities on underlying EBIT if +10% in price Revenue impact NOK million • Realized price lags LME spot by ~1-2 months 2,360 • Realized premium lags market premium by ~2-4 months Cost impact Alumina • ~1.9 tonnes per tonne aluminium • ~14.5% of 3-month LME price per t
Slide 100: Depreciation by currency and business area
Depreciation by currency and business area Total 2014 depreciation 4.6 BNOK Depreciation currency exposure by business area Depreciation by business area* NOK & 4% 1% Percent USD EUR BRL Others 15% Bauxite & Alumina 100% 39% Primary Metal 25% 20% 55% 2% Metal Markets 25% 75% Rolled Products 90% 10%
Slide 101: Items excluded from underlying results - 2015
Items excluded from underlying results - 2015 NOK million (+=loss/()=gain) Q1 2015 Unrealized derivative effects on LME related contracts Bauxite & alumina 3 Total impact Bauxite & alumina 3 Unrealized derivative effects on LME related contracts Primary metal 54 Unrealized effects on power contracts
Slide 102: Items excluded from underlying results - 2014
Items excluded from underlying results - 2014 NOK million (+=loss/()=gain) Q1 2014 Q2 2014 Q3 2014 Q4 2014 2014 Unrealized derivative effects on LME related contracts Bauxite & Alumina (4) (1) (2) (10) (16) Total impact Bauxite & Alumina (4) (1) (2) (10) (16) Unrealized derivative effects on LME rel
Slide 103: Operating segment information
Operating segment information Underlying EBIT NOK million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Bauxite & Alumina (63) (244) (370) (379) (288) (269) (26) 528 780 (1 057) (55) Primary Metal 364 237 337 484 312 420 1 216 1 989 2 012 1 422 3 937 Met
Slide 104: Operating segment information
Operating segment information EBIT NOK million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Bauxite & Alumina (76) (241) (370) (491) (284) (269) (23) 537 776 (1 178) (39) Primary Metal 19 122 338 377 303 434 1 278 1 912 1 956 855 3 928 Metal Markets 228
Slide 105: Operating segment information
Operating segment information Total revenue NOK million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Bauxite & Alumina 3 304 3 147 3 354 3 546 3 511 3 828 3 737 4 770 5 461 13 350 15 847 Primary Metal 5 945 5 896 5 884 5 554 6 618 6 384 6 986 8 075 9 09
Slide 106: Operating segment information
Operating segment information Internal revenue NOK million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Bauxite & Alumina 1 322 1 253 1 277 1 375 1 304 1 424 1 480 2 071 2 074 5 226 6 279 Primary Metal 5 132 4 856 4 860 4 566 5 391 5 047 5 396 5 833 7 3
Slide 107: Operating segment information
Operating segment information Depreciation, amortization and impairment NOK million Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Bauxite & Alumina 429 448 417 424 410 431 442 519 460 1 718 1 802 Primary Metal 470 472 461 452 437 427 431 499 511 1 855 1
Slide 108: Income statements
Income statements NOK million Q1 2015 Q4 2014 Q1 2014 Year 2014 Revenue 23 290 21 656 18 282 77 907 Share of the profit (loss) in equity accounted investments 265 (34) 40 415 Other income, net 271 327 132 751 Total revenue and income 23 827 21 948 18 454 79 073 Raw material and energy expense 14 662
Slide 109: Balance sheets
Balance sheets NOK million Mar 31 2015 Dec 31 2014 Sep 30 2014 Jun 30 2014 Mar 31 2014 Cash and cash equivalents 7 172 9 253 6 045 6 617 6 476 Short-term investments 2 456 1 786 1 745 1 765 3 081 Accounts receivable 15 122 11 703 11 280 10 835 11 116 Inventories 13 392 12 642 10 334 10 213 9 599 Oth
Slide 110: Operational data
Operational data Bauxite & Alumina Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2013 Year 2014 Alumina production (kmt) 1 361 1 248 1 316 1 452 1 428 1 526 1 478 1 501 1 451 5 377 5 933 Sourced alumina (kmt) 476 427 711 395 550 431 532 503 666 2 009 2 016 Total alumin
Slide 111: Operational data
Operational data Metal Markets Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year2013 Year2014 Remelt production (1 000 mt) 135 132 127 123 139 141 128 130 145 517 538 Third-party Metal Products sales (1 000 mt)2) 88 84 82 82 84 81 80 79 74 336 324 Metal Products sales excl
Slide 112: Sapa joint venture information
Sapa joint venture information Sapa JV (100 % basis), underlying (unaudited) NOK million, except sales volumes Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Year 2014 Sales volume (1000 mt) 343 311 346 360 346 314 359 367 350 322 353 1 399 Revenues 10 414 9
Slide 113: Investor Relations in Hydro
Investor Relations in Hydro Next events Pål Kildemo Head of Investor Relations Annual General meeting t: +47 970 96 711 e: pal.kildemo@hydro.com May 6, 2015 Sapa JV conference call May 18, 2015 Olena Lepikhina Second quarter results Investor Relations Officer July 21, 2015 t: +47 96853035 e: olena.l