Hydro Presentation
Nordnet
Pål Kildemo
Head of Investor Relations
(1)
01
A resource rich global
aluminium company
(2)
(3)
A resource-rich, global aluminium company
With robust positions across the value chain
• Global provider of alumina, a...
Attractively positioned, global reach
Continental Europe
• Leading upstream and midstream positions
• Europe’s largest rol...
(5)
Hydro - a first tier aluminium company
Source: CRU, Hydro
Equity production in 2013 in aluminium equivalents excl. Chi...
(6)
Curtailing 26% of
primary metal capacity
USD 300
program
Climb From B to A
Starting up
Qatalum
Acquiring bauxite
and a...
03
The Market
(7)
0
100
200
300
400
500
600
700
800
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
95
115
135
155
175...
Historical overproduction continues to weigh on prices
LME and BOC
(USD/t)
Metal Balance
Source: CRU, Hydro Analysis
*BOC=...
Source: CRU/Hydro
• Seasonally stronger demand
• 2014 aluminium demand expected to
grow 2-4 % in world outside China
• New...
Standard ingot premiums rise to record highs
Source: Metal Bulletin, MW/MJP: Platts
Regional standard ingot premiums
USD p...
1960
2000
2040
2080
2120
2160
2200
2240
2012 2013 2014 2015
The mechanism of financial deals – driving forces
Warehouse
re...
Aluminium prices decrease through the quarter
USD per mt
Source: Reuters Ecowin
Primary aluminium LME USD/mt NOK/mt
Q1 201...
All-in aluminium price rising
USD per mt
Source: Metal Bulletin, MW/MJP: Platts, Reuters Ecowin
1600
1800
2000
2200
2400
J...
And the same is seen for product premiums
MB Billet
premium
MB Ingot
premium DDP
Billet
premium
over ingot
Source: Metal B...
Slight reduction in reported inventories world ex-China
Source: CRU/Hydro
World outside China reported primary aluminium i...
Range-bound alumina prices
Platts alumina index (PAX)
Percent
USD per mt
− Q1 average price 328 USD/mt,
up 5 USD/mt from Q...
Indonesia bauxite export ban taking effect
• Complete ban on bauxite exports from
mid-January 2014
• Closures by bauxite m...
China bauxite imports decreasing through Q1
• Bauxite and alumina
− Significant drop in bauxite
imports during Q1 as
Indon...
03
Ambitious improvement
drive
(20)
Ambitious improvement efforts throughout the
value chain
Energy
Bauxite
Alumina
Primary metal
Casting
Remelting
Rolling
Ex...
World-class asset base, focus on operational
improvements
(22)
NOK 1 billion by end-
2015
20% manning reduction
Platts alu...
13.9% 14.4% 15.3% LME%3)
286 275 269 Price2)
Strong improvement focus in Brazil
2012 2013 Q1 2014
Implied alumina cost and...
Primary Metal: a strong culture of continuous
improvement
(24)
USD 180
JV program
USD 300
program
USD 100
program
Financia...
Primary Metal operational improvements continue
2012 2013 Q1 2014
Implied primary cost and margin, USD/mt 1)
• Primary cos...
Primary Metal: A strong improvement track record
(26)
Underlying EBITDA per mt in USD for respective primary aluminium div...
(27)
‘Climb’
Rolled Products: improvements and portfolio high-
grading
New, integrated UBC line at Neuss,
Germany
New auto...
1.7
7.1 (2.5)
(2.5)
(2.0)
1.8
0.6 (1.8)
0.7
Net cash Q4
2012
Underlying
EBITDA
Other
adjustments
Investments
divestments
D...
Dividend yield in percentage, based on year-end share-prices
Hydro compared to its aluminium peers
2010 2011
Source: Thoms...
03
Strategy
(30)
(31)
Energy
Maximize asset potential,
strengthen global support function
Rolled Products
Continue to high-grade portfolio,...
(32)
Hydro’s value
proposition
• Improve relative industry position
• Capitalize on raw material positions
• Strengthen in...
(33)
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Nordnet med Hydro investorpresentasjon

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Nordnet med Hydro investorpresentasjon

  1. 1. Hydro Presentation Nordnet Pål Kildemo Head of Investor Relations (1)
  2. 2. 01 A resource rich global aluminium company (2)
  3. 3. (3) A resource-rich, global aluminium company With robust positions across the value chain • Global provider of alumina, aluminium and aluminium products • Leading businesses along the value chain; raw materials, energy, primary metal production, aluminium products and recycling • 13 000 employees involved in activities in more than 50 countries • Market capitalization ~NOK 70 billion • Annual revenues ~NOK 65 billion • Included in Dow Jones Sustainability Indexes and FTSE4Good Primary Metal Rolled Products Energy Bauxite & Alumina 50% joint venture in extruded products
  4. 4. Attractively positioned, global reach Continental Europe • Leading upstream and midstream positions • Europe’s largest rolled products producer • Technology and R&D centers • Recycling network Extruded Products • 50% ownership in Sapa - global leader in extruded products Norway • 900,000 tpy hydro-powered aluminium production • Technology and R&D centers • Hydropower developments • Rolled products, recycling and remelting North America • Alouette aluminium smelter in Canada, expansion potential • Remelting Brazil • World-class operations and resource base • Bauxite and alumina growth projects • Albras aluminium smelter Middle East • Qatalum 1 in production • Qatalum expansion opportunity Australia • Primary aluminium production
  5. 5. (5) Hydro - a first tier aluminium company Source: CRU, Hydro Equity production in 2013 in aluminium equivalents excl. China, thousand mt 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 Alcoa/AWAC Rio Tinto Alcan* UC Rusal BHP Billiton Norsk Hydro Glencore/Century Hindalco Vedanta Emirates Global Aluminium Aluminium Bahrain Alumina Aluminium
  6. 6. (6) Curtailing 26% of primary metal capacity USD 300 program Climb From B to A Starting up Qatalum Acquiring bauxite and alumina assets Establishing Sapa JV JV-program Hydro’s path towards global leadership 2010 20122009 2011 2013
  7. 7. 03 The Market (7)
  8. 8. 0 100 200 300 400 500 600 700 800 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 95 115 135 155 175 195 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Yearly consumption (Index 2000=100), global 3-month LME price (Index 2000=100) The big dilemma of our industry A demand-side winner, yet a looser in the market place TinZincIP GDP Copper Lead Aluminium Nickel Source: CRU/Global Insight.
  9. 9. Historical overproduction continues to weigh on prices LME and BOC (USD/t) Metal Balance Source: CRU, Hydro Analysis *BOC=Business Operating Costs World ex. China (9) (1 500) (1 000) ( 500) 0 500 1 000 1 500 2 000 2 500 3 000 (1 500) (1 000) ( 500) 0 500 1 000 1 500 2 000 2 500 3 000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LME 3m Metal balance 90 percentile BOC
  10. 10. Source: CRU/Hydro • Seasonally stronger demand • 2014 aluminium demand expected to grow 2-4 % in world outside China • New curtailments and delays partly offsetting ramp-ups Demand expected to exceed production in 2014 0 5 000 10 000 15 000 20 000 25 000 30 000 Jan-08 Nov-08 Sep-09 Jul-10 May-11 Mar-12 Jan-13 Nov-13 Demand Production World outside China (quarterly annualized) 1 000 mt World outside China
  11. 11. Standard ingot premiums rise to record highs Source: Metal Bulletin, MW/MJP: Platts Regional standard ingot premiums USD per mt • Standard ingot premiums rose sharply in Q1 2014 • US and EU premiums (duty-paid) ~415 USD/mt • Proposed changes to LME warehousing rules not implemented from April 1, due to UK court ruling 0 50 100 150 200 250 300 350 400 450 500 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 US Mid West Japan Europe (duty-paid)
  12. 12. 1960 2000 2040 2080 2120 2160 2200 2240 2012 2013 2014 2015 The mechanism of financial deals – driving forces Warehouse rents Attractiveness of financial deals dependent on the following equation Financing cost < LME contango+ 0% 1% 2% 3% 4% 5% 6% 7% 8% Jan- 07 Jan- 08 Jan- 09 Jan- 10 Jan- 11 Jan- 12 Jan- 13 Jan- 14 Jan- 15 OECD US Eurozone UK Source: Global Insight/Reuters USD/t $ (12)
  13. 13. Aluminium prices decrease through the quarter USD per mt Source: Reuters Ecowin Primary aluminium LME USD/mt NOK/mt Q1 2014 average Q1 2014 end 1 752 1 774 10 671 10 620 Q4 2013 average Q4 2013 end 1 815 1 811 10 981 10 986 • Aluminium price declining to range of USD 1 700 - 1 800 per mt in Q1 • Minor decrease in average USD/mt price, partly offset by weaker NOK 1 000 1 400 1 800 2 200 2 600 3 000 3 400 2000 2002 2004 2006 2008 2010 2012 2014 2016 LME (3-month avg.) LME forward June 2014
  14. 14. All-in aluminium price rising USD per mt Source: Metal Bulletin, MW/MJP: Platts, Reuters Ecowin 1600 1800 2000 2200 2400 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 LME cash LME cash + US Midwest LME cash + Europe duty paid LME cash + Japan
  15. 15. And the same is seen for product premiums MB Billet premium MB Ingot premium DDP Billet premium over ingot Source: Metal Bulletin, Hydro Metal Bulletin ingot and billet premium USD per mt (15) 0 100 200 300 400 500 600 700 800 Jan-90 Jan-93 Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14
  16. 16. Slight reduction in reported inventories world ex-China Source: CRU/Hydro World outside China reported primary aluminium inventories 1 000 mt Days 0 20 40 60 80 100 120 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 Q1 00 Q1 01 Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 IAI Other LME World ex. China inventory days
  17. 17. Range-bound alumina prices Platts alumina index (PAX) Percent USD per mt − Q1 average price 328 USD/mt, up 5 USD/mt from Q4 − Alumina as % of LME rose to close to 20 % mid-quarter, highest since PAX introduction − PAX and alumina as % of LME decreased through the quarter, following smelter curtailments in the world outside China and increased LME price 10 12 14 16 18 20 250 300 350 400 450 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Alumina price % of LME
  18. 18. Indonesia bauxite export ban taking effect • Complete ban on bauxite exports from mid-January 2014 • Closures by bauxite miners in Indonesia • Uncertainty around possibility of getting export license for those with plans to build alumina capacity in Indonesia Source: China customs Chinese bauxite import by origin (monthly) Million mt 0 1 2 3 4 5 6 7 8 9 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Australia Indonesia Other Monthly average
  19. 19. China bauxite imports decreasing through Q1 • Bauxite and alumina − Significant drop in bauxite imports during Q1 as Indonesia export ban starts − Q1 alumina imports at highest level since Q1 2010 • Primary aluminium − No significant import or export expected in 2014 • Semis and fabricated − Export of semis and fabricated products slightly down in Jan/Feb Annualized aluminium equivalents*, million mt Source: CRU/Antaike/Hydro * Bauxite/alumina to aluminium conversion factor: 5.0/1.925 Indonesia export ban taking effect Fabricated Semis ScrapBauxite Alumina Primary aluminium ChinaimportChinaexport 2011 2012 2013 Total aluminium imports ( 10) ( 5) 0 5 10 15 20 25 YTD 2014
  20. 20. 03 Ambitious improvement drive (20)
  21. 21. Ambitious improvement efforts throughout the value chain Energy Bauxite Alumina Primary metal Casting Remelting Rolling Extrusion ‘From B to A’ Sapa JV ‘Energy Aspiration’ ‘Climb’ ‘USD 300 program’ ‘CCIP’ ‘JV program’ (21)
  22. 22. World-class asset base, focus on operational improvements (22) NOK 1 billion by end- 2015 20% manning reduction Platts alumina index (PAX) 5.5 5.0 5.2 5.8 5.8 Q1 Q2 Q3 Q4 Q1-14 Alunorte production gradually increases “From B to A” improvement program Alumina trending higher production, annualized mmt 10 12 14 16 18 20 250 300 350 400 450 Aug-10 Nov-11 Feb-13 May-14 Alumina price % of LME
  23. 23. 13.9% 14.4% 15.3% LME%3) 286 275 269 Price2) Strong improvement focus in Brazil 2012 2013 Q1 2014 Implied alumina cost and margin, USD/mt 1) • Annualized alumina production stable from Q4 • Higher hydrate production at Alunorte, increased production at Paragominas • “From B to A” improvement program progressing according to plan − Target NOK 1 billion by end-2015, of which NOK 600 million by end-2014 • Continued and close dialogue on ICMS taxes and framework conditions 1) Realized alumina price minus EBITDA for B&A, per mt alumina sales. 2) Realized alumina price 3) Realized alumina price as % of three month LME price with one month lag Implied EBITDA cost per mt 475 263 425 EBITDA margin per mt 23 260 15 258 11 (23)
  24. 24. Primary Metal: a strong culture of continuous improvement (24) USD 180 JV program USD 300 program USD 100 program Financial crisis Sovereign debt crisis USD 300 program completion 2010 20132009 20112009 2013
  25. 25. Primary Metal operational improvements continue 2012 2013 Q1 2014 Implied primary cost and margin, USD/mt 1) • Primary cost continues downward trend − Improvement efforts with bottom-line effect − Favorable exchange rate development − Increasing premiums • USD 180 JV program on track, to be concluded by end-2016 − Positive contribution from continued reduced cost at Qatalum 1) Realized aluminium price minus EBITDA margin per mt primary aluminium. Includes net earnings from primary casthouses. 2) Realized LME Implied EBITDA cost per mt 475 1 775 425 EBITDA margin per mt 300 1 500 400 1 400 350 2 080 1 902 1 749 LME2) (25)
  26. 26. Primary Metal: A strong improvement track record (26) Underlying EBITDA per mt in USD for respective primary aluminium divisions All figures based on public accounting data, not verified by Hydro. Data not adjusted for different accounting principles and non-specified underlying items. Hydro makes no representation as to the accuracy or completeness of such information. The analyses are based on assumptions subject to uncertainty and therefore intended only for general comparisons across companies and should not be used to support any individual investment decision. All results are provided for informational purposes only. Hydro figures includes Primary Metal, Metal Markets and attributable share of EBITDA and production in Qatalum. 1H 2011 -100 100 300 500 700 2H 2013 -100 100 300 500 700 Source: Company filings
  27. 27. (27) ‘Climb’ Rolled Products: improvements and portfolio high- grading New, integrated UBC line at Neuss, Germany New automotive line at Grevenbroich, Germany
  28. 28. 1.7 7.1 (2.5) (2.5) (2.0) 1.8 0.6 (1.8) 0.7 Net cash Q4 2012 Underlying EBITDA Other adjustments Investments divestments Dividends Net cash after dividend Operating capital Currency translation & other Net cash Q4 2013 Cash neutral after dividend at LME ~1 900 USD/mt (28) NOK billion
  29. 29. Dividend yield in percentage, based on year-end share-prices Hydro compared to its aluminium peers 2010 2011 Source: Thomson ONE 2013 2.77% 1.10% 0.00% 0.00% 0.00% 0.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% Hydro Peers 2012 Competitive yield through tough times 2.49% 1.80% 0.78% 0.19% 0.00%0.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 5.10% 2.70% 1.39% 0.00% 0.00%0.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 2.70% 1.38% 0.00% 0.00% 0.00%0.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% (29)
  30. 30. 03 Strategy (30)
  31. 31. (31) Energy Maximize asset potential, strengthen global support function Rolled Products Continue to high-grade portfolio, develop step-change innovations Primary Metal Continue improvement drive, capitalize on technological edge Bauxite & Alumina Deliver on productivity goals, realize improvement targets Hydro’s main priorities
  32. 32. (32) Hydro’s value proposition • Improve relative industry position • Capitalize on raw material positions • Strengthen innovative and commercial edge • Maintain financial strength and flexibility • Ensure competitive shareholder return
  33. 33. (33)

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