Norsk Hydro's value chain
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Hydr's value chain - from the raw material Bauxite to aluminium products.

Hydr's value chain - from the raw material Bauxite to aluminium products.

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Norsk Hydro's value chain Presentation Transcript

  • 1. Hydro’s value chainFrom bauxite to building systemsApril 2011Page 1 © Hydro
  • 2. The Hydro WayOur talents Our Values• Building businesses Hydro’s Mission • Courage that matter is to create a more • Respect• A passion for viable society by • Cooperation social commerce • Determination developing natural• Always looking for • Foresight resources and commercial solutions products in innovative• Making the most of what’s available and efficient waysPage 2 © Hydro
  • 3. Resource rich and fully integratedHydro underlying EBIT quarterly, NOK million • Based in Norway with operations 9 930 6 009 (2 555) 3 351 in 40 countries3 200 • 23,000 employees2 8002 400 • Operating revenues2 000 • 2007: NOK 94 billion,1 600 Euro 11.7 billion • 2008: NOK 89 billion,1 200 Euro 10.8 billion 800 • 2009: NOK 67 billion, 400 Euro 7.6 billion 0 • 2010: NOK 76 billion,(400) Euro 9.5 billion(800) 2007 2008 2009 2010 • Market capitalization • End March 2011~NOK 95 billion, Euro 12 billionPage 3 © Hydro
  • 4. Responsible business is our license to operateSafety remains a top priority Commitment to sustainable operationsTRI rate • Reducing specific energy consumption and climate gas emissions 10.3 • Helping our customers reduce their climate footprint • Responsible restructuring 7.0 • Welcoming new colleagues from Vale 6.0 – drawing on their competence 5.4 • Recognized on key indexes 4.0 4.1 3.9 3.7 2.9 2002 2003 2004 2005 2006 2007 2008 2009 2010Page 4 © Hydro
  • 5. Upstream production facilities Bauxite/alumina Smelters RemeltersPage 5 © Hydro
  • 6. Aluminium downstream worldwide network Extruded Products Rolled ProductsPage 6 © Hydro
  • 7. Today’s aluminium industry positionProduction capacity for 2010 in aluminium equivalents, million metric tons per year9 000 Alumina Aluminium8 0007 0006 0005 0004 0003 0002 0001 000 0 Alcoa Chalco Rusal Rio Tinto Hydro after Chiping Weiqiao BHP Vale Hydro East Hope China Dubal Xinfa Yichuan Aluminium Century Vedanta acquisition Xinfa Billiton Group Power Group Power BahrainSource: CRUPage 7 © Hydro
  • 8. 1 Hydro’s value chainPage 8 © Hydro
  • 9. Hydro’s value chain Rolling Primary Products Bauxite Alumina Energy Casting aluminium ExtrusionPage 9 © Hydro
  • 10. Bauxite & Alumina • Bauxite capacity 12.2 million metric tons per year • Expansion potential to 17.2 million metric tons per year • Alumina capacity 6.9 million metric tons per year • Expansion potential to 14.5 million metric tons per year • Long-term sourcing contracts for bauxite and alumina Pro forma capacity for end 2010 after Vale transaction. 100% of volumes for assets that are fully consolidated and pro rata volumes for other assets.Page 10 © Hydro
  • 11. New global Bauxite & Alumina business area MRN Paragominas CAP alumina Alunorte alumina Alpart bauxite mine bauxite mine refinery project refinery alumina refinery • 5% ownership • 60% ownership, 100% • 81% ownership • 91% ownership • 35% ownership • Signed volume by 2015 • CAP refinery (Phase I) • World’s largest alumina • Capacity 1.65 million off-take agreement for • One of the world’s is planned to be refinery metric tons per year of Vale’s 40% stake largest bauxite mines in operation in 2015 • 2010 production alumina • Capacity 18 million • 2010 production 7.5 • Paragominas expansion 5.8 million metric tons • Fully integrated with metric tons per year million metric tons per to be developed per year bauxite year in parallel • Target to reach 6.3 • 100% curtailed since • Target to reach 10 • Investment estimates million metric tons per mid-2009 million metric tons per and expansion concepts year year under evaluation • Bauxite supplied from • Possible expansion to • Full utilization of the Paragominas and MRN 15 million metric tons existing bauxite pipeline • First quartile integrated per year cash cost position • Reserve life of several decades Refining and mining External supply Sales contract Bauxite licenses competencies contracts portfolioPage 11 © Hydro
  • 12. Hydro long in bauxite and aluminaAluminium equivalent equity capacity, million metric tons per year • Hydro’s position Hydro end-2010 Pro forma end-2010 Pro forma 2016 transformed from large (Before Vale transaction) (60% Paragominas) (100% Paragominas) share of long-term 4.2 contract sourcing to full resource ownership 3.7 3.3 • Excess alumina sold on standard industry contracts until 2015 2.2 2.2 1.9 • Portfolio of bauxite 1.8 and alumina sourcing 1.4 contracts strengthens equity position 0.5 • Hydro will annually purchase 6.8 million metric tons of bauxite on an evergreen contract from MRN Bauxite Alumina Aluminium Bauxite Alumina Aluminium Bauxite Alumina Aluminium • Hydro’s current alumina sourcing contracts will remain in portfolioIncludes idled capacity. Assumed assets included on a pro rata basis. 2016 includes Paragominas at 15 million metric tons and CAP first phase.Page 12 © Hydro
  • 13. Energy • Long-term power supply secured • 9.4 TWh of renewable energy production in NorwayPage 13 © Hydro
  • 14. Substantial values in long-termassets 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 • Normal production ~9.4 TWh 3.0 0.5 • Sourcing on long-term contracts ~7.0 TWh • Consumption in Primary Metal* ~12.5 TWh 2044- No reversion 2049 • Contract sales and concession power ~1.0 TWh Normal • Spot sales ~3.0 TWh production Sogn• Value enhancement potential • Growth opportunities in Norway 9.4 3.1 • Holsbru project to add 84 GWh from 2012 2051-2057 • Optimization of power value in market, and in cooperation with smelters Røldal-Suldal 2.8 2023* Including Sunndal 3 line currently curtailedPage 14 © Hydro
  • 15. Solid long-term power coveragefor Primary Metal GWh35 000 • 90% of power needs secured until 202030 000 • High share of renewable energy • More than two-thirds of power needs from25 000 renewable sources • Albras smelter in Brazil has hydropower-20 000 based contracts through 202415 000 • High share of general inflation linked and fixed-price contracts10 000 • Limited commodity price exposure 5 000 • Securing acceptable power sourcing in Europe requires CO2 compensation 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Self-generated Long-term Medium-term C onsumptionPage 15 © Hydro
  • 16. Primary Metal Primary aluminium • 2.4 million metric tons per year primary capacity • High LME and USD sensitivity • Improving cost position • Leading in technology Pro forma capacity for end 2010 after Vale transaction. 100% of volumes for assets that are fully consolidated and pro rata volumes for other assets.Page 16 © Hydro
  • 17. Attractive Qatalum fundamentals • Joint venture (50/50) between Qatar Petroleum and Hydro • Capacity: 585,000 metric tons • Smelter with world-class cash cost position • Ideally located to serve all major markets in Asia, U.S. and Europe • 2011 focus • Ramp-up to be completed by June 2011 • Stabilize production and cost optimizationPage 17 © Hydro
  • 18. Improvement program: $300 per mtCost reduction target from 2009 level for ~1 million metric tons annual capacity Operational improvements 300 • Improved current efficiency • Reduced power consumption • Reduced anode consumption Fixed-cost reductions and lean operations 200 125 Further operational improvements Technology costs/spin-offs $300/mt Investments 100 Maintenance and relining Procurement 50 Logistics Organization and manning 0 Realized 2011 2012 2013 2010 onwards Casthouse product marginPage 18 © Hydro
  • 19. Strong focus to further improve cost positionEstimated primary aluminium production Estimated business operating cost 2014 by CRUcash costs USD/metric tonFirst half 2010, USD/ton2 800 2 800 Hydro Peer companies2 400 2 4002 000 2 0001 600 1 600 Hydro1 200 1 200 Accumulated world capacity, 1,000 metric tons 800 800 Rio Tinto Rusal Hydro Alcoa C entury 0 10 000 20 000 30 000 40 000 50 000 60 000Source: CRU, BOCPage 19 © Hydro
  • 20. Metal Markets Casting • 3.8 million metric tons (primary, remelt, recycling and cold metal) • Expertise in materials • Flexible system • Strong marketing organization • Risk management Pro forma capacity for end 2010 after Vale transaction. 100% of volumes for assets that are fully consolidated and pro rata volumes for other assets.Page 20 © Hydro
  • 21. 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 mt/year • Capitalize on strong market position through sourcing and trading strategies • Firm operational LME risk management Foundry alloys 450,000 mt/year Casthouse production Primary production Remelting & recycling Commercial agreements Sheet ingot 525,000 mt/yearPage 21 © Hydro
  • 22. Rolled Products • 1 million metric tons per year Rolling • Regional business • Close to customers • Innovation • Market leading in litho and foilPage 22 © Hydro
  • 23. No. 1 flat rolled products producer in Europe • World leading positions in high-end Packaging products: foil, litho and automotive & building Revenues: NOK 11.3 billion • Record results in 2010 • Technology leadership and innovation Automotive, heat exchangers • Strategy and general engineering • Focus production system on core Revenues: assets NOK 6.8 billion • High-grading product portfolio Litho Revenues: NOK 3.7 billionPage 23 © Hydro
  • 24. Attractive market position and customersMore than 50% of products with global reach Our products Our customers Our position Litho World market leaderGlobalreach Foil Can Leading position in Europe AutoRegionalreach Leading position in Europe GE/ BuildingPage 24 © Hydro
  • 25. Extruded Products Extrusion • 0.6 million metric tons/year • Local business – Close to customers. More than 40 locations in 19 countries • Close to customers • Innovation and design • Market leading in Building SystemsPage 25 © Hydro
  • 26. Strong position in Europe, U.S. and BrazilExtruded Products • 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 European extrusion base • Specialist in energy-neutral building solutions, including solar Extrusion Precision Tubing North America • Selective acquisitions Revenues NOK 2.4 billion Revenues: NOK 2.5 billion • Entry into emerging markets • Operating revenues ~NOK 19.4 billion Strong Product entrepreneur -ship, innovation through • ~9,500 employees management strong culture and customer Extrusion competence relations South America Revenues: NOK 0.8 billionPage 26 © Hydro
  • 27. A true entrepreneurial-driven enterpriseExtrusion Eurasia, Extrusion North America and Extrusion South America Location • “Mastering” Europe/gaining market share in the U.S. • Close to customers due to strong regional presence • More then 40 locations in 19 countries • Top product innovation and design • Main segments • Building and construction • Automotive • Transport • Solar • 2010 sales volume: 388,000 metric tonsPage 27 © Hydro
  • 28. Building the future with aluminiumBuilding 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 2010 sales volume: 73,000 metric tonsPage 28 © Hydro
  • 29. Winning in a demanding marketPrecision Tubing• Competence - our proven resource• Strike a new path• Strong global presence• 2010 sales volume: 67,000 metric tonsPage 29 © Hydro
  • 30. Aluminium productsHydro innovation drives product demand Consumer electronics Lithographic plates Automotive Heat exchangers Heat Building & construction exchangersFoil packaging Beverage cansPage 30 © Hydro
  • 31. Recycling • Release value of conserved energy in the material • Improve carbon footprint and raise viability profile of Hydro • Primary metal production is under threat in Europe – restructuring and consolidation of recycling industry • Collected aluminium scrap volumes will increase significantlyPage 31 © Hydro
  • 32. 2 Strong performance and healthy financial positionPage 32 © Hydro
  • 33. 2010: A stronger Hydro• Underlying EBIT up NOK 6.1 billion Underlying EBIT from 2009 NOK million • Reduced costs 6,009 (2,555) 3,551 • Improved operational performance 2 100 • Higher prices and strengthened demand 1 800• Secured long bauxite and alumina 1 500 position 1 200• Maintained solid financial position 900• Reduced operating capital days 600• Qatalum ramp-up 300• Stepped up cost improvement 0 program -300 -600 -900 2008 2009 2010Page 33 © Hydro
  • 34. Strong financial positionNet cash/(debt), NOK billion 11,0 Dec 31, Jun 30, Dec 31, NOK billion 2009 2010 2010 Cash and cash equivalents 2.6 2.2 10.9 Short-term investments 1.5 1.3 1.3 Short-term debt (2.0) (1.5) (0.9) Long-term debt (0.1) (2.1) (0.3) Net cash/(debt) 2.0 (0.1) 11.0 Net int.-bearing debt in equity (8.0) (9.1) (7.8) accounted invest. Net pension liability at fair value, (5.6) (5.2) (5.6) 2,0 net of expected tax benefit Other adjustments* (4.0) (3.8) (4.0) (0,1) Adjusted net debt (15.6) (18.2) (6.4) Dec 31, 2009 Jun 30, 2010 Dec 31, 2010 * Operating lease commitments and otherPage 34 © Hydro
  • 35. 3 OutlookPage 35 © Hydro
  • 36. Aluminium is the metal of the future • Lightweight • Formability • One-third the 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 • Corrosion resistant • Alloying technology • Gives a wide range of physical properties • Oxide layer Properties lead • Aluminium-intensive urbanization and infrastructure to increased • Climate challenge – aluminium as part of the solution market share • Recyclability more important with high energy pricesPage 36 © Hydro
  • 37. Firm long-term demand for aluminiumWorld primary aluminium demand, 1,000 metric tons80 000 + 76%70 000 Main future growth expected Change in % per decade60 000 in transportation and construction sectors50 000 + 54%40 000 + 39%30 000 + 18%20 00010 000 0 1980 1990 2000 2010E 2020ESource: CRU, Oct 2010Page 37 © Hydro
  • 38. Innovation drives aluminium demand The new trend: “Aluminium cars” New Audi A6 contains a large amount of aluminium and aluminium solutions – making it lighter, safer and more environmentally sustainable EU: Stricter emissions limits Aluminium: Part of the solutionHydro has developed new multilayer sheet materials which enable car makers to greatly reduce nitrogen oxide emissions from vehicles Aluminium tubing for solar collectors Hydro is taking the lead in Europe in the introduction of aluminium tubes to the solar thermal industry, replacing traditional copper tubesPage 38 © Hydro
  • 39. 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 operation and commercialization of current assets • Implement global approach to power sourcing Mid- and downstream • Continue proven high-end product strategy • Pursue profitable life-cycle investments: recycling, energy-efficient building systems, aluminum in transport • Expand selectively in emerging marketsPage 39 © Hydro
  • 40. Priorities 2011• Successful integration of Vale’s aluminum assets• Upstream repositioning through $300 program and Qatalum ramp-up• Solid operations with firm cost control and strong market focusPage 40 © Hydro
  • 41. www.hydro.com