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Investor presentation - April 2011

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Hydros investor presentation for the first quarter in 2011. The presentation is based on the latest capital markets day presentation with subsequent updates.

Hydros investor presentation for the first quarter in 2011. The presentation is based on the latest capital markets day presentation with subsequent updates.


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  • 1. Investor presentation May/June 2011
  • 2. 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 planned expansions, Company overview 3 investments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, Market outlook 11 (d) various expectations about future developments in Hydro’s markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, as well as (i) statements preceded by “expected”, “scheduled”, “targeted”, First quarter results 2011 29 “planned”, “proposed”, “intended” or similar statements. Although we believe that the expectations reflected in such forward- Business overview 51 looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our – Bauxite & Alumina 52 actual results to differ materially from those projected in a forward- looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not – Primary Metal 69 limited to: our continued ability to reposition and restructure our upstream and downstream aluminium business; changes in availability and cost of energy and raw materials; global supply and demand for – Metal Markets 78 aluminium and aluminium products; world economic growth, including rates of inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro’s – Rolled Products 82 key markets and competition; and legislative, regulatory and political factors. – Extruded Products 89 No assurance can be given that such expectations will prove to have been correct. Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, – Energy 96 future events or otherwise. Additional information 102(2)
  • 3. Company overview(3)
  • 4. 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 • 2009: NOK 67 billion 400 • 2010: NOK 76 billion 0 • Current market capitalization (400) • NOK 100 billion/USD 18 billion (800) 2007 2008 2009 2010 2011(4)
  • 5. 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 from June 2011 • Increasing value of Energy business and competence • Exciting prospects for high-end downstream business in mature and emerging markets • Proactive portfolio, performance and margin management(5)
  • 6. 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 tonnes • 3.8 million tonnes • 1 million tonnes • 0.6 million tonnes 12.2 million tonnes supply secured primary capacity (primary, remelt, • Margin business • Margin business• Expansion potential • 9.4 TWh of renewable • High LME and USD recycling and cold • Regional business • Local business to 17.2 million tonnes energy production sensitivity metal) • Close to customers • Close to customers• Alumina capacity in Norway • Improving cost • Expertise in materials • Innovation • Innovation 6.9 million tonnes position • Flexible system • Market leading in • Market leading in• Expansion potential • Leading in technology • Strong marketing litho and foil Building Systems to 14.5 million tonnes organization• Long-term sourcing • Risk management contracts for bauxite and aluminaPro forma capacity for end-2010 after Vale transaction. 100% of volumes for assets that are fully consolidated and pro rata volumes for other assets.(6)
  • 7. 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 • Corrosion resistant • Alloying technology • Gives 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 prices(7)
  • 8. Hydro becomes first tier aluminium companyProduction capacity for 2010 in aluminium equivalents, million tonnes9 000 Alumina Aluminium8 0007 0006 0005 0004 0003 0002 0001 000 0 Alcoa Chalco Rusal Rio Tinto Hydro pro Chiping Weiqiao BHP Vale Hydro East Hope China Dubal Xinf a Yichuan Aluminium Cent ury Vedant a forma Xinf a Billit on Group Power Group Power BahrainSource: CRU(8)
  • 9. 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 • Hydro is recognized on key indexes 4.0 4.1 3.9 3.7 2.9 2002 2003 2004 2005 2006 2007 2008 2009 2010(9)
  • 10. 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 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 markets(10)
  • 11. Market outlook(11)
  • 12. Significant aluminium demand growth expectedDemand for primary aluminium World outside China ChinaMillion tonnes9080 +80%70 3760 285040 17 3730 3120 2410 0 2010 2015 2020 Fight for raw materials to continue Resource-constrained world(12)
  • 13. Aluminium price increase, strong premiumsAluminium price USD per tonne Ingot premiums USD per tonne3 400 200 1753 000 1502 600 125 1002 200 751 800 501 400 25 01 000 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 2015 LME (3-month avg.) LME forward April 21, 2011 US Mid West Japan Europe*Primary aluminium LME USD/tonne NOK/tonne Ingot premiums, USD/tonne US Mid West Japan EuropeQ1 2010 average 2 527 14 437 Q1 2011 average 140 113 193Q1 2010 end 2 632 14 502 Q4 2010 average 138 116 189Q4 2010 average 2 368 14 036Q4 2010 end 2 468 14 368 Average 2010 138 120 159Average 2010 2 199 13 257 Average 2009 105 95 58Average 2009 1 702 10 575Average 2008 2 620 14 453 Average 2008 93 79 83 * Duty-paidSource: Reuters Ecowin Source: Metal Bulletin, MW/MJP: Platts(13)
  • 14. 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 exchanger America America Q1 11 vs Q1 11 vs 16% 17% 17% Q4 10 Q1 10 14% 10% 6% 6% 3% 4% 3% 1% -6% -13% Hydro’s upstream sales Q1 2011 vs Q4 2010 Total upstream sales Extrusion ingot Sheet ingot Foundry alloys Q1 11 vs Q1 11 vs Q4 10 Q1 10 19% 15% 12% 4% 2% Albras included from March 1, 2011(14)
  • 15. Mid-term development scenario thinkingWorld outside China1 000 tonnes28 000 Supply Demand27 00026 00025 000 3%–6%24 000 5%–9%23 00022 000 Supply influences Demand influences21 000 • New projects 19% • GDP growth • Potential restart • Further restocking • Supply disruptions • Emerging markets20 00019 00018 000 2006 2007 2008 2009 2010 2011 2012Source: CRU/Hydro(15)
  • 16. Global inventory days trending downWorld reported primary aluminium inventories • Inventory days reduction driven by1 000 tonnes Days increased consumption7 000 806 000 70 • Q1 LME stocks increase believed to partly reflect unreported metal moved into 605 000 reported warehouses 504 000 • High inventories well known in market 40 • Different views on unreported inventories3 000 302 000 • Estimated total reported and unreported 20 inventories ~11 million tonnes1 000 10 • Represents ~3 months of consumption 0 0 • Financial deals locking up metal Q1 07 Q3 07 Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 • Profitable on a 3-6 month horizon IAI Other LME SHFE Global inventory daysSource: CRU(16)
  • 17. China balanced in primary aluminium 1 000 tonnes 600 • Reduced production due to 500 Chinese New Year celebration 400 in FebruaryNet 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 inNet export (200) north and west China (300) • Partly replacing high-cost (400) production in south and east 2007 2008 2009 2010 Primary / alloyed Semis Fabricated Scrap Total Source: Hydro / Antaike, April 2011 (17)
  • 18. Positive 2011 market outlook maintainedWorld outside China (quarterly annualized) • World outside China1 000 tonnes • Annualized demand at 25.3 million tonnes in Q130 000 • Up 1% vs Q4 201028 00026 000 • 7% demand growth expected in 201124 000 • Capacity development22 000 • 1.2 million tonnes curtailed capacity restarted20 000 or in process of being restarted18 000 • 1.2 million tonnes curtailed capacity may16 00014 000 restart if current market conditions continue12 00010 000 8 000 • China 6 000 • Annualized demand at 16.7 million tonnes in Q1 4 000 • Down 3% vs Q4 2010 2 000 0 • 10% demand growth expected in 2011 • Broadly balanced in primary aluminium Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Demand ProductionSource: CRU(18)
  • 19. Downstream demand developmentDemand, million tonnes Share of semis consumption27 2010 – 54 million tonnes Western Europe North America China & Mexico22 Consumer Electrical durables 10% 7% Packaging17 Machinery 9% & equipment 10% Foil stock 8%12 Other 6% Transport 26% 7 Construction 24% 2 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012-3 Transport C onstruction Packaging Foil Electrical C onsumer durables Machinery & equipment OtherSource: CRU Source: CRU LT October 2010(19)
  • 20. 66% of bauxite reserves in 3 countriesBillion 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 resources *, and undeveloped resources ** Mid-league (Top- 11; each > 2% of world total) Potential reserves, billion tonnes: associated with currently operating mines ****) Mine site resources are known bauxite resources that do not currently qualify as reserves for various reasons**) Undeveloped resources might or might not became feasible for new mines (quality, size, access, etc)***) Potential reserves = current reserves (economically extractible) + 70% of mine site resources. Undeveloped resources are excluded.(20)Source: Roskill and Hydro analysis
  • 21. China dependent on bauxite importsChinese bauxite sourcing • Domestic bauxite reserves estimatedMillion 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 2015 • The balance mainly from AustraliaChinese alumina sourcingMillion tonnes 54 • China to be relatively balanced in alumina Import 5 49 • Minor imports Domestic source 35 4 29 • New alumina capacity mainly based on 16 domestic bauxite 7 9 2005 2010 2015 Source: Antaike / Hydro(21)
  • 22. Significant alumina demand growth expectedMillion tonnes160 +80% Alumina demand140 135 Production China 55 Production world outside China 118120 48100 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 projectsSource: Hydro analysis/ Antaike(22)
  • 23. 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 2020Export to 3.5 3.5 4.0 4.5 4.5 5.0ChinaIdled 5.1 4.2 4.2 3.5 3.5 3.5capacitySource: Hydro analysis / CRU(23)
  • 24. Alumina market is consolidatingNet 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 2000 Aluar -0.9 2011 VAW -0.5 Century -1.1 Hydro -0.6 Vimetco -1.1 Alba -0.9 Alba -1.7 Dubal -1.0 Dubal -2.2 Rusal -1.2 Source: CRU and Hydro analysis(24)
  • 25. Attractive cost positionGlobal business operating cost curve 2010USD per tonne Alunorte stand-alone450400350300 Average - USD 243250200150100 50 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Million tonnesSource: CRU(25)
  • 26. Alumina price developmentHistorical alumina price Platts index in USD* Alumina price Alumina priceUSD per tonne % LME USD per tonne % LME % of LME % of LME700 32 450 20600 28 425 24 400 18500 20 375400 16 350 16300 12 325200 8 300 14100 4 275 0 0 12 250 1998 2000 2002 2004 2006 2008 2010 09.10 10.10 11.10 12.10 01.11 02.11 03.11 04.11Source: Reuters/CRU/Platts. *Platts started spot notifications in August 2010(26)
  • 27. Commodity prices drive industry costsCrude oil – Brent (USD/bbl) Coal – CIF ARA (USD/mt) Petroleum coke FOB USG (USD/tonne)160 245 550140 210 500120 175 450100 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 2008 2009 2010 2011Power – EEX Germany (EUR/MWh) Freight – Baltic Dry Index Caustic soda (USD/tonne)90 11 900 1 20080 10 200 1 05070 8 500 90060 6 800 75050 5 100 60040 3 400 45030 1 700 30020 0 150 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011Source: Reuters Ecowin / PACE / CMAI(27)
  • 28. Strong power prices, low reservoir levelsHydro’s snow and water reservoir levels assumed better than market averageMarket 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 0 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Week Week Price NOK/MWh Q4 2010 Q1 2011 Reservoir levels Dec 31, 2010 Mar 31, 2011 System 498 518 Norway 45.3 % 18.1 % Southwestern Norway (NO2) 469 520 Southwestern Norway (NO2) 42.8 % 15.4 %Source: Nordpool and NVE(28)
  • 29. First quarter results 2011(29)
  • 30. • Vale transaction completed • Qatalum ramp-up on track • Positive market outlook(30)
  • 31. 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 and lower costs• Solid Energy result(31)
  • 32. Ambitious cost improvement program on targetEstimated primary aluminium cash cost and margin • USD 300 per tonne cost improvementUSD/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 1 875 due to increased raw material costs 1 675 • Energy 1 475 • LME-linked alumina prices 1 275 1 275 1 225 • Petroleum coke • Weaker USD • Program assumptions 2008 2009 2010 Q1 2011 3) • Higher energy and petroleum coke costs may offset some improvements Estimated cash cost excluding LME-linked alumina cost 2) Estimated LME-linked alumina cost 2) • Improvements may be influenced by fluct- Estimated EBITDA margin uations in raw material prices and currencies1) Realized aluminium price minus EBITDA margin per tonne primary • Applies to ~1 000 000 tonnes annual capacity aluminium. Excludes Qatalum earnings and volumes, but includes net earnings from primary casthouses.2) 13% of LME 3 month price with 2.5 months delay3) Albras included from March 1, 2011(32)
  • 33. 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 performance in Q1• Promising growth prospects• Vale has become key shareholder in Hydro with 22% ownership(33)
  • 34. 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 31 163 62 143 Rolled Products (53) (28) 51 57 223 309 227 105 232 Extruded Products (204) (26) 95 68 117 201 102 24 105 Energy 447 281 217 295 588 177 169 482 573 Other and eliminations 1) (213) (153) (382) (311) (297) (278) (85) (284) (344) Total (493) (618) (793) (651) 688 1 110 965 588 1 4481) Bauxite & Alumina, Primary Metal and Other and eliminations are reclassified from 2009.(34)
  • 35. Underlying EBIT developmentNOK 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)
  • 36. 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 1 060 1 530 3 706 Income tax expense (608) (401) (605) (1 588) Net income (loss) 5 154 658 924 2 118 Underlying net income (loss) 1 244 376 401 1 852 Reported EPS, NOK 2.89 0.39 0.68 1.33 Underlying EPS, NOK 0.65 0.21 0.27 1.14(36)
  • 37. Tax and financial expenseTax FinanceNOK million Q1 2011 Q4 2010 NOK million Q1 2011 Q4 2010Income before tax 5 762 1 060 Interest income 51 84 Dividends received and net gain on securities (10) 22Equity accounted investments (19) 17 Financial income 41 107Revaluation gain Alunorte and CAP 4 222 -Adjusted income before tax 1 559 1 043 Interest expense (80) (30) Net foreign exchange gain (loss) (30) 232Income tax expense (608) (401) Other (25) (16) Financial expense (134) 185Effective tax rate 11% 38%Adjusted effective tax rate 39% 38% Net financials (93) 292• Low tax rate for Q1 due to tax-free revaluation • Lower interest income due to reduced cash gain on previous stakes in Alunorte and CAP balance in Q1• Adjusted effective tax rate influenced by high • Net foreign exchange loss due to weaker USD share of earnings from Energy subject to power largely offset by gains on intercompany balances sur tax in EUR(37)
  • 38. 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 charges and closure costs - (131) 19 (130) Impairment charges - (12) (61) (187) Gains (losses) on divestments - 7 67 74 Vale transaction related effects 4 328 - - - Other - 91 - 242 Reported EBIT 5 855 768 985 3 184(38)
  • 39. Pro forma underlying EBIT & EBITDAUnderlying EBIT before transaction and contribution from acquired Vale assetsNOK 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 2011Underlying EBITDA before transaction and contribution from acquired Vale assetsNOK million 6 420 + 3 030 = 9 450 2 881 2 702 2 555 467 825 835 2 213 2 415 1 979 830 539 1 877 1 720 1 440 1 383 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011(39)
  • 40. Preliminary purchase price allocation NOK billionProperty, plant and equipment 44.8Goodwill 2.7Net other assets 9.2Deferred tax liabilities (6.2)Net interest-bearing debt (6.4)Net assets acquired 44.1Net assets acquired by Hydro 37.0Minority interests 7.1Net assets acquired 44.1Consideration shares issued to Vale 20.0Cash consideration paid 6.3Deferred cash payment Paragominas 1.5Fair value of previously held shares in Alunorte and CAP 9.2Net assets acquired by Hydro 37.0Revaluation gain on Alunorte and CAP recognized in Q1 2011 reported result ~4.2Estimated annual excess value depreciation (exposed to NOK/BRL exchange rate) ~1.0(40)
  • 41. Pro forma income statement Q1 2011 Vale Pro forma Aluminium Pro forma Hydro afterNOK million Hydro actual combined adjustments transactionRevenue 21 138 2 121 (444) 22 815Share of the profit (loss) in equity accounted investments (19) - (27) (45)Other income, net 4 553 - (4 421) 132Total revenue and income 25 672 2 121 (4 891) 22 902Depreciation, amortization and impairment 940 214 162 1 316Other expenses 18 877 1 656 (551) 19 981Earnings before financial items and tax (EBIT) 5 855 251 (4 502) 1 604Financial income (expense), net (93) (22) (21) (137)Income (loss) before tax 5 762 229 (4 523) 1 468Income taxes (608) (79) 144 (543)Tax rate 11% 37%Net income (loss) 5 154 150 (4 379) 925Net income (loss) attributable to minority interest 112 21 11 144Net income (loss) attributable to Hydro shareholders 5 043 129 (4 390) 782Earnings per share attributable to Hydro shareholders 2.89 0.38(41)
  • 42. Bauxite & AluminaPro 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, NOK million 725 693 643 Underlying EBIT, NOK million 237 223 205 Q1 operating results • Weak production performance in Alunorte and ParagominasUnderlying EBIT • Higher realized alumina price driven by LME linkNOK million • Lower sales volumes in Alunorte 1 225 237 • Increased caustic and energy costs 448 • Higher bauxite costs due to scheduled maintenance of 348 Paragominas bauxite pipeline and increased operating costs • Lower contribution from commercial activities 223 237 205 Outlook • Higher LME-linked alumina prices 2010 2011 • Improved production at Alunorte and Paragominas • Reduced unit costs due to higher utilization(42)
  • 43. Primary MetalPro 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 million 592 230 (203) Q1 operating resultsUnderlying EBIT • Prices and premiums lift result by NOK 480 millionNOK million • Increased raw material costs, partly offset by lower fixed 816 592 costs, reduce result by NOK 170 million 592 • Insurance compensation of NOK 145 million included in 481 positive NOK 20 million Qatalum result 306 230 • Albras contributing NOK 50 million vs NOK 144 million in Q4 Outlook (203) • Close to 100% of primary production affecting Q2 results 2010 2011 priced at ~USD 2 450 mt, excluding Qatalum • Increased alumina and petroleum coke cost • Restart of 15 000 mt at Sunndal 3 line in June(43)
  • 44. 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 operating resultsUnderlying EBITNOK million • Increased sales volumes for third-party products 321 143 • Improved margins for remelters • Lower contribution from metal sourcing and trading • Positive currency and inventory valuation effects of 163 NOK 50 million 143 65 62 Outlook 31 • Slightly increased volumes • Volatile trading and currency effects 2010 2011(44)
  • 45. 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 223Underlying EBITNOK million 864 232 Q1 operating results 309 • Seasonally higher sales improve result 227 232 by NOK 80 million 223 • Improved margins driven by general 105 engineering applications • Higher energy costs offset by lower maintenance costs 2010 2011 Outlook • Solid order book for 2011 • Stable sales volumes in Q2(45)
  • 46. 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 117Underlying EBITNOK million 444 105 Q1 operating results • Weak European construction market 201 • Seasonally higher volumes • Lower costs 117 102 105 • Solid results in Precision Tubing and Extrusion South America 24 Outlook • Current market conditions expected to continue, 2010 2011 but increased volatility in demand • Seasonally higher sales(46)
  • 47. 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 588Underlying EBIT Q1 operating resultsNOK million • High and stable production 1 416 573 • Strong spot prices • Lower transmission costs 588 573 482 Outlook • Significantly lower production and spot sales • Lower prices 177 169 2010 2011(47)
  • 48. Net cash development Q1NOK 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 adjustments divestments payment Vale(48)
  • 49. Robust financial positionNet 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 debt in equity (8.0) (7.8) (7.3) accounted invest. Net pension liability at fair value, (5.6) (5.6) (5.5) 2.0 net of expected tax benefit Other adjustments* (4.0) (4.0) (5.6) Adjusted net debt (15.6) (6.4) (20.5) Dec 31, 2009 Dec 31, 2010 Mar 31, 2011 * Operating lease commitments and other (2.0)(49)
  • 50. 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)
  • 51. Business overview(51)
  • 52. Bauxite & Alumina(52)
  • 53. 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 refinery (Phase I) • Capacity 1.65 agreement for • One of the world’s refinery is planned to be million tonnes Vale’s 40% stake largest bauxite mines • 2010 production in operation in 2015 of alumina • Capacity 18 • 2010 production 5.8 million tonnes • Paragominas expansion • Fully integrated million tonnes 7.5 million tonnes • Nameplate capacity of to be developed with bauxite • Nameplate capacity of 6.3 million tonnes in parallel • 100% curtailed 9.9 million tonnes • Bauxite supplied from • Investment estimates since mid-2009 • Possible expansion to Paragominas and MRN and expansion concepts 15 million tonnes under evaluation • World-class conversion • Long-life resource cost position • Full utilization of the existing bauxite pipeline Refining and mining External supply Sales contract Bauxite licenses competencies contracts portfolio(53)
  • 54. 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 • Customers • Social dialogue developing positively • Expansion projects maturing(54)
  • 55. 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 • Low environmental impact• High-quality bauxite • Gibbsite bauxite with 48-49% available alumina and 4.5-5% of reactive silica • Absence of organics reduces investments and cash cost at Alunorte(55)
  • 56. Paragominas – production process Reclaimer Silo SAG mill Pumping station Classification to pipeline Tailings dam/recovered Classification water Ball mill Recrusher Vibrating screen(56)
  • 57. 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 – power and fuel Maintenance/ consumables, 19% Support & Energy; 16 % infrastructure; 12 %(57)
  • 58. Paragominas prioritiesBauxite production, million tonnes • Operational improvements10 • Housekeeping and safety9 • Improve performance stability8 • Beneficiation plant • Dewatering filters in Alunorte7 • Stripping ratio6 • Recovery rate5 • Improved production system43 • Target significant production increase2 • Nameplate capacity of 9.9 million tonnes10 2007 2008 2009 2010 Target(58)
  • 59. 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)
  • 60. Alunorte prioritiesAlumina production, million tonnes • Operational improvements7 • Housekeeping and safety • Improve plant efficiency6 • Performance in older lines5 • Availability of coal boilers • Dewatering filters4 • Port costs • Improved production system32 • Targeting stable production above 6 million tonnes1 • Nameplate capacity of 6.3 million tonnes0 1995 1997 1999 2001 2003 2005 2007 2009(60)
  • 61. 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 pipeline is fully utilized• Energy Other costs; 15 % • First-quartile energy consumption – 8 MJ/t Bauxite; 36 % • Energy mix of heavy fuel oil and coal• Caustic soda • Competitive caustic soda consumption due to bauxite with low level of reactive silica Energy; 31 %• Other costs Caustic soda, • Maintenance, labor and other 10%• Sourced alumina • Alumina purchased for resale(61)
  • 62. 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 and expansion concepts under evaluation • Competitive cost position • Full utilization of existing bauxite pipeline • Technology and project execution for CAP built on Alunorte experience(62)
  • 63. Business model – volume flows1 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 Alumina 7 400 Hydro Bauxite 900 availability Equity 91% MRN 6 700 Prod (100%) 17 000 900 External Hydro availability bauxite sales Equity 5% 900 Contract 40%1) Third party customers and non-consolidated joint ventures2) Fully owned smelters and consolidated joint ventures(63)
  • 64. Attractive alumina position1 000 tonnes9 000 Open position not committed to sales contracts8 000 Sourcing contracts7 000 CAP equity6 000 Alunorte equity5 0004 0003 000 Smelter demand*2 0001 000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*Sunndal 3 line assumed back in operation, Neuss and Søral at 2010 production level(64)
  • 65. 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)Source: Hydro estimates(65)
  • 66. Alumina pricing shifting from LME-link toalumina 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)
  • 67. 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 ~13-14% of LME • Similar percentage expected for 2011-2015 • Minor volumes available for sale before 2016 • Majority of sales contracts expire in 2016-2018(67)
  • 68. 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 to be industry benchmark • Hydro’s values and culture important for further improvements(68)
  • 69. Primary Metal(69)
  • 70. World-wide production networkPrimary 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 potential • Søral (50%): 85 000 tonnes 6% Germany, 230 000 tonnes 11% • Neuss (100%): 230 000 tonnes 2.1 Slovakia, 90 000 tonnes 4% • Slovalco (55%): 90 000 tonnes million tonnes Qatar, 300 000 tonnes 14% • Qatalum (50%): 300 000 tonnes • Ramping up during first half 2011 • Expansion potential 11% Australia, 240 000 tonnesBrazil , 235 000 tonnes 12% • Kurri Kurri (100%): 175 000 tonnes• Albras: (51%): 235 000 tonnes • Tomago (20%): 65 000 tonnesAttributable capacity: 2.1 million mt. Consolidated capacity: 2.4 million tonnes, Slovalco and Albras are consolidated) The smelters have an additionalremelt capacity: 0.6 million tonnes. Consolidated casthouse capacity: 3.0 million tonnes. Qatalum and Søral are equity accounted in Hydro’s results.(70)
  • 71. Strong focus to further improve cost positionEstimated primary aluminium production Estimated business operating cost 2014 by CRUcash costs USD/tonneFull year 2010, USD/tonne2 800 2 800 Hydro Peer companies2 400 2 4002 000 2 0001 600 1 600 Hydro1 200 1 200 Accumulated world capacity, 1 000 tonnes 800 800 Rusal Rio Tinto Hydro Alcoa C entury 0 10 000 20 000 30 000 40 000 50 000 60 000Estimated primary aluminium production cash costs including casthouse margin based on company reports. Assumptions: Hydro cash costs increased by USD50/tonne for relining cost in order to compare with Alcoa. Pricing: Century 1 month LME cash lag, Hydro 3 months and 20 days LME forward lag, Alcoa, RioTinto and Rusal 15 days LME cash lag.Source: CRU, BOC2014: LME 2 145 USD/tonne (real 2010)(71)
  • 72. Improvement program: USD 300 per tonneCost 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 improvements Technology costs/spin-offs USD 300/tonne Investments 100 Maintenance and relining 50 Procurement Logistics 0 Realized 2011 2012 2013 2010 onwards Organization and manning Casthouse product margin(72)
  • 73. 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 be completed by June 2011 markets in Asia, US and Europe • Stabilize production and cost optimization(73)
  • 74. 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 related to August power outage • NOK 145 million recognized in Q1 result • NOK 300 million recognized in Q4 result • Remaining insurance coverage expected to be recognized at final insurance settlement • World-class cost position • Cash costs estimated around USD 1 400-1 500 per tonne at 2010 market conditions when in full production(74)
  • 75. 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% project financed • Satisfactory project economics at LME 1 900 USD/tonne • Engineering Procurement Construction (EPC) contract philosophy • Maximize competition by involving resources and experience of several principal aluminium contractors for 11 EPC packages • Compensation formats mainly lump-sum • Financials • Depreciated over ~20 years • Marginal tax implications • First quartile cash cost based on very competitive gas contract(75)
  • 76. 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 next to Albras • Among the largest smelters in the Americas and established in 1985-86 • Key operational facts • Capacity 100%: 460 000 tonnes • Production 2010: 450 000 tonnes • Technology: AP 13 • Product mix: Standard ingot(76)
  • 77. 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• Qatalum power outage • 30 months of operations • Significantly lower kWh/kg HAL 300 verified the robustness of in Årdal, Norway • Carbon capture-ready cell the cells operation In • First verification period • New materials and cell surpassed targets design• Operating at: • Reduced investment costs • 13.3 kWh/kg • Currently operating at: • 313 kA • 12.5 kWh/kg • 1.6 tonne CO2/tonne • 424 kA aluminium • 1.5 tonne CO2/tonne aluminium(77)
  • 78. Metal Markets(78)
  • 79. 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 management and contribute to improved earnings in primary casthouses • Capitalize on strong market position Foundry alloys through sourcing and trading strategies 450 000 tonnes • Firm operational LME risk management Casthouse production Primary production Remelting & recycling Commercial agreements Sheet ingot 525 000 tonnes(79)
  • 80. 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 of third party metal products primary source Høyanger Årdal Karmøy• Capacity outside Europe • 0.6 mill tonnes of primary metal • 0.2 mill tonnes of remelting and recycling Deeside Hannover Rackwitz• Stand-alone remelters close to customers Rheinwerk Clervaux Slovalco Luce• Business concept • Increased business volume with low investments • Optimized system costs for sourcing, casthouse operations and marketing of metal products Azuqueca • Maximize casthouse capacity utilization • Basis for strategic alliances 1) Including ~320 000 tonnes presently curtailed • Gain leading position in scrap conversion 2) Excluding downstream capacities in Rolled Products and Extruded Products 3) Ramp-up to 600 000 tonnes by June 2011(80)
  • 81. 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 – proximity to market 150 • Gas and electricity consumption and prices 100• Other main businesses 50 • Physical and LME trading 0 • Third-party products Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 • High purity aluminium -50 -100• Results influenced by currency fluctuations -150 2008 2009 2010 2011(81)
  • 82. Rolled Products(82)
  • 83. 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 engineering • Strategy Revenues: • Margin management and cash generation NOK 6.8 billion • Focus production system on core assets • High-grading product portfolio Litho Revenues: NOK 3.7 billion(83)
  • 84. 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 -7% 2 -7% 2 -7% 1 -10% 1 -10% 1 -10% -13% -13% -13% 0 -16% 0 -16% 0 -16% 2004 2006 2008 2010 2004 2006 2008 2010 2004 2006 2008 2010 Solid market share for Rolled Products 1) Hydro 19 % • 75% of shipments in Europe European market • 6% of business in North America 4.3 million tonnes • 19% of business in Asia/rest of the world Other 81 %Source: CRU February 20111) Source: EAA(84)
  • 85. 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 rolling mill Cisterna • Grevenbroich plant Malaysia • World’s largest finishing mill • ~4 000 employees Rolling Mill Sales Office(85)
  • 86. 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/ Building(86)
  • 87. European producer with global reach25% export share for high-end markets serving key global customers & marketsTonnes 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 region2010 (YTD Nov annualized);(87)
  • 88. Rolled Products earnings driversUnderlying EBIT per tonne, NOK1 400 • Contract structure • Margin business based on conversion price1 200 • LME element passed on to customers • Medium-term contracts1 000 • Range from spot contracts to multi-year contracts 800 • High share of fixed costs - volume sensitive 600 • Preferred supplier market position in 400 high-end products 200 • Hydro’s market position key advantage in cost and volume driven industry 0-200 2006 2007 2008 2009 2010 2011(88)
  • 89. Extruded Products(89)
  • 90. 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 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 billion(90)
  • 91. A true entrepreneurial driven enterpriseExtrusion 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 segments • Building and construction • Automotive • Transport • Solar • 2010 sales volume • 388 000 tonnes(91)
  • 92. Winning in a demanding marketPrecision Tubing• Competence - our proven resource• Strike a new path• Strong global presence• 2010 sales volume: 67 000 tonnes(92)
  • 93. Building the future with aluminumBuilding 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 tonnes(93)
  • 94. 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 2009 2010 201 e 1 2002 2003 2004 2005 2006 2007 2008 2009 2010 201 e 1 1) Solid market share for Extrusion in Europe Hydro 17 % • 74% of shipments in Europe European market Sapa • 14% of business in North America Other 16 % 2.4 million tonnes 56 % • 12% of business in Asia/rest of the world Alcan Aleris % 8 3%Source: European and North American consumption figures from CRU February 2011.1) Best estimates shown for competitor 2009 market share. Market share Hydro ~17% excluded divested Automotive Structures.Hydro ~15% for EE/HBS(94)
  • 95. 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• Margin management is key 750• Volume sensitive - but flexible 500 production system 250• Support customers in product development 0 • Value creation in excess of metal price -250 -500 2006 2007 2008 2009 2010 2011* Excluding divested businesses (Structures, Castings, Magnesium)(95)
  • 96. Energy(96)
  • 97. Solid long-term power coveragefor Primary Metal35 000 • 90% of power needs secured until 202030 000 • High share of renewable energy • More than 2/3 of power needs from25 000 renewable sources • Albras smelter in Brazil has hydropower20 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 onsumption(97)
  • 98. Hydro is a global energy playerEnergy 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 TWh2011 estimate for Hydro’s equity production including Vale assets acquisition. Sunndal 3 line and Alpart curtailed, Neuss and Søral at current production level.(98)
  • 99. 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 3.0 0.5 • Normal production ~9.4 TW • Sourcing on long-term contracts ~7.0 TWh 2044- • Consumption in Primary Metal* ~12.5 TWh No reversion 2049 • Contract sales and concession power ~1.0 TWh Normal • Spot sales ~3.0 TWh production Sogn 3.1• Value enhancement potential • Growth opportunities in Norway 9.4 • Holsbru project to add 84 GWh from 2012 2051-2057 • Vasstøl project to add 26 GWh from 2012 • Rjukan system and Herva upgrades • Represents NOK 1.2 billion in investments during Røldal-Suldal 2.8 2011-2015 • Optimization of power value in market, and in cooperation with smelters 2023* Including Sunndal 3 line currently curtailed(99)
  • 100. 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 sector • Actively working on framework conditions (CO2 and grid) • Value of assets protected by several possible types of transaction • Sell or merge into state or municipality owned entity (minimum 2/3 of asset) • Maintaining ownership to Røldal-Suldal assets means owning an option(100)
  • 101. Energy earnings driversUnderlying EBIT* and spot price • Production and market prices stronglyNOK million NOK/MWh linked to hydrological conditions2 000 5001 500 400 • Relatively stable annual EBIT contribution 3001 000 • Large quarterly variations due to volatile spot 200 sales and spot prices 500 100 0 0 • Seasonal market variations in demand 2003 2004 2005 2006 2007 2008 2009 2010 and supplyUnderlying EBIT and spot price • Occasional delink between area pricesNOK million NOK/MWh800 • Power portfolio optimized versus market 500600 400 • Stable cost base 300400 200200 100 0 0 2006 2007 2008 2009 2010 2011 Underlying EBIT Spot price * Underlying EBIT 2003–2006 based on USGAAP(101)
  • 102. Additional information(102)
  • 103. 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 dividend policy Short-term debt (1.2) (1.9) (0.9) (2.5) • Ordinary dividend: 30% of net income over the cycle Long-term debt (0.3) (0.1) (0.3) (4.5) • Average ordinary pay-out ratio 2007-2010: 57% • NOK 0.75 per share proposed for 2010 Net cash/(debt) 3.5 2.0 11.0 (2.0) • Share buybacks and extraordinary dividends as supplement in periods with strong financials Cash and short-term investments (1.7) (1.5) (1.4) (1.4) in captive insurance companyMaintain investment-grade rating Net pension liability at fair value, (9.6) (5.6) (5.6) (5.5) • Currently: BBB (S&P) & Baa2 (Moody’s) stable outlook net of expected tax benefit • Competitive access to capital and important for Hydro’s Operating lease commitments, business model (counterparty risk and partnerships) (1.9) (1.7) (1.7) (1.7) net of expected tax benefitFinancial ratios over the business cycle Net interest-bearing debt in (4.9) (8.0) (7.8) (7.3) equity accounted investments • Funds from operations to net adjusted debt > 40% • Net adjusted debt to equity < 0.55 Other financial obligations, net of (0.9) (0.9) (0.9) (2.4) expected tax benefit• USD 1.7 billion in multi-currency revolving credit Net adjusted cash/(debt) (15.4) (15.5) (6.4) (20.5) facility maturing in 2014(103)
  • 104. 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’ pricing • Currency exposure, mainly USD and BRL • Policy of maintaining long-term debt in USD • Partly natural hedge through negative correlation between LME and major exposed currencies Mid- and downstream • Operational LME and currency hedging to secure margin Volatility mitigated by strong balance sheet(104)
  • 105. Capital allocation mainly upstreamNOK 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 center Karmøy • Extruded Products expansion China • Paragominas and CAP development under 2009 2010E 2011E evaluation C apex Vale Debt-financed investments Qatalum Investments Qatalum New growth projects Sustaining capex1) Including net operating capital in Qatalum2) Excluding Vale assets acquisition(105)
  • 106. Price and currency sensitivitiesCommodity 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) Caustic soda (100) • Annual sensitivities based on expected business volumes for 2011 (including Vale assets for the full year), LME USD 2 500, Oil USD 880 per tonne, petroleum coke USD 550 per tonne, caustic soda USD 300 per tonne, coal USD 90 per tonne, Coal (50) NOK/USD 5.50, NOK/BRL 3.42, NOK/EUR 7.70. • Aluminium price sensitivity is net of aluminium price indexed costs and exclusive of Vale-hedge and unrealized effects related to operational hedging(106)
  • 107. Items excluded from underlying results - 2011NOK million (+=loss/()=gain) Q1 2011Unrealized derivative effects on currency contracts (Alunorte) Bauxite & alumina (1)Derivative effects on LME related contracts (Vale Aluminium) Bauxite & alumina 16Transaction related effects (Vale Aluminium) Bauxite & alumina (4 421)Total impact Bauxite & alumina (4 406)Derivative effects on LME related contracts (Vale Aluminium) Primary metal 27Unrealized derivative effects on LME related contracts Primary metal (23)Unrealized derivative effects on power contracts (Søral) Primary metal 30Unrealized derivative effects on power contracts Primary metal (84)Unrealized derivative effects on raw material contracts Primary metal 16Transaction related effects (Vale Aluminium) Primary metal 93Total impact Primary metal 59Unrealized derivative effects on LME related contracts Metal markets (8)Total impact Metal markets (8)Unrealized derivative effects on LME related contracts Rolled products 59Metal effect Rolled products (176)Total impact Rolled products (117)Unrealized derivative effects on LME related contracts Extruded products (3)Total impact Extruded products (3)Unrealized derivative effects on power contracts Energy 7Total impact Energy 7Unrealized derivative effects on power contracts Other and eliminations 8Unrealized derivative effects on LME related contracts Other and eliminations 54Total impact Other and eliminations 61Total EBIT Hydro (4 408)Net foreign exchange (gain)/loss Hydro 30Income (loss) before tax Hydro (4 378)Calculated income tax effect Hydro 467Net income (loss) Hydro (3 911)(107)
  • 108. Items excluded from underlying results - 2010NOK million (+=loss/()=gain) Q1 2010 Q2 2010 Q3 2010 Q4 2010 Year 2010Unrealized derivative effects on currency contracts (Alunorte) Bauxite & alumina 23 12 (65) (20) (50)Derivative effects on LME related contracts (Vale Aluminium) Bauxite & alumina - (298) 93 41 (164)Total impact Bauxite & alumina 23 (286) 28 22 (214)Derivative effects on LME related contracts (Vale Aluminium) Primary metal - (22) 7 14 (2)Rationalization charges and closure costs Primary metal (19) 18 - 66 66Unrealized derivative effects on power contracts Primary metal 64 (186) 150 21 49Unrealized derivative effects on power contracts (Søral) Primary metal 5 (18) 2 (46) (56)Unrealized derivative effects on LME related contracts Primary metal (212) (56) 424 (61) 95Impairment charge (Qatalum) Primary metal - - 114 (16) 98Insurance compensation (Qatalum) Primary metal - - - (91) (91)Unrealized derivative effects on raw material contracts Primary metal - - - (156) (156)Total impact Primary metal (161) (264) 696 (269) 2Unrealized derivative effects on LME related contracts Metal markets 97 (26) 145 (53) 164Pension – curtailment and settlement Metal Markets - (2) - - (2)Total impact Metal markets 97 (28) 145 (53) 162Unrealized derivative effects on LME related contracts Rolled products (147) 476 (86) (22) 222Pension – curtailment and settlement Rolled products - (12) - - (12)Metal effect Rolled products (314) (206) 52 (92) (560)Total impact Rolled products (461) 259 (34) (114) (350)Unrealized derivative effects on LME related contracts Extruded products 12 24 (18) - 18Pension – curtailment and settlement Extruded products - (25) - - (25)Rationalization charges and closure costs Extruded products - - - 64 64Impairment charges Extruded products - - - 28 28(Gains)/Loss on divestments Extruded products (67) - - - (67)Total impact Extruded products (55) (1) (18) 92 18Unrealized derivative effects on power contracts Energy (16) 1 1 (7) (21)Total impact Energy (16) 1 1 (7) (21)Unrealized derivative effects on power contracts Other and eliminations 220 413 (178) 182 637Unrealized derivative effects on LME related contracts Other and eliminations (3) (30) 50 (26) (9)Pension – curtailment and settlement Other and eliminations - (112) - - (112)Impairment charges Other and eliminations 61 - - - 61(Gains)/Loss on divestments Other and eliminations - - - (7) (7)Total impact Other and eliminations 277 271 (127) 149 569Total EBIT Hydro (297) (47) 690 (180) 167Net foreign exchange (gain)/loss Hydro (468) (59) 246 (232) (513)Income (loss) before tax Hydro (764) (106) 936 (412) (346)Calculated income tax effect Hydro 241 38 (328) 129 80Net income (loss) Hydro (523) (68) 608 (282) (266)(108)
  • 109. Items excluded from underlying results - 2009NOK million (+=loss/( )=gain) Q1 2009 Q2 2009 Q3 2009 Q4 2009 Year 2009Unrealized derivative effects on LME related contracts (Alunorte) Primary metal - - (16) 16 -Unrealized derivative effects on currency contracts (Alunorte) Primary metal (11) (222) (105) (18) (357)Rationalization charges and closure costs Primary metal 305 62 (4) - 363Unrealized derivative effects on power contracts Primary metal 338 57 81 196 671Unrealized derivative effects on power contracts (Søral) Primary metal 1 (41) 6 (42) (77)Defined pension plan (Søral) Primary metal - - (52) - (52)Unrealized derivative effects on currency contracts (Qatalum) Primary metal (8) 18 3 (2) 12Unrealized derivative effects on LME related contracts Primary metal 1 027 (231) (519) 8 285Total impact Primary metal 1 652 (357) (607) 158 846Unrealized derivative effects on LME related contracts Metal markets 70 (275) (222) (59) (487)Total impact Metal markets 70 (275) (222) (59) (487)Unrealized derivative effects on LME related contracts Rolled products (337) (692) (578) (659) (2 265)Metal effect Rolled products 662 225 (141) (157) 588Impairment charges Rolled products - - 286 - 286(Gains)/Loss on divestments Rolled products - - - 231 231Total impact Rolled products 325 (466) (433) (585) (1 160)Impairment charges Automotive 10 4 - - 14Rationalization charges and closure costs Extrusion - - - 63 63Rationalization charges and closure costs Automotive - 7 34 2 44(Gains)/Loss on divestments Extrusion - - - 472 472Unrealized derivative effects on LME related contracts Other and eliminations (27) (125) (48) (47) (247)Total impact Extruded products (17) (114) (14) 490 346Unrealized derivative effects on power contracts Energy (4) 12 (28) 11 (9)Rationalization charges and closure costs Energy - 14 - - 14Insurance compensation Energy - (66) (73) (13) (152)Total impact Energy (4) (40) (101) (2) (146)Unrealized derivative effects on power contracts Other and eliminations (915) 90 (112) 153 (784)Unrealized derivative effects on LME related contracts Other and eliminations (7) 100 (23) 13 83Rationalization charges and closure costs Other and eliminations - 34 - - 34Impairment charges Other and eliminations - - - 138 138(Gains)/Loss on divestments Other and eliminations - - - (19) (19)Total impact Other and eliminations (922) 224 (135) 286 (548)Total EBIT Hydro 1 105 (1 029) (1 512) 287 (1 148)Net foreign exchange (gain)/loss Hydro (1 478) (88) (992) (216) (2 774)Income (loss) before tax Hydro (373) (1 117) (2 504) 71 (3 922)Calculated income tax effect Hydro 174 262 280 (275) 441Net income (loss) Hydro (199) (854) (2 224) (204) (3 481)(109)
  • 110. Operating segment informationUnderlying EBIT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year YearNOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010Bauxite & Alumina (228) (73) 21 (117) 162 288 71 113 155 (397) 633Primary Metal 3 (815) (780) (623) (169) 382 318 86 583 (2 215) 617Metal Markets (245) 196 (15) (20) 65 31 163 62 143 (83) 321Rolled Products (53) (28) 51 57 223 309 227 105 232 26 864Extruded Products (204) (26) 95 68 117 201 102 24 105 (67) 444Energy 447 281 217 295 588 177 169 482 573 1 240 1 416Other and eliminations (213) (153) (382) (311) (297) (278) (85) (284) (344) (1 059) (945)Total (493) (618) (793) (651) 688 1 110 965 588 1 448 (2 555) 3 351Underlying EBITDA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year YearNOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010Bauxite & Alumina (222) (17) 39 (83) 172 295 76 118 340 (283) 661Primary Metal 472 (349) (324) (174) 252 817 752 553 1 055 (375) 2 374Metal Markets (212) 226 14 8 91 59 189 88 168 36 428Rolled Products 79 100 175 179 335 419 338 226 342 532 1 318Extruded Products (32) 139 246 232 252 337 236 162 237 585 987Energy 471 305 254 325 623 214 201 502 600 1 355 1 540Other and eliminations (203) (137) (367) (297) (284) (265) (72) (266) (328) (1 004) (887)Total 352 266 38 189 1 440 1 877 1 720 1 383 2 415 845 6 420(110)
  • 111. Operating segment informationPro forma underlying EBIT Q1 Q2 Q3 Q4 Q1 YearNOK million 2010 2010 2010 2010 2011 2010Bauxite & Alumina 205 448 348 223 237 1 225Primary Metal (203) 481 306 230 592 816Metal Markets 65 31 163 62 143 321Rolled Products 223 309 227 105 232 864Extruded Products 117 201 102 24 105 444Energy 588 177 169 482 573 1 416Other and eliminations (297) (278) (84) (285) (344) (945)Total 698 1 369 1 231 841 1 538 4 141Pro forma underlying EBITDA Q1 Q2 Q3 Q4 Q1 YearNOK million 2010 2010 2010 2010 2011 2010Bauxite & Alumina 643 912 813 693 725 3 061Primary Metal 320 1 026 850 808 1 137 3 006Metal Markets 91 59 189 88 168 428Rolled Products 335 419 338 226 342 1 318Extruded Products 252 337 236 162 237 987Energy 623 214 201 502 600 1 540Other and eliminations (285) (265) (72) (266) (328) (889)Total 1 979 2 702 2 555 2 213 2 881 9 450(111)
  • 112. Operating segment informationEBIT 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 (315) 472 207 39 (32) 59 18 115 151 403 160 Rolled Products (379) 438 484 642 684 50 261 219 349 1 186 1 214 Extruded Products (187) 87 108 (422) 172 202 120 (68) 108 (413) 426 Energy 451 321 318 297 605 176 167 489 566 1 386 1 438 Other and eliminations* 709 (377) (247) (597) (574) (549) 42 (433) (405) (511) (1 514) Total (1 598) 410 719 (938) 985 1 157 274 768 5 855 (1 407) 3 184EBITDA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year YearNOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina* (421) 173 160 (81) 149 581 49 97 4 746 (168) 875 Primary Metal* (982) (182) 162 (334) 413 1 081 56 822 997 (1 336) 2 372 Metal Markets (283) 502 237 67 (6) 87 44 140 176 523 266 Rolled Products (247) 566 894 764 796 160 372 340 459 1 977 1 668 Extruded Products (5) 256 260 (258) 307 338 254 98 240 253 997 Energy 475 345 355 327 639 213 200 509 593 1 501 1 561 Other and eliminations* 719 (361) (232) (445) (500) (536) 55 (414) (389) (318) (1 395) Total (743) 1 299 1 836 41 1 798 1 924 1 029 1 592 6 822 2 432 6 343* Bauxite & Alumina, Primary Metal and Other and eliminations reclassified in 2009 and 2010.(112)
  • 113. Operating segment informationPro forma reported EBIT Q1 Q2 Q3 Q4 Q1 YearNOK million 2010 2010 2010 2010 2011 2010Bauxite & Alumina 205 768 47 140 213 1 161Primary Metal (41) 723 (368) 499 622 813Metal Markets (32) 59 18 115 151 160Rolled Products 684 50 261 219 349 1 214Extruded Products 172 202 120 (68) 108 426Energy 605 176 167 489 566 1 438Other and eliminations (574) (549) 42 (433) (405) (1 514)Total 1 018 1 429 289 960 1 604 3 696Pro forma reported EBITDA Q1 Q2 Q3 Q4 Q1 YearNOK million 2010 2010 2010 2010 2011 2010Bauxite & Alumina 643 1 232 512 610 701 2 997Primary Metal 482 1 268 176 1 077 1 167 3 003Metal Markets (6) 87 44 140 176 266Rolled Products 796 160 372 340 459 1 668Extruded Products 307 338 254 98 240 997Energy 639 213 200 509 593 1 561Other and eliminations (500) (536) 55 (414) (389) (1 395)Total 2 361 2 762 1 613 2 360 2 947 9 095(113)
  • 114. Operating segment informationTotal 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 8 234 22 976 27 592 Metal Markets 7 945 8 921 8 851 8 480 9 950 11 419 10 498 11 134 12 005 34 197 43 001 Rolled Products 4 443 4 449 4 610 4 909 5 222 5 019 5 447 5 492 5 703 18 411 21 180 Extruded Products 5 070 5 119 4 967 4 909 4 540 5 097 4 901 4 867 5 102 20 065 19 405 Energy 1 515 1 330 1 079 1 362 1 985 1 838 1 255 1 976 2 080 5 286 7 055 Other and eliminations* ( 9 630) (9 397) (10 174) (10 461) (11 790) (13 468) (11 971) (13 131) (14 168) (39 661) (50 360) Total 16 569 17 617 16 795 16 427 18 145 19 779 18 424 19 406 21 138 67 409 75 754External revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year YearNOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Bauxite & Alumina* 483 750 551 720 628 1 186 659 891 1 014 2 504 3 364 Primary Metal* 355 334 559 380 397 456 392 358 651 1 628 1 603 Metal Markets 5 329 6 730 5 953 5 638 6 536 7 040 6 511 7 003 7 520 23 650 27 090 Rolled Products 4 629 4 232 4 317 4 308 4 893 5 206 5 237 5 275 5 585 17 486 20 611 Extruded Products 5 107 5 055 4 922 4 821 4 523 5 066 4 831 4 804 5 068 19 906 19 225 Energy 499 361 354 467 1 043 697 683 1 025 1 226 1 682 3 448 Other and eliminations* 165 155 140 94 124 128 112 50 73 554 414 Total 16 569 17 617 16 795 16 427 18 145 19 779 18 424 19 406 21 138 67 409 75 754* Bauxite & Alumina, Primary Metal and Other and eliminations reclassified in 2009 and 2010.(114)
  • 115. Operating segment informationInternal revenue Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year YearNOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010Bauxite & Alumina* 1 042 746 974 869 1 003 1 241 1 076 1 199 1 168 3 631 4 518Primary Metal* 5 344 5 365 5 379 5 260 6 210 6 992 6 166 6 620 7 582 21 348 25 988Metal Markets 2 616 2 191 2 898 2 843 3 414 4 379 3 988 4 131 4 485 10 548 15 911Rolled Products (186) 217 293 601 329 (187) 210 217 118 925 569Extruded Products (37) 64 44 88 17 31 70 63 34 159 180Energy 1 016 969 725 895 942 1 141 573 951 855 3 605 3 607Other and eliminations* (9 795) (9 552) (10 313) (10 555) (11 915) (13 596) (12 082) (13 181) (14 241) (40 215) (50 774)Total - - - - - - - - - - -Share of profit /(loss) in equity accounted investments 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* (266) 121 128 12 15 94 46 22 13 (5) 177 Primary Metal* (109) (120) (102) (151) (159) (112) (335) 33 (6) (482) (574) Metal Markets (1) (1) (6) (7) (4) - (1) 1 - (14) (4) Rolled Products (33) (19) (12) (27) (17) (13) (10) (23) (22) (91) (64) Extruded Products 4 3 2 3 5 2 2 4 4 12 13 Energy 8 (3) (1) 20 14 1 4 9 7 24 29 Other and eliminations* (16) (22) (23) (191) (91) (54) (9) (29) (15) (253) (182) Total (413) (42) (14) (341) (236) (83) (303) 17 (19) (809) (606)* Bauxite & Alumina, Primary Metal and Other and eliminations reclassified in 2009 and 2010.(115)
  • 116. Operating segment informationDepreciation, 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 30 29 27 26 28 26 26 25 118 106 Rolled Products 116 112 395 107 98 96 97 107 96 730 398 Extruded Products 182 169 151 164 135 136 133 166 132 666 571 Energy 23 23 35 29 33 35 31 18 26 109 118 Other and eliminations* 10 11 15 15 13 13 13 14 16 50 52 Total 827 805 1 077 786 721 740 730 794 940 3 494 2 985* Bauxite & Alumina, Primary Metal and Other and eliminations reclassified in 2009 and 2010.Capital employed – upstream focus Extruded Energy Products 4% 6% NOK million Mar 31, 2011 Rolled Products 9% Bauxite & Alumina 35 503 Primary Metal 39 242 Metal Markets Bauxite & 3% Alumina Metal Markets 2 674 37% Rolled Products 8 903 Extruded Products 6 022 Energy 3 345 Other and eliminations (5 719) Primary Metal Total 89 971 41%Graph excludes NOK 5.7 billion in negative capital employed in Other and eliminations(116)
  • 117. Income statements Q1 Q4 Q1 YearNOK million 2011 2010 2010 2010Revenue 21 138 19 406 18 145 75 754Share of the profit (loss) in equity accounted investments (19) 17 (236) (606)Other income, net 4 553 112 183 568Total revenue and income 25 672 19 535 18 091 75 717Depreciation, amortization and impairment 940 794 721 2 985Other expenses 18 877 17 973 16 385 69 548Earnings before financial items and tax (EBIT) 5 855 768 985 3 184Financial income (expense), net (93) 292 545 522Income (loss) before tax 5 762 1 060 1 530 3 706Income taxes (608) (401) (605) (1 588)Tax rate 11% 38% 40% 43%Net income (loss) 5 154 658 924 2 118Net income (loss) attributable to minority interest 112 38 55 230Net income (loss) attributable to Hydro shareholders 5 043 620 869 1 888Earnings per share attributable to Hydro shareholders 2.89 0.39 0.68 1.33 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year YearNOK million 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010Reported EBIT (1 598) 410 719 (938) 985 1 157 274 768 5 855 (1 407) 3 184Underlying EBIT (493) (618) (793) (651) 688 1 110 965 588 1 448 (2 555) 3 351Net income (loss) (280) 282 1 001 (587) 924 598 (63) 658 5 154 416 2 118Underlying net income (loss) (480) (572) (1 222) (791) 401 530 545 376 1 244 (3 066) 1 852Earnings per share (0.27) 0.17 0.79 (0.45) 0.68 0.40 (0.07) 0.39 2.89 0.24 1.33Underlying earnings per share (0.43) (0.51) (0.96) (0.61) 0.27 0.34 0.33 0.21 0.65 (2.50) 1.14(117)
  • 118. Balance sheets March 31; December 30, September 30, June 30, March 31,NOK million 2011 2010 2010 2010 2010Cash and cash equivalents 3 698 10 929 8 658 2 192 2 502Short-term investments 1 319 1 321 1 316 1 311 1 554Receivables and other current assets 20 440 13 597 15 939 17 338 15 576Inventories 13 827 10 971 10 431 10 273 9 678Property, plant and equipment 69 042 24 849 24 842 25 758 25 499Other non-current assets 26 732 27 122 26 036 26 566 25 109Total assets 135 060 88 788 87 222 83 439 79 919Bank-loans and other interest-bearing short-term debt 2 482 940 974 1 480 972Other current liabilities 17 058 14 970 14 077 14 909 13 551Long-term debt 4 539 328 123 2 142 2 574Other long-term liabilities 16 321 13 925 14 280 14 429 14 430Deferred tax liabilities 6 692 1 183 804 803 816Equity attributable to Hydro shareholders 79 719 56 418 55 973 48 624 46 458Minority interest 8 250 1 025 991 1 053 1 118Total liabilities and equity 135 060 88 788 87 222 83 439 79 919(118)
  • 119. Operational data Q1 Q2 Q3 Q4 Q1 YearPro forma Bauxite & Alumina 2010 2010 2010 2010 2011 2010Alumina production (kmt) 1) 1 394 1 521 1 442 1 448 1 336 5 805Sourced alumina (kmt) 539 557 488 556 453 2 141Total alumina sales (kmt) 2) 1 843 2 056 2 023 2 018 1 762 7 941Realized alumina price (USD) 3) 293 299 277 311 329 295Apparent alumina cash cost (USD) 4) 231 223 247 251 266 238Bauxite production (kmt) 5) 1 745 1 845 1 918 2 017 1 720 7 524Sourced bauxite (kmt) 6) 1 544 2 081 2 064 2 143 1 711 7 832Bauxite sales (kmt) 7) 885 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year YearBauxite & Alumina 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010Alumina production (1 000 mt) 578 494 514 504 474 518 491 493 773 2 091 1 9761) Including Alunorte on a 100 percent basis.2) Including own production and third party contracts.3) Weighted average of own production and third party contracts.4) Apparent integrated alumina cash production cost based on cost of produced alumina and cost of alumina sourced on contracts. Paragominas bauxite included at cost and MRN bauxite included at contract price.5) Paragominas on wet basis(100 percent).6) 40 percent MRN offtake from Vale and 5 percent Hydro share on wet basis.7) Dry basis.(119)
  • 120. Operational data Q1 Q2 Q3 Q4 Q1 YearPro forma Primary Metal 2010 2010 2010 2010 2011 2010Realized aluminium price LME, USD/mt 2 039 2 200 2 137 2 131 2 366 2 128Realized aluminium price LME, NOK/mt 11 826 13 192 13 226 12 739 13 664 12 758Realized premium above LME, USD/mt 255 266 287 284 347 273Realized premium above LME, NOK/mt 1 474 1 605 1 781 1 705 2 004 1 641Realized NOK/USD exchange rate 5.80 5.85 6.19 5.98 5.77 5.96Primary aluminium production, kmt 447 475 469 475 490 1 867Casthouse production, kmt 591 625 627 627 634 2 470Casthouse sales, kmt 601 631 596 624 627 2 453 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year YearPrimary Metal 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010Realized premium above LME (USD/mt) 1) 230 230 260 272 294 307 329 340 376 246 317Realized premium above LME (NOK/mt) 1) 1 545 1 505 1 618 1 576 1 699 1 856 2 041 2 040 2 169 1 559 1 906Primary aluminium production (1 000 mt) 397 338 330 332 339 362 355 360 415 1 396 1 415Casthouse production (1 000 mt) 433 411 466 473 484 512 513 512 560 1 782 2 022Casthouse sales (1 000 mt) 440 461 476 450 495 521 499 494 568 1 822 2008LME realized (USD/mt) including hedges 1 996 1 468 1 523 1 804 1 997 2 200 2 179 2 074 2 358 1 698 2 113NOK/USD realized including hedges 2) 6.71 6.54 6.22 5.80 5.78 6.05 6.20 6.00 5.77 6.34 6.00LME realized (NOK/mt) including hedges 13 393 9 598 9 480 10 452 11 542 13 302 13 503 12 436 13 607 10 764 12 674LME realized (USD/mt) excluding hedges 1 996 1 457 1 511 1 797 1 986 2 194 2 171 2 065 2 351 1 691 2 104NOK/USD realized excluding hedges 2) 6.71 6.54 6.22 5.80 5.78 6.05 6.20 6.00 5.77 6.34 6.00LME realized (NOK/mt) excluding hedges 13 393 9 526 9 405 10 411 11 483 13 265 13 453 12 381 13 568 10 717 12 6231) Average realized premium above LME for total metal products sold from Primary Metal.2) Difference between realized exchange rate and spot rate at the transaction date is reported as currency gain/loss and not included in EBITDA (except currency hedges where hedge accounting is applied).(120)
  • 121. 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-party metal products sales (1 000 mt) 24 20 10 9 19 31 38 32 38 63 121 Total metal products sales excl. ingot trading (1 000 mt) 575 614 618 605 670 733 695 688 772 2 414 2 787 Hereof external sales excl. ingot trading (1 000 mt) 323 375 395 375 414 457 429 417 467 1 468 1 717 External revenue (NOK million) 5 329 6 730 5 953 5 638 6 536 7 040 6 511 7 003 7 520 23 650 27 090 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year Rolled Products 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Rolled Products external shipments (1 000 mt) 191 187 205 211 231 242 239 234 245 794 945 Rolled Products – Underlying EBIT per tonne, NOK (279) (152) 248 270 966 1 275 952 450 946 33 914 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year Extruded Products 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Extruded external shipments (1 000 mt) 2) 113 120 128 126 128 141 134 127 136 487 529 Extruded – underlying EBIT per tonne, NOK (1 805) (217) 742 540 914 1 430 764 188 772 (138) 839 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Year Year Energy 2009 2009 2009 2009 2010 2010 2010 2010 2011 2009 2010 Power production, GWh 2 477 1 809 1 682 1 929 2 781 1 621 1 479 2 263 2 308 7 897 8 144 Net spot sales, GWh 838 413 480 486 1 323 144 86 827 955 2 217 2 380 Nordic spot electricity price, NOK/MWh 344.0 301.0 274.0 307.0 485.0 355.0 365.0 498.0 518.0 306.0 426.0 Southern Norway spot electricity price (NO2) 3), NOK/MWh 341.0 297.0 249.0 296.0 430.0 368.0 363.0 469.0 520.0 295.0 407.01) Production in Metal Markets soft alloy remelt casthouses. Hannover casthouse production excluded from Q1 2011 (2010 production volumes are restated).2) Including Structures until divested end 20093) Southern Norway spot price NO2 for 2010 and 2011 figures and NO1 for 2009 figures due to the establishment of new price areas(121)
  • 122. 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.alyanakian.kristiansen@hydro.comNext investor event: Q2 results, July 26, 2011For more information see: www.hydro.com/ir(122)
  • 123. www.hydro.com

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