Norsk Hydro. Svein Richard Brandtzæg Global Metals, Mining & Steel Conference - PDF

Norsk Hydro Svein Richard Brandtzæg 2016 Global Metals, Mining & Steel Conference Cautionary note in relation to certain forward-looking statements Certain statements included within this announcement

Please download to get full document.

View again

of 25
All materials on our website are shared by users. If you have any questions about copyright issues, please report us to resolve them. We are always happy to assist you.


Publish on:

Views: 14 | Pages: 25

Extension: PDF | Download: 0

Norsk Hydro Svein Richard Brandtzæg 2016 Global Metals, Mining & Steel Conference Cautionary note in relation to certain forward-looking statements 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, investments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (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, planned, proposed, intended or similar statements. Although we believe that the expectations reflected in such forward-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 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 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 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 key markets and competition; and legislative, regulatory and political factors. 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, future events or otherwise. 2 Norsk Hydro Well positioned in challenging markets 3 Leading performance compared to aluminium peers First-quartile aluminium producer, 2016 Smelter BOC curve by company USD/t Strongest balance sheet, Total Debt/Total Equity, % 275 % % 25 % 13 % First quartile alumina position, 2016 Alumina BOC curve by company USD/t Highest underlying payout ratio and dividend yield % Dividend yield, % % 11 % 0 % 0 % Source: ThomsonOne, CRU, company filings Total debt/total Equity= (Long Term Debt + Short Term Debt & Current Portion of Long Term Debt) /Equity attributable to shareholders Dividend yield = Dividend Per Share / Market Price at Year End Underlying dividend payout ratio = Dividend Per Share / Underlying Consolidated Earnings Per share Peers Hydro Aluminium peers included: Alcoa, Century, Chalco, Rusal A resource-rich, global aluminium company Robust positions along the entire value chain Primary aluminium 2.1 million tonnes Long position in bauxite and alumina Extruded products 30 %*** market share Norway s 2 nd largest hydropower producer World s Largest* hot-rolling mill Europe s #1 aluminium company A complete aluminium company Primary aluminium production in Norway, Germany, Qatar, Slovakia, Brazil, Canada, Australia 10 TWh captive hydropower production European #1 in rolled products 50% partner in Sapa, world leader in aluminium extruded profiles Remelting in the US, European recycling network Technology and R&D centers Bauxite & Alumina Primary aluminium Rolling mills Remelters Two High quality bauxite mines World s largest alumina refinery Top 10 smelter Market Leader PFA** * Outside China ** Primary Foundry Alloys *** Sapa JV 5 Building competitiveness through HSE, CSR and compliance Safety performance (TRI) at industry benchmark 3.6/2.0* Own employees/ Contractors Carbon-neutral from a life-cycle perspective On track High focus on compliant behavior and practices HSE, CSR and compliance always first on the Hydro priority list and part of the company s license to operate Strong correlation between financial and non-financial performance Clear lines of responsibility throughout the organization and in all business areas on HSE and CSR Leading practice on compliance culture * TRI rate YTD end-mar-16 total recordable incidents per million hours worked 6 Uncertain markets Solid demand growth 7 Strong long-term growth drivers across all segments Recycling taking a bigger share Strong demand drivers in key aluminium segments Semis demand CAGR Transport Construction Growth in automotive vehicle production Aluminium content in cars increasing Growth in other transport modes, e.g. railway Urbanization Housing market recovery in mature regions Energy neutral buildings 5 6 % 3 4 % Global semis demand: 4 5 % Primary 3 4 % Electrical Machinery & equipment Urbanization Copper substitution Improving industrial sentiment in mature regions Manufacturing activity and industrial growth in emerging countries 5 6 % 4 5 % Recycling 5 6 % Packaging Urbanization Environmentally-friendly solutions 3 4 % Source: CRU, Hydro Analysis 8 Environmental regulations accelerate substitution across segments Steel substitution in automotive Copper substituion in HVAC&R, cabling and transmission lines Key enabler for energy-efficient buildings 13% BiW CAGR ~75% growth in x HVAC&R* market growth potential from 2015 levels 40% of energy worldwide consumed by buildings Lighter vehicles in aluminium make a big impact on the climate challenge: US CAFE regulations EU CO2 emission reduction targets Aluminium weight and price advantages vs copper on a volume conductivity equivalent basis Flexibility and formability of aluminium enable energy-efficient building solutions: US Building energy use laws EU 2012 Energy efficiency directive * Heat, ventilation, air conditioning & refrigeration (HVAC&R) Source: Ducker Europe, CRU; Hydro analysis, Sapa analysis 9 Undersupply Oversupply Aluminium market expected to be largely balanced in 2016 Higher risk of capacity restarts in China Supply development 2016 Market balance 2016 Mill tonnes Estimated cash negative in ) 15 % 20 % Milll tonnes mill tonnes World ex-china China ~2.4 ~1.2 ( ) mill tonnes (0.5) 0.5 mill tonnes ~0.8 ~1.6 Potential additions Net effect of curtailments & confirmed restarts World ex-china China Global Source: CRU, Hydro Analysis 1) Based on CRU BoC curve 2016 and CRU price assumptions of LME 3m at 1505 USD/t and SHFE at RMB/t (10) SHFE prices increase on tighter market, stable all-in LME prices USD/mt USD/mt USD/mt NOK/mt Feb-14 Jul-14 Dec-14 May-15 Oct-15 Apr-16 Mar jan 12 jun 13 nov 14 apr 16 LME 3m USD SHFE* ex. VAT in USD LME cash LME cash + Europe duty paid LME cash + US Midwest LME Cash + Europe dutypaid NOK (RHS) Source: Metal Bulletin, MW/MJP: Platts, Reuters Ecowin, Hydro analysis * Shanghai Futures Exchange 11 Improved comp. adv. China Shrinking arbitrage amid rising SHFE prices Preliminary exports figures indicate increased exports in March Semis exports (monthly, kmt) Comp. adv. (USD/mt) ( 200) 0 ( 400) jan.07 nov.08 sep.10 jul.12 mai.14 mar.16 Semis exports (Left axis) Chinese competitive adv. downstream* (Right axis) Source: CRU/Ecowin Est. metal cost China versus Europe: LME cash + European duty-paid standard ingot premium China: SHFE cash + avg. local premium + freight export rebates (~13 %) (12) Alumina prices rebound on tightening market balance Bauxite market may be affected by refinery curtailments Platts alumina index (PAX) USD/mt Percent 20% 19% 18% 17% China bauxite imports, volume and price by country USD/tonne CIF % % % PAX % of LME 13% 12% Indonesia Australia India Brazil Guinea Malaysia Bubble size represents volume = ~5 million tonnes Source: Platts, Ecowin, China Customs, CRU 13 Norsk Hydro Strengthening relative industry position with ambitious targets 14 Proven track-record of productivity gains continues Hydro s improvement drive until 2015 Total improvements : BNOK 4.5¹ Hydro s new improvement ambition Total improvements of BNOK 2.9 from Tailor-made ambitions across the value chain Sapa JV Energy Aspiration Better BNOK Better Bauxite & Alumina BNOK 1.0 Better Primary Metal BNOK 1.0 JV program From B to A Climb USD 300 program CCIP II Better Rolled Products BNOK 0.9 1) Includes USD 300 from ) Includes some larger investments of 3.2 billion NOK in : AL3 and UBC in Rolled Products, kt capacity creep in Primary Metal, Alunorte debottlenecking in B&A. 3) Real 2015 terms 15 Structurally improved cost position Productivity gains supported by currency All-in implied primary cost and margin, USD/mt 1) Implied alumina cost and margin, USD/mt 1) 2, , , , Q2 12-Q1 13 Q2 15-Q1 16 All-in 3) 2, LME 4) 2, USD/NOK Q2 12-Q1 13 Q2 15-Q1 16 Price 2) LME% 3) 14.1% 15.8% USD/BRL All-in Implied EBITDA cost per mt LME Implied EBITDA cost per mt All-in EBITDA margin per mt Implied EBITDA cost per mt EBITDA margin per mt 1) Realized all-in aluminium price minus underlying EBITDA margin, including Qatalum, per mt aluminium sold 2) Realized LME aluminium price minus underlying EBITDA margin, including Qatalum, per mt primary aluminium produced 3) Realized LME plus realized premiums, including Qatalum 4) Realized LME, including Qatalum 1) Realized alumina price minus underlying EBITDA for B&A, per mt alumina sales 2) Realized alumina price 3) Realized alumina price as % of three month LME price with one month lag 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15** 2Q15** 3Q15 4Q15 1Q15 Significant operational and commercial improvements in Bauxite & Alumina Annualized bauxite production, million mt Paragominas 9,0 7,1 6,0 8,3 9,1 9,5 9,1 10,2 8,7 9,0 10,9 11,7 10,8 9,9 Sales exposure to index and short term pricing* 100 % 90 % % 100% 90% 80% 70 % 70% 60 % 60% Annualized alumina production, million mt Alunorte 6,1 5,8 5,8 5,9 6,0 5,9 5,8 5,9 5,5 5,2 5,0 6,3 6,1 6,3 50 % 40 % 30 % 20 % 10 % 50% 40% 30% 20% 10% 0 % % Nameplate capacity Internal index External index Index exposure Intenal LME External LME * Rounded figures. Indicating volumes available for index pricing. Includes minority sales priced at % of LME with floor. Based on annual sourced volumes of 2.3 million tonnes (2015 based on 2.7 million tonnes) ** Extended maintenance period in March / April 2015 resulted in lower bauxite production 17 Extending the technology and innovation lead Key to maintain and further improve Hydro s competitive position Step-change Instability Stability Bauxite & Alumina Primary Metal Rolled Products Technology approach Debottlenecking to go beyond nameplate capacity in Paragominas to 11 mill t/y and Alunorte up to 6,6 mill t/y Developing technology for utilization of residual bauxite Enhanced precipitation process control for improved quality and output Testing aluminium production technology with world s lowest energy consumption of KWh/kg Use technology development to create spin-off effects for existing capacity AFM technology to capture high-tech market auto segments in automotive Recycling strategy supported by worldleading sorting technology* Automotive line 3 to lift Body-in-White capacity to 200,000 t/yr** State-of-the-art UBC recycling line Utilize leading technology competence to exceed customer expectations, e.g. step-change innovation in foil (HyFoil) De-bottlecking of Alunorf hot-rolling mill Hydro s technology strategy encompasses entire value chain from bauxite to recycling Gradual approach to ensure full stability at existing level ahead of step-change developments * Acquired WMR Recycling GmbH ** Refers to nominal capacity 18 Taking productivity beyond lean operations with the Karmøy technology pilot With spin-off effects for the entire portfolio Technology pilot with production of mt 48 cells HAL4e technology 12.3 kwh/kg 12 cells HAL4e Ultra kwh/kg Spin-off technology elements for existing portfolio 100 kt contribution to 2025 creep ambition ~NOK 400 million annual EBITDA effect with CRU 2016 assumptions 1) Verifying next-generation aluminium production technology First metal expected in second half 2017 Net capex NOK 2.7 billion Total capex NOK 4.3 billion NOK ~1.6 billion support from Enova 1) Using CRU 2016 assumptions, LME 1 500, Standard ingot EU DDP 130, Extrusion ingot EU 265, NOK/USD 8.53, estimated Hydro fixed costs USD Optimizing product portfolio by expanding in higher-margin segments Pursuing attractive automotive growth opportunity Increasing share of automotive in Rolled Products portfolio 20 % Hydro in car models 14 % 12 % Audi Q7 Peugeot 308 BMW 7 series Porsche Macan Audi A6 New Mercedes C Class T Strong improvement trend in Sapa JV 1 BNOK in restructuring gains and synergies delivered one year ahead of plan Sapa restructuring agenda* Sapa 100% basis MNOK 1,407.0 Sapa results (100 % basis), MNOK Underlying EBIT Underlying Net income Q2 14-Q1 15 Q2 15-Q1 16 (89) UEBIT 2013 Net FX and metal effects Exits and operational performance** JV synergy program UEBIT 2015 Strong demand in North America, stable in Europe BNOK 1 in synergy gains to be delivered ahead of plan Positive currency effects 21 Managing industry cyclicality through a prudent financial framework Lifting cash flow potential Financial strength and flexibility Disciplined capital allocation Reliable shareholder remuneration policy Effective risk management Cost improvements: 4,5 BNOK * 2,9 BNOK ** Investment grade credit rating: BBB Stable Funds from operations/net adjusted Debt 40% Net adjusted Debt/Equity 55% Long-term sustaining capex BNOK per year. Below depreciation Total capex: 2015 BNOK 5, BNOK 8,1 Revised dividend policy: Current dividend 1 NOK/share 40% payout ratio over the cycle Strong balance sheet Improving relative position Diversified business Includes USD 300 from ** Real 2015 terms 22 Hydro aspiration supported with ambitious mid-term strategic goals Ambitions Improve safety performance, strive for injury free environment Deliver on Better improvement ambition Secure new competitive sourcing contracts in Norway post 2020 Lift Paragominas production Lift Alunorte production Shift alumina sales to PAX-based pricing Extend technology lead with Karmøy technology pilot Target TRI 2 BNOK TWh 11 mill mt/yr 6.6 mill mt/yr 85% PAX* Build decision Timeframe Realize technology-driven smelter capacity creep Lift equity bauxite production Expand BiW capacity Ramp up UBC line to full capacity 200,000 mt/yr 19 mill mt/yr** 200,000 mt/yr*** mt/yr 2025 Long-term Become carbon-neutral from a life-cycle perspective Increase recycling of post-consumed scrap Deliver of reforestation ambition Zero 250,000 mt/yr 1: * Based on sourcing volume of ~ 2.3 million tonnes per annum ** Provided the acquisition of the 40% stake in MRN from Vale *** Refers to nominal capacity 23 Hydro 2016 Well-positioned to create value in challenging markets Strengthening relative industry position through improvement ambitions and R&D lead Securing resources for future decades Re-positioning portfolio towards high-margin markets and advanced customers Financial strength through relative positioning and balanced capital allocation 24 Better Bigger Greener 25
Related Search
We Need Your Support
Thank you for visiting our website and your interest in our free products and services. We are nonprofit website to share and download documents. To the running of this website, we need your help to support us.

Thanks to everyone for your continued support.

No, Thanks