Hydro Update

Hydro Update
Pål Kildemo
StorAksjeKvelden i Grenland
September 2014
A highly attractive asset base
(2)
High-quality bauxite and alumina
Captive hydropower
Competitive smelter portfolio
World-class Qatalum
European leader in rolling
A global extrusion champion
Hydro - a first tier aluminium company
Equity production in 2013 in aluminium equivalents excl. China, thousand mt
9 000
Alumina
Aluminium
8 000
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
Alcoa/AWAC
Source: CRU, Hydro
(3)
Rio Tinto Alcan*
UC Rusal
BHP Billiton
Norsk Hydro
Glencore/Century
Hindalco
Vedanta
Emirates Global
Aluminium
Aluminium Bahrain
Aluminium is the metal of the future
• Lightweight
− 1/3 density of steel
• Recyclability
− 5% of original energy
consumption
• Corrosion resistant
− Oxide layer
• Formability
− Extrusion, rolling, casting
− Low melting point vs. steel
• Excellent conductivity
− Thermal – electrical
• Alloying technology
− Gives wide range of physical properties
− 75% of all aluminium
produced still in use
Properties lead
to increased
market share
(4)
• Aluminium intensive urbanization and infrastructure
• Climate challenge – aluminium as part of the solution
• Recyclability more important with high energy prices
Hydro
(5)
Market update
A culture of
improvements
Strategy
Hydro
(6)
Market update
A culture of
improvements
Strategy
Demand to exceed production in 2014
World outside China
World outside China (quarterly annualized)
Production less demand, (quarterly annualized)*
1 000 mt
30 000
1 000 mt
4 000
3 000
25 000
2 000
1 000
20 000
0
(1 000)
15 000
Jan-08
Dec-08
Nov-09
Oct-10
Demand
Sep-11
Aug-12
Jul-13
Jun-14
Dec-08
Nov-09
Production
• Transport sector drives growth in US and Europe
• 2014 aluminium demand grew 4 % year to date in world outside China
• New curtailments and delays partly offsetting ramp-ups
Source: CRU/Hydro
* 12 month rolling average
(7)
Oct-10
Sep-11
Aug-12
Jul-13
Jun-14
Tighter physical market driving all-in aluminium prices
Regional standard ingot premiums
“All-in” aluminium price rising
USD per mt
USD per mt
500
2 900
450
2 700
400
2 500
350
2 300
300
2 100
250
200
1 900
150
1 700
100
1 500
50
1 300
Jan-11
0
Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11
US Mid West
Source: Metal Bulletin, MW/MJP: Platts
(8)
Japan
Feb-12 Sep-12 Apr-13 Nov-13 Jun-14
Europe (duty-paid)
Mar-12
May-13
Jul-14
LME cash
LME cash + US Midwest
LME cash + Europe duty paid
LME cash + Japan
Source: Metal Bulletin, MW/MJP: Platts, Reuters Ecowin
Indonesia bauxite ban remains in place
Annualized aluminium equivalents*, million mt
2011
2013
2012
China import
25
Average Chinese import price
2014
USD per mt
65
60
20
15
55
10
50
China export
5
45
0
( 5)
40
( 10)
Bauxite
Fabricated
Alumina
Semis
Scrap
35
Jan-10
Feb-11
Total aluminium imports
Source: CRU/Antaike/Hydro
* Bauxite/alumina to aluminium conversion factor: 5.0/1.925
(9)
Primary aluminium
Source: Chinese import statistics
Mar-12
Apr-13
May-14
Substitution contributing to growth in aluminium demand
Aluminium sheet demand for automotive applications robust and fast growing
Body in white demand, thousand tonnes
CAGR ’12-’20
(Dec 2013)
CAGR ’12-’20
(May 2014)
24%
29%
2 219
1 552 35%
45%
13%
13%
45%
45%
872
285
2012
2016
China
Source: IHS, Hydro analysis
(10)
2020
Europe
North America
2020
«Stronger, tougher, and more fuel efficient”
The automotive industry embraces aluminium
“At Jaguar Land Rover
we are world leaders in the area of
aluminium body construction for cars.
The use of aluminium in an automotive
application brings many benefits
in terms of weight savings,
improved fuel efficiency,
lower emissions, increased
crash safety and even better
vehicle dynamics”
(11)
“ALUMINUM BODY STRUCTURE:
STRONG, RIGID, AND LIGHT
The Model S body is a state-of-the-art,
aluminum-intensive design.
Weight-saving benefits
make aluminum
a natural choice”
Aluminium is stronger, tougher,
and more fuel efficient than steel
Ford CEO Alan Mulally
“The F-150 establishes aluminum as
a primary choice for mainstream
auto use”
Automotive News
Hydro
(12)
Market update
A culture of
improvements
Strategy
Improvements throughout the value chain
‘Energy
Aspiration’
Energy
Sapa JV
Bauxite
Extrusion
‘Climb’
Rolling
Remelting
‘CCIP’
Alumina
Primary metal
‘USD 300
program’
Casting
‘JV program’
(13)
‘From B to A’
World-class asset base, focus on operational improvements
Alunorte production gradually increases
“From B to A” improvement program
Alumina trending sideways
production, annualized mmt
Platts alumina index (PAX)
USD/t
6.1
5.8
5.8
5.5
% of LME
430
20%
410
19%
390
18%
370
5.2
17%
5.0
350
16%
330
15%
NOK 1 billion by end-2015
20% manning reduction
310
14%
290
270
Alumina
13%
% of LME
250
Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14
(14)
Aug-10
12%
Jul-11
Jun-12
May-13
Apr-14
Primary Metal operational improvements continue
Implied primary cost and margin, USD/mt 1)
• Primary cost continues downward trend
− Improvement efforts with bottom-line effect
− Favorable exchange rate development
− Increasing premiums
475 325
425
375
350
1 825
1 600
1 400
• USD 180 JV program on track, to be
concluded by end-2016
− Positive contribution from continued reduced
H1 2012
2 161
H1 2013
1 986
cost at Qatalum
H1 2014
1 755
LME2)
Implied EBITDA cost per mt
EBITDA margin per mt
1) Realized aluminium price minus EBITDA margin per mt primary aluminium. Includes net
earnings from primary casthouses.
2) Realized LME
(15)
Primary Metal: A strong improvement track record
Underlying EBITDA per mt in USD for respective primary aluminium divisions
1H 2011
2H 2013
700
700
500
500
300
300
100
100
-100
-100
All figures based on public accounting data, not verified by Hydro. Data not adjusted for different accounting principles and non-specified underlying items. Hydro makes no representation as to the accuracy or completeness of such
information. The analyses are based on assumptions subject to uncertainty and therefore intended only for general comparisons across companies and should not be used to support any individual investment decision. All results are
provided for informational purposes only. Hydro figures includes Primary Metal, Metal Markets and attributable share of EBITDA and production in Qatalum.
Source: Company filings
(16)
Rolled Products: improvements and portfolio high-grading
‘Climb’
New automotive line at Grevenbroich, Germany
New, integrated UBC line at Neuss, Germany
(17)
Hydro
(18)
Market update
A culture of
improvements
Strategy
Hydro’s main priorities
Bauxite & Alumina
Energy
Primary Metal
Rolled Products
Deliver on productivity goals,
realize improvement targets
Maximize asset potential,
strengthen global support function
Continue improvement drive,
capitalize on technological edge
Continue to high-grade portfolio,
develop step-change innovations
(19)
Hydro’s value
proposition
•
•
•
•
•
Improve relative industry position
Capitalize on raw material positions
Strengthen innovative and commercial edge
Maintain financial strength and flexibility
Ensure competitive shareholder return
(20)
(21)

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