Q4 highlights Record high quarterly underlying EBIT of NOK 2 886 million Proposed dividend for 2014 of NOK 1 per share Revised dividend policy: 40% of net income over the cycle Higher realized all-in* metal and alumina prices,…
Multi-speed global economy Encouraging macro development in the US, softer in Eurozone Weaker German industrial production Eurozone Quantitative easing measures from the ECB starting in March Weaker, but still positive demand…
Major currency movements affecting industry costs USD appreciation against currencies where Falling oil prices have limited effect Hydro has significant operations* on smelting costs USD appreciation end January-14 to end January-15…
Physical market deficit continues World ex-China Demand and production (quarterly annualized) Production less demand, (quarterly annualized)* 1 000 mt primary aluminium 1 000 mt primary aluminium 30 000 4 000 3 000 25 000 2 000 1…
Standard ingot premiums continued to rise in Q4 Mixed regional developments so far in 2015 Regional standard ingot premiums Mixed regional developments USD per mt 600 US Mid-West premium strong at 535 USD/mt 500 EU premium softening 30…
Stronger all-in ingot price in NOK 3-month LME price traded between USD/mt NOK/mt 3 100 18 000 1 854 and 2 070 USD/mt during Q4 2 900 17 000 Recent LME decrease offset by 2 700 weakening NOK 16 000 2 500 Realized LME price for…
Reported inventories world ex-China decline further Increase in inventory days reflects seasonally lower demand World ex-China reported primary aluminium inventories 1 000 mt Days 8 000 120 7 000 100 6 000 80 5 000 4 000 60 3 000…
China: Higher raw material imports and semis exports Lower 2014 bauxite imports partly offset by alumina imports Annualized aluminium equivalents*, million mt 2011 2012 2013 2014 Bauxite and alumina 25 Significant drop in bauxite…
Chinese semis exports picking up amid increased metal advantage Comp. adv Semis exports (USD/mt) (monthly, kmt) 1 000 500 450 800 400 Improved comp. adv. China 600 350 300 400 250 200 200 0 150 100 ( 200) 50 (…
Lower cost and higher margins in Bauxite & Alumina USD 23 per mt reduction in implied Implied alumina cost and margin, USD/mt 1) alumina cost from third quarter 475 Improved energy efficiency and fixed cost 23 425 reductions 15…
Improving margins in Primary Metal Implied primary cost and margin, USD/mt 1) Implied cost on a downward trend Improvement efforts 300 Positive exchange rate development 400 1 775 550 Increasing premiums 1 500 1 300 EBITDA…
Investment decision made for Karmy technology pilot Demonstrating the worlds most energy and climate-efficient aluminium production Annual production 75 000 tonnes First metal in 2017 at the earliest Estimated total project cost NOK…
Lower shipments in Rolled Products Rolled Products sales by segment Q4 2014 vs. Q3 2014 Q4 2014 vs. Q4 2013 0% (5%) (8%) (9%) (9%) (13%) (13%) (15%) Packaging Litho, Auto & General Total Rolled Packaging Litho, Auto &…
Seasonally weaker demand for extruded products Seasonally weaker demand 10% decrease in North America 6% decrease in Europe Demand increased compared to same quarter last year 9% in North America due to increased building…
Sapa restructuring program ahead of plan Targeting synergies of around NOK 1 billion by end 2016 About half realized in underlying 2014 results Majority of restructuring activities taking place in Europe 20 major restructuring…
Energy: High inflow and volatile prices Market price Southwestern Norway (NO2) Water reservoir levels Southwestern Norway (NO2) NOK/MWh Percent 600 100 500 80 400 60 300 40 200 MIN NO2 (2002-2013) MAX NO2 (2002-2013) 2013 2013…
Proposed 2014 dividend NOK 1 per share Dividend policy: 40% of net income over the cycle Revised dividend policy reflecting commitment to return cash to shareholders New policy and increased dividend level in line with: Solid…
High-level quarterly result development NOK billion 0,2 (0.2) 1,3 2,9 1,5 0.1 0,5 Underlying EBIT Q4 Underlying EBIT Q3 Energy volume and Realized LME, Bauxite & Alumina Eliminations and Underlying EBIT Q4 2013 2014…
Higher realized all-in metal price drives Qatalum earnings Q4 Q3 Q4 Key figures Qatalum (50%) 2014 2014 2013 Revenue, NOK million 1 510 1 207 1 072 Underlying EBITDA, NOK million 614 446 504 Underlying EBIT, NOK million 371 231 237…
Metal Markets Q4 Q3 Q4 Key figures 2014 2014 2013 Remelt production, kmt 130 128 123 Metal products sales, kmt* 645 674 648 Underlying EBITDA, NOK million 243 192 214 Underlying EBIT excl currency and inventory 106 136 144…
Rolled Products Q4 Q3 Q4 Key figures 2014 2014 2013 External sales volumes, kmt 213 244 226 Underlying EBITDA, NOK million 280 417 284 Underlying EBIT, NOK million 96 243 100 Underlying EBIT Q4 results NOK million Seasonally…
Energy Q4 Q3 Q4 Key figures 2014 2014 2013 Power production, GWh 2 823 2 170 2 411 Net spot sales, GWh 1 339 873 1 089 Southwest Norway spot price (NO2), 248 247 287 NOK/MWh Underlying EBITDA, NOK million 402 275 420 Underlying…
Sapa joint venture Lower results compared to previous Key figures Sapa (50%) Q4 2014 Q3 2014 Q4 2013 quarter, mainly due to lower seasonal Revenue, NOK million 5 945 5 802 5 066 demand Improved results compared to same…
Other and Eliminations Q4 Q3 Q4 Other and Eliminations 2014 2014 2013 Sapa JV (22) 55 (140) Other (118) (128) (134) Eliminations (168) (276) (31) Other and Eliminations (308) (349) (306) (32)
Net cash(debt) development Q4 2014 NOK billion Net cash flow from operations NOK 4.4 billion 0.2 (0.8) (1.6) (0.1) 4.2 (2.1) End Q3-2014 Underlying Operating Investments Currency End Q4-2014 EBITDA capital and…
Net cash(debt) development 2014 NOK billion Net cash flow from operations NOK 5.9 billion (2.2) (2.2) 10.3 (3.0) (1.5) 0.7 (2.1) (0.1) End Q4-2013 Underlying Operating Tax and other Investments Dividends Currency End…
Adjusted net debt development Q4 2014 Dec 31 Sep 30 Jun 30 NOK billion 2014 2014 2014 Cash and cash equivalents 9.3 6.0 6.6 Short-term investments 1.8 1.7 1.8 Short-term debt (6.0) (5.0) (6.1) Long-term debt (5.1) (4.8) (4.1)…
2014 Tightening physical markets Stable and robust Brazilian operations Significant contributions from improvement programs 2015 Continuing operational and commercial improvement drive High-grading and selective growth to improve…
Market 02 (37)
Aluminium is the metal of the future Lightweight Corrosion resistant Excellent conductivity 1/3 density of steel Oxide layer Thermal electrical Recyclability Formability Alloying technology 5% of original energy Extrusion,…
Aluminium demand accelerating in response to global needs Strong demand drivers in key aluminium segments Growth in automotive vehicle production Aluminium content in cars increasing Rising primary aluminium demand Transport Growth…
Broad-based aluminium demand growth across segments and regions Global semis 2014 demand 74.9 million tonnes Global aluminium semis demand, per segment Global aluminium semis demand, per region Million tonnes (2014) Million tonnes…
Infinite ideas in aluminium More and more sectors discover new areas for aluminium applications Lightweight, non-corrosive Zero-emission electrical car ferry in 100% aluminium Floating aluminium bridge with a submerged offshore…
Transport drives global flat rolled product growth of 5% Total FRP 2014 consumption around 23 million tonnes Global FRP consumption by end-use 2014 CAGR 2014-2018, % Transport 11% 10 % 14 % Electrical 6% 9% 4% Construction 6% 12…
Automotive demand growth outperforms all other segments 40 years of uninterrupted growth accelerating from 2015 to 2025 Aluminium content pounds per light vehicle Global Body-in-White demand 000 mt 600 DUCKER WORLDWIDE 500 In 2015,…
Aluminium a perfect fit for next-generation automotive Lighter weight means lower fuel emissions Tightening fuel economy regulations 10% reduction in vehicle weight gives car manufacturers a 5-7% fuel saving Land Rover Sport 2010…
Higher raw material imports and semis exports in 2014 China remains balanced on primary metal Annualized aluminium equivalents*, million mt 2006 2007 2008 2009 2010 2011 2012 2013 2014 20 to China 15 Import 10 5 0…
Large and concentrated bauxite resources But many challenges for future developments Billion mt Guinea 41.0 China 4.1 2.9 India Jamaica 6.2 3.0 1.1 0.5 1.0 Venezuela Vietnam 1.8 0.3 4.7 Indonesia 0.5 2.0 2.0…
Alumina market is consolidating Net long equity alumina position based on 2014 production, million tonnes Alcoa 4.3 Alcoa/AWAC 8.3 Vale 3.0 BHP Billiton 3.0 Glencore 2.4 Rio Tinto Alcan* 1.9 BHP Billiton 1.9 Hydro 1.8 Kaiser 1.0…
Business overview 03 (48)
Hydro - Group (49)
Hydro: a resource rich global aluminium company Based in Norway, involved Hydro underlying EBIT quarterly, NOK million in activities in more than 50 countries (2 555) 3 551 5 982 1 297 2 725 5 692 13 000 employees 2 700 Operating…
Strong positions across aluminium value chain Raw materials Primary aluminium production, Aluminium in products processing and energy marketing and recycling Bauxite Rolled Sapa JV (50%) Energy Primary Metal Metal Markets &…
Hydro - a first tier aluminium company Equity production in 2014 in aluminium equivalents ex-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 Rio Tinto Alcan* UC Rusal…
Hydros path towards global leadership Curtailing 26% of USD 300 Climb From B to A JV-program primary metal capacity program 2009 2010 CCIP 1 2011 2012 CCIP 2 2013 Starting up Acquiring bauxite Establishing Qatalum and…
Hydros aspiration for higher value creation Further strengthen Turn leading HSE/CSR Continue improvements relative industry position position into competitive drive Enhance market advantage Capture commercial positions and…
Better: Hydro improvement drive continues at full pace Energy Aspiration Sapa JV Total contribution from Hydros improvement programs (excl. Sapa) JV program From B to A 2011*-2014 2015-2016** Climb BNOK 3.7 BNOK 1.5 USD 300…
Bigger: A solid platform for building an even stronger Hydro Bauxite & Alumina Energy Primary Aluminium Rolled Products Move beyond nameplate Mature captive growth Enhance position in Expand automotive capacity opportunities…
Greener: Hydro aims to be climate neutral by 2020 Energy and Electrolysis technology pilot primary production Developing the worlds most energy Reduce emissions, efficient electrolysis cells with the increase efficiency most…
Safe and responsible operations is a top priority TRI Rate 10.3 7.0 6.0 5.4 4.0 4.1 3.9 3.7 3.8 3.4 3.4 3.2 2.9 2002 2004 2006 2008 2010 2012 2014 (58)
Attractive Improvement positions culture and Financial Hydro throughout the technological strength value chain leadership (59)
Strengthening the competitiveness of Bauxite & Alumina From B to A Alunorte Increase productivity and rightsize organization Stabilize performance at nameplate capacity Improve logistics efficiency Paragominas Increase productivity…
Paragominas One of the worlds largest bauxite mines 2014 production: 9.5 million mt Target to deliver production increases and stabilize Possible expansion: up to 15 million mt Current reserve life: 30 years 300 million mt…
Bauxite operational mining costs in Paragominas Energy cost - Power and fuel Paragominas bauxite mining costs 2014 Labor cost 9% Influenced by Brazilian wage level 26% Productivity improvements 20% Maintenance and consumables…
Alunorte Worlds largest alumina refinery 2014 production: 5.9 million mt Targeting stable production above 6 million tonnes World-class conversion cost position Modern technology Bauxite supplied from Paragominas and MRN (65)
Favorable integrated alumina cash cost position Implied alumina cash cost position 2014 Implied alumina cash cost position 2014 USD 250 per mt USD 250 per mt Alunorte, Paragominas and sourced alumina Bauxite 6% Internal bauxite…
External alumina sourcing 2.0 million mt of external alumina sourcing in 2014 Long term off-take agreement with Rio Tinto 900 000 mt annually from Yarwun Short- and medium term contracts To balance and optimize position…
Alumina pricing shifting from LME-link to market fundamentals Index spot price exposure Future pricing should reflect fundamentals 100% of bauxite and alumina value chain New norm for the industry Index pricing and short to medium-term…
Delivering on ambitious USD 300 improvement program Total annual improvement effect of NOK 1.5 billion Improvement categories Improvements in USD per mt* Operational improvements 300 Improved current efficiency Reduced power…
Primary Metal joint ventures improvement program USD 180 per mt improvements by end-2016, corresponding to NOK 1.2billion Improvement categories Improvements in USD per mt* 180 160 Fixed cost reductions 140 and lean operations…
Improvement drive yields results in primary production Underlying EBITDA per mt in USD for respective primary aluminium divisions 1H 2011 1H 2012 1H 2013 1H 2014 700 700 700 700 500 500 500 500 300 300 300 300 100 100…
Develop technology to fulfill ambitions HAL 300 HAL4e R&D portfolio Operating for several years in Benchmark technology HAL4e optimization to be Sunndal process parameters and ready for next project environment Ramping up in Qatar…
Metal Markets (75)
Preferred partner in casthouse products Capitalizing on value-added casthouse products portfolio Extrusion ingot Extensive multi-sourcing system 1.3 million mt including fully- and part-owned primary casthouses and stand- alone…
Metal Markets earnings drivers Remelters Underlying EBIT excluding currency effects and Revenue impact volume and product ingot stock valuation effect, NOK million premiums above LME 250 Cost impact Scrap and standard ingot…
Rolled Products (78)
No. 1 flat rolled products producer in Europe External sales in tonnages 2014 World leader in high-end products foil and litho Foil 12 % Alunorf (JV 50%) worlds largest rolling mill Litho 19 % Grevenbroich plant worlds largest…
Attractive market position and customers More than 50% of products with global reach Our products Our customers Our position Litho World market leader Global reach Foil Can Leading position in Europe Auto Regional…
Hydro inside Hydro supplies premium European carmakers with aluminium Lightweight construction is a core element of Jaguars DNA and Jaguar is at the cutting-edge of aluminium technology in the automotive industry BMW 7 series…
Rolled Products earnings drivers Underlying EBIT per tonne, NOK 1 400 Contract structure 1 200 Margin business based on conversion price LME element passed on to customers 1 000 Range from spot contracts to multi-year contracts…
Sapa joint venture (83)
Global leader in extruded products established Sapa, 50/50 joint venture, between Hydro and Orkla Positioned for restructuring and value creation Established September 1, 2013 Hydro has agreed to supply the new company with…
Sapa global leader in extruded products Heavyweight company lightweight material External sales of 1.4 million tonnes (2014) Precision Building Tubing System 7% 6% Extrusions 50/50 joint venture between Hydro and Orkla, Asia…
Energy (86)
Power production increased to 10 TWh Power production capacity (TWh), per region and reversion year Telemark Power producing assets and ongoing projects Normal 3.1 0.5 Maintain cost control in operations and projects production…
Hydros energy map Energy consumption in alumina refineries, smelters and rolling mills Europe Power 16.7 TWh North America Natural gas 3.3 TWh Power 1.7 TWh Middle East Power 4.6 TWh South America Power 4.6 TWh…
Reversion regime secures Hydros 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…
Energy earnings drivers Underlying EBIT* and spot price Production and market prices strongly NOK million NOK/MWh 2000 500 linked to hydrological conditions 1500 400 Relatively weak annual EBIT contribution 300 1000 Lower spot…
Hydros value proposition Improve relative industry position Capitalize on raw material positions Maintain financial strength and flexibility Ensure competitive shareholder return (91)
Additional information 04 (92)
Shareholder and financial policy Hydro aims to give its shareholders competitive returns compared to alternative investments in peers Maintained dividend policy Ordinary dividend: 40% of net income over the cycle Average ordinary…
Hedging policy Bauxite & Alumina, Primary Metal Remain primarily exposed to LME prices Operational LME hedging One-month forward sales Currency exposure, mainly USD, NOK and BRL Policy of maintaining long-term debt in USD BRL…
Capital allocation mainly upstream NOK billion Debt-financed investments Qatalum Investments Qatalum Sustaining capex NOK 3.5 billion 10.2 Growth capex annually Sustaining capex Minor growth projects planned for 2014 85% of…
Price and currency sensitivities Commodity price sensitivity +10%* Currency sensitivities +10%* Hydro Group: Sustainable effect: NOK NOK million EBIT million USD BRL EUR EBIT 3 230 (820) (350) Aluminium 3 200 One-off reevaluation…
Bauxite & Alumina sensitivities Sensitivities on underlying EBIT if +10% in price Revenue impact NOK million 14.3% of 3-month LME price per tonne alumina One month lag 840 Realized alumina price lags PAX by one month Cost impact…
Primary Metal sensitivities Sensitivities on underlying EBIT if +10% in price Revenue impact NOK million Realized price lags LME spot by 1-2 months Realized premium lags market premium by 2-4 months 2170 Cost impact Alumina 1.9…
Depreciation by currency and business area Total 2014 depreciation 4,6 BNOK Depreciation currency exposure by business area Depreciation by business area* 4% 1% NOK & Percent USD EUR BRL Others 15% Bauxite & Alumina 100% 39%…
Items excluded from underlying results - 2014 NOK million (+=loss/()=gain) Q1 2014 Q2 2014 Q3 2014 Q4 2014 2014 Unrealized derivative effects on LME related contracts Bauxite & Alumina (4) (1) (2) (10) (16) Total impact Bauxite &…
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