Capital Markets Day 24 Progress in Aluminium Jon-Harald Nilsen, Executive Vice President 24-12-15
Progress in Aluminium Improved financial and operational performance Strong strategic progress upstream and improved cost positions Building competitive strengths downstream 52358_3 12 24 2 Hydro Media
We have delivered on our commitments Return on Capital target achieved one year ahead of plan CROGI 1998 23: Actual prices Percent 12 1 8 Improvement programs delivered 2 1 5 1 Magnesium Date: 24-1-16 Page: 66 All projects as planned Workforce reduction Aluminium Cost reductions 3 CROGI (normalised*) Magnesium Aluminium 21 5% 2 1 5 1 5 6 Divestments 5 1,8 9,3 Q4- Q1- Q2- Q3- Q4- Target Q4- Q1- Q2- Q3- Q4- Target Delivering Run Target on strategic priorities 8,3 8,6 4 22 23 23 23 23 23 22 23 23 Rolled 23 24 products 23 rateshipments 24 in Extrusion shipments in Europe 7,1 New capacity Europe 5,7 Annual change Annual change 2 Restructuring and rationalization costs (NOK million) in percent in percent Realized 8 Total Original Specialised product lines 8 6 estimate 21 22 23 3.6 4 1998 1999 Magnesium 2 21 7 22-123 4 69 743.7 1.3 * With normalised LME-price (1 Aluminium 5 USD/tonnes) and 8 NOK/USD 4,6-3 * 176 476 78 Metal products margins and downstream margins are not normalised, neither metal part Restructuring nor currency and closures 2,8 1,1-4 Workforce and cost reductionsrelative to 21-2,4 * Of which NOK 89 million charged to VAW opening balance -8-4.4 Date: 24-1-16 Page: 64-4 1. Improve global cost position -12 upstream 2. Strengthen leadership in Europe, midstream and downstream Date: 24-1-16 Page: 68 Active portfolio development Strengthened market positions -8-12 -8,9-16 -2-24 2 21 22 23 24E 2 21 22 23 24E Date: 24-1-16 Page: 14 Sources: CRU; AA, EAA. Date: 24-1-16 Page: 73 3. Performance focus and selective growth outside Europe midstream and downstream 4. Performance focus and selective growth in global automotive Date: 24-9-2 Page: 17 52358_3 12 24 3 Hydro Media
Operating income improving NOK million Metals Extrusion and Automotive Rolled Products Other and Eliminations 1 629 1 269 858 833 495 345 711 412 23 653 564 53 79 (146) (997) 21 22 23 24 Jan-Sep Accumulated 185 1 698 2 456 3 756 52358_3 12 24 4 Hydro Media
Improving financial performance Metals NOK million 5 4 3 2 1 22 23 24 Jan- Sep Non-consolidated investees and depreciation Operating income EBITDA Jan-Sep 23 52358_3 12 24 5 Hydro Media
Improving financial performance Rolled Products NOK million 12 1 8 6 4 2-2 -4 22 23 24 Jan- Sep Non-consolidated investees and depreciation Operating income/loss EBITDA Jan-Sep 23 52358_3 12 24 6 Hydro Media
Improving financial performance Extrusion NOK million 1 8 6 4 2 22 23 24 Jan- Sep Non-consolidated investees and depreciation Operating income EBITDA Jan-Sep 23 52358_3 12 24 7 Hydro Media
Improving financial performance Automotive NOK million 6 4 2-2 22 23 24 Jan- Sep Non-consolidated investees and depreciation Operating income/loss EBITDA Jan-Sep 23 52358_3 12 24 8 Hydro Media
Improving financial performance North America NOK million 2 1-1 22 23 24 Jan- Sep -2-3 Non-consolidated investees and depreciation Operating income/ loss EBITDA Jan-Sep 23 52358_3 12 24 9 Hydro Media
Improving financial performance Hydro Aluminium NOK million 75 6 45 3 15 22 23 24 Jan- Sep Non-consolidated investees and depreciation Operating income EBITDA Jan-Sep 23 52358_3 12 24 1 Hydro Media
Strengthening strategic positions Improve alumina relative cost position Improve aluminium relative cost position Strengthen leadership position in Europe: Metal Products, Extrusion, Rolled Products and Automotive Selective growth outside Europe: Metal Products, Extrusion, Rolled Products and Automotive 52358_3 12 24 11 Hydro Media
A unique and differentiated portfolio Estimates 24 and 29** 1 tonnes Equity Medium/long term contracts Alumina * 715 885 2E Equity Electrolysis metal 16 2E Equity 3 rd party Remelt Metal products 16 35 172 43-5E Rolled Extrusion & Automotive Downstream 94 686 18-2E * Aluminium equivalents (2 tonnes alumina per tonne aluminium) ** Including Qatar 52358_3 12 24 12 Hydro Media
A unique portfolio: Higher capital turnover Revenues / gross investments Factor 1.4 Pechiney EBITDA / Revenues Percent 25 1.2 1..8.6 Hydro Aluminium Alcan Alcoa 2 15 1 Alcoa Hydro Aluminium Alcan.4.2 5 Pechiney. 1998 1999 2 21 22 23 24* Source: Company reports. Hydro-estimates. Proxy figures where needed to get comparative figures. * Jan-Sep 24 annualized 1998 1999 2 21 22 23 24* 52358_3 12 24 13 Hydro Media
Western World* demand expected to grow in the coming years 1 tonnes 4 35 3 25 2 15 1 5 24 24 48 56 59 5 27 25 5 51 28 28 53 63 54 3 3 56 65 57 8 84 93 11 21 23 25E 27E * World excluding Central and Eastern Europe, China, Russia, Ukraine, North Korea Sources: BrookHunt; Hydro Aluminium % growth per segment 4.1 4.1 2.8 2.7 2.3 4.3 Other Durables Electrical and engineering B&C Packaging Transportation 52358_3 12 24 14 Hydro Media
Energy drives primary restructuring Net exports, 1 tonnes 4 3 2 1 Asia* Europe USA -1 China Canada South America Australia and New Zeeland CIS ROW** -2-3 -4-5 2 25E 212E * Excluding China ** Rest of the world, including the Middle East Source: CRU, Hydro Aluminium 52358_3 12 24 15 Hydro Media
Increasing industry exposure to market power prices Aluminum production power sourcing 1 tonnes* 22 584 2 To be renewed 15 Russia 1 Contract 5 Unknown contract expiry Captive 23 27 211 215 219 223 * Excluding China Source:CRU, Hydro Aluminium 52358_3 12 24 16 Hydro Media
Attractive power contract portfolio for Hydro Germany a challenge Norway Self generation and long term contracts Australia Canada Slovakia Germany Timeline 25 21 215 22 52358_3 12 24 17 Hydro Media
Qatar the future pattern Heads of agreement signed Annual capacity - 57 tonnes - Expansion potential up to 1 2 tonnes Investments - Smelter and casthouse: USD 2 2.5 billion - Power plant: USD.7-.8 billion Excellent location Hydro ownership - 49 % in smelter and power station - 51 % in casthouse - Hydro to market total tonnage Production start-up end 28 Exceed 1% IRR after tax at USD 14/tonne HAL Technology 52358_3 12 24 18 Hydro Media
Ambitious primary production growth Million tonnes 2. 1.5 1. 21 25E 29E Production growth, % Hydro Total world 1999-24 36% 24% 25-29* 27% 2% Source: Hydro Aluminium, Brook Hunt long -term outlook 24. * incl. Qatar for Hydro 52358_3 12 24 19 Hydro Media
Improving relative cost position 23-29 Cash cost USD/tonne 2 1 5 Hydro 9 To be closed Høyanger SØ, 22 kt Årdal SØ, 5 kt Karmøy SØ,122 kt Hydro 3 1 5 Total average USD 1 97/tonne New capacity Alouette, 6 kt Sunndal, 25 kt Qatar, 28 kt 2 4 6 8 1 Cumulative production (%) Assumptions: Aluminium price USD 1 5, USD/NOK 7., Cumulative production 27.8 million tonnes Source: CRU, Hydro Aluminium 52358_3 12 24 2 Hydro Media
Increasing equity alumina at lower cost Cash cost USD/tonne 22 2 18 16 14 12 World weighted average 23: USD 134/tonne 2: Hydro average USD 165/tonne 1 8 26*: Hydro average USD 12/tonne 6 5 1 15 2 25 3 35 4 45 Cumulative production, million tonnes per year * After sale of alumina plant in Germany. Bauxite to Alunorte at cost. Source: CRU 23 : Major Western World Refineries (43 mill tons, i.e 8% of world production) Hydro Aluminium estimates 52358_3 12 24 21 Hydro Media
Medium term price outlook favourable USD/tonne 2 5 Strong market fundamentals 2 1 5 Increased production costs Energy Alumina Carbon raw materials Freight 1 Weakening USD 5 198 1984 1988 1992 1996 2 24 Nominal prices 52358_3 12 24 22 Hydro Media
Downstream activities Rolled Products Extrusion Total revenue*: NOK 35 bn Europe 8% North America 12% Others 8% Automotive 45% * Jan-Sep 24, split on sectors based on revenue 37% 18% 52358_3 12 24 23 Hydro Media
Rolled Products: Building a stronger business Growth in high margin segments - New litho line in 25 - Foil mills upgraded - Increased heat exchanger volume Delivered on improvement programs - Cost reduction and demanning - Turnaround of underperforming units - Modernization of Slim plant (Italy) Optimize plants product mix High capacity utilization through strong market position 52358_3 12 24 24 Hydro Media
Rolled Products: Increasing focus on higher margin segments Annualized shipments* 95 tonnes Operating income Jan-Sep 24: NOK 593 million Litho 15% Foil 16% Litho 3% Foil 22% *Jan-Sep 24: 71 tonnes Strip 69% Strip 48% 52358_3 12 24 25 Hydro Media
Extrusion: Global growth from leading position in Europe Consolidating leadership in Europe Closing performance gap in USA Expanding in emerging and low cost markets Growing value added business Realizing system benefits 52358_3 12 24 26 Hydro Media
Extrusion: Strong financial performance EBITDA / Sales Capital Turnover * Percent SAPA Hydro Extrusion Percent SAPA Hydro Extrusion 14 25 12 2 1 8 15 6 1 4 2 5 1998 1999 2 21 22 23 24 Jan- Sep * Sales / Gross investment 1998 1999 2 21 22 23 24 Jan- Sep 52358_3 12 24 27 Hydro Media
Automotive: Leading market positions in focus areas Market positions 23 % of total market incl. steel/cast iron solutions 8 6 65 Europe NAFTA 4 35 2 Precision tubing 17 Bumper beams 14 4 5 6 1 Cylinder heads Engine blocks 52358_3 12 24 28 Hydro Media
Automotive: Building on strengths and fixing underperformance Precision Tubing - Strong financial performance - New plants in China and Mexico 25 Structures - Improving financial performance from low level - Focusing product portfolio - Restructuring ongoing Castings - Improved financial performance - New diesel engine line in Dillingen - Production shifting towards low cost countries - Leeds closure to be finalized in 25 52358_3 12 24 29 Hydro Media
Continued strong focus on bottom line growth Continue to strengthen European leadership and build global presence in selected segments and geographical areas Capitalize on a unique and differentiated portfolio profile and value chain integration in an environment of structural change Improve relative cost position upstream - Energy in Germany a particular challenge Sharing of best practice throughout the value chain Active portfolio development 52358_3 12 24 3 Hydro Media
Forward-looking statements/ use of non-gaap financial measures In order to utilize the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, Hydro is providing the following cautionary statement: This presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company and certain of the plans and objectives of the Company with respect to these items. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. The actual results and developments may differ materially from those expressed or implied in the forward-looking statements due to any number of different factors. These factors include, but are not limited to, changes in costs and prices, changes in economic conditions, and changes in demand for the Company's products. Additional information, including information on factors which may affect Hydro's business, is contained in the Company's 23 Annual Report on Form 2-F filed with the U.S. Securities and Exchange Commission. With respect to each non-gaap financial measure Hydro uses in connection with its financial reporting and other public communications, Hydro provides a presentation of what Hydro believes to be the most directly comparable GAAP financial measure and a reconciliation between the non-gaap and GAAP measures. This information can be found in Hydro s earnings press releases, quarterly reports and other written communications, all of which have been posted to Hydro s website (www.hydro.com). 52358_3 12 24 31 Hydro Media
Hydro is a Fortune 5 energy and aluminium supplier founded in 195, with 36, employees in nearly 4 countries. We are a leading offshore producer of oil and gas, the world's third-largest integrated aluminium supplier and a pioneer in renewable energy and energy-efficient solutions. As we look forward to our next 1 years, we celebrate a century of creating value by strengthening the viability of the customers and communities we serve 52358_3 12 24 32 Hydro Media