Investor
presentation
February 2016
Table of contents
Fourth quarter results 2015
2
3
Market
36
Business overview
52
> Hydro - Group
53
> Bauxite & Alumina
64
> Energy
73
> Primary Metal
82
> Metal Markets
90
> Rolled Products
95
> Sapa joint venture
103
Additional information
107
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, 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.
Q4 2015
3
Q4
highlights
•
•
•
•
•
•
•
•
Underlying EBIT of NOK 1 566 million for Q4, NOK 9 656 million for full-year 2015
Proposed dividend for 2015 of NOK 1 per share
Record high quarterly bauxite and alumina1) production
Lower costs, including record low implied alumina cost
Lower realized alumina and all-in aluminium prices, higher Nordic energy prices
Build decision for the Karmøy technology pilot
NOK 800 million improvements delivered across the value chain in 2015
2016 global primary demand growth outlook of ~3-4%, global market largely balanced
1) Since Hydro acquired Vale’s aluminium business in 2011
4
Global oversupply ~1.2 million tonnes in 2015
~2.1 million tonnes oversupply in China, ~0.9 million tonnes undersupply World ex-China
Demand and production (quarterly annualized)
Production less demand1)
1 000 mt primary aluminium
1 000 mt primary aluminium
65 000
5 000
4 000
60 000
3 000
55 000
2 000
50 000
1 000
45 000
0
(1 000)
40 000
(2 000)
jan.09
35 000
30 000
apr.13
• ~4% demand growth Q4 15 vs Q4 14
20 000
aug.09
mar.11
Demand
okt.12
Production
Source: CRU/Hydro
1) Yearly rolling average of quarterly annualized production less demand
5
nov.11
• ~4% demand growth 2015
25 000
15 000
jan.08
jun.10
mai.14
des
−
−
−
−
~6% China
~3% Europe
~2% North America
(~16%) Central and South America
sep.14
Dec-15
Aluminium market expected to be largely balanced in 2016
Significant curtailments in China at the end of 2015
Market balance 20162)
Supply development 20161)
Mill tonnes
Estimated cash
negative in 20161)
25 %
65 %
World ex-China
China
1.5 – 2.0
mill tonnes
Oversupply
~3,4
Milll tonnes
~1,1
(0.5) – 0.5
mill tonnes
(1.5 – 2.0)
mill tonnes
~0,7
~0,9
~2,0
Potential
additions
Effect of curtailments
announced
in 2015 and 2016
CRU-expected
additional
curtailments
Source: CRU, Hydro Analysis
1) Based on CRU BoC curve 2016 and CRU price assumptions of LME 3m at 1475 USD/t and SHFE at 10.300 RMB/t
2) Includes CRU’s expected curtailments
6
Undersupply
~0,2
World ex-China
China
Global
Increased Chinese net semis export on widening arbitrage
Comp. adv.
(USD/mt)
Semis exports
(monthly, kmt)
500
1 000
450
800
Improved comp. adv. China
400
600
350
300
400
250
200
200
150
0
100
( 200)
50
0
jan.07
( 400)
mai.08
sep.09
Semis exports (Left axis)
Source: CRU/Ecowin
Est. metal cost China versus Europe
Europe: LME cash + European duty-paid standard ingot premium
China: SHFE cash + avg. local premium + freight – export rebates (~13 %)
jan.11
mai.12
sep.13
Chinese competitive adv. downstream* (Right axis)
jan.15
Feb 16
Stabilizing all-in ingot prices after weakening in Q4
Tightening spread between standard ingot and product premiums
NOK/mt
USD/mt
18 000
3 000
USD/mt
900
800
16 000
2 600
700
600
500
14 000
2 200
400
300
12 000
1 800
200
100
1 400
jan 11
jan 12
jan 13
jan 14
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
8
jan 15
10 000
Feb1616
jan
0
jan.11
nov.11
sep.12
Extrusion ingot over standard ingot
Standard ingot duty paid
Extrusion ingot duty paid
jul.13
mai.14
mar.15
jan.16
Feb.16
Alumina prices fall in oversupplied markets
Signs of curtailments as around 50% of global alumina capacity is estimated to be loss-making
Global alumina business operating costs (USD/mt)1)
Platts alumina index (PAX)
USD/mt
Percent
450
400
20%
450
19%
400
18%
350
USD/mt
17%
350
300
250
PAX Australia USD/mt 208
16%
300
200
15%
250
14%
200
150
Aug 2010
Apr 2012
Nov 2013
PAX
June 2015
150
100
13%
50
12%
0
0
20.000
40.000
60.000
% of LME
Source: Platts, Ecowin, China Customs, CRU
1) Key macro data CRU Q415: LME 3M 1500 USD/mt, Brent blend 56 USD/t, caustic soda 331 USD/mt FOB US Gulf, RMB per USD 6.56, BRL per USD 4.04, AUD per USD 1.45)
9
80.000
100.000
120.000
140.000
China net import balance stable
Small increases in upstream imports and downstream exports
• Bauxite and alumina
Annualized aluminium equivalents1), million mt
25
2011
2012
2013
− Beginning January 15 2016, Malaysia imposed three-month
2015
2014
moratorium on bauxite mining to reduce associated pollution
China import
20
− Bauxite imports higher in Q4 as well as FY 2015
− Alumina imports higher in Q4, but lower FY 2015
15
• Primary aluminium
10
− No significant import or export
− However, some primary exports for remelt
5
China export
• Scrap
0
− Scrap import slightly lower
• Semis and fabricated
( 5)
− Export levels increased somewhat in Q4 and FY 2015
( 10)
Bauxite
Alumina
Scrap
Primary aluminium
Source: CRU/Antaike/Hydro
*1) Bauxite/alumina to aluminium conversion factor: 5.0/1.925
10
Fabricated
Semis
Total aluminium imports
Bauxite and alumina* production reach record quarterly levels
Implied alumina cost continues steep decline
Annualized bauxite production, million mt
Paragominas
9,0
8,3
10,9
475
8,7 9,0
74
56
425
229
4Q15
3Q15
2Q15**
1Q15**
4Q14
3Q14
2Q14
1Q14
4Q13
217
58
5,8 5,8
5,5
5,0
6,1
5,9 6,0 5,9 5,8 5,9
6,3
• “From B to A” NOK 1 billion
improvement program completed
Q4 2014
Q3 2015
Q4 2015
303
273
245
15.1%
16.5%
15.8%
5,2
4Q15
3Q15
2Q15
1Q15
4Q14
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
Implied EBITDA cost per mt
Price2)
LME%3)
EBITDA margin per mt
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
* Since Hydro acquired Vale’s aluminium business in 2011
** Extended maintenance period in March / April 2015 resulted in lower bauxite production
11
production
− Lower alumina sourcing costs
− Historically weak BRL
187
Annualized alumina production, million mt
Alunorte
• Significant decline in implied
alumina cost
− Increased bauxite and alumina
11,7
6,0
3Q13
2Q13
1Q13
7,1
9,1 9,5 9,1
10,2
Implied alumina cost and margin, USD/mt 1)
Lower primary margin on weaker all-in prices
Implied primary cost down on weaker currency and lower alumina price
All-in implied primary cost and margin, USD/mt 1)
• Developments Q4 vs Q3
− Lower variable costs, mainly alumina
800
350
1 775
1 675
1 3252)
1 1502)
− Weaker NOK and BRL vs USD
275
• Årdal power outage has limited production effect
1 575
− 10% cells shut-down, to be restarted
1 275 2)
− Full production expected to resume in Q2 2016
− Customers expected to be unaffected due to increased
remelt of cold metal
Q4 2014
Q3 2015
Q4 2015
2 574
2 029
1 851
All-in3)
1 997
1 685
1 555
LME4)
All-in Implied EBITDA cost per mt
LME Implied EBITDA cost per mt
All-in EBITDA margin per mt
1) Realized
2) Realized
3) Realized
4) Realized
all-in aluminium price minus underlying EBITDA margin, including Qatalum, per mt aluminium sold.
LME aluminium price minus underlying EBITDA margin, including Qatalum, per mt primary aluminium produced.
LME plus realized premiums, including Qatalum
LME, including Qatalum
• USD 180 JV improvement program on track to be
concluded by end-2016
Hydro to build Karmøy technology pilot
With spin-off effects for the entire portfolio
• Technology pilot with production of 75 000 mt
− 48 cells HAL4e technology – 12.3 kWh/kg
− 12 cellsNext-generation
HAL4e Ultra - 11.5 – 11.8 kWh/kg
technology
• Spin-off technology elements for existing portfolio
R&D as the next step in cost optimization
− 100 kt contribution to 2025 creep ambition
the400
world’s
mostannual
energy-efficient
−Testing
~NOK
million
EBITDAand
effect with CRU 2016
1) smelter technology
climate-friendly
assumptions
Significant
spin-off effectsaluminium
to
• Verifying
next-generation
production
raise production and reduce costs
technology
in current assets
• First metal
expected
in second half 2017
Potential
build decision
expected in H1 2016*
• 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 312
13
Seasonally lower sales in Rolled Products
Year-on-year improvement driven by stronger can sales and positive general engineering development
Q4 2015 vs Q3 2015
Q4 2015 vs Q4 2014
17%
10%
7%
(4%)
(7%)
(7%)
(8%)
(10%)
Packaging & building
14
Litho, Auto &
Heat exchanger
General engineering
Total Rolled
Products
Packaging & building
Litho, Auto &
Heat exchanger
General engineering
Total Rolled
Products
Seasonally weaker extrusion demand
• Seasonally weaker demand
− 9% decrease in North America
− 7% decrease in Europe
• Demand increased from same quarter last year
− 1% in North America due to increased building
activity and strong automotive demand
− Stable in Europe, weak building activity continues
15
Sapa restructuring agenda delivered one year ahead of plan
Sapa aims for additional improvements
• Significant improvements since 2013
Sapa 100% basis
MNOK
1,407
1)
−
−
−
−
Realized synergy program of about NOK 1 billion
Higher share of value-added products
Divestments and closure of non-profitable businesses
Improved capacity utilization and lower fixed-cost base
• Additional improvements to be delivered
− Continue to increase share of value-added activities
− Continued productivity improvements
(89)
UEBIT 2013
Net FX and
metal effects
Exits2) and
operational
performance
1) Other items not covered by the earnings waterfall net out to ~0
2) Exits which are not part of the JV synergy program
16
JV synergy program
UEBIT 2015
Energy: Inflow remains high, but seasonally higher prices
Market price Southwestern Norway (NO2)
Water reservoir levels Southwestern Norway (NO2)
NOK/MWh
Percent
600
100
2014
2015
500
80
2016
400
60
300
40
200
MIN NO2 (2002-2014)
MAX NO2 (2002-2014)
2014
2015
2016
20
100
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
Energy price NOK/MWh
Southwestern Norway (NO2)
System
17
40 43 46 49 52
Week
Week
Q4 2015
Q3 2015
197
204
102
122
Reservoir levels
Southwestern Norway (NO2)
Norway
Dec 31, 2015
Sep 30, 2015
89.5%
82.5%
93.7%
92.7%
Strong improvement track record continues in 2015
MNOK 800 delivered in 2015, another NOK 2.9 billion targeted in 2016-2019
Hydro’s improvement drive until 2015
Hydro’s new improvement ambition
Total improvements 2011-2015: BNOK 4.51)
Total improvements of BNOK 2.9
from 2016-20192)
Sapa JV
‘Energy
Aspiration’
‘JV program’
‘From B to A’
Better
BNOK 2.9
Tailor-made ambitions
across the value chain
Better
Bauxite &
Alumina
BNOK 1.0
Better
Primary
Metal
BNOK 1.0
‘Climb’
‘USD 300
program’
‘CCIP II’
1) Includes USD 300 from 2009-2011. Does not include our share of Sapa’s delivered improvements
2) Includes some larger investments of 3.2 billion NOK in 2015-2019: AL3 and UBC in Rolled Products, 100+100kt capacity creep in Primary Metal, Alunorte debottlenecking in B&A. Real 2015 terms
18
Better
Rolled
Products
BNOK 0.9
Proposed 2015 dividend NOK 1.0 per share
Payout ratio of 101 % for the year
• Aim to provide stable cash return to shareholders
• Reflects operational performance and strong
financial position
• Uncertain market outlook taken into
consideration
• Average five-year payout ratio1) of ~110 %
− Dividend policy 40% payout over the cycle
• Represents payout of ~NOK 2 billion
1) Dividend paid divided by net income from continuing operations attributable to equity holders, including proposed 2015 dividend
19
Declining metal prices, lower costs and record production in Brazil
NOK billion
0.2
(1.2)
2.9
(0.3)
0.4
0.3
2.2
1.6
Underlying
EBIT Q4-2014
* Price revenue effects, cost effects shown separately
20
Underlying
EBIT Q3-2015
LME, PAX
and premium*
Net currency
Fixed and
variable cost
Energy price
and volume
Other
Underlying
EBIT Q4-2015
Key financials
Underlying EPS 2015 of 2.98 NOK/share
NOK million
Q4 2015
Q3 2015
Q4 2014
2015
2014
20 374
21 594
21 656
87 694
77 907
Underlying EBIT
1 566
2 215
2 886
9 656
5 692
Items excluded from underlying EBIT
(841)
(586)
(591)
(1 398)
(18)
Reported EBIT
725
1 630
2 295
8 258
5 674
Financial income (expense)
(70)
(3 341)
(2 341)
(4 834)
(3 554)
Income (loss) before tax
655
(1 711)
(46)
3 425
2 121
(113)
367
(122)
(1 092)
(892)
541
(1 345)
(168)
2 333
1 228
1 296
1 377
1 979
6 709
3 728
Reported EPS, NOK
0.23
(0.65)
(0.18)
0.99
0.39
Underlying EPS, NOK
0.59
0.61
0.83
2.98
1.55
Revenue
Income taxes
Net income (loss)
Underlying net income (loss)
21
Items excluded from underlying EBIT
Excluded MNOK 841, including loss on Slim divestment
NOK million
Q4 2015
Q3 2015
Q4 2014
2015
2014
1 566
2 215
2 886
9 656
5 692
Unrealized derivative effects on LME related contracts
5
(249)
-
(415)
352
Unrealized effects on power and raw material contracts
33
73
(261)
419
(72)
(177)
(344)
189
(458)
449
-
-
(145)
-
(207)
Gains (losses) on divestments
(365)
-
-
(365)
8
Other effects
(285)
-
(36)
(248)
(36)
Items excluded in equity accounted investment (Sapa)
(53)
(65)
(337)
(331)
(512)
Reported EBIT
725
1 630
2 295
8 258
5 674
Underlying EBIT
Metal effect, Rolled Products
Impairment charges
• Other effects include an accrual of MNOK 285 related to termination of the lease contract for Vækerø Park office buildings
22
Bauxite & Alumina
Lower realized alumina price offset by record production and currency tailwinds
Key figures
Q4 2015
Q3 2015
Q4 2014
Alumina production, kmt
1 577
1 498
1 501
Total alumina sales, kmt
2 368
2 268
2 043
Realized alumina price, USD/mt
245
273
303
Implied alumina cost, USD/mt
187
217
229
Bauxite production, kmt
2 959
2 735
2 582
Underlying EBITDA, NOK million
1 165
1 048
1 046
532
628
528
Underlying EBIT, NOK million
Q4 results
Underlying EBIT
NOK million
(55)
2 421
780
528
482
628
532
•
•
•
•
Lower alumina sales price due to lower LME and PAX
Record alumina* and bauxite production
Positive currency effect of MNOK ~175, mainly related to USD/BRL
Negative MNOK ~200 effect from higher depreciation due to reassessment of the useful
life of certain assets
Outlook
(26)
(288)
(269)
2014
* Since Hydro acquired Vale’s assets in 2011
23
2015
•
•
•
•
Higher index exposure
Stable alumina production
High bauxite production, down from record levels in Q4
Lower external bauxite sales margins and volumes
Primary Metal
Falling all-in metal prices, partly offset by lower costs
Key figures
Q4 2015
Q3 2015
Q4 2014
Primary aluminium production, kmt
521
520
499
Total sales, kmt
531
550
527
Realized LME price, USD/mt
1 555
1 685
1 997
Realized LME price, NOK/mt
13 125
13 779
13 355
291
342
575
1 575
1 675
1 775
Underlying EBITDA, NOK million
883
1 245
2 489
Underlying EBIT, NOK million
407
762
1 989
Realized premium, USD/mt
Implied all-in primary cost, USD/mt *
Q4 results
Underlying EBIT
NOK million
3 937
1 989
1 216
•
•
•
•
4 628
2 012
1 448
Outlook
762
312
420
2014
Lower realized all-in prices reduced results by MNOK ~900
Positive net currency effect of MNOK ~100
Lower costs lifted results by MNOK ~400
Seasonally lower sales volumes
407
2015
• About 50 % of primary production affecting Q1 2016 results priced at USD ~1 500 per
mt, ex. Qatalum
• About 50% of premiums affecting Q1 booked at USD ~335 per mt, ex. Qatalum
• Higher sales volumes
• Lower raw material costs and seasonally higher fixed costs
*Realized all-in aluminium price minus underlying EBITDA margin, including Qatalum, per mt aluminium sold. Figures for 2014 have been restated due to a change in definition
24
Qatalum results decline further
Lower realized aluminium price and premiums
Key figures – Qatalum (50%)
Q4 2015
Q3 2015
Q4 2014
1 226
1 242
1 510
216
365
614
Underlying EBIT, NOK million
(105)
85
371
Underlying Net income (loss), NOK million
(167)
26
317
Primary aluminium production, kmt
77
77
77
Casthouse sales, kmt
84
76
85
Revenue, NOK million
Underlying EBITDA, NOK million
• Underlying net income down by NOK 193 million from
Q3 2015 on falling all-in prices
• Results further affected by a time lag in the recognition
of realized premiums
• Stable production above nameplate capacity and
higher sales volumes
25
Metal Markets
Results negatively affected by currency effects
Key figures
Q4 2015
Q3 2015
Q4 2014
Remelt production, kmt
130
117
130
Metal products sales, kmt 1)
676
676
654
Underlying EBITDA, NOK million
180
317
243
Underlying EBIT excl currency and inventory valuation
effects, NOK million 2)
180
189
130
Underlying EBIT, NOK million
152
291
221
Q4 results
Underlying EBIT
NOK million
634
• Continued strong result at remelters; higher than expected volumes and margins
• NOK 28 million in negative currency and inventory valuation effects vs NOK 102 million
379
positive in Q3
291
141
171
221
152
100
Outlook
• Seasonally higher volumes at remelters
• Volatile trading and currency effects
24
(89)
2014
2015
1) Includes external and internal sales from primary casthouse operations, remelters and third party metal sources. Sales volumes for 2014 have been restated
2) Currency effects for 2014 have been restated
26
Rolled Products
Seasonally weaker results
Key figures
Q4 2015
Q3 2015
Q4 2014
External sales volumes, kmt
229
248
213
Underlying EBITDA, NOK million
404
517
280
Underlying EBIT, NOK million
204
331
96
Q4 results
Underlying EBIT
NOK million
698
292
243
181
315
331
204
177
96
2014
27
• Seasonally lower shipments
• Stable margin and cost level
• Rheinwerk result affected by falling all-in metal prices
1 142
2015
Outlook
•
•
•
•
Seasonally higher shipments
Higher costs and depreciation
Lower margins on export sales
Rheinwerk results driven by the all-in metal price development
Energy
Increasing prices from low levels, lower production costs
Key figures
Q4 2015
Q3 2015
Q4 2014
Power production, GWh
2 882
2 839
2 823
Net spot sales, GWh
1 292
1 363
1 339
Southwest Norway spot price (NO2), NOK/MWh
197
102
248
Underlying EBITDA, NOK million
403
241
402
Underlying EBIT, NOK million
353
191
360
Q4 results
Underlying EBIT
NOK million
1 197
435
360
234
169
2014
• Stable production at high levels
• Increased prices from low levels
• Lower production costs*
1 105
382
353
179
191
Outlook
• Higher property taxes*
• Strong production on high reservoir levels
• Price uncertainty
2015
* From 2015 property tax is charged to the period it becomes an unconditional payment obligation (in Norway when invoiced). This leads to periodic variations within the year without affecting the annual
property tax level.
28
Seasonally weaker results in Sapa JV
BNOK 1 in synergies delivered one year ahead of plan
• Quarter-on-quarter results affected by:
− Seasonally weaker demand
− Negative impact from unsanctioned quality testing practices
in North America
• Year-on-year results supported by:
− Strong demand growth in North America
− Restructuring program and continuous improvement activities
− Positive currency effects
• Restructuring program completed one year ahead of plan:
− Realized BNOK 1 in synergies since 2013
* Historical revenues have been reclassified
29
Key figures – Sapa (50%)
Q4 2015
Q3 2015
Q4 2014
6 410
6 948
5 921
245
367
171
Underlying EBIT, NOK million
64
202
(27)
Underlying Net income (loss), NOK million
70
120
(22)
156
171
161
Revenue, NOK million*
Underlying EBITDA, NOK million
Sales volumes (kmt)
Divestment of Herøya Industrial Park
Supporting Hydro’s pure play aluminium strategy
• Herøya Industripark AS and Herøya Nett AS put for
sale in Jan 2015
− Assets include properties, buildings, infrastructure, electricity
grid and process water supplies
• In Dec 2015 Hydro agreed to sell Herøya Industripark
AS to municipality-owned life insurer Oslo
Pensjonsforsikring AS (OPF)
− Transaction expected to close in the first half of 2016
− Expected book gain of MNOK ~350
• Herøya Nett AS not a part of the transaction and
remains up for sale
30
Herøya Industrial Park
• Established in 1929 with the Eidanger saltpeter factory
• Expanded with increased production of fertilizers,
PVC and magnesium
• Fertilizer production spun off to Yara in 2004
• Petrochemical business sold to Ineos in 2008
Other and Eliminations
Other and Eliminations,
Underlying EBIT, NOK million
Sapa JV
Other
Eliminations
Other and Eliminations
31
Q4 2015
Q3 2015
Q4 2014
70
120
(22)
(169)
(95)
(118)
17
(13)
(168)
(83)
12
(308)
Net cash development Q4 2015
Increase in net cash following further operating capital release
NOK billion
Net cash flow from operations
NOK 4.3 billion
(0.3)
1.7
(2.1)
(0.4)
3.0
5.1
3.3
End Q3-2015
32
Underlying EBITDA
Operating capital
Taxes and other
Investments
Currency and minorities
End Q4-2015
Net cash development 2015
Net cash position driven by higher cash flow from operations
Net cash flow from operations
NOK 14.3 billion
NOK billion
0.8
(1.1)
(5.4)
(2.0)
14.7
(1.7)
5.1
(0.1)
End 2014
Underlying EBITDA
Operating capital
* Includes ~1.5 BNOK reimbursement of VAT in Brazil for the earlier periods
33
Tax & other*
Investments
Divestments
Dividends
Currency and minorities
End 2015
Adjusted net debt reduced in Q4 2015
Higher net cash position partly offset by increased net pension liability
Dec 31
2015
Sep 30
2015
Jun 30
2015
Cash and cash equivalents
6.9
9.4
8.1
Short-term investments
5.8
1.8
1.2
Short-term debt
(3.6)
(3.5)
(3.7)
Long-term debt
(4.0)
(4.4)
(5.0)
5.1
3.3
0.7
(8.0)
(7.1)
(6.3)
(5.3)
(5.5)
(5.4)
Adjusted net debt ex. EAI
(8.2)
(9.3)
(11.0)
Net debt in EAI2
(8.0)
(8.0)
(8.2)
(16.2)
(17.3)
(19.2)
NOK billion
Net cash/(debt)
Net pension liability at fair value, net of expected
tax benefit
Other adjustments1
Adjusted net debt incl. EAI
1) Operating lease commitments and other obligations
2) Equity accounted investments Qatalum and Sapa. Hydro share (50%) of net debt in Qatalum 7.1 BNOK, and in Sapa 0.9 BNOK at the end of Q4 2015
34
2015
• Record B&A and downstream results
• Improvements across value chain
• Significant positive development in Brazil
2016
•
•
•
•
35
Strengthen relative industry position
Secure resource base
High-grade portfolio
Maintain financial strength
Market
36
Aluminium is the metal of the future due to its attractive properties
Macro trends drive aluminium demand
Climate challenge
Urbanization
Demographic change
Aluminium properties make it part of the solution
• Lightweight
− 1/3 density of steel
• Recyclability
− 5% of original energy consumption
− 75% of all aluminium produced still in use
37
• 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
Environmental regulations accelerate substitution across segments
Steel substitution in automotive
13%
BiW 2016-2023
CAGR
~75% growth
in 2015
Lighter vehicles in aluminium make a big impact
on the climate challenge:
• US CAFE regulations
• EU CO2 emission reduction targets
* Heat, ventilation, air conditioning & refrigeration (HVAC&R)
Source: Ducker Europe, CRU; Hydro analysis, Sapa analysis
38
Copper substituion in HVAC&R,
cabling and transmission lines
6x
HVAC&R*
market growth
potential from
2015 levels
Aluminium weight and price advantages vs
copper on a volume conductivity equivalent
basis
Key enabler for energy-efficient buildings
40%
of energy
worldwide consumed
by buildings
Flexibility and formability of aluminium enable
energy-efficient building solutions:
• US Building energy use laws
• EU 2012 Energy efficiency directive
Automotive demand growth outperforms all other segments
Aluminium starting to penetrate mass-market vehicles
Steel
Aluminium
C02 emissions
327 g/100 km
Aluminium vehicle penetration, North America
C02 emissions
194 g/100 km
Pounds per light vehicle
600
DUCKER
WORLDWIDE
500
Land Rover Sport 2010
Land Rover Sport 2014
3,100 kg
2,600 kg
In 2015, aluminium penetration
will reach the critical mass for
an explosive period of
growth from 2015 to 2025
400
In 2025, light vehicles will
be the most important
global market for
aluminium.
300
200
• 10% reduction in vehicle weight gives car
manufacturers a 5-7% fuel saving
• 1 kg of aluminium substitution in cars saves
between 15-20 kg GHG emissions
Source: Ducker Worldwide, ‘2015 North American Light Vehicle Aluminum Content Study, Hydro
39
100
0
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
Semis demand to grow above GDP with increasing recycling share
Global demand outlook
CAGR 2015 – 2025
Million tonnes
120
Semis
4–5%
100
80
60
40
20
0
2015
2016
2017
2018
Primary
Source: CRU, Hydro Analysis
*Post-consumed and fabrication scrap
40
2019
2020
2021
Recycled material*
2022
2023
Semis
2024
2025
Primary
3–4%
Recycling
5–6%
Strong growth drivers across multiple segments
Short-term macroeconomic volatility, long term fundamentals still in place
Strong demand drivers in key aluminium segments
Transport
Construction
Electrical
Machinery &
equipment
Packaging
Source: CRU, Hydro Analysis
41
Semis demand CAGR 2015 – 2025
Growth in automotive vehicle production
Aluminium content in cars increasing
Growth in other transport modes, e.g. railway
5–6%
Urbanization
Housing market recovery in mature regions
Energy neutral buildings
3–4%
Urbanization
Copper substitution
5–6%
Improving industrial sentiment in mature regions
Manufacturing activity and industrial growth in emerging countries
4–5%
Urbanization
Environmentally-friendly solutions
3–4%
Global semis
demand:
4–5%
Transport & construction key semis demand segments
China accounting for 45 per cent of global semis demand
Global aluminium semis demand - 79 mill mt, per segment
Global aluminium semis demand – 79 mill mt, per region
Million tonnes (2015)
Million tonnes (2015)
5% 5%
15%
Transport
26%
Construction
Electrical
3%
15% 2%
1%
9%
Asia ex. China
Europe
45%
Machinery & Equipment
Foil stock & packaging
China
C. & S. America
16%
Consumer durables
14%
25%
North America
Africa
Other
Australasia
18%
Global semis segment composition, rolled products – 24 mill mt
Global semis segment composition, extrusions – 26 mill mt
Million tonnes (2015)
Million tonnes (2015)
8%
4%
3%
8%
4%
Packaging
Transport
41%
Construction
12%
3%
Construction
Transport
3%
Machinery & equipment
Consumer Durables
Consumer durables and other
Machinery & Equipment
14%
Electrical
Other
23%
Source: CRU, Hydro Analysis
42
13%
Electrical
65%
Other
Commodity prices drive industry costs
Fuel oil A1 (USD/mt)
Steam coal (USD/mt)
750
180
150
600
120
450
90
300
60
150
30
0
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2006
2007
2008
2009
2010
Caustic soda (USD/mt)
Petroleum coke FOB USG (USD/mt)
900
600
750
500
600
400
450
300
300
200
150
100
0
0
2006
2007
2008
2009
2010
2011
2012
Source: Reuters Ecowin, PACE, CMAI/Harriman, Platts Bolivar Index, ANP
43
2013
2014
2015
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Primary metal market
Historical strong correlation between LME and 90th percentile smelters
LME prices fall on global oversupply and lower cost curves
China
World ex-China
Market balance in thousand tonnes*
Nominal USD/t
10 000
Current LME
(~1500 USD/t)
8 000
2800
2600
2400
6 000
2200
2000
4 000
Market balance in thousand tonnes*
Nominal USD/t
2800
10 000
2600
8 000
2400
6 000
2200
2000
4 000
1800
2 000
1600
1400
0
-2 000 2000
2003
2006
2009
2012
2015
1000
800
-4 000
Market balance
LME 3-month
90th Percentile
• Cost curve moving down due to lower underlying cost elements,
currency and curtailments
Source: CRU, Hydro Analysis
*Primary production less primary demand
44
1200
1800
2 000
1600
1400
0
-2 000 2000
2003
2006
2009
2012
2015
Current SHFE
(~1680 USD/t)
-4 000
Market balance
SHFE Cash
90th Percentile
• SHFE price falls into unchartered territory
• At present, a large share of primary smelters cash negative
• Closures have been announced, still overcapacity
1200
1000
800
Primary metal market
Roughly 40-50% of global smelter capacity currently cash negative
Of which ~75% is located in China
Business operating cost by smelter, 2016
USD/tonne
2 500
Chinese smelters
Smelters outside China
2 000
Current LME 3m ~1500 USD/t
1 500
1 000
500
0
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
55 000
60 000
Production in thousand tonnes
Source: CRU, Hydro Analysis
45
Primary metal market
The global primary market approaching a balanced state in 2016
Driven by curtailments and limited capacity additions outside China
World ex. China
2016
Primary market balances 2015
~3 %
(mill t.)
~0 %
28
Production
Demand
26,3
China
2016
3000
China
2000
ROW
1000
Global
0
-1000
-2000
World ex. China
Primary market balances 2016
~2 %
2000
(mill t.)
1000
~4 %
0
31,9
30,3
China
Source: CRU, Hydro analysis
X%
Production
Demand
-1000
-2000
Growth from 2015 to 2016
2016 market balance includes effects from announced curtailments of ~2 Mt in China and ~0.9 Mt outside China; as well as CRU expected additional curtailments of 0.7 Mt in China and 0.2 Mt outside China
46
(‘000t)
Primary metal market
Total global inventories remain high
Global reported stocks declining, uncertain unreported volumes
Global reported stocks and inventory days
Total global stocks and inventory days
Thousand tonnes
Thousand tonnes
Inventory days
10 000
90
9 000
80
8 000
70
7 000
60
6 000
Inventory days
year
100
12 000
10 000
50
8 000
40
6 000
Source: CRU, Hydro Analysis
47
Global estimated unreported
Global reported
Total inventory days
2015
2014
2013
2012
2011
0
2010
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
Reported China
Other reported ROW
LME stocks
Global reported inventory days
0
2009
0
0
20
2 000
2008
10
• High uncertainty regarding absolute
40
2007
1 000
regulations
4 000
2006
20
− Influenced by new LME warehousing
level of unreported volumes
Reported
2 000
crisis
60
2005
30
3 000
• LME stocks lowest since the financial
80
5 000
4 000
• Reported stocks decreasing over last
120
14 000
Bauxite and alumina markets
Higher Chinese raw material imports and semis exports in 2015
Annualized aluminium equivalents*, million mt
2006
2007
2008
2009
2010
2011
2012
2013
2014
Import
to China
25
20
15
10
Export
from China
5
0
( 5)
( 10)
Bauxite
Source: CRU/Antaike/Hydro
* Bauxite/alumina to aluminium conversion factor: 5.0/1.925
48
Alumina
Scrap
Primary aluminium
Fabricated
Semis
Net aluminium imports
2015
Bauxite market
Large and concentrated bauxite resources
But many challenges for future developments
Billion mt
Bauxite suppliers
short/medium term
Big-league (Top- 3)
Guinea
Mid-league (Top- 10;
each > 2% of world total)
41.0
China 1)
4.0
1.0
Vietnam
9.2
India
Jamaica
1.1
0.5
3.0
6.2
Venezuela
1.8
0.3
1.0
0.5
Malaysia
0.1
0.1
Brazil
8.7
Australia
9.5
2.5
5.6
Atlantic
Pacific
1) Official reported resources in China (Not CM estimates)
*) 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.
Source: Roskill and Hydro analysis
Indonesia
4.0
1.5
Total bauxite, billion tonnes:
reserves, mine site resources*,
and undeveloped resources**
Potential reserves, billion tonnes:
associated with currently operating
mines***
Bauxite market
China driving bauxite prices
Malaysia emerging as largest bauxite exporter to China in 2015
Bauxite quality comparison
China bauxite imports, volume and price by country
USD/tonne CIF
Available Al2O3 %
100
90
Energy Usage
Reactive SiO2 %
80
70
60
Residue Generation
Caustic Usage
50
40
30
Bauxite Usage
Impurities
20
Refinery Yield Potential
10
0
2009
2010
Indonesia
Brazil
2011
Australia
Guinea
Bubble size represents volume
Source: China Customs
50
2012
2013
India
Malaysia
= ~5 million tonnes
2014
2015
West African
West Australian
Amazonic
Alumina market
Alumina market is consolidating
Net long equity alumina position based on 2015 production, million tonnes
4.3
Alcoa
Alcoa/AWAC
3.0
Vale
2.4
Glencore
Alcan
0.8
Sual
0.7
Rio Tinto
0.5
Pechiney
0.4
1.6
Rio Tinto Alcan
1.0
Kaiser
3.1
Hydro
1.9
BHP Billiton
8.7
South 32
1.2
Hindalco
0.5
UC Rusal
(0.1)
Vedanta
(0.4)
Glencore/Century
(0.7)
Alba
(1.8)
VAW
(0.5)
Emirates Global
(4.6)
Hydro
(0.6)
China
(4.7)
(0.9)
Alba
(1.0)
Dubal
Rusal
China
(1.2)
(1.9)
Source: CRU, Hydro
51
2000
2015
Business overview
52
Hydro - Group
Hydro: a resource rich global aluminium company
Hydro underlying EBIT quarterly, NOK billion
3 551
5 982
1 297
2 725
5 692
9 656
2011
2012
2013
2014
2015
3.5
3.0
2.5
2.0
1.5
1.0
• Based in Norway,
involved in activities in
more than 50 countries
• 13 000 employees
• Operating revenues
0.5
− 2015: NOK 88 billion
0
− 2014: NOK 78 billion
• Current market capitalization
− NOK 60 billion/ USD 7 billion
2010
Extruded Products classified as discontinued operations, and thereby excluded from revenues and underlying EBIT for 2011, 2012 and 2013.
Figures for 2012 are adjusted reflecting IAS 19R. Figures for 2013 are adjusted reflecting IFRS 11
54
Fully-integrated value chain
World class assets, high-end products and leading market positions
Raw materials
processing and energy
Bauxite
& Alumina
• High quality Gibsite bauxite
• Bauxite capacity 10.8 million
•
•
•
•
Primary aluminium production,
marketing and recycling
Energy
• Long-term power supply
secured
tonnes; debottlecking to
• Norway’s second largest
11.9 mill tonnes by 2018
hydropower producer –
Paragominas expansion potential 10 TWh normal renewable
energy production
to 15 million tonnes
World’s largest alumina refinery
with capacity of 6.3 million
tonnes; debottlecking to
6.6 mill tonnes by 2018
Expansion potential of 1.9 million
tonnes first phase CAP refinery
Long-term sourcing contracts
for bauxite and alumina
Primary Metal
• 2.1 million tonnes primary
•
•
•
•
capacity
200 k mt technology-driven
capacity creep by 2025
High LME and USD
sensitivity
Improving cost position –
currently 1st quartile
Leading in technology
100% of volumes for assets that are fully consolidated and pro rata volumes for other assets.
55
Aluminium in products
Metal Markets
Rolled Products
• 3.6 million tonnes (primary,
• ~1 million tonnes – Europe’s
•
•
•
•
•
•
remelt, recycling and cold
metal)
Expertise in materials
Flexible system
High share value-add products
Strong marketing organization
Risk management
Strong market positions in
Europe, Asia and the US
•
•
•
•
•
largest producer
Margin business
Regional business
Close to customers
Innovation and R&D
Market leading in litho and
foil, strong BiW position in
Europe
Sapa JV (50%)
• 0.7 million tonnes (50%)
• No. 1 position in North
America and Europe
• Solid foothold in emerging
markets
Hydro - a first tier aluminium company
Equity production in 2015 in aluminium equivalents, thousand mt
8 000
Alumina
Aluminium
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
Weiqao
Source: CRU, Hydro
56
Alcoa/AWAC
Rio Tinto Alcan*
UC Rusal
Chalco
Xinfa
Norsk Hydro
BHP Billiton
Glencore/Century
Hindalco
Vedanta
Emirates Global
Aluminium
Aluminium Bahrain
Hydro’s continuous transformation for value creation
Better
BNOK
2.9
Curtailing 26% of primary
metal capacity
USD 300 program
2009
2010
Starting up Qatalum
57
CCIP 1
Climb
From B to A
2011
2012
Acquiring bauxite and
alumina assets
CCIP 2
JV program
Portfolio high-grading
Launching a new
improvement ambition
2016-2019
2013
2014
2015
Establishing
Sapa JV
Strengthening recycling
position
Securing sustainable
framework conditions
Hydro aspiration supported with ambitious mid-term strategic goals
Ambitions
Target
Timeframe
• Improve safety performance, strive for injury free environment
TRI<2
2020
• Deliver on Better improvement ambition
BNOK 2.9
2019
• Secure new competitive sourcing contracts in Norway post 2020
4-6 TWh
2020
• Lift Paragominas production
11 mill mt/yr
2018
• Lift Alunorte production
6.6 mill mt/yr
2018
• Shift alumina sales to PAX-based pricing
> 85% PAX*
2020
• Extend technology lead with Karmøy technology pilot
Build decision
2016
• Realize technology-driven smelter capacity creep
200,000 mt/yr
2025
• Lift equity bauxite production
19 mill mt/yr**
Long-term
• Expand BiW capacity
200,000 mt/yr***
2017
• Ramp up UBC line to full capacity
>40 000 mt/yr
2017
• Become carbon-neutral from a life-cycle perspective
Zero
2020
• Increase recycling of post-consumed scrap
>250,000 mt/yr
2020
• Deliver of reforestation ambition
1:1
2017
* 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
58
Better: proven track-record of productivity gains continues
Hydro’s improvement drive until 2015
Hydro’s new improvement ambition
Total improvements 2011-2015:
BNOK 4.5¹
Total improvements of
BNOK 2.9 from 2016-20192
Sapa JV
‘Energy
Aspiration’
Better
BNOK 2.93
Tailor-made ambitions across
the value chain
Better
Bauxite &
Alumina
BNOK 1.0
Better
Primary
Metal
BNOK 1.0
‘JV program’ ‘From B to A’
‘Climb’
‘USD 300
program’
CCIP II
1) Includes USD 300 from 2009
2) Includes some larger investments of 3.2 billion NOK in 2015-2019: AL3 and UBC in Rolled Products, 100+100kt capacity creep in Primary Metal, Alunorte debottlenecking in B&A.
3) Real 2015 terms
Better
Rolled
Products
BNOK 0.9
Bigger: A solid platform for building an even stronger Hydro
Bauxite & Alumina
• Move beyond nameplate
capacity
• Further improve bauxite
positions
Energy
• Mature captive growth
opportunities
• Raise income potential
from market operations
• Mature CAP project and
• Leverage value from
Paragominas expansion
for when time is right
Nordic power surplus
Primary Aluminium
Rolled Products
• Enhance position in high-
• Expand automotive
margin segments
• Realize 200,000 tonnes
technology-driven capacity
creep
• Extend technology lead with
Karmøy technology pilot
• Mature Qatalum 2 and
Alouette expansion for when
time is right
•
Includes recycling ambition in Primary Metal
** Refers to nominal capacity
60
capacity to 200,000 t/yr**
• Increase recycling of
post-consumed scrap
above 250,000 t/year*
• Build positions and lift
margins through technology
leadership and innovation
Greener: Carbon-neutral from a life-cycle perspective by 2020
Integrated into business strategy in all business areas
• Increasing energy-efficiency and reducing emissions in production processes in
aluminium plants, rolling mills, and alumina refinery
• Increasing production of renewable hydropower, evaluating potential of switching
Energy efficency and
emissions in production
Hydro
carbon neutral
in 2020
From a life-cycle
perspective
to renewable energy sources or natural gas in production processes
• Developing products and solutions, establishing partnerships with advanced
customers, and identifying new applications for metal and downstream products
• Supporting global energy-efficiency goals by helping customers reduce energy
consumption and emissions and by promoting sustainable frameworks
Use-phase benefits
• Reducing waste and saving ~95% of energy by recycling of post-consumed scrap in
Primary Metal and Rolled Products
• Utilizing advanced sorting technology and developing recycle-friendy alloys
Recycling
61
Safe and responsible operations is a top priority
Leadership in HSE, CSR and compliance as a license to operate
TRI Rate*
10.3
7.0
6.0
5.4
4.0
4.1
3.9
3.7
3.8
2.9
2002
2003
2004
2005
2006
2007
2008
2009
* Total recordable incidents (TRI) rate defined as cases per 1 million hours worked
62
2010
2011
3.4
3.4
3.2
3.0
2012
2013
2014
2015
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, 2010-2014
2 000
251 %
181 %
1 500
1 000
71 %
25 %
500
0
10 000
20 000
30 000
First quartile alumina position, 2016
40 000
50 000
11 %
60 000
Highest underlying payout ratio and dividend yield
Alumina BOC curve by company
2010-2014
USD/t
500
2.5
400
1.1
0
0
0
0%
0%
0%
74 %
300
200
24 %
100
0
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
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 Earnings Per Share
Peers
Hydro
Aluminium peers included: Alcoa, Century, Chalco, Rusal
Dividend
yield, %
Bauxite & Alumina
Bauxite and alumina cluster in Para, Brazil
MRN bauxite mine
• Top 3 bauxite mine in the world
• 5% ownership
• Volume off-take agreement for Vale’s 40%
stake
• Capacity 18 million tonnes
• LoI signed with Vale to raise MRN ownership
to 45%
Bauxite
licenses
65
Paragominas bauxite mine
• Full financial exposure, increase ownership
•
•
•
•
•
•
to 100% by 2016
One of the world’s largest bauxite mines
2015 production 10.1 million tonnes
Nameplate capacity of 9.9 million tonnes
Debottlnecking to ~ 11 mill mt/yr by 2018
Possible expansion to 15 million tonnes
Long-life resource
Refining and
mining competencies
Alunorte alumina refinery
•
•
•
•
•
•
•
92% ownership
World’s largest alumina refinery
2015 production 6.0 million tonnes
Nameplate capacity of 6.3 million tonnes
Debottlenecking to 6.6 mill mt/yr by 2018
Bauxite supplied from Paragominas and MRN
World-class conversion cost position
External
supply contracts
CAP alumina refinery project
• 81% ownership
• Paragominas expansion to be developed in
parallel
• Full utilization of the existing bauxite pipeline
Sales contract
portfolio
Further strengthening the competitiveness of Bauxite & Alumina
Alunorte
BNOK 1.0 improvements 2016 – 2019
• Increase production
• Improve energy consumption
500
• Reduce fixed costs
500
Paragominas
1 000
• Support production above nameplate capacity
• Improve product flow and minimize tailings
Commercial
• Increase logistical flexibility and optimize scheduling
66
Delivered
2012-2015
2016
2017-2019
Stabilizing and lifting bauxite and alumina production
Improving operations
Bauxite production in Paragominas,
Reducing alumina production rate variability in Alunorte
Annualized million tonnes
9,0
Annualized million tonnes
8,3
9,1
9,5
10,9
10,2
9,1
11,7
Hydrate production boxplot
7,3
6,6
8,7
9,0
Median 2015
5,8
7,1
5,1
6,0
4Q15
3Q15
2Q15*
1Q15*
4Q14
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4,4
3,7
2009
2010
2011
2012
2013
2014
2015
Paragominas bauxite mine
Alunorte alumina refinery
• Production above nameplate capacity
• Stabilized production environment – first step towards lifting production
• Productivity improvements driven by debottlenecking at beneficiation
• Enhanced precipitation process control – improved quality and output
plant and optimization of mining operations
• Debottlenecking to ~11 mill mt/yr by 2018
• Improved usage of residual bauxite – potential to increase lifetime of
the mine by 4-5 years
* Extended maintenance period in March / April 2015 resulted in lower bauxite production
67
• Improving raw material efficiency
• Increased robustness in power supply to prevent serious power outages
• Debottlenecking up to 6.6 mill mt/yr by 2018
Bauxite operational mining costs in Paragominas
• Energy cost - Power and fuel
Paragominas bauxite mining costs 2015
• Labor cost
10%
− Influenced by Brazilian wage level
− Productivity improvements
• Maintenance and consumables
27%
Labor
19%
Energy
Support & infrastructure
− Influenced by Brazilian inflation
Maintenance/consumables
• Large fixed cost base
Other costs
18%
* Cost element definition restated in 2014
68
25%
Favorable integrated alumina cost position
• Implied alumina cost position 2015
− USD 215 per mt
− Alunorte, Paragominas and sourced alumina
Implied alumina cost* position 2015
USD 215 per mt
• Bauxite
19%
− Internal bauxite from Paragominas at cost, sourced bauxite from MRN
− External bauxite sales
27%
Bauxite
• Energy
− First-quartile energy consumption – 8 GJ/mt
− Energy mix of heavy fuel oil, coal and electric power
Caustic soda
Energy
12%
Other costs
• Caustic soda
Sourced alumina
− Competitive caustic soda consumption due
11%
to bauxite with low level of reactive silica
• Other costs
− Maintenance, labor, services and other
• Sourced alumina
− Alumina purchased for resale
* Realized alumina price minus Underlying EBITDA for B&A, per mt alumina sales
69
31%
Commercial activities
External alumina sourcing
Long bauxite and alumina position
• ~ 2.3 million mt of external alumina sourced annually:
• Future pricing should reflect fundamentals of bauxite and
− ~ 2.8 million mt of external alumina was sourced in 2015
• Long term off-take agreement with Rio Tinto
− ~900 000 mt annually from Yarwun refinery
• Short- and medium term contracts
− To balance and optimize position geographically
− Various pricing mechanisms
− Older contracts linked to LME
− New contracts mostly index
− Fixed USD per mt for short-term
contracts
alumina value chain
• Selling 2.5-3.5 million mt annually of MRN bauxite externally:
− Premium for high bauxite quality
− Advantageous bauxite quality enables export to China from Brazil
despite freight disadvantage
• Selling 2-3 million mt/yr of alumina externally:
− Alumina pricing becomes a new norm for the industry
– capturing larger part of aluminium value chain profits
− Index pricing and short to medium-term contracts
• Hydro’s commercial strategy
− Move towards alumina index pricing (PAX)
− Focus on selling to end-users based on a global portfolio
− Establish a premium for Alunorte quality
70
Shift of alumina sales to index-based pricing continues at full speed
Sales exposure to index and short term pricing*
35% index
50% index
65% index
75% index
~1 mmt net
~2.7 mmt net
~4 mmt net
~5 mmt net
75% index
85% index
~5 mmt net
~5.8 mmt net
100 %
100%
90 %
90%
80 %
80%
70 %
70%
60 %
60%
50 %
50%
40 %
40%
30 %
30%
20 %
20%
10 %
10%
0%
0%
2015
2016
Internal index
2017
Intenal LME
2018
External index
External LME
2019
2020
Index exposure
* 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)
71
Bauxite & Alumina mid-term goals
Creating shareholder value through efficient and commercial use of raw materials
Target
• Improve safety performance, strive for injury free environment
TRI <2
2020
• Deliver on new improvement ambition
BNOK 1.0
2019
• Lift alumina production at Alunorte through stabilization and debottlenecking
6.6 million mt
2018
• Lift Paragominas production through debottlenecking
11 million mt
2018
• Shift alumina sales portfolio to index-based pricing
>85 %*
2020
• Deliver on reforestation ambition
1:1
2017
* Based on annual sourced volumes of 2.3 million tonnes
72
Timeframe
Ambitions
Energy
Hydro energy needs are spread across the value chain, global
regions and energy carriers
Europe
North America
Power 1.7 TWh
Power 19.6 TWh
Natural gas 3.2 TWh
Middle East
Power 4.6 TWh
South America
Power 7.3 TWh
Coal
4.9 TWh
Fuel oil 8.2 TWh
Australia/Asia
Power 1.0 TWh
Hydro’s energy consumption in alumina refineries, smelters and rolling mills
Based on consolidated figures mid-2015
74
Securing long-term competitive power sourcing for smelters
Sourcing platform for fully-owned smelters, Norway*
Sourcing platform for JVs and Rheinwerk smelter**
TWh
TWh
25
20
18
20
16
14
15
12
10
10
8
6
5
4
2
0
2033
Qatalum captive
Total power consumption in smelters at full capacity
2032
Tomago
Alouette
2031
Slovalco
Albras
2030
Rheinwerk
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2033
2032
2031
2030
2029
2028
2027
75
2026
* Net 8 TWh captive assumed available for smelters
** Albras and Slovalco on 100% basis
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
Statkraft 6.4 TWh
No
Current captive
Total consumption at full capacity
Total consumption at full capacity plus Karmøy pilot
0
Power production increased to 10 TWh
• Power producing assets and ongoing projects
Power production capacity (TWh),
per region and reversion year
− Maintain cost control in operations and projects
− Holsbru and Vasstøl power plants into operation in 2012
− Vigeland acquisition completed, exemption from concession
Sogn
2051-2057*
Normal annual
production
requirement granted - no time limitations
• New growth projects
3.2
10 TWh
Telemark
2044-2049*
Røldal-Suldal
2022*
− Mature new equity growth options
− New power plants under construction:
− Midtlæger, Mannsberg
• Framework conditions
0.5
− Reversion regime secures full value of energy assets:
• Prevents further licensing to non-public entities, but allows for everlasting
3.1
3.0
minority private ownership of up to 1/3
• Law proposal on industrial ownership published on November 9, 2015
Vigeland
0.2
No reversion
− El-certificates support investments in new capacity
Subject to reversion
Bubble size = production in TWh
* Reversion year
76
Competitive production costs driven by economies of scale
and operational improvements
Taxes and fees account for a large share of costs, making sustainable framework conditions crucial
Average operating cost, incl. tax/fees, by category
2007-2015
Total operating costs for Norwegian power producers*
NOK/GWh
6%
11%
36%
12%
Resource rent tax
Property tax
Sustaining capex
Opex
Transmission costs
21%
14%
Concession fees and other
Hydro
* Based on PA Benchmarking survey
77
Peers
Market pricing principle applied to internal contracts
Based on external price references
Revenue side
Sourcing side
0-6
10
(8-12)1)
• Market pricing
• Duration varies
• Different indexation
parameters
Spot
price
3)
1
• Long-term contract
• Market pricing
• Fixed annual pricing
adjustments
Regulated
price
14-172
)
9,5
Back-to-back
Normal production
Sourcing on long-term contracts
Norway up to 2020
1) Depending on the precipitation level, hydropower production may vary from 8 TWh in a dry year to 12 TWh in a wet year
2) Consumption in PM at current production levels and at full installed capacity (incl. Karmøy pilot plant)
3) Net spot sales vary depending on the power production level and internal consumption in PM
* Includes legacy external contracts
Net spot sales
Concession power *
Consumption in Primary Metal
Broad optionality to maintain asset value within the reversion regime
Hydro’s preferred alternative is to maintain industrial ownership of RSK volumes
Sell to a publicly-owned entity
Merge into a larger publicly-owned
asset with one or several owners
TWh
10*
3
2
1
Sell 2/3
NewCo
>= 9 TWh
7
Proposed model for industrial
ownership (ANS/DA)
Private
company
or
Dividend
via power
3
7
Sell 100%
Energy production
with RSK
7
>= 6 TWh
• Retain full production as part of a
RSK
Production w/o RSK
larger asset
• Max 1/3 Hydro (private) ownership
• No reversion after such a transaction
• Need partner(s) with min 6 TWh to
maintain equity volume
Can use
1/3 of the power
in industrial
production
79
“NewCo”
Public
company
Dividend
via power
2/3 of the power sold
in the market
Proposal for hydropower JVs:
• Maximum 1/3 private ownership maintained
• Allow private owners access to physical power
• Pro-rata power offtake in line with ownership
share
The diagrams on this slide are simplified for illustration purposes
* Normal production
2/3
ownership
RSK ~3 TWh
Energy production
w/o RSK
Sourcing to compensate for RSK
1/3
ownership
Energy earnings drivers
Underlying EBIT* and spot price
NOK million
NOK/MWh
2000
500
1500
400
300
1000
200
500
100
0
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
NOK million
NOK/MWh
600
500
400
300
200
100
0
800
600
400
200
0
2007
Underlying EBIT
2008
2009
2010
Spot price
* Underlying EBIT 2003–2006 based on USGAAP
80
hydrological conditions
• Stable annual EBIT contribution
• Seasonal market variations in demand and supply
• Occasional delink between area prices
• Power portfolio optimized versus market
Underlying EBIT and spot price
2006
• Production and market prices strongly linked to
2011
2012
2013
2014
2015
• Stable cost base:
− Mainly fixed costs
− Volume-related transmission costs
− Property taxes higher in Q1 and Q3, and lower in Q2
and Q4 due to the invoicing pattern
Energy mid-term goals
Creating shareholder value by maximizing value of own hydropower assets and ensuring reliable and
competitive energy supply for Hydro
81
Timeframe
Ambitions
Target
• Improve safety performance – injury free environment
TRI <2
2020
• Robust industrial ownership for RSK – maintain physical power offtake post 2022
3,0 TWh
2022
• Deliver additional production volumes through upgrades/sustaining investments
~0,1 TWh
2020
• Secure new competitive sourcing contracts in Norway post 2020
4-6 TWh
2020
• Support competitive energy supply as well as energy policy and framework
development for other business areas
Progress
Continuous
Primary Metal
World-wide production network
Primary Metal and Metal Markets
49%
Norway, 1 015 000 tonnes
6%
Canada, 120 000 tonnes
• Alouette (20%): 120 000 tonnes
• Expansion potential
7 stand-alone remelters:
• 2 in the US
• 5 in Europe (UK, Luxemboug, France,
Spain and Germany)
•
•
•
•
•
Sunndal (100%) : 390 000 tonnes
Årdal (100%): 190 000 tonnes
Karmøy (100%): 190 000 tonnes
Høyanger (100%): 65 000 tonnes
Husnes (100%): 180 000 tonnes
11%
Germany, 235 000 tonnes
• Rheinwerk* (100%): 235 000 tonnes
Remelt/
Recycling
1.0
million tonnes
Primary
4%
2.1
Slovakia, 90 000 tonnes
• Slovalco (55%): 90 000 tonnes
million tonnes
Qatar, 300 000 tonnes
• Qatalum (50%): 300 000 tonnes
• Expansion potential
11%
Brazil , 235 000 tonnes
• Albras: (51%): 235 000 tonnes
Australia, 70 000 tonnes
3%
• Tomago (12%): 70 000 tonnes
Attributable capacity: 2.1 million mt. Consolidated capacity: 2.4 million tonnes (Slovalco and Albras are consolidated). The smelters have an additional remelt capacity: 0.5 million tonnes.
Consolidated casthouse capacity: 2.9 million tonnes. Qatalum is equity accounted in Hydro’s results.
* Rheinwerk smelter is included in the Rolled Products division for logistical reasons
83
15%
Delivering on ambitious improvement programs
Fully-owned smelters improvements continue beyond USD 300
Joint venture improvement program on track
Improvement categories
Improvement categories
Operational improvements
• Improved current efficiency
• Reduced power consumption
• Reduced anode consumption
Fixed cost reductions
and lean operations
Further operational improvements
Technology costs/spin-offs
Investments
Maintenance and relining
Improvements 2009-2015,
corresponding to NOK ~2.0 billion
In USD per mt in real terms
400
160
300
140
250
Operational improvements
200
• Improved current efficiency
• Reduced power consumption
• Reduced anode consumption
150
100
Logistics
50
Organization and manning
0
120
100
80
60
40
20
2010 2011 2012 2013 2014 2015
2009-2013
84
In USD per mt in real terms
180
350
Procurement
Casthouse product margin
Fixed cost reductions
and lean operations
USD 180 per mt improvements
2011- 2016, corresponding to
NOK ~1.2 billion
Additional improvements
0
2012
2013
2014
2015 E2016
Technology-driven capacity creep of ~200 000 mt over the next decade
Contributing to the new BNOK 1 improvement ambition by 2019
Production fully-owned¹ smelter portfolio
2014-2025, in mt
Production joint venture2 portfolio
2014-2025, in mt
100
100
75
75
Known technologies
and enablers
Technology
spin-offs
Technology
spin-offs
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
Known technologies
and enablers
1) Årdal, Høyanger, Husnes, Sunndal and Karmøy
2) Volume as consolidated in Hydro from Alouette, Tomago, Albras, Slovalco and Qatalum
85
Includes remainder of USD 180 program,
To be delivered from 2016 to 2019
Better
Primary
Metal
BNOK 1.0
2025
2024
2023
2022
2021
2020
2019
0
2018
0
2017
25
2016
25
2015
50
2014
50
New BNOK 1.0 improvement ambition
Improvement drive yields results in primary production
Underlying EBITDA per mt in USD for respective primary aluminium divisions
800
700
600
500
400
300
200
100
2011
2012
2013
2014
-100
-200
Hydro
Peers
1) 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 information purposes only. Hydro figures includes Primary Metal, Metal Markets and attributable share of EBITDA and production in Qatalum.
2) Companies included in the graph: Hydro, Rio Tinto Alcan, South 32 (BHP), Rusal, Chalco, Alba, Alcoa
1h2015
Continuous technology development
R&D
vision
HAL 300
HAL4e
R&D vision
• Operating for several years in
• To be used in Karmøy technology pilot
• Benchmark on energy-efficiency
• 10 kWh/kg
• Carbon capture-ready cell
• Higher degree of automation and
Sunndal and Qatalum
− 13.5 kWh/kg
− 314 kA
− 1.5 kg CO2/kg Al
and environment
• Hal4e
− 12.3 kWh/kg / 450 kA / <1.5 kg CO2/kg Al
• Hal4e Ultra
− 11.5-8 kWh/kg / 415 kA / <1.5 kg CO2/kg Al
87
autonomous control system
Low carbon footprint due to renewable energy base and industry
lowest energy consumption
Indirect emissions, in tonne CO2/t al
Energy consumption in Hydro smelters*, kwh/kg al
17.5
18
16
18
15.0
14.8
16
14.4
14
13.7
13.5
14
12.5
12.3
12
11.5-11.8
12
10.0
10
10
8
8
6
6
4
4
2
2
0
Hydro
Peers
World average (2012)
0
Karmøy
1967
Hydro
1993
Hydro
1998
Hydro
2003
Hydro
2015
HAl300
2013
HAL4E
2012
HAL4e
2014
World average (2015)
Source: CRU and Hydro analysis
* Hydro’s consolidated share
88
HAL4e
Ultra
Hydro
vision
Primary Metal mid-term goals
Creating shareholder value by strengthening relative cost position through lean operations and technology
Ambitions
Target
• Improve safety performance – strive for injury-free environment
TRI <2
2020
• Deliver BNOK 1 bn under new improvement ambition
BNOK 1.0
2019
• Realize ~200 000 mt technology-driven capacity creep
200 000 mt
2025
• Verify world’s most energy efficient primary technology, including
spin-off elements
complete Pilot*
• Increase post-consumed scrap recycling to improve margins and
environmental footprint
150 000 mt
* Karmøy technology pilot
** Dependent on build decision early 2016
89
Timeframe
2017**
2020
Metal Markets
Strong position in value-added casthouse products
Extrusion ingot
• Capitalizing on value-added casthouse products
portfolio
1.4 million mt
• Extensive multi-sourcing system including fullyand part-owned primary casthouses and standalone remelters
Foundry alloys
0.5 million mt
Sheet ingot
0.3 million mt
Standard ingot / Wire rod
0.5 million mt
Numbers are based on 2015 Metal Markets sales, including casthouse and remelter production, standard ingot and external sources
91
• Value creation from margin management based
on commercial expertise and risk management
competence
• Strong market positions in Europe, US and Asia
Casthouse production
Primary production
Remelting & recycling
Commercial agreements
• Flexible sourcing system enabling rapid and cost
effective volume adjustments
Pricing of value-added products
Smelter
Aluminium
Intermediate product
Casthouse
Standard ingot
Value added products
Sheet ingot
Wire rod
• US Midwest - 1020
(in cent per pound)
•
•
•
•
Extrusion Ingot – Priced above standard ingot
Foundry Alloy – Priced above standard ingot
Sheet ingot – Priced above standard ingot
Wire rod - Priced above standard ingot
Traded on
LME
• Duty paid IW Rotterdam
• Duty unpaid IW Rotterdam
•
•
•
•
Extrusion ingot – Priced above LME
Foundry Alloy – Priced partly above standard ingot and partly above LME
Sheet ingot – Priced above standard ingot
Wire rod - Priced partly above standard ingot and partly above LME
Traded on
LME & SHFE
• CIF Japan Premium (MJP)
• Singapore In Warehouse
• CIF South Korea
• Extrusion ingot – Priced partly above standard ingot and partly above LME
• Foundry Alloy – Priced partly above standard ingot and partly above LME
• Sheet ingot – Priced partly above standard ingot and partly above LME
US
Traded on
LME
Europe
Foundry alloy
Asia
Extrusion ingot
92
Value-added products trade at a premium to standard ingot
Hydro realizes premiums on 1-2 month time lag
USD/t
900
800
700
600
500
400
300
200
100
0
jan.90
jan.91
jan.92
jan.93
jan.94
jan.95
jan.96
jan.97
jan.98
EI over ingot
Source: Metal Bulletin, Hydro
93
jan.99
jan.00
jan.01
jan.02
jan.03
Ingot DDP Premium Indicator
jan.04
jan.05
jan.06
jan.07
jan.08
jan.09
jan.10
Metal Bulletin Billet Premium Indicator
jan.11
jan.12
jan.13
jan.14
jan.15
jan.16
Metal Markets earnings drivers
• Remelters
− Revenue impact – volume and product
premiums above LME
− Cost impact
−
−
−
−
Scrap and standard ingot premiums above LME
Raw material mix
Freight cost – proximity to market
Gas and electricity consumption and prices
• Other main businesses
50
0
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
94
100
Q4
Q3
Q2
Q1
* Underlying EBIT ex. currency and ingot inventory valuation effect have been restated for 2013 and 2014
150
Q4
Q3
Q2
Q1
inventory valuation effects
200
Q4
Q3
Q2
Q1
• Results influenced by currency fluctuations and
250
Q4
Q3
Q2
Q1
− Physical and LME trading
− Third-party products
− High purity aluminium
Underlying EBIT excluding currency effects and
ingot inventory valuation effect, NOK million*
( 50)
2010
2011
2012
2013
2014
2015
Rolled Products
Hydro Rolled Products
Aiming to be No. 1 in Europe and world benchmark
• Strong European production base and global
sales force
Karmøy
• 1 million tonnes of flat rolled products per year
Holmestrand
• Unique integrated aluminium cluster:
− smelter
− world’s largest rolling mill
− dedicated conversion mill
Hamburg
Neuss
Norf
Grevenbroich
Bonn
• Casthouse network and integrated recycling capacity
Singapore
Rolling mill
96
Sales Office
Smelter
R&D centre
• Industry-leading R&D facility
No. 1 flat rolled products producer in Europe
• World leader in high-end products foil and litho
External sales in tonnages 2015
− Alunorf (JV 50%) – world’s largest rolling mill
− Grevenbroich plant – world’s largest multi-product finishing mill
Total 948 kT
Foil
12 %
17 %
Can
Building and other
20 %
• High-grading product portfolio
Auto
− Margin management and cash generation
Heat exchanger
− Portfolio adjustment towards higher margins
General engineering
Litho
• Capitalize on automotive market growth
− Investment in new automotive capacity
29 %
− Commissioning expected in 2nd half of 2016
7%
4%
11 %
• Strengthen recycling position
− Installation of a Used Beverage Can (UBC) recycling line
started beginning of 2016
97
Strong positions in market segments with high focus on
quality and innovation
Ambition
Automotive
Gain No.2 position
in European BiW
Foil
Defend global No. 1
in high-end plain foil
Beverage can
Maintain No.3
position in Europe
Lithography
Defend global
No.1 position
Special products
Maintain No.1
position in Europe
Market
growth*
World ~11%
Europe ~10%
World ~2-3%
Europe ~1%
World ~4-5%
Europe ~2-3%
World ~1%
Europe ~(2)%
Europe ~2-3%
*Market growth as compound annual growth rate 2015 – 2020 in %
98
Hydro to become second largest BiW producer in Europe
Quadrupling BiW capacity to 200,000 mt/yr by 2017
“Lightweight construction is a core element of Jaguar’s
DNA and Jaguar is at the cutting-edge of aluminium
technology in the automotive industry”
Peugeot 308
BMW 7 series
“Audi believes aluminium still offers abundant potential,
especially in the shape of the new, higher-strength alloys”
Audi A6
New Mercedes C Class T
“Aluminium plays a major role in lightweight construction
at the BMW Group”
Audi Q7
200,000 mt/yr refers to nominal BiW capacity
99
Porsche Macan
Continuously improving competitiveness in Rolled Products
Significant contribution from recycling, operational improvements and portfolio high-grading
Target
900 MNOK
Time period
NOK Million
2016-2019
900
Recycling
Operational
improvements
Improvement driven by
•
•
•
•
Recycling
Operational performance
Supply chain management
• Product high-grading
• Margin and portfolio mix
• Culture change
800
High-grading,
margin &
portfolio mix
Achieved
2011-15
Ambition
2016-19
Automotive growth
100
Rolled Products earnings drivers
Underlying EBIT per tonne, NOK
• Contract structure
1 400
− Margin business based on conversion price
1 200
− LME element passed on to customers
1 000
− Range from spot contracts to multi-year
contracts
800
600
• High share of fixed costs - volume
sensitive
400
200
• Preferred supplier market position in
0
high-end products
(200)
(400)
2010
2011
2012
2013
Yearly average UEBIT/mt
2013 are adjusted to reflect IFRS11
101
2014
2015
Rolled Products mid-term goals
Creating shareholder value with technology, product innovation and customer relations
Ambitions
Timeframe
• Improve safety performance – injury free environment
TRI <2
2020
• Deliver on new improvement ambition
900 MNOK
2019
• Differentiate through product innovation, quality and service
Min.1 step change/year
• Build up automotive BIW capacity
200 kmt*
2017
• Fully ramp up new recycling capacity with UBC line
>40 kmt
2017
• Lift post-consumer scrap recycling
>100 kmt
2020
* Refers to nominal capacity
102
Target
Annually
Sapa joint venture
Strong improvement trend in Sapa JV
1 BNOK restructuring and synergy program completed
Sapa restructuring agenda delivered one year ahead of plan*
• 50/50 joint venture between Hydro and Orkla,
1,407.0
Sapa 100% basis
MNOK
established September 1, 2013, with 23,500
employees
• No. 1 position in North America and Europe
• Strong foothold in emerging markets
• Increasing share of value added activities
(89)
UEBIT 2013
*Other items not covered by the earnings waterfall net out to ~0
** Exits which are not part of the JV synergy program
104
Net FX and
metal effects
Exits and
operational
performance**
JV synergy
program
UEBIT 2015
Sapa – global leader in extruded products
More advanced applications and quality-focused customers
Sapa 2014 revenue composition
Sapa – partnering with major OEMs on aluminium solutions
By market
By geography
2%
4%
15%
15%
15%
18%
38%
• Supplying structural aluminium tubing
• Providing ongoing development support
for future extrusion applications
56%
1%
• Partnership on process development,
alloy development and complex
extrusion & fabrication between 5
states and 3 countries
36%
Europe
Automotive
HVAC&R
North & Central America
Transportation
Industrial
South America
Building & construction
Distribution/other
Asia incl. ME
105
• Partnership with Leoni and Jaguar to
replace copper with coated aluminium
in battery cables
Hydro’s value proposition
•
•
•
•
106
Improve relative industry position
Capitalize on raw material positions
Maintain financial strength and flexibility
Ensure competitive shareholder return
Additional
information
107
Prudent financial framework
Strong balance sheet and reliable dividend in cyclical industry
Lifting
cash flow
potential
Improving efficiency,
strengthening margins with
operational and commercial
excellence
Improvement efforts
• 4.5 BNOK 2011-2015 1)
• 2.9 BNOK 2016-2019 2)
Managing working
capital
Financial
strength
and flexibility
Disciplined
capital
allocation
Investment grade credit
rating
• > BBB Stable
Long-term sustaining
capex below depreciation
• 3.5-4.0 BNOK per year
Financial ratio targets
over the cycle
• FFO/aND 3) > 40%
• aND/E 4) < 55%
Total capex incl. growth
• 2015 BNOK 5.8
• 2016 BNOK 8.15)
• Average 2016-2018
BNOK 6.15)
Strong liquidity
Attractive organic growth
prospects for the future
M&A optionality
1) USD 300 program from 2009
2) Real 2015 terms
3) Funds from operations / adjusted net debt
4) Adjusted net debt / Equity
5) With Karmøy Technology Pilot net investment, after ENOVA support
Reliable
shareholder
remuneration
policy
Sector competitive TSR
Dividend policy since 2014
• Dividend 1 NOK/share
• 40% payout ratio of Net
Income over the cycle
Special dividends and share
buybacks in the toolbox
Effective risk
management
Volatility mitigated by
strong balance sheet
and relative positioning
Hedging policy
• Operational LME and
currency hedging
• Limited financial
hedging
• Long-term debt in USD
Diversified business
Hydro’s aspiration underpinned by firm financial targets
Medium and long-term
1)
2)
3)
4)
5)
Ambition
Timeframe
Actual 2015
Improvement programs
2.9 BNOK
2016-2019
4.5 BNOK
Sustaining capex
3.5 - 4.0 BNOK
Over the cycle
4.6 BNOK
Average capex incl. growth
6.1 BNOK 1)
2016-2018
Dividend payout ratio
40% of net income
Over the cycle
FFO/adjusted net debt 3)
> 40%
Over the cycle
Adjusted net debt/equity
< 55%
Over the cycle
20%
RoACE
Competitive 4)
Over the cycle
9.1% 5)
With Karmøy Technology Pilot net investment, after ENOVA support
Dividend paid divided by net income from continuing operations attributable to equity holders, including proposed 2015 dividend
FFO – funds from operations
Measured against a relevant peer group
Underlying return on average capital employed (RoACE)
2009 - 2015
2015
5.8 BNOK
2015
~110% 2)
2011-2015
89%
2015
2015
2015
Shareholder and
financial policy
Hedging policy
• Hydro aims to give its shareholders competitive returns
• Hedging strategy:
compared to alternative investments in peers
• Maintained dividend policy
− Ordinary dividend: 40% of net income over the cycle
− Five-year average ordinary pay-out ratio 2011-2015 of ~110%*
− Committed to a stable and reliable dividend level: currently 1 NOK/share
since 2014
− Share buybacks and extraordinary dividends as supplement in periods
with strong financials and outlook
• Maintain investment-grade rating
− At least BBB Stable
− Currently: BBB stable (S&P) & Baa2 negative (Moody’s)
− Competitive access to capital and important for Hydro’s
business model (counterparty risk and partnerships)
• Financial ratios over the business cycle
− Funds from operations to adjusted net debt > 40%
− Adjusted net debt to equity < 55%
− Fluctuating with the market: primarily exposed to LME and USD
− Volatility mitigated by strong balance sheet
− Improving relative position to ensure competitiveness
• Diversified business:
− Upstream cyclicality balanced with more stable earnings downstream
− Exposed to different markets and cycles
• Bauxite & Alumina, Primary Metal
− Operational LME hedging - one-month forward sales
− Currency exposure, mainly USD, NOK and BRL
• Metal Markets, Rolled Products
− Operational LME and currency hedging to secure margin
• Flexibility to hedge LME or currency in certain cases
• Maintaining long-term debt in the revenue currency (USD)
• Strong liquidity:
− NOK 6.9 billion in cash and cash equivalents, end-Q4 2015
− USD 1.7 billion in multi-currency revolving credit facility maturing in 2020,
currently undrawn
* Including NOK 1 2015 dividend per share proposed by Board of Directors, dependent on approval from the Annual General Meeting on May 2, 2016
110
Maintaining a solid balance sheet and investment-grade credit rating
Funds from operations determine the balance sheet structure
Adjusted net debt
Adjusted net debt / Equity
60 %
NOK billion
55 %
50 %
40 %
Dec 31, 2014
(0.1) (5.3)
(7.3)
(8.2)
(20.9)
32 %
30 %
24 %
20 %
26 %
20 %
0%
2009
Dec 31, 2015
22 %
11 %
10 %
-22%
19 %
5.1
(5.3)
(8.0)
(8.0)
(16.2)
2010
2011
2012
2013
2014
2015
Funds from operations / Adjusted net debt
118 %
120 %
100 %
89 %
80 %
Net debt (cash)
Debt in EAI
60 %
Operating leases and other
Net pension liability
40 %
20 %
0%
39 %
2011
2012
33 %
42 %
40 %
1%
2009
111
42 %
2010
2013
2014
2015
Majority of sustaining capex allocated upstream
High-grading and technology growth investments
NOK billion
• Long-term annual sustaining capex BNOK 3.5-4
• Sustaining projects for 2014-2016:
10,2
10
−
−
−
−
9
8,1
8
7
6,2
5,8
6
5
4,4
4,1
4
• Ongoing organic growth projects:
5,7
4,6
3,4
2,9
3
2
1
2009
2010
2011
2013
2014
2015
2016E
Debt-financed investment Qatalum
Karmøy technology pilot (net of ENOVA support)
Investments Qatalum
Growth capex
2011 excludes Vale assets acquisition
Excluding Extruded Products from 2013 onwards
112
2012
2017E
Red mud disposal area
Bauxite tailing dam
Smelter relining
Energy rehabilitation
2018E
Sustaining capex
−
−
−
−
−
−
RP Automotive line
RP UBC recycling line
Clervaux recycling upgrade
Alunorf debottlenecking
Energy projects
AFM technology
• WMR technology acquisition in 2015
• Karmøy technology pilot 2015-2018:
− Gross investment 4.3 BNOK
− Of which ENOVA support ~1.6 BNOK
EFFECTIVE RISK MANAGEMENT
Significant exposure to commodity and currency fluctuations
Aluminium price sensitivity +10%*
UEPS
+0.98
NOK/share
NOK million
2 892
Currency sensitivities +10%*
Sustainable effect:
NOK million
2 200
UEBIT
USD
BRL
EUR
2 591
(890)
(272)
(550)
516
(2 069)
One-off reevaluation effect:
UEBIT
Financial items
Underlying Net Income
Other commodity prices, sensitivity +10%*
•
NOK million
257
•
224
•
(266)
(183)
(145)
(64)
(37)
•
•
Standard
ingot
Realized
PAX*
Pet coke
Fuel oil
Caustic
soda
Pitch
Coal
USD 140
per mt
USD 250
per mt
USD 350
per mt
USD 330
per mt
USD 275
per mt
EUR 400
per mt
USD 50
per mt
* Excluding Sapa JV
113
•
Annual sensitivities based on normal annual business volumes, LME USD 1 550 per mt, fuel oil USD 330
per mt, petroleum coke USD 350 per mt, caustic soda USD 275 per mt, coal USD 50 per mt, USD/NOK
8.40, BRL/NOK 2.20, EUR/NOK 9.30
Aluminium price sensitivity is net of aluminium price indexed costs and excluding unrealized effects related
to operational hedging
BRL sensitivity calculated on a long-term basis with fuel oil assumed in USD. In the short-term, fuel oil is
BRL-denominated
Excludes effects of priced contracts in currencies different from underlying currency exposure (transaction
exposure)
Currency sensitivity on financial items includes effects from intercompany positions
2016 Platts alumina index (PAX) exposure used
Bauxite & Alumina sensitivities
Annual sensitivities on underlying EBIT if +10% in price
Revenue impact
NOK million
• ~14.5% of 3-month LME price per tonne alumina
− ~One month lag
• Realized alumina price lags PAX by one month
643
507
Cost impact
Bauxite
• ~2.45 tonnes bauxite per tonne alumina
• Pricing partly LME-linked for bauxite from MRN
(36)
(183)
Aluminium
Realized PAX*
USD 1 550
per mt
USD 250
per mt
Fuel oil
USD 330
per mt
* 2016 Platts alumina index exposure
Currency rates used: USD/NOK 8.40, BRL/NOK 2.20, EUR/NOK 9.30
114
(145)
Caustic soda
USD 275
per mt
Coal
USD 50
per mt
Caustic soda
• ~0.1 tonnes per tonne alumina
• Prices based on IHS Chemical, pricing mainly monthly per shipment
Energy
• ~0.11 tonnes coal per tonne alumina, Platts prices, one year volume
contracts, weekly per shipment pricing
• ~0.11 tonnes heavy fuel oil per tonne alumina, prices set by
ANP/Petrobras in Brazil, weekly pricing (ANP) or anytime (Petrobras)
• Increased use of coal as energy source in Alunorte
Primary Metal sensitivities
Annual 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 ~1-2 months
2 210
Cost impact
Alumina
• ~1.9 tonnes per tonne aluminium
• ~14.5% of 3-month LME price per tonne alumina, increasing volumes
priced on Platts index
• ~Two months lag
239
(60)
(386)
Aluminium
USD 1 550
per mt
Standard
ingot premium
USD 140
per mt*
Realized PAX ** Petroleum coke
USD 250
per mt
* Europe duty paid. Hydro Q4’15 realized premium USD 291 per mt
**2016 Platts alumina index exposure
Currency rates used: USD/NOK 8.40, BRL/NOK 2.20, EUR/NOK 9.30
115
(249)
USD 350
per mt
Pitch
EUR 400
per mt
Carbon
• ~0.35 tonnes petroleum coke per tonne aluminium,
Pace Jacobs Consultancy, 2-3 year volume contracts, half yearly pricing
• ~0.08 tonnes pitch per tonne aluminium, CRU, 2-3 year volume
contracts, quarterly pricing
Power
• 13.7 MWh per tonne aluminium
• Long-term power contracts with indexations
Depreciation by currency and business area
Total 2015 depreciation 5.0 BNOK
Depreciation by business area*
Depreciation currency exposure by business area
Percent
USD
EUR
BRL
4% 1%
NOK &
Others
15%
Bauxite & Alumina
100%
Primary Metal
25%
Metal Markets
25%
Rolled Products
25%
50%
45%
30%
90%
10%
Energy
100%
Other & Eliminations
100%
39%
2%
Primary Metal
Metal Markets
Rolled Products
Energy
Other & Eliminations
39%
* Based on 2015 depreciation figures
116
Bauxite and alumina
Items excluded from underlying results - 2015
NOK million (+=loss/()=gain)
Q1 2015
Q2 2015
Q3 2015
Q4 2015
2015
Unrealized derivative effects on LME related contracts
Bauxite & alumina
3
(6)
(6)
19
11
Total impact
Bauxite & alumina
3
(6)
(6)
19
11
Unrealized derivative effects on LME related contracts
Primary metal
54
(41)
75
7
95
Unrealized effects on power contracts
Primary metal
2
(2)
23
89
112
Insurance compensation (Qatalum)
Primary metal
-
(37)
-
-
(37)
Total impact
Primary metal
56
(81)
99
96
169
Unrealized derivative effects on LME related contracts
Metal markets
146
(45)
86
12
199
Total impact
Metal markets
146
(45)
86
12
199
Unrealized derivative effects on LME related contracts
Rolled products
(80)
143
82
(49)
95
Metal effect
Rolled products
(61)
(2)
344
177
458
(Gains)/losses on divestments
Rolled products
Total impact
Rolled products
Unrealized derivative effects on power contracts
Total impact
-
-
-
434
434
(141)
141
426
562
988
Energy
1
(9)
10
1
3
Energy
1
(9)
10
1
3
(533)
Unrealized derivative effects on power contracts
Other and eliminations
(154)
(150)
(106)
(122)
Unrealized derivative effects on LME related contracts
Other and eliminations
17
(20)
12
6
15
(Gains)/losses on divestments
Other and eliminations
-
-
-
(69)
(69)
Items excluded in equity accounted investment (Sapa)
Other and eliminations
74
139
65
53
331
Termination of lease contract Vækerø Park
Other and eliminations
-
-
-
285
285
Total impact
Other and eliminations
(63)
(32)
(29)
152
28
Total EBIT
Hydro
2
(31)
586
841
1 398
Net foreign exchange (gain)/loss
Hydro
1 587
(346)
3 205
(48)
4 397
Income (loss) before tax
Hydro
1 589
(377)
3 790
793
5 795
Calculated income tax effect
Hydro
(454)
144
(1 069)
(38)
(1 418)
Net income (loss)
Hydro
1 134
(234)
2 721
755
4 377
117
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 & Alumina
(4)
(1)
(2)
(10)
(16)
Unrealized derivative effects on LME related contracts
Primary metal
(12)
(38)
(36)
-
(86)
Unrealized effects on power contracts
Primary metal
43
(8)
1
27
63
Unrealized derivative effects on power contracts (Søral)
Primary metal
(33)
24
(64)
57
(16)
Unrealized derivative effects on raw material contracts
Primary metal
10
9
9
10
37
Impairment charges (Qatalum)
Primary metal
-
-
28
-
28
Insurance compensation (Qatalum)
Primary metal
-
-
-
(55)
(55)
Transaction effects Søral acquisition
Primary metal
-
-
-
38
38
Total impact
Primary metal
8
(14)
(62)
77
9
Unrealized derivative effects on LME related contracts
Metal Markets
35
6
(94)
(64)
(117)
Impairment charges
Metal Markets
33
-
-
-
33
Total impact
Metal Markets
69
6
(94)
(64)
(83)
Unrealized derivative effects on LME related contracts
Rolled Products
(16)
(101)
(79)
76
(119)
Metal effect
Rolled Products
-
(58)
(202)
(189)
(449)
Impairment charges
Rolled Products
-
-
-
145
145
Total impact
Rolled Products
(16)
(159)
(281)
32
(423)
Unrealized derivative effects on power contracts
Energy
3
4
(1)
(2)
4
Total impact
Energy
3
4
(1)
(2)
4
Unrealized derivative effects on power contracts
Other and Eliminations
(198)
12
1
170
(16)
Unrealized derivative effects on LME related contracts
Other and Eliminations
1
(2)
(9)
(3)
(13)
(Gains)/Losses on divestments
Other and Eliminations
-
(8)
-
-
(8)
Items excluded in equity accounted investment (Sapa)
Other and Eliminations
86
87
2
337
512
Other effects
Other and Eliminations
Total impact
Other and Eliminations
-
-
-
53
53
(111)
88
(7)
558
528
Total EBIT
Hydro
(50)
(75)
(447)
591
18
Net foreign exchange (gain)/loss
Hydro
(193)
101
1 001
2 252
3 161
Income (loss) before tax
Hydro
(244)
26
554
2 843
3 179
Calculated income tax effect
Hydro
170
23
(176)
(696)
(680)
Net income (loss)
Hydro
(74)
49
378
2 147
2 499
118
Operating segment information
Underlying EBIT
NOK million
Bauxite & Alumina
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
(288)
(269)
(26)
528
780
482
628
532
(55)
2 421
Primary Metal
312
420
1 216
1 989
2 012
1 448
762
407
3 937
4 628
Metal Markets
141
100
171
221
24
(89)
291
152
634
379
Rolled Products
181
177
243
96
292
315
331
204
698
1 142
Energy
435
169
234
360
382
179
191
353
1 197
1 105
Other and Eliminations
Total
(8)
(52)
(349)
(308)
(281)
333
12
(83)
(717)
(19)
772
544
1 490
2 886
3 208
2 667
2 215
1 566
5 692
9 656
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
122
162
417
1 046
1 240
951
1 048
1 165
1 747
4 404
Underlying EBITDA
NOK million
Bauxite & Alumina
Primary Metal
753
852
1 651
2 489
2 522
1 931
1 245
883
5 745
6 581
Metal Markets
157
120
192
243
47
(64)
317
180
712
480
Rolled Products
351
350
417
280
465
488
517
404
1 398
1 873
Energy
474
209
275
402
429
227
241
403
1 360
1 300
Other and Eliminations
Total
119
4
(40)
(336)
(290)
(267)
347
26
(64)
(662)
42
1 861
1 653
2 615
4 170
4 437
3 880
3 394
2 969
10 299
14 680
Operating segment information
EBIT
NOK million
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
(284)
(269)
(23)
537
776
487
634
513
(39)
2 411
Primary Metal
303
434
1 278
1 912
1 956
1 528
664
311
3 928
4 459
Metal Markets
73
93
265
285
(122)
(44)
205
141
717
180
Rolled Products
197
336
525
64
433
174
(95)
(358)
1 121
154
Energy
431
165
235
362
381
187
182
353
1 193
1 103
Other and Eliminations
102
(140)
(342)
(866)
(218)
364
41
(235)
(1 245)
(48)
Total
822
620
1 937
2 295
3 206
2 698
1 630
725
5 674
8 258
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
125
163
419
1 056
1 237
957
1 054
1 146
1 763
4 393
Bauxite & Alumina
EBITDA
NOK million
Bauxite & Alumina
Primary Metal
745
866
1 713
2 413
2 467
2 012
1 146
786
5 736
6 411
Metal Markets
122
114
286
307
(99)
(19)
231
168
829
281
Rolled Products
367
508
698
393
607
347
91
(158)
1 966
886
Energy
471
205
276
404
428
236
231
402
1 355
1 297
Other and Eliminations
Total
120
115
(127)
(329)
(848)
(204)
379
55
(216)
(1 190)
14
1 944
1 728
3 062
3 725
4 436
3 911
2 808
2 128
10 460
13 282
Operating segment information
Total revenue
NOK million
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
Bauxite & Alumina
3 511
3 828
3 737
4 770
5 461
5 127
5 758
5 542
15 847
21 889
Primary Metal
6 618
6 384
6 986
8 075
9 096
8 154
7 951
7 138
28 064
32 340
Metal Markets
10 292
10 109
10 919
11 709
12 181
13 127
11 173
10 428
43 029
46 909
5 238
5 275
5 618
5 324
6 170
6 173
6 225
5 592
21 455
24 160
Rolled Products
Energy
1 539
1 381
1 492
1 891
1 553
1 140
1 152
1 481
6 303
5 326
Other and Eliminations
(8 917)
(8 706)
(9 055)
(10 112)
(11 171)
(11 286)
(10 666)
(9 808)
(36 790)
(42 931)
Total
18 282
18 272
19 698
21 656
23 290
22 436
21 594
20 374
77 907
87 694
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
2 208
2 404
2 257
2 699
3 387
2 978
3 656
3 513
9 568
13 534
External revenue
NOK million
Bauxite & Alumina
Primary Metal
1 227
1 337
1 590
2 242
1 789
1 059
1 311
1 214
6 397
5 373
Metal Markets
8 719
8 853
9 784
10 625
11 315
11 862
10 100
9 518
37 981
42 795
Rolled Products
5 290
5 212
5 498
5 345
6 079
6 254
6 334
5 625
21 345
24 293
807
436
540
710
698
264
176
485
2 492
1 623
Energy
Other and Eliminations
Total
121
31
29
28
35
21
19
17
19
124
77
18 282
18 272
19 698
21 656
23 290
22 436
21 594
20 374
77 907
87 694
Operating segment information
Internal revenue
NOK million
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Bauxite & Alumina
1 304
1 424
1 480
2 071
2 074
2 150
2 103
2 030
6 279
8 356
Primary Metal
5 391
5 047
5 396
5 833
7 307
7 095
6 641
5 925
21 667
26 967
Metal Markets
1 573
1 256
1 136
1 084
866
1 265
1 073
910
5 048
4 114
(52)
63
120
(22)
91
(81)
(109)
(33)
109
(132)
Rolled Products
Energy
Other and Eliminations
Total
Q3 2015
Q4 2015
Year 2014
Year 2015
732
945
952
1 181
854
877
976
996
3 810
3 703
(8 948)
(8 735)
(9 084)
(10 147)
(11 192)
(11 306)
(10 683)
(9 827)
(36 914)
(43 008)
-
-
-
-
-
-
-
-
-
-
Share of profit /(loss) in equity accounted investments
NOK million
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
-
-
-
-
-
-
-
-
-
-
Primary Metal
92
77
234
325
250
282
25
(168)
728
389
Metal Markets
-
-
-
-
-
-
-
-
-
-
Bauxite & Alumina
Rolled Products
-
-
-
-
-
-
-
-
-
-
Energy
-
-
-
-
-
-
-
-
-
-
Other and Eliminations
Total
122
(51)
45
53
(359)
16
(6)
90
23
(313)
123
40
122
287
(34)
265
276
115
(144)
415
512
Operating segment information
Depreciation, amortization and impairment
NOK million
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
Bauxite & Alumina
410
431
442
519
460
470
420
633
1 802
1 983
Primary Metal
437
427
431
499
511
483
483
475
1 794
1 952
Metal Markets
49
21
21
22
23
25
26
27
112
101
170
172
174
329
173
173
186
200
845
732
39
40
41
42
47
48
50
49
162
195
Rolled Products
Energy
Other and Eliminations
Total
13
13
13
17
15
14
14
18
55
61
1 117
1 104
1 121
1 428
1 229
1 213
1 178
1 403
4 771
5 023
Capital employed – upstream focus
Energy 4%
NOK million
Dec 31, 2015
Bauxite & Alumina
29 352
Primary Metal
30 677
Metal Markets
Rolled Products
Energy
Other and Eliminations
Total
2 211
Rolled Products
14%
Metal Markets
3%
10 555
2 814
1
75 583
Primary Metal
41%
123
Bauxite &
Alumina 39%
Graph excludes MNOK 1 in capital
employed in Other and Eliminations
Income statements
NOK million
Q4 2015
Q3 2015
Q4 2014
Year 2014
Year 2015
Revenue
Share of the profit (loss) in equity accounted investments
Other income, net
20 374
(144)
(172)
21 594
115
167
21 656
(34)
327
77 907
415
751
87 694
512
461
Total revenue and income
20 057
21 875
21 948
79 073
88 667
Raw material and energy expense
Employee benefit expense
Depreciation, amortization and impairment
Other expenses
12 933
2 309
1 403
2 687
14 361
2 172
1 178
2 535
13 697
2 104
1 428
2 424
51 480
8 089
4 771
9 059
56 330
9 048
5 023
10 008
725
1 630
2 295
5 674
8 258
Financial income
Financial expense
104
(174)
47
(3 388)
115
(2 456)
347
(3 900)
297
(5 130)
Income (loss) before tax
Income taxes
655
(113)
(1 711)
367
(46)
(122)
2 121
(892)
3 425
(1 092)
Net income (loss)
541
(1 345)
(168)
1 228
2 333
Net income (loss) attributable to minority interest
Net income (loss) attributable to Hydro shareholders
63
478
(21)
(1 324)
202
(370)
432
797
313
2 020
Earnings per share attributable to Hydro shareholders
0.23
(0.65)
(0.18)
0.39
0.99
Earnings before financial items and tax (EBIT)
NOK million
Net income (loss)
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year2014
Year2015
462
269
665
(168)
1 072
2 064
(1 345)
541
1 228
2 333
Underlying net income (loss)
388
318
1 043
1 979
2 206
1 830
1 377
1 296
3 728
6 709
Earnings per share
0.19
0.09
0.29
(0.18)
0.46
0.94
(0.65)
0.23
0.39
0.99
Underlying earnings per share
0.16
0.13
0.43
0.83
0.95
0.83
0.61
0.59
1.55
2.98
124
Balance sheets
NOK million
Dec 31, 2015
Sep 30 2015
Jun 30 2015
Mar 31 2015
Dec 31, 2014
Cash and cash equivalents
Short-term investments
Accounts receivable
Inventories
Other current assets
6 917
5 752
10 797
12 192
502
9 372
1 860
14 417
11 996
390
8 142
1 240
14 847
12 722
301
7 172
2 456
15 122
13 392
272
9 253
1 786
11 703
12 642
543
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Prepaid pension
Other non-current assets
51 174
5 121
20 150
3 382
6 557
47 850
4 773
19 414
4 116
5 476
51 945
5 547
18 413
4 313
5 856
50 952
5 332
18 679
3 753
6 015
55 719
5 947
18 095
2 881
7 703
122 544
119 665
123 326
123 145
126 273
3 562
9 375
4 462
3 509
10 727
3 825
3 683
10 192
4 081
4 239
10 593
4 373
6 039
9 663
3 414
Long-term debt
Provisions
Pension liabilities
Deferred tax liabilities
Other non-current liabilities
3 969
3 264
12 782
1 999
3 801
4 408
2 850
12 358
2 078
3 821
5 013
2 876
11 706
2 459
2 919
5 722
2 802
13 407
1 318
3 146
5 128
3 993
12 796
1 676
3 622
Equity attributable to Hydro shareholders
Minority interest
74 169
5 159
71 284
4 806
74 737
5 660
72 068
5 477
74 030
5 911
122 544
119 665
123 326
123 145
126 273
Total assets
Bank-loans and other interest-bearing short-term debt
Trade and other payables
Other current liabilities
Total liabilities and equity
125
Operational data
Bauxite & Alumina
Alumina production (kmt)
Sourced alumina (kmt)
Total alumina sales (kmt)
Realized alumina price (USD)
1)
Implied alumina cost (USD) 2)
Bauxite production (kmt)
Sourced bauxite (kmt)
3)
4)
Underlying EBITDA margin
11) 12)
Primary Metal 5)
Realized aluminium price LME, USD/mt
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
1 428
1 526
1 478
1 501
1 451
1 437
1 498
1 577
5 933
5 962
550
431
532
503
666
725
806
590
2 016
2 787
1 906
2 071
1 922
2 043
2 136
2 099
2 268
2 368
7 942
8 871
269
276
287
303
300
292
273
245
284
276
259
263
252
229
225
233
217
187
250
215
2 242
2 370
2 287
2 582
2 135
2 232
2 735
2 959
9 481
10 060
1 874
2 204
2 305
2 433
1 806
2 103
2 377
2 398
8 815
8 684
3.5%
4.2%
11.2%
21.9%
22.7%
18.5%
18.2%
21.0%
11.0%
20.1%
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
2 043
1 926
1 822
1 802
1 749
1 762
1 906
1 997
1 897
1 803
1 685
1 555
1 850
1 737
Realized aluminium price LME, NOK/mt7)
11 533
11 217
10 938
10 916
10 702
10 660
11 909
13 355
14 383
13 923
13 779
13 125
11 624
13 813
Realized premium above LME, USD/mt6)
345
358
374
371
422
476
537
575
614
509
342
291
500
439
1 945
2 087
2 247
2 246
2 583
2 883
3 355
3 845
4 660
3 927
2 796
2 460
3 140
3 492
5.64
5.82
6.00
6.06
6.12
6.05
6.25
6.69
7.58
7.72
8.18
8.44
6.28
7.95
Realized premium above LME,
NOK/mt6)7)
Realized NOK/USD exchange rate 7)
Realized NOK/USD exchange rate excluding hedge
5.64
5.82
6.01
6.06
6.12
5.98
6.21
6.76
7.58
7.72
8.18
8.44
6.27
7.95
Implied primary cost (USD) 8)
1 625
1 575
1 450
1 375
1 400
1 375
1 275
1 150
1 150
1 225
1 325
1 275
1 300
1 250
Implied all-in primary cost (USD) 9)
2 025
1 975
1 850
1 775
1 900
1 925
1 875
1 775
1 800
1 775
1 675
1 575
1 875
1 725
Primary aluminium production, kmt
478
483
491
492
484
488
487
499
497
509
520
521
1 958
2 046
Casthouse production, kmt 10)
495
513
516
522
525
529
521
515
495
516
524
525
2 088
2 059
Total sales, kmt11)
541
531
540
515
593
559
542
527
534
544
550
531
2 220
2 159
14.1%
12.1%
13.6%
16.9%
11.4%
13.3%
23.6%
30.8%
27.7%
23.7%
15.7%
12.4%
20.5%
20.3%
Underlying EBITDA margin
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
12)
Weighted average of own production and third party contracts, excluding hedge results. The majority of the alumina is sold linked to the LME prices with a one month delay.
Implied alumina cost (based on EBITDA and sales volume) replaces previous apparent alumina cash cost
Paragominas on wet basis
40 percent MRN offtake from Vale and 5 percent Hydro share on wet basis
Operating and financial information includes Hydro's proportionate share of production and sales volumes in equity accounted investments. Realized prices, premiums and exchange rates exclude equity accounted investments
Average realized premium above LME for casthouse sales from Primary Metal. Historical premiums for 2013 have been revised due to change of definition
Including strategic hedges /hedge accounting applied
Realized LME price minus Underlying EBITDA margin (incl. Qatalum) per mt primary aluminium produced. Includes net earnings from primary casthouses.
Realized all-in price minus Underlying EBITDA margin (incl. Qatalum) per mt primary aluminium sold. Includes net earnings from primary casthouses.
Production volumes for 2013 have been revised, due to change of definition
Total sales replaces previous casthouse sales due to change of definition
Underlying EBITDA divided by total revenues
Operational data
Metal Markets
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year2014
Year2015
139
141
128
130
145
141
117
130
538
533
84
81
80
79
74
80
81
84
324
319
776
726
696
654
626
750
676
676
2 852
2 728
654
619
609
596
571
674
616
613
2 478
2 474
8 719
8 853
9 784
10 625
11 315
11 862
10 100
9 518
37 981
42 795
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year2014
Year2015
Rolled Products external shipments (1 000 mt)
243
245
244
213
227
243
248
229
946
948
Rolled Products – Underlying EBIT per mt, NOK
744
723
996
452
1 284
1 294
1 332
888
738
1 204
6.7%
6.6%
7.4%
5.3%
7.5%
7.9%
8.3%
7.2%
6.5%
7.8%
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year2014
Year2015
Power production, GWh
2 964
2 248
2 170
2 823
3 071
2 103
2 839
2 882
10 206
10 894
Net spot sales, GWh
1 581
1 028
873
1 339
1 610
724
1 363
1 292
4 820
4 989
Nordic spot electricity price, NOK/MWh
252.0
211.0
263.0
264.0
246.0
177.0
122.0
204.0
248.0
187.0
Southern Norway spot electricity price (NO2), NOK/MWh
249.0
168.0
247.0
248.0
238.0
171.0
102.0
197.0
228.0
177.0
30.8%
15.1%
18.4%
21.3%
27.6%
19.9%
20.9%
27.2%
21.6%
24.4%
Remelt production (1 000 mt)
Third-party Metal Products sales (1 000 mt)
Metal Products sales excl. ingot trading (1 000 mt)
1)
Hereof external sales excl. ingot trading (1 000 mt)
External revenue (NOK million)
Rolled Products
Underlying EBITDA margin
2)
Energy
Underlying EBITDA margin
2)
1) Includes external and internal sales from primary casthouse operations, remelters and third party Metal sources
2) Underlying EBITDA divided by total revenues
127
Sapa joint venture information
Sapa JV (100 % basis), underlying (unaudited)
NOK million, except sales volumes
Sales volume (1000 mt)
Revenues*
Underlying EBITDA
Underlying EBIT
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
343
311
346
360
346
314
359
367
350
322
353
358
341
312
1 399
1 364
10 414
9 654
10 367
10 974
10 798
10 132
11 311
11 496
11 561
11 842
14 051
14 484
13 895
12 821
46 210
55 252
365
154
304
508
328
(43)
440
641
492
343
705
799
734
491
1 916
2 729
76
(142)
16
213
24
(339)
155
350
201
(55)
392
483
404
128
652
1 407
(281)
69
263
110
(44)
238
291
240
139
398
907
Underlying net income (loss)
Sapa JV (100 % basis), reported (unaudited)
NOK million
Reported EBIT
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
(954)
(618)
(148)
(1 096)
(1 985)
(787)
(3)
168
198
(679)
201
65
174
88
(316)
528
(620)
(103)
89
107
(719)
89
14
109
34
(626)
246
Reported net income (loss)
Sapa JV (100 % basis), reconciliation between reported and underlying EBIT (unaudited)
NOK million, except sales volumes
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Year 2014
Year 2015
(3)
168
198
(679)
201
65
174
88
(316)
528
73
36
66
(79)
(145)
(158)
(95)
208
96
(189)
Restructuring cost and other items
(231)
(218)
(70)
(546)
(47)
(260)
(135)
(249)
(1 065)
(690)
Total items excluded from EBIT**
(159)
(182)
(4)
(624)
(191)
(418)
(230)
(41)
(969)
(879)
155
350
201
(55)
392
483
404
128
652
1 407
Reported EBIT
Items excluded from EBIT:
Unrealized derivative effects
Underlying EBIT
Pro forma figures before Q4 2013
* Historical revenues have been reclassified
** Negative figures represent a net cost to be added to get from reported EBIT to Underlying EBIT
128
Investor Relations in Hydro
Pål Kildemo
Head of Investor Relations
t: +47 970 96 711
e: [email protected]
Next events
First Quarter Results
April 27, 2016
Olena Lepikhina
Investor Relations Officer
t: +47 96853035
e: [email protected]
129
For more information see
www.hydro.com/ir