Norsk Hydro - Capital Markets Day 2011: Performance frontrunner
With substantial long positions within bauxite and alumina in a resource-
constrained world, ambitious cost improvement programs in place throughout the
value chain and the highly competitive Qatalum smelter in full operation, Hydro
is now positioned as a performance frontrunner within the aluminium industry.
"The long-term prospects of aluminium remain very promising despite the current
economic turbulence, and I am highly encouraged by the strong development of
Hydro's operational performance" says Hydro's President and CEO Svein Richard
"With our solid financial position and ability to make proactive corrective
measures, we aim to come strengthened out from this period of uncertainty and
further improve our relative industry position within the metal of the future,"
Hydro concluded its transforming transaction in Brazil in 2011, creating a fully
integrated aluminium company with world-class assets within bauxite mining and
alumina refining that have shown considerable operational improvements in the
nine-month period since becoming part of Hydro.
Now with a complete value chain from bauxite to fabricated products and strong
fundamentals for aluminium in a longer-term perspective, Hydro also saw Qatalum
reaching full production in September, a state-of-the-art smelter with the
world's biggest value-added casthouse in a logistically advantageous region.
With the current macroeconomic uncertainty, including the sovereign debt
situation in Europe, a slow recovery in the US economy and slowing growth in
emerging markets, the consumer sentiment has been negatively affected, which in
turn has led to weaker aluminium prices and softer end-markets.
In a forceful response to the uncertain economic environment, Hydro has
implemented several proactive improvement measures across the value chain. The
USD 300 per mt improvement program within Primary Metal is developing as planned
and in accordance with the 2013 completion target, while Hydro's flexible
remelting system has been utilized to meet the lower demand seen after the
"Continuous improvement is a core activity within all business areas to
establish Hydro as a performance frontrunner. Our operational model has already
given impressive results in the Bauxite & Alumina business area, and our strong
operational capabilities enable our downstream business to create new business
opportunities through technological leadership and innovation," BrandtzÃ¦g says.
World aluminum demand has grown strongly over the last two years, rising 19
percent in 2010 and around seven percent in 2011. Growth outside China is
expected to continue in 2012, although at a slower pace of around 3-5%.
Aluminium fundamentals remain promising due to the metal's many positive
qualities, including its light weight and recyclability, and the global
aluminium market is expected to show solid long-term growth.
Hydro's Capital Markets Day includes the following highlights:
* Hydro's strategically important assets within Bauxite & Alumina have
delivered solid operational improvements since the acquisition in the first
quarter of 2011. The implementation of Hydro's production system continues
as a core activity and has already given significant improvements.
* Hydro will seek to capture the full potential of its long position in
bauxite and alumina in a resource constrained world, which may be further
strengthened through the CAP and Paragominas projects. As part of the
strategy, Hydro aims to take advantage of this favorable position by
considering commercial opportunities and possibilities of growing the
* Hydro's USD 300 per mt cash-cost improvement program for its fully-owned
smelters is on track, with completion planned by the end of 2013. A real-
term accumulated cost improvement of USD 200 per mt is expected to be
realized by the end of 2011, and a further USD 100 per mt is targeted by
end-2013. The industry is facing raw material cost pressure and
strengthening of currencies, offsetting the savings of the improvement
program and underpinning the importance of the measures taken.
* The Qatalum smelter reached full production in September 2011, concluding
the USD 5.8 billion project. Qatalum is now producing at 600Â 000 mt per
year, slightly above its nameplate capacity, and its volumes of value-added
products are leading to growing market positions in the US and Asian markets
for Hydro. The focus in 2012 will be on streamlining operations and
achieving a cost level of USD 1400-1500 per mt at 2010 market conditions.
* In the current uncertain economic climate with high levels of volatility,
Hydro is in a robust financial position with only NOK 0.1 billion in net
debt and with an ambition of maintaining its financial flexibility and
upholding its investment-grade rating. Sustaining capital expenditures are
expected to remain at NOK 3.5 billion in 2012, of which approximately NOK
1.0 billion relates to Brazilian assets acquired from Vale.
* Hydro presents three scenarios for earnings potential at the Capital Markets
Day. The scenarios are not forecasts, but represent earnings potential based
on selected aluminium prices and NOK/USD exchange rates using sensitivities.
All non-LME related revenues and costs and other currencies are kept
constant, and the last four quarters pro-forma underlying EBITDA have been
used as baseline. All three scenarios indicate EBITDA significantly above
sustaining capital expenditures, illustrating Hydro's cash generation
Investor contact in Hydro
Contact Â Â Stian Hasle
Cellular Â Â +47 97736022
E-mail Â Â Â Stian.Hasle@hydro.com
Press contact in Hydro
Contact Â Â Halvor Molland
Cellular Â Â +47 92979797
E-mail Â Â Â Halvor.Molland@hydro.com
Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â *********
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. Â 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. Â 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. Â Hydro disclaims any obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
This information is subject of the disclosure requirements pursuant to section
5-12 of the Norwegian Securities Trading Act.
CMD - Primary and Finance:
CMD - Market and Bauxite and Alumina :
CMD - Hydro:
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Norsk Hydro via Thomson Reuters ONE