Norsk Hydro ASA · OSL:NHY
Norsk Hydro ASA — Investor Day (January 2002)
36 slides from Norsk Hydro ASA's investor day presentation, Jan 8, 2002
Slide 1: Capital Markets Day Hydro Aluminium
Capital Markets Day Hydro Aluminium Executive Vice President Jon-Harald Nilsen Norsk Hydro ASA Oslo, January 8, 2002
Slide 2: What we said and what we have done
2 What we said and what we have done Objectives in Dec. 00 Actions taken in 2001 ● Participate in industry ● VAW -acquisition restructuring ● Technal Building Systems ● Magnesium restructuring ● Continue to leverage our ● Sunndal-expansion strengths ● Expansion Søral, Slovalco, Alunorte ● Continue t
Slide 3: Hydro's stated ambition in Aluminium
3 Hydro’s stated ambition in Aluminium A profitable position among the world’s top three integrated aluminium companies 33047_4 - 01.2002 - * 3 - Hydro Media
Slide 4: Hydro Light Metals and VAW (2000 - figures)
4 Hydro Light Metals and VAW (2000 - figures) Hydro Light Metals VAW Gross revenues 6,400 mill Euro 3,700 mill Euro EBITDA 680 mill Euro 450 mill Euro Flexible Other pack. Rolled 10% 13% products 5% Cas tings Metal 7% 34% Extrusion Metal 27% 58% Ex trusion Rolled 6% produc ts 40% Hydro Light Metals
Slide 5: The new entity: Hydro Aluminium Pro Forma 2000 combined
5 The new entity: Hydro Aluminium Pro Forma 2000 combined HAL (Pro Forma) Gross revenues 9,700 mill Euro Combined sales Hydro Aluminium EBITDA 1,130 mill Euro Flexible pack. Other Other Europe Asia/Pacific Other 4% 2% 12% 7% 9% Norway 2% North America 16% Rolled products Metal 18% 49% EU(ex. Germany
Slide 6: Hydro — VAW: An attractive combination
6 Hydro — VAW: An attractive combination Attractive financials Innovative global force More value for customers Significant synergies and value creation Rapid integration 33047_4 - 01.2002 - * 6 - Hydro Media
Slide 7: Transaction highlights
7 Transaction highlights ✔ Norsk Hydro acquires all shares in VAW AG from E.ON ✔ Total consideration is 2 645 mill Euro (21.2 bn NOK)1) including net interest bearing debt of 757 mill Euro (6.1 bn NOK) ✔ In addition Norsk Hydro takes over 450 mill. Euro (3.6 bn NOK) unfunded pension obligations ✔ Ex
Slide 8: Financial impact for Hydro Aluminium
8 Financial impact for Hydro Aluminium ✔ Pro Forma first nine months 2001: ➤ EBITDA: + 100% ✔ Synergies plus Hydro Aluminium overhead cost improvement project will reduce annual cost by 200 mill Euro (1.6 bn NOK) in 2004 33047_4 - 01.2002 - * 8 - Hydro Media
Slide 9: Creating a “top-tier” company
9 Creating a “top-tier” company Total production, thousand tonnes, 2000 Europe Global: World Integrated Aluminium Companies 1200 1000 4500 4000 800 3500 3000 600 2500 400 2000 1500 200 1000 500 0 0 W y an r oa y W oa n s se ne A ne ca ru A lc lc lc V ai hi Al +V Co i A A A ch K + ec ro Pe ro P d yd
Slide 10: The leading company in Europe
10 The leading company in Europe Europe PRIMARY METAL EXTRUSION AUTOMOTIVE METAL PRODUCTS ROLLED PRODUCTS 33047_4 - 01.2002 - * 10 - Hydro Media
Slide 11: Significant value creation opportunities in North America
11 Significant value creation opportunities in North America ● High quality smelter capacity (Alouette) ● High quality extrusion assets ● #3 in Extrusion North America ● Roll-out of asset-light PRIMARY METAL EXTRUSION / metal supply concept METAL PRODUCTS ● Leverage Latin-American AUTOMOTIVE metal s
Slide 12: Stronger position in Asia/Pacific's growing markets
12 Stronger position in Asia/Pacific’s growing markets ● Low-cost smelter capacity ● Foothold in rolling (Malaysia) ● Foothold in extrusion (China) ● Low-cost brownfield potential ● Opportunities for metal swaps ● Roll-out of asset-light metal supply concept Asia and Australia PRIMARY METAL EXTRUSIO
Slide 13: A full range aluminium company
13 A full range aluminium company Global Volumes 2000 Hydro VAW LT Contracts Alumina* Hydro remelt and 3rd party** Primary production Downstream 0 500 1000 1500 2000 2500 3000 Thousand tonnes * Aluminium equivalent. VAW metallurgical alumina only ** Remelt + Hydro non-equity primary: Contracts to se
Slide 14: Leadership in global market segments
14 Leadership in global market segments Foil Litho Building systems Magnesium alloys Structures Heat Transfer Engine castings 33047_4 - 01.2002 - * 14 - Hydro Media
Slide 15: Leverage innovative industrial and commercial concepts
15 Leverage innovative industrial and commercial concepts - Metal supply concept - recycling ✔ Casthouse network increases ✔ Streamlining production ✔ Possible to expand capacity in VAW’s casthouses Improved ✔ Logistics improvements margins ✔ Access to broader and bigger scrap base ✔ Increased use o
Slide 16: A major step forward — Rolled Products
16 A major step forward — Rolled Products Lithographic sheet Beverage Food can sheet canstock Others 33047_4 - 01.2002 - * 16 - Hydro Media
Slide 17: Broader products offering — Automotive
17 Broader products offering — Automotive Approx. sales from Hydro + VAW Structures 300 mill Euro Heat Transfer 300 mill Euro Casting 300 mill Euro Alloys: Aluminium & Magn. Sheet & Sheet Products Meridian (49%) 150 mill Euro 33047_4 - 01.2002 - * 17 - Hydro Media
Slide 18: Organisational structure and first level management identified
18 Organisational structure and first level management identified (effective from after closing) CO-CEO Integration Hydro Aluminium Integration Team Helmut Burmester CEO: Jon-Harald Nilsen Oslo Support functions Primary Metal Rolled Extrusions Automotive North Flexible Metal Products Products Americ
Slide 19: Overall integration philosophy and approach
19 Overall integration philosophy and approach Transform and develop Hydro Aluminium into an integrated and global entity built on best practice and strength from both companies Business Governance Organization People concepts • Leverage best • Align with Hydro • Use the Hydro • Equal from both corp
Slide 20: Hydro — VAW: An attractive combination
20 Hydro — VAW: An attractive combination Attractive financials Innovative global force More value for customers Significant synergies and value creation Rapid integration 33047_4 - 01.2002 - * 20 - Hydro Media
Slide 21: Present situation & Going Forward
21 Present situation & Going Forward 33047_4 - 01.2002 - * 21 - Hydro Media
Slide 22: The economic downturn in 2001 has lead to substantial drop in shipments
22 The economic downturn in 2001 has lead to substantial drop in shipments Fall in aluminium shipment largest drop in 20 years change over Primary Al. apparent consumption and IP Western World previous year 16 % 14 % 12 % 10 % 8% 6% 4% 2% 0% -2 % -4 % -6 % Weighted IP W.W Al shipments W.W. -8 % -10
Slide 23: Recovery in downstream shipments in Europe is expected
23 Recovery in downstream shipments in Europe is expected Est. European rolled products shipments Est. European extrusion shipments annual annual change change (%) 5 (%) 5 4.5 4 3.8 3 2.5 3 1 1 1 1 -1 -1 -1.5 -3 -3 -4 -5 -5 1995-2000 2001 2002 2003-2005 1995-2000 2001 2002 2003-2005 Source: EAA, CRU
Slide 24: Longer term outlook positive
24 Longer term outlook positive Light weight of cars Construction Packaging (CO2) material 2.5-3% growth going Recyclability up to 90% forward Only 5% energy use in recycling 33047_4 - 01.2002 - * 24 - Hydro Media
Slide 25: The industry attractiveness has improved
25 The industry attractiveness has improved ✔ Healthy growth in demand ✔ Industry consolidation will continue ✔ High entry barriers ✔ Better up- and mid-stream supply and demand balance expected 33047_4 - 01.2002 - * 25 - Hydro Media
Slide 26: The industry structure
26 The industry structure Total consumption of aluminium, Western World Rolled Cast Extruded Other Products products products 5% 50% 20% 25% Degree of Casting integration: 10% 1000 mt Degree of Rolling integration, 80% 1000 mt Degree of Extrusion integration, 50% 7000 7000 6000 6000 5000 5000 Indepe
Slide 27: Clearly weaker financial performance for Light Metals in 2001
27 Clearly weaker financial performance for Light Metals in 2001 CROGI proxy % = EBITDA less tax*/Gross investment 10 % 9% 8% 7% 6% 5% Light metals Pechiney Alcoa Alcan 4% 1997 1998 1999 2000 3.Q annualiz. Assumed standard tax rate of 30 percent for all companies Source: Hydro 33047_4 - 01.2002 - *
Slide 28: Actions taken to improve performance
28 Actions taken to improve performance ✔ Decision to close Porsgrunn magnesium production ✔ Significant cost reduction programmes in SG&A ✔ Initiatives taken to compensate for lower volumes and margins ➤ Demanning of 350 employees in Extrusion. Capacity reduction of 10% ➤ Capacity reduction of 90.0
Slide 29: Substantial financial effects of main programmes 2002-2003
29 Substantial financial effects of main programmes 2002-2003 (full effect 2004) Mill.NOK Cost reductions EBITDA - investment projects 2500 Income increase Fixed and variable 2000 Fixed cost 1500 1000 500 0 Magnesium Hydro/VAW Investment Porsgrunn Optimize/SG&A Projects* * Projects : Including appro
Slide 30: Substantial reduction in manning
30 Substantial reduction in manning Manning 1800 1600 Hydro/VAW SG&A Magnesium 1400 1200 1000 800 600 400 200 0 Mid 2002 End 2002 End 2003 Expected effect approx. 1.2 - 1.4 bn NOK Net financial effect in 2002 will be negative due to upfront restructuring costs 33047_4 - 01.2002 - * 30 - Hydro Media
Slide 31: Magnesium restructuring
31 Magnesium restructuring 120 Gross investment Fixed costs Volume alloys ✔ Focusing on higher 100 margin alloys 80 ✔ Long term contracts - automotive 60 ✔ Asset-light metal supply concept 40 20 0 2001 2002(e) 2001 2002(e) 2001 2002(e) 33047_4 - 01.2002 - * 31 - Hydro Media
Slide 32: The way forward
32 The way forward ✔ Forceful integration of VAW and Technal ✔ Realise significant short term improvement potentials ✔ Successful restructuring of magnesium ✔ Execution of large projects 33047_4 - 01.2002 - * 32 - Hydro Media
Slide 33: Backup
33 Backup 33047_4 - 01.2002 - * 33 - Hydro Media
Slide 34: Hydro Light Metal — quarter by quarter
34 Hydro Light Metal — quarter by quarter EBITDA Mill NOK 2000 1500 1000 500 0 Aluminium Metal Production Aluminium Extrusion Other Light Metals Eliminations -500 1998 1999 2000 2001 Accumulated 4060 3760 5501 2845 33047_4 - 01.2002 - * 34 - Hydro Media
Slide 35: Effect of slowdown in the US has been extreme
35 Effect of slowdown in the US has been extreme Extrusion shipments 2000 -21% 1969 - 2000: 2.7% growth p.a. 000 tpa -20% 1500 -25% 1000 500 0 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2002E 33047_4 - 01.2002 - * 35 - Hydro Media
Slide 36: Safe harbour statement
36 Safe harbour statement In order to utilize the "Safe Harbor" provisions of the United States Private Securities Litigation Reform Act of 1995, Hydro is providing the following cautionary statement: This presentation contains certain forward-looking statements with respect to the financial conditi