Aluminium: Delivering improvements as announced
 Jon-Harald Nilsen |
| |
(Dec. 11, 2003) "We have delivered greater cost improvements than announced for 2003, and will take further steps in 2004," said executive vice president Jon-Harald Nilsen at Hydro's Capital Markets Day in Oslo on Thursday.
Hydro Aluminium's target for 2004 is a "normalized" CROGI of between nine and ten percent. This will mainly be achieved through the current improvement programs, cutting production costs throughout the value chain, increased volumes from expansions and upgrades of production plants and higher income from the market.
Jon-Harald Nilsen mentioned the expansion of Alunorte in Brazil and increased deliveries from the new aluminium plant at Sunndal as examples of operations that would contribute to higher volumes.
Among the operations that were sold in 2003 were Flexible Packaging and 50 percent of VAW-Imco. Both were part of the VAW acquisition.
With reference to the market situation, he pointed out that the global metal balance in 2003 had been better than expected. Inventories are now estimated at 300,000 tonnes, around half the increase forecast a few months ago.
"The semi-manufacture market has been weaker than expected both in the US and Europe. This has resulted in pressurized margins and lower earnings. An extensive restructuring has been carried out in the extrusion operation in the US, and in this connection we decided to withdraw from product and customer segments where the margins were too low. Earnings have been low in the whole of the European rolling mill industry. An extensive restructuring is in progress, which should improve this situation. Hydro is taking proactive steps to improve the relative cost position, at the same time as we steer our portfolio towards high margin areas, such as litho plates, which are delivered to the graphics industry."
Nilsen refered to the Homestrand operation as one example of an efficient turnaround operation in the rolling area during the course of 2003.
"Through sharp focus on costs, manning reductions, product optimization and strong emphasis on exchange of competence, we have achieved a satisfactory pace of improvement," he said. But he added that there is still much to be done before the operation meets Hydro's profitability requirements.
Hydro has a leading position in the extrusion market in Europe, around 30 percent ahead of Alcoa, which has second place.
"The profitability of the extrusion operation has on the whole exceeded Hydro's profitability target. We have developed a strong performance culture, local ownership of results and local service of markets, and we have developed good customer relations through collaboration and innovative product development."
Nilsen pointed out how Hydro benefits from its global competence, for example through using experience and competence in the European extrusion operations to build up and strengthen production and market position in the US.
"The result is a significant improvement in the operation of the North American units, although they have produced low financial results due to the weak market and extraordinary losses this year. Hydro still has weak results in the Automotive sector, especially within the production of structural extruded automotive parts, but can register significant improvements in operations, for example at Raufoss Structures and the casting company Fundo in Sweden.
With regard to priorities for 2004, Nilsen highlighted continued focus on costs and on retaining and strengthening Hydro's leading position in Europe, at the same time as the company would continue to cultivate its unique portfolio.
| 