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Lessons learned, building for the future

In our first year as a fully integrated and truly global aluminium company, we showed encouraging progress in designing, developing and delivering aluminium products and solutions worldwide. But 2018 was also heavily affected by the production embargo at our alumina refinery Alunorte in Brazil.

2018 was the year our new business area Extruded Solutions was financially and operationally fully integrated in our now 36,000-strong Hydro family. It has added competence, assets and customers in key downstream segments across all continents, in line with our ambition to become a better, bigger and greener company.

The Karmøy technology pilot has been ramped up to produce the world’s most climate and energy-efficient primary aluminium, we have decided to upgrade the Husnes plant, delivered better results from remelters, secured future renewable power sourcing, invested in selective downstream projects such as extrusion capacity for the US automotive market and improved performance at the new automotive line in Germany.

At the same time, 2018 stands out as the most demanding year for me as president and CEO of Hydro. We have learned from the Alunorte situation – both with regards to our operational activities inside the fence of Alunorte, as well as how local communities surrounding our operations regard us as a neighbor. Through dialog with our local communities, we realize that we had not lived up to their expectations or our own ambitions. Hydro can only succeed as a company if the societies around us are viable.

The Alunorte situation

The impact of the rainfall event in Barcarena, Brazil, in February 2018, has been thoroughly investigated through public agencies, professional reports from internal and independent third-party as well as public hearings. Environmental authorities have confirmed that there were no leaks or overflow from Alunorte’s bauxite residue deposits.

However, we did recognize a need to strengthen the robustness of the plant, and we have increased water treatment capacity to prepare the plant for future climate and weather changes. Our clear ambition is to make Alunorte the benchmark in our industry, ensuring sustainable operations and social development in the communities around us.

Technical and social agreements with the authorities with clear commitments have been negotiated and concluded, and in addition we have promised to invest in social projects and capacity building through the Sustainable Barcarena Initiative over the next 10 years.

We have concluded a broad climate risk and impact assessment of Hydro plants worldwide, as part of our measures to increase resilience toward future effects of climate change.

Better, Bigger, Greener

The curtailment at Alunorte has weakened our financial results and progress of our improvement program. In addition, different tariffs and sanctions have influenced global markets and trade flows over the past year, also affecting our industry.

But as the metal of the future continues to find its way into new applications, demand growth remains firm and future prospects look promising.

More and more of our aluminium is used in automotive applications, light-weighting transportation and reducing carbon emissions in the user phase. Hydro has become one of the world’s leading suppliers of building systems, including energy-efficient roofs, façades and windows solutions. We delivered our first physical metal in the series Hydro 4.0 and Hydro 75R, with a documented low-carbon footprint and record-high recycled content of post-consumer scrap. Our revised Hydro Way and visual identity have been well received internally and externally, boosted internal engagement and collaboration and given Hydro a unified face and voice toward our 30,000 customers worldwide.

We continue our efforts to solve equipment design issues that have delayed the ramp-up of the new Used Beverage Can (UBC) recycling line in Germany. We are also dealing with increased raw material costs and some reduced margins that are offsetting improvements, including restructuring costs at our two recently acquired extrusion plants in Brazil.

Aluminium is a key building block for the low-carbon, circular economy. A brand new fully-electric car ferry to service a 12.5-kilometre fjord crossing in western Norway can serve as an example of the potential for new solutions. Hydro has delivered the rolled and extruded aluminium necessary to lightweight the ferry to enable its electric operations. And we have indirectly taken part in delivering the 3 MWh battery pack that powers the vessel through our 25 percent stake in Corvus Energy. I am convinced that the world will need – and soon will see – more of this kind of innovative and greener transport solutions, enabled by aluminium.

Care, Courage, Collaboration

We marked our new chapter by modernizing our values. We are still the same purpose-driven company aiming to create a more viable society, and our contribution is to help engineer the future and lightweight our planet through innovative and sustainable aluminium products and solutions. We aspire to become better, bigger and greener through continuous improvement of existing operations, selective growth and expansion, and setting new standards within the global aluminium industry. And the values Care, Courage and Collaboration are our guidelines for the way we work to achieve it.

Our performance on safety in 2018 missed our targets. It was with great sorrow that I got the news that an employee of a contracting company died while working for Hydro, at Extruded Solutions in Hungary, in November 2018. At the same time, 77 of our sites were injury-free in 2018, demonstrating that half of all our production facilities don’t just believe that zero is possible – they are doing it and leading the way.

The difference between injury free and a serious injury can often be measured in millimeters, or in milliseconds. We must improve our abilities by learning from all incidents, share our learning from our best practices and bestperforming colleagues, focus on prevention of fatalities and serious injuries – and always strive to make our workplace safer.

Our employees are by far Hydro’s most important asset, and I would like to extend my gratitude to all our 36,000 engaged employees for solving challenges and seizing opportunities and making Hydro perform and improve.

Being engaged in the entire aluminium value chain provides advantages that are unmatched by our global peers. By tracking each step along the way, we are able to document and be transparent about our sustainability practices. As part of taking responsibility, and to contribute to sustainable development, we have taken part in developing the standards of the Aluminium Stewardship Initiative. The first Hydro plants have already received certification, and we are on track with our plan to achieve certification along the entire aluminium value chain from mine to recycling in the coming months.

Hydro is a signatory to the UN Global Compact and the Task force on Climate-related Financial Disclosure (TCFD). Hydro was a co-founder of the World Business Council for Sustainable Development, and a member of the International Council on Mining and Metals (ICMM). Hydro became aluminium sector leader in 2018 on the Dow Jones Sustainability Indices and is included in the UN Global Compact 100 and the FTSE4Good list.

Technology and sustainability

If the global climate challenge is our biggest challenge, technological advancement is our greatest opportunity.

We are pushing the laws of nature to achieve more energyefficient electrolysis. We utilize digitalization, big data and artificial intelligence to optimize and automate processes. We tailor-make specific aluminium properties on the atomic level to innovate new products and solutions that reduces emissions in the user phase.

In short, by bringing to life the unique qualities of aluminium, we address both the greatest threat and opportunity of our time.

Svein Richard Brandtzæg

CEO and President