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Capital Markets Day 2011: Leading performance

With considerable long-term positions in the area of bauxite and aluminum in this world of limited resources, with ambitious cost improvement programs, implemented throughout the production chain, and with the Qatalum foundry plant in full operation, Hydro currently occupies a position cutting edge performance in the aluminum industry.

"Despite the current financial turmoil, the long-term prospects in the aluminum sector remain very promising and I am strongly encouraged by the intense development of Hydro's operational performance," said Hydro President and CEO, Svein Richard Brandtzæg .

"Due to our solid financial position and the ability to take proactive corrective measures, we intend to emerge even stronger from this short period of uncertainty and further increase our industrial position regarding the metal of the future," says Brandtzæg.

Completed the transaction in Brazil in 2011, which revolutionized the company, Hydro is now a fully integrated aluminum company, with world-class assets in bauxite mining and alumina refinement operations, which point to considerable operational improvements in these nines months since they became part of Hydro.

Now, with the complete production chain, from bauxite to the manufacture of products, and, in a long-term perspective, a solid base in aluminum, Hydro also reached, in September, full production capacity at Qatalum, a the most advanced aluminum factory with the largest value-added foundry in the world, located in an advantageous region in terms of logistics.

The consumer's mood was negatively affected by the current macroeconomic uncertainty, including the national debt situation in Europe, the weaker economic outlook for the United States and the slowdown in growth in emerging markets, leading to a decline in aluminum prices and weaker end markets.

Responding vigorously to this situation of financial uncertainty, Hydro has implemented several proactive improvement measures throughout its production chain: Metal Primário's USD 300 per ton improvement program is developing as planned and in accordance with the 2013 completion plan and the flexible remelting system have been used to satisfy less demand, seen after the summer.

"Continuous improvement is a central activity in all business areas, to put Hydro at the forefront of performance. Our operating model has already delivered impressive results in the Bauxite & Alumina business area and our solid capacity operating allows our downstream businesses to create new business opportunities through technological leadership and innovation, "says Brandtzæg.

The worldwide demand for aluminum has grown significantly in the last two years, increasing 19% in 2010 and 7% in 2011. Growth outside China is expected to continue in 2012, albeit at a slower pace of 3-5% . The essence of the aluminum business remains promising - due to the many positive qualities of the metal, including its light weight and the possibility of recycling it - and there are expectations that the global aluminum market will grow steadily over the long term.

Some highlights of Hydro's Capital Markets Day:

  • Hydro's strategically important assets in the Bauxite & Alumina area have proven to have solid operational improvements since its acquisition in the first quarter of 2011. The implementation of Hydro's production system remains a central activity, which has already yielded improvements significant.

  • In a world of limited resources, Hydro will try to take full advantage of the potential of its position in the area of bauxite and alumina, which may be even more pronounced with the CAP and Paragominas projects. As part of this strategy, Hydro intends to take advantage of this favorable position when considering commercial opportunities and growth possibilities for the foundry portfolio.

  • The cash-cost improvement program of USD 300 per ton in Hydro's exclusive holding companies is on track, with completion scheduled for the end of 2013. Expected to achieve a real cost improvement of USD 200 per ton until the end of 2011 and another USD 100 per ton until the end of 2013. Currently, the industry is under pressure, due to the costs of raw materials and the strengthening of currencies, a reality that, on the one hand, decreases the savings made by the improvement program and, on the other hand, underlines the importance of the measure taken.

  • The Qatalum foundry plant reached full production capacity in September 2011, completing a USD 5.8 billion project. Qatalum is currently producing 600,000 tonnes per year, slightly above its nominal capacity, and its volumes of value-added products are leading Hydro to gain increasing market positions in the United States and Asia. The focus in 2012 will be on streamlining operations and obtaining a cost level of around USD 1,400 - 1.500 per ton, under market conditions in 2010.

  • In this climate of economic uncertainty with high levels of volatility, Hydro exudes financial strength, with only NOK 0.1 billion of net debt and with the ambition to maintain its financial flexibility and its investment grade rating. Capital expenditures are expected to remain at NOK 3.5 billion in 2012, of which approximately NOK 1.0 billion is related to Brazilian assets acquired from Vale.

  • Hydro presents three scenarios for the profit potential on Capital Markets Day. The scenarios are not forecasts, but represent the profit potential based on selected aluminum prices and exchange rates between the Norwegian krone and the US dollar, using sensitivity analysis. All revenues not related to the London Stock Exchange (LME in English) and costs and other currencies were kept constant and the proforma EBITDA for the last four quarters was used as a basis. All three scenarios indicate EBITDA significantly above capital expenditures, illustrating Hydro's cash-generating ability.
This text is machine translated. To view the original Portuguese text, click on PT on the top right of this window

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