Strategy and targets

Bauxite and alumina

Delivering on its ambitious improvement program, "from B to A", continues to be a key priority for Bauxite & Alumina in the coming year together with lifting production towards name-plate capacity. Focus on safe, cost-effective and stable operations will continue. Optimizing and enhancing the commercial value of our attractive sales portfolio will be an important item on our agenda. We will alsof continue our proactive approach to regulatory challenges including ICMS taxation by systematic dialogue with key stakeholders in Brazil.

2014 targets

  • Reduction in total recordable injuries per million hours worked by 20 percent to 2.8 for own employees and by 30 percent to 3.5 for contractors
  • Accelerate operational improvements
  • Deliver "from B to A" contribution of 600 MNOK
  • No reportable environmental incidents
  • Full implementation of grievance mechanisms for Hydro's activities in Pará, Brazil
  • Complete the implementation of the CSR stakeholder engagement and action plan as well as further development of social projects

2014 results

  • Reduction in total recordable injuries per million hours for own employees down 23 percent to 2.3 for own employees and 42 percent to 2.8 for contractor employees.
  • Improved annual production levels in Alunorte by 0.6 million mt and in Paragominas by 1.9 million mt compared to 2013
  • Delivered "from B to A" contribution of 700 MNOK on an annual basis
  • Achieved no reportable environmental incident
  • Grievance mechanism for Hydro's activities in Pará, Brazil implemented. Efforts ongoing to increase awareness of new mechanism among key stakeholders
  • CSR stakeholder engagement plan implemented and further developed as part of continuous improvement strategy
  • Enhancement to major social projects to increase positive impacts and results from the programs

 2015 targets

  • Reduction in total recordable injuries per million hours from 2.3 in 2014 to 2.0 in 2015
  • Increase annual production levels in Alunorte to 6.2 million mt and in Paragominas 9.9 million mt
  • Deliver "from B to A" contribution of at least 300 MNOK
  • No reportable environmental incidents
  • Enhance system for monitoring and evaluation of social project portfolio
  • Develop social indicators for Brazilian operations

Ambitions going forward

We are strongly committed to safety and to eliminating high-risk incidents in our operations. Going forward, we intend to capitalize on our strong position in bauxite and alumina in a resource constrained world. This will increase our attractiveness as a partner in new ventures and our ability to exploit other opportunities which may arise. Reducing our impact on the local environment is also an important objective going forward, including closing the gap between clearing for mining operations and reforestation.


Primary Metal

A key ongoing strategic focus for Primary Metal is the continuous improvement of the efficiency of our smelter system, while constantly addressing the cost challenges facing our business. We have a strong commitment to ensuring a safe work environment and a highly motivated and engaged work force. In order to secure the viability of our operations over time, we intend to focus on business opportunities that enhance our cost position. We will also maintain our technological leadership, which contributes to lower operating costs, reduced emissions, and ensures our attractiveness as a partner for world-class projects within an industry with sound long-term fundamentals.

2014 targets

  • Reduction of total recordable injuries per million hours worked (TRI) by 8 percent to 2.2
  • Strong cost discipline in all smelters with further improvements to offset cost inflation
  • Continue focus on operating capital
  • Further progress on joint venture USD 180 per mt improvement program
  • Maximize Qatalum cash generation and secure first-decile business operating cash cost position
  • Emissions of 1.58 mt CO2e/mt aluminium from electrolysis, down from 1.59 in 2013
  • Employee participation rate of 90 percent in My Way, Hydro's enhanced people performance and development system 
  • Continued reduction of employee exposure to work place hazards

2014 results

  • TRI improved 21 percent compared to 2013 with a reduction to 1.9
  • Further improvements achieved in fully owned smelters beyond USD 300 cost reduction program
  • Improved operating capital position reflected in a decline of net operating capital as a percentage of sales revenues
  • Global joint venture improvement program progressed further with USD 120 achieved by the end of 2014
  • Qatalum first decile business operating cash cost position secured. Dividend of NOK 0.9 billion paid in 2014 (Hydro share)
  • Emissions of 1.62 mt CO2e/mt aluminium from electrolysis, up from 1.59 in 2013
  • 90 percent of all employees participated in My Way or another appraisal dialog tool
  • Reduction of employee exposure to work place hazards by 5 percent or more at all production sites in 2014

2015 targets

  • Maintain total recordable injuries per million hours worked of < 2.0
  • Strong cost discipline with further targeted improvements for fully owned smelters
  • Continue focus on operating capital 
  • Further progress on joint venture USD 180 per mt improvement program
  • Emissions of 1.61 mt CO2e/mt aluminium from electrolysis, down from 1.62 in 2014
  • Continued employee participation rate of more than 96 percent in My Way, Hydro's enhanced people performance and development system 
  • Continued reduction of employee exposure to work place hazards

Ambitions going forward

Hydro has an ambition to expand its upstream activities while maintaining a strong emphasis on sustainable cost development. We will continue to focus on lean smelter operations, operational excellence and safety. The ongoing development of next-generation technology, HAL4e, will provide a strong technological basis for continued organic growth, increased efficiency and lower emissions.

Metal Markets

Hydro's flexible and extensive multi-sourcing system enables us to rapidly adjust our remelt production to market demand. We intend to capitalize on this flexibility going forward to secure our market position and create additional value on top of LME for our production capacity. We will also exploit this competitive advantage to optimize our casthouse utilization and margin contribution. Global optimization of Qatalum sales volumes continues to be key priority.

2014 targets

  • Safe operations with a return to reduction trend in TRI rate
  • Strengthen capability for use of post-consumed scrap 
  • Full-scale testing of Adjustable Flexible Mould technology (AFM) to target automotive sector in sheet ingot market
  • Shifting product mix towards higher premium alloy mix
  • Maintain strong focus on risk management and capital discipline

2014 results

  • Increased use of shredded post-consumed scrap in own remelters through utilization of tolling agreements with external shredder facilities
  • Full-scale testing of AFM technology completed successfully at Høyanger 
  • Increased sales volumes of higher premium alloy products 
  • Strong focus on risk management and capital discipline maintained

2015 targets

  • Progress with implementation of key product strategies
  • Progress on implementation of new AFM casting technology during 2015 with completion in 2016
  • Further increase in usage of post-consumer scrap
  • Further increased sales of recycling-friendly alloys
  • Maintain strong focus on risk management and capital discipline

Ambitions going forward

Our vision is to be the preferred partner for casthouse products and services. We will strengthen our focus on product premium margins utilizing the flexibility of our multi-sourcing system to manage our global product portfolio in an optimal way. We will continue our strong focus on safety and risk management, and maintain firm discipline on operating costs and capital expenditures.

Rolled Products

Securing a strong market position and increasing returns continue to be key priorities in our Rolled Products business operations. Differentiation through innovation in products, processes and services is an important means to grow our market share and margin contribution. Measures aimed at increasing efficiency and reducing costs will continue together with efforts to reinforce safe operations and sustainable business practices.

2014 targets

  • Reduction of total recordable injuries per million hours worked (TRI) by 20 percent
  • Manage margin and shipment level in uncertain Euro-zone and macro environment
  • Deliver targeted improvement in the Climb program through product portfolio development, efficiency improvements and cost reductions
  • Further performance enhancements in delivery reliability and lead time
  • Capitalize on innovation capabilities achieving one step change during 2014

2014 results

  • Despite new initiatives and reinforcement of ongoing measures, we did not meet our targeted reduction in TRI rate which increased compared to 2013 
  • Some growth in shipments achieved despite a weakening market in the second half of 2014, however, average margins declined somewhat
  • Achieved approximately NOK 600 million of annual improvements in the Climb program compared to cost and revenue levels in 2011, however, somewhat lower than target for the year 
  • Lead time performance improved due to the implementation of innovative supply chain solutions, however, delivery reliability declined somewhat 
  • Step changes realized with the introduction of 5 µm record-thin gauge foil and development of new high-formability automotive alloys

2015 targets

  • Reverse negative trend in TRI and bring rate down by 30 percent
  • Realize targeted Climb improvements through further process as well as cost improvements and cost initiatives
  • Improve delivery reliability compared to the two previous years
  • Start of production at our new UBC recycling line 
  • Realize minimum one step change related to alloy, product or process development supported by our innovation drive
  • Further increase awareness of competition regulations though training across organization 
  • Progress on implementation of enhanced Rolled Products Business Partner Procedures

Ambitions going forward

We are committed to safety and to eliminating accidents in our operations. We aim to increase the returns of our business operations, concentrating on operational excellence and involving all employees in continuous improvement. We will pursue growth opportunities and keep our focus on innovation and technology to sharpen our competitive edge.

Energy

Hydro is the second-largest power plant operator in Norway, with more than 100 years of experience in hydropower production. We intend to develop the value of our Norwegian assets and to use our extensive energy competence to secure competitive energy sources for our global activities. Operational excellence and on-going improvement continue to be a key priority to secure cost effective, safe and reliable production.

2014 targets

  • Continued strong focus on safe operations with target of zero recordable injuries for 2014
  • Cost and improvement focus in operations and projects, including capturing value potential in physical markets
  • Enhancing value potential from the Vigeland acquisition
  • Continue maturing new equity growth options supported by electricity certificates
  • Continued work on securing competitive energy sourcing for aluminium operations
  • Contribute to improved energy solutions and strategic options in Brazil

2014 results

  • Maintained a strong focus on safe operations, however one recordable contractor injury (TRI) occurred in 2014
  • Increased activity in physical power markets. Maintained focus on cost related to upgrade projects, Rjukan upgrade nearing completion 
  • Vigeland fully integrated into Hydro Energy 
  • New equity growth options further matured. Build decision taken for small power plant Midtlæger in the Røldal-Suldal power system
  • Secured power contracts at competitive prices for our Norwegian smelters securing 2.7 TWh annually for the period 2021 – 2030. 
  • High activity in Brazil, focusing on ensuring competitive power cost for the Brazilian operations and maturing long term energy options
    2015 targets 
  • Operational excellence, continued strong emphasis on HSE and security in projects as well as in operations with no recordable injuries
  • Further efforts on securing competitive long term power sourcing for the aluminium operations including the potential pilot plant at Karmøy 
  • Progress construction of small hydropower plants and continue efficiency improvements in existing plants
  • Strengthen local presence in Brazil to secure competitive energy supplies for our alumina refining and aluminium smelting operations and exploit commercial opportunities in the Brazilian power market

Ambitions going forward

Our goal is to develop our equity power position and capitalize on our energy competence, supporting the sourcing of power to our operations on a global basis.

Viability

2014 targets

  • No fatal accidents. Total recordable injuries per million hours down by 16 percent to 2.85
  • Emission of 1.58 CO2e/mt aluminium from production
  • The two main recycling projects in Germany and Luxembourg shall both be within schedule and total cost estimate
  • Grievance mechanisms for Hydro's activities in Pará, Brazil fully implemented
  • Roll-out of "My Way," the revised people performance and development process to 35 percent of all employees

2014 results

  •  No fatal accidents. Total recordable injuries per million hours down by 6 percent to 3.19. Target not reached 
  • Emission of 1.63 mt CO2e/mt aluminium from production. Target not reached
  • The two main recycling projects in Germany and Luxembourg on track and within cost towards start-up end 2015 / beginning 2016
  • Grievance mechanisms for Hydro's activities in Pará, Brazil implemented. Work needed to make it better known
  • Roll-out of "My Way", the revised people performance and development process to 32 percent of all employees. Target not reached 

2015 targets

  • No fatal accidents. Total recordable injuries per million hours down by 12 percent to 2.8
  • Emission of 1.61 mt CO2e/mt aluminium from production
  • The two main recycling projects in Germany and Luxembourg shall both be within schedule and total cost estimates
  • Implementation of Hydro's new system for planning, monitoring & evaluating social projects in Brazil
  • Roll-out of My Way to further 40 percent of all employees

Strategic goals 2018-2020

  • No fatal accidents. Total recordable injuries per million hours below 2
  • Become climate neutral by 2020
  • Recycling of 250,000 metric tons post-consumed scrap and increasing the share of recycled metal in our production
  • New mining areas equal reforested areas by 2020. The long term ambition is no net loss
  • All suppliers are committed to comply with Hydro's CSR principles
  • Hydro scores in the top 25 percent on the employee engagement index in Hydro Monitor

Includes combined performance for Primary Metal and Metal Markets.

Emissions targeted for 2015 include Husnes and about 50,000 mt of curtailed capacity in Sundal that is expected to be in operations by the middle of 2015.

See Strategy and targets for Primary Metal for combined TRI results for 2014 and target for 2015.

The reported target for 2014 in Hydro's Annual Report 2013 was 1.56 mt CO2e/mt aluminium from production. Due to changes in the greenhouse gas potential factors for C2F6 and CF4, the targets have been recalculated accordingly.
 

  • Annual report 2014

  • Annual report 2014

  • Annual report 2014

  • Annual report 2014

  • Annual report 2014

  • Annual report 2014

  • Annual report 2014

  • Annual report 2014

  • Annual report 2014

  • Annual report 2014


Updated: September 13, 2016