- Managing cyclicality through continued financial strength and flexibility
- Strengthening competitiveness, based on improvements, high-grading, technology and innovation
- Capitalizing on being integrated, adding value through combining competencies
“With Sapa becoming our new Extruded Solutions business area, Hydro is now integrated across the value chain from mining to advanced products and solutions and with leading positions within most markets and regions,” says President and CEO Svein Richard Brandtzæg.
“We have 35,000 dedicated, motivated and competent people across 150 production facilities in around 40 countries, and more than 30,000 customers worldwide that are now benefitting from an improved customer offering and even stronger capabilities within technology, R&D, innovation and product development,” Brandtzæg says.
Hydro remains committed to ensuring capital discipline and a strong balance sheet, and the inclusion of the new Extruded Solutions business area will further strengthen the company’s cash flow.
Positive long-term outlook
The long-term outlook for aluminium as a light, strong and infinitely recyclable material continues to be positive, with global demand growth for primary aluminium estimated at 2-3 percent per year for the next 10 years. Global semis demand growth is projected at 3 percent and recycling at 3-4 percent per year over the same period.
“We see the global aluminium supply-and-demand for 2017 and 2018 to be fairly balanced, with the deficit in the world accelerating while China continues to be in an oversupply situation. Consequently, the main uncertainty in this scenario relates to what extent China will act on its stated intention to reduce output over the winter due to environmental concerns,” Brandtzæg says.
Within this continued demand-growth for aluminium, Hydro continues to focus on advanced, high-margin segments and product innovation downstream, while upstream the focus remains on cost efficiency and process technology – in line with the strategic direction Better, Bigger, Greener, now updated with even more ambitious targets.
A new chapter for Hydro
In 2017, Hydro delivered on several key ambitions, confirming the integrated model, increasing competitiveness and strengthening the capability for further growth. In addition to adding Extruded Solutions as a new business area in October, Hydro inaugurated Rolled Products’ new automotive line in Germany in May and is on track for first metal from Primary Metal’s Karmøy technology pilot in Norway by year-end.
Hydro is also launching today two new certified low-carbon products – 4.0 and 75R – as an extension to its industry-leading climate ambition of becoming carbon neutral from a life-cycle perspective by 2020.
“We are delivering on our strategy for high value creation across our long value chain, while at the same time remaining committed to our ambitious improvements drive, where we are increasing our overall improvement ambition for the period 2016-2019 to NOK 3 billion,” Brandtzæg says.
The upwards adjustment of Hydro’s overall improvement target is a result of Bauxite & Alumina lifting its ambition level by NOK 300 million while Rolled Products is lowering its 2019 target by NOK 200 million, caused by operational challenges and delayed ramp-up of the new automotive line and recycling facility for used beverage cans that are now being corrected.
Hydro is committed to disciplined capital allocation throughout the business cycle of aluminium, and the long-term sustaining capex guidance remains below depreciation even after being adjusted to around NOK 5.5-6.0 billion per year, with the inclusion of Extruded Solutions. Shareholder returns continue to be a Hydro priority, with a dividend policy of returning 40 percent of net income over the cycle.