Investor presentation

Transcription

1 2012 Investor presentation February 2013 (1)

2 Table of contents Company overview 3 Market outlook 14 Forth quarter results Business overview 48 > Bauxite & Alumina 49 > Primary Metal 58 > Metal Markets 62 > Rolled Products 65 > Extruded Products 69 > Energy 74 Additional information 79 Cautionary note Certain statements included within this announcement contain forwardlooking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management s plans, objectives and strategies for Hydro, such as planned expansions, investments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro s markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, as well as (i) statements preceded by expected, scheduled, targeted, planned, proposed, intended or similar statements. Although we believe that the expectations reflected in such forwardlooking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to: our continued ability to reposition and restructure our upstream and downstream aluminium business; changes in availability and cost of energy and raw materials; global supply and demand for aluminium and aluminium products; world economic growth, including rates of inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro s key markets and competition; and legislative, regulatory and political factors. No assurance can be given that such expectations will prove to have been correct. Hydro disclaims any obligation to update or revise any forwardlooking statements, whether as a result of new information, future events or otherwise. (2)

3 (3) Company overview

4 Hydro: a resource rich global aluminium company Based in Norway with operations in 40 countries employees Operating revenues* 2011: NOK 72 billion 2012: NOK 64 billion Current market capitalization NOK 54 billion/usd 10 billion Hydro underlying EBIT quarterly, NOK million (2 555) * Extruded Products classified as discontinued operations, and thereby excluded from revenues ** 2011 and 2012 reclassified (4)

5 Hydro s path towards global leadership Curtailing 26% of primary metal capacity Launching USD 300 program Announcing SAPA JV Creating the world s leading aluminium solutions provider Starting up Qatalum Acquiring bauxite and alumina assets (5) (5)

6 Hydro s value proposition Improve relative industry position Capitalize on raw material positions Maintain financial strength and flexibility Ensure competitive shareholder return (6)

7 Strong positions across aluminium value chain Raw materials processing and energy Primary aluminium production, marketing and recycling Aluminium in products Bauxite & Alumina Energy Primary Metal Metal Markets Rolled Products Extruded Products Bauxite capacity 10.8 million tonnes Expansion potential to 15.8 million tonnes Alumina capacity 6.3 million tonnes Expansion potential to 8.2 million tonnes first phase CAP Long-term sourcing contracts for bauxite and alumina Long-term power supply secured 9.5 TWh of renewable energy production in Norway 2.4 million tonnes primary capacity High LME and USD sensitivity Improving cost position Leading in technology 3.8 million tonnes (primary, remelt, recycling and cold metal) Expertise in materials Flexible system Strong marketing organization Risk management 1 million tonnes Margin business Regional business Close to customers Innovation Market leading in litho and foil 0.6 million tonnes Announced Sapa joint Venture, pending regulatory approval Market leading in Europe and within precision tubing 100% of volumes for assets that are fully consolidated and pro rata volumes for other assets. (7)

8 Aluminium is the metal of the future Lightweight 1/3 density of steel Recyclability 5% of original energy consumption 75% of all aluminium produced still in use Corrosion resistant Oxide layer Formability Extrusion, rolling, casting Low melting point vs. steel Excellent conductivity Thermal electrical Alloying technology Gives wide range of physical properties Properties lead to increased market share Aluminium intensive urbanization and infrastructure Climate challenge aluminium as part of the solution Recyclability more important with high energy prices (8)

9 Hydro - a first tier aluminium company Production in 2012 in aluminium equivalents excl. China, thousand mt Alumina Aluminium Alcoa UC Rusal Rio Tinto Alcan Norsk Hydro BHP Billiton Pacific Alu. Hindalco Glenc. Vedanta Dubal Aluminium Bahrain Century Source: CRU, Hydro (9)

10 Raw material is key to our aluminium future Aluminium equivalent consolidated capacity, million tonnes End-2010 End-2011 Post-CAP Long position in bauxite and alumina creates flexibility Strategically attractive assets New business opportunities 0.5 Resource constrained world Bauxite Alumina Aluminium Bauxite Alumina Aluminium Bauxite Alumina Aluminium Includes idled capacity. Post-CAP includes Paragominas at 15 million tonnes and CAP first phase. (10)

11 Strategy for further value creation Bauxite & Alumina Primary Metal Energy Mid- and downstream Improvement efforts and cost reduction Commercialize Attractive growth projects Reposition Keep solid cash flow in current assets Expand in first quartile assets Increase value of energy business Develop current base Global approach to power sourcing Adjust capacity and cost base to market Continue proven high-end product strategy (11)

12 Ideally positioned for future growth Attractive growth project portfolio Partnerships and joint ventures Hydro Structural changes Financial strength and flexibility (12)

13 Safe and responsible operations is a top priority TRI rate (13)

14 (14) Market outlook

15 Aluminium is part of the solution Demand for semis Share of semis consumption Global trends Million mt % annual growth million mt Electrical 12% Machinery & equipment 10% Consumer durables 6% Packaging 9% Foil stock 8% Other 6% 27 Capabilities Transport 25% Construction 24% World outside China China Source: CRU (15)

16 Rolled Products 2012 sales in line with 2011 Rolled Products sales by segment 2012 vs 2011 Rolled Products total sales Foil & Can Litho & Auto General engineering & Other 2012 vs 2011 Q vs Q Q vs Q % 5% -3% -2% -1% -7% (16)

17 Balanced primary aluminium market World outside China (quarterly annualized) mt Seasonally lower demand in Q4 Aluminium production increasing due to restart of disrupted capacity 2-4 % aluminium demand growth expected in world outside China in 2013 Balanced market expected in Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 Apr-11 Jan-11 Oct-10 Jul-10 Apr-10 Jan-10 Oct-09 Jul-09 Apr-09 Jan-09 Oct-08 Jul-08 Apr-08 Jan-08 Demand Production Source: CRU/Hydro (17)

18 Continued upward trend in ingot premiums World reported primary aluminium inventories mt Days Regional ingot premiums USD per mt Q1 00 Q1 01 Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q Jan- 08 Jul- 08 Jan- 09 Jul- 09 Jan- 10 Jul- 10 Jan- 11 Jul- 11 Jan- 12 Jul- 12 Jan- 13 IAI Other LME SHFE Global inventory days US Mid West Japan Europe (duty-paid) Source: CRU/Hydro Source: Metal Bulletin, MW/MJP: Platts (18)

19 Increased bauxite imports into China Annualized aluminium equivalents*, million mt Import to China Export from China - 5 Source: CRU/Antaike/Hydro * Bauxite/alumina to aluminium conversion factor: 5.4/1.925 Bauxite Alumina Scrap Primary aluminium Fabricated Semis (19)

20 Volatile aluminium prices at low levels USD per tonne Increased aluminium price towards end of quarter Aluminium price still at low levels Reflecting weak macro-economic outlook Primary aluminium LME USD/mt NOK/mt Q average Q end Q average Q end LME (3-month avg.) LME forw ard February 11, 2013 Source: Reuters Ecowin (20)

21 66% of available bauxite in 3 countries Billion mt Guinea 41.0 China1) Jamaica Venezuela Mali Vietnam 4.7 India Cameroon Indonesia 1.0 Australia 9.5 Brazil Atlantic Pacific Big-league (Top- 3) Total bauxite, billion tonnes: reserves, mine site resources*, and undeveloped resources** Mid-league (Top- 11; each > 2% of world total) Potential reserves, billion tonnes: associated with currently operating mines*** 1) Official reported resources in China (Not CM estimates) *) Mine site resources are known bauxite resources that do not currently qualify as reserves for various reasons **) Undeveloped resources might or might not became feasible for new mines (quality, size, access, etc) (21) ***) Potential reserves = current reserves (economically extractible) + 70% of mine site resources. Undeveloped resources are excluded. Source: Roskill and Hydro analysis 0.5

22 Alumina market is consolidating Net long alumina position, million tonnes Alcoa 4.3 Alcoa 8.8 Vale 3.0 Hydro 2.1 Glencore 2.4 BHP Billiton 1.7 BHP Billiton 1.9 Rio Tinto Alcan 1.6 Kaiser Alcan Sual Rio Tinto Pechiney VAW Hydro UC Rusal -0.8 Vedanta -1.1 Century -1.1 Alba -1.7 China Dubal Alba -0.9 Dubal -1.0 Rusal -1.2 China -1.9 Source: CRU and Hydro analysis (22)

23 Commodity prices drive industry costs Fuel oil A1 (USD/mt) Steam coal (USD/mt) Petroleum coke FOB USG (USD/mt) Freight Baltic Dry Index Caustic soda (USD/mt) Source: Reuters Ecowin, PACE, CMAI/Harriman, Platts Bolivar Index, ANP (23)

24 Energy: Increased prices, normal reservoir levels Market price Southwestern Norway (NO2) NOK/MWh Week Water reservoir levels Southwestern Norway (NO2) Percent Week Price NOK/MWh Q Q Reservoir levels Dec 31, 2012 Sep 30, 2012 System Norway 70.4 % 91.1 % Southwestern Norway (NO2) Southwestern Norway (NO2) 77.8 % 92.2 % Source: Nordpool and NVE (24)

25 (25) Fourth quarter results 2012

26 Q4 highlights Underlying EBIT NOK 138 million Lower raw material costs Lower realized aluminium prices, higher alumina prices Higher power prices and production in Energy Ambitious improvement programs on track Proposed 2012 dividend NOK 0.75 per share (26)

27 Increased bauxite imports into China Annualized aluminium equivalents*, million mt Import to China Export from China Bauxite and alumina Increased imports of bauxite after removal of temporary export restrictions from Indonesia Significantly increased alumina imports in 2012 Primary aluminium Expected to remain broadly balanced also in 2013 Semis and fabricated Stable export of semis and fabricated products Bauxite Alumina Scrap Primary aluminium Fabricated Semis Source: CRU/Antaike/Hydro * Bauxite/alumina to aluminium conversion factor: 5.4/1.925 (27)

28 Stable raw material prices, LME still lagging Indexed (Q1 2010=100) 3-month LME Caustic price Coal price Fuel oil price * Pet coke price +127% +125% +119% +105% +87% +87% +84% +67% +67% +50% +56% +54% +35% +36% +30% +15% +1% -8% -12% -8% +17% +10% -1% +3% +4% Q1 Q1 Q1 Q2 Q3 Q Q1 Q1 Q1 Q2 Q3 Q Q1 Q1 Q1 Q2 Q3 Q Q1 Q1 Q1 Q2 Q3 Q Q1 Q1 Q1 Q2 Q3 Q Source: EcoWin (LME), CMAI/Harriman (Caustic soda), Platts Bolivar Index (Coal), ANP (Fuel oil) * ICMS effect not included in graph for Q1-Q (28)

29 2012 production up in Paragominas, stable in Alunorte Paragominas stabilizing above 9 million tonnes 9.2 million tonnes produced in % increase in 2012 vs 2011 Alunorte production stable vs million tonnes produced in 2012 «From B to A» improvement program includes identified efforts targeting increased production Improvement program progressing according to plan (29)

30 USD 300 program to reach target by end-2013 Estimated primary aluminium cash cost and margin USD/mt 1) Estimated cash cost excluding LME-linked alumina cost 2) Estimated LME-linked alumina cost 2) Estimated EBITDA margin USD 300 per mt improvement program is targeted to be reached by end-2013 Achieved USD 235 per mt by end-2012 Weak markets put pressure on casthouse margins Cash cost down ~USD 225 per mt from 2011 Cash cost down on lower alumina cost, cost improvements and currency Qatalum EBITDA included in 2012, further reducing cash cost 1) Realized aluminium price minus EBITDA margin per mt primary aluminium. Includes net earnings from primary casthouses, Qatalum included from ) ~13.5% of LME 3 month price with 2.5 months delay (30)

31 Underlying EBIT 1,343 1,810 1,606 1, NOK million Q Q Q Q Q Q Q Q Bauxite & Alumina Primary Metal Metal Markets Rolled Products Energy Other and eliminations (344) (65) (73) (39) (144) (137) (188) (166) (386) (10) (64) (73) (305) Total 1) (19) ) Extruded Products classified as discontinued operations and excluded from underlying EBIT for all periods. (31)

32 High-level quarterly result development NOK billion Underlying EBIT Q Variable cost Energy volume and price Alumina and aluminium volume/price Other Underlying EBIT Q (32)

33 Key financials NOK million Q Q Q Revenue Underlying EBIT 138 (19) Items excluded from underlying EBIT 532 (249) (1 176) (725) Reported EBIT 669 (267) Financial income (expense) Income (loss) before tax (82) (16) (13) 33 (348) 85 (1 248) Income tax expense (224) (48) (179) (803) (1 569) Income (loss) from continuing operations Income (loss) from discontinued operations 364 (251) (64) (167) (147) (603) (718) (528) (502) Net income (loss) 113 (231) (749) (1 246) Underlying net income (loss) 0 (20) Reported EPS, NOK 0.07 (0.14) (0.36) (0.61) 3.41 Underlying EPS, NOK (33)

34 Tax and financial expense Tax NOK million Income before tax Tax free loss (gain) of shares, revaluation gain (47) (5 348) Equity accounted investments Impairment of PP&E and rationalization charges Adjusted income (loss) before tax Income tax expense Write down of deferred tax assets - (150) Adjusted income tax expense Finance NOK million Q Q Interest income Dividends received and net gain (loss) on securities Financial income Interest expense (111) (102) Net foreign exchange gain (loss) (102) 282 Other (6) (36) Financial expense (219) 144 Effective tax rate N/A 18% Net financials (82) 251 Adjusted effective tax rate 38% 30% Increased adjusted tax rate 2012 reflecting higher share of earnings from Energy (power sur tax) Effective tax rate impacted by impairment and operating losses in regions without tax capacity Net currency loss for fourth quarter mainly due to strengthening EUR vs USD, intercompany balances Offsetting effects from strengthening NOK and weakening BRL vs USD (34)

35 Items excluded from underlying EBIT NOK million Q Q Q Underlying EBIT 138 (19) Unrealized effects on power and raw material contracts Unrealized derivative effects on LME related contracts Metal effect, Rolled Products Rationalization charges and closure costs Impairment charges Gains (losses) on divestments Vale transaction related effects Other (151) (266) (53) (32) (140) (6) - 68 (37) (343) (134) (37) (1 091) (64) (617) (1 215) (328) (7) (97) (1 147) Reported EBIT 669 (267) (35)

36 Bauxite & Alumina Key figures Q Q Q Alumina production, kmt Total alumina sales, kmt Realized alumina price, USD/mt Apparent alumina cash cost, USD/mt Bauxite production, kmt Underlying EBITDA, NOK million Underlying EBIT, NOK million (73) (386) 159 Underlying EBIT NOK million 969 (791) Q4 operating results Result up on higher LME-linked alumina price Lower energy cost, mainly due to ICMS exemption on fuel oil, reducing cash cost at Alunorte Improved commercial results Outlook (144) (188) (386) (73) Stable production volumes Alumina priced with approximately one month lag to LME Numbers for Q are pro forma. (36)

37 Primary Metal Key figures Q Q Q Primary aluminium production, kmt Total sales, kmt Realized LME price, USD/mt Realized LME price, NOK/mt Underlying EBITDA, NOK million Underlying EBIT, NOK million 53 (10) 484 Underlying EBIT NOK million (10) Q4 operating results Price and volume reducing result by NOK 250 million Lower variable costs lift results by NOK 200 million Qatalum result improved by NOK 90 million Outlook About 60% of primary production affecting Q1 results priced at ~USD per mt, excluding Qatalum Higher sales volumes Numbers for Q are pro forma. (37)

38 Improved result for Qatalum Key figures Qatalum (50%) Q Q High and stable production volumes Revenue, NOK million Underlying EBITDA, NOK million Underlying EBIT, NOK million 4 (79) (22) Underlying net income (loss), NOK million (39) (129) (217) Underlying net income up NOK 90 million from Q Higher LME and lower energy costs Q3 result negatively affected by NOK ~70 million in increased energy cost related to fire in cooling tower Primary aluminium production, kmt Casthouse sales, kmt All numbers on 50% basis. (38)

39 Metal Markets Key figures Q Q Q Remelt production, kmt Metal products sales, kmt Underlying EBITDA, NOK million (13) Underlying EBIT excl currency and inventory valuation effects, NOK million Underlying EBIT, NOK million 69 7 (39) Underlying EBIT NOK million Q4 operating results Remelt volumes and margins down Reduced contribution from sourcing and trading activities NOK 29 million in positive currency and ingot valuation effects vs NOK 96 million negative in Q (39) Outlook Increased volumes for remelters in seasonally stronger quarter Volatile trading and currency effects (39)

40 Rolled Products Key figures Q Q Q External sales volumes, kmt Underlying EBITDA, NOK million Underlying EBIT, NOK million Underlying EBIT NOK million Q4 operating results Stable sales volumes Margins reduced due to product mix and currency effects on export sales Operating costs up mainly due to higher maintenance activities Outlook Seasonally higher sales, although lower than Q General engineering margins still under pressure (40)

41 Energy Key figures Q Q Q Power production, GWh Net spot sales, GWh Southwest Norway spot price (NO2), NOK/MWh Underlying EBITDA, NOK million Underlying EBIT, NOK million Underlying EBIT NOK million Q4 operating results Result up on increased prices and production Seasonally higher level of concession sales Outlook Seasonally higher production Expect higher prices, although dependent on weather conditions (41)

42 Discontinued operations Extruded Products Underlying loss from discontinued operations NOK 59 million Pro-forma underlying EBIT negative NOK 75 million 1) Reduced sales volumes somewhat offset by improvement efforts Continued weak European extrusion markets * 1) Pro-forma underlying EBIT includes full depreciation charges as if Extruded Product would have been continuing operations (42)

43 Net cash/(debt) development Q NOK billion Net cash flow from operations NOK 2.8 billion Net debt Q Underlying EBITDA Operating capital Other adjustments Investments Dividends and other Net cash Q (43)

44 Decreased net pension liability NOK billion December 31, 2012 December 31, 2011 Projected benefit obligation (15.5) (20.5) Fair value of plan assets Projected benefit obligation down NOK 5 billion on changed assumption Extruded Products as discontinued operations Increased discount rate in Norway, reduced discount rate in Germany Termination benefits and other (0.2) (0.5) Net pension liability at fair value (4.8) (8.4) Unrecognized (gain)/loss (2.0) 0.9 Net pension liability recognized on balance sheet (6.8) (7.5) Plan assets down NOK 1.7 billion Mainly affected by Extruded Products as discontinued operations 2013 pension cost estimate NOK ~600 million, partly as financial items Net pension liability at fair value, net of tax (4.3) (6.9) (44)

45 Adjusted net debt down to NOK 8.3 billion NOK billion Cash and cash equivalents Short-term investments Short-term debt Long-term debt Dec 31, (6.0) (3.7) Dec 31, (4.3) (4.2) Reduced net adjusted debt due to Completion guarantee in Qatalum Reduced net pension liability Extruded Products classified as discontinued operations Net cash/(debt) Net pension liability at fair value, net of expected tax benefit Net interest-bearing debt in equity accounted investments 1 Other adjustments 2 (4.3) - (5.7) (6.9) (7.4) (7.3) Net adjusted cash/(debt) (8.3) (19.9) 1) Net interest-bearing debt in equity accounted investments taken out of adjusted net debt as of Sep 30, 2012 due to end of completion guarantee Qatalum. 2) Operating lease commitments and other (45)

46 Proposed 2012 dividend NOK 0.75 per share Strong commitment to return cash to shareholders Solid operational performance Solid financial position Uncertain market outlook Average five year payout ratio * is ~172% Dividend policy is 30% payout over the cycle Represents payout of ~NOK 1.5 billion * Dividend paid divided by net income from continuing operations attributable to equity holders, including proposed 2012 dividend (46)

47 Summing up 2012 Challenging markets, in particular in Europe Increasing global demand for aluminium products Continue our efforts to create a global leader in aluminium Priorities for 2013 USD 300 program in Primary Metal Performance in Bauxite & Alumina through «From B to A» Competitive shareholder returns (47)

48 (48) Business overview

49 (49) Bauxite & Alumina

50 High-quality asset portfolio MRN bauxite mine Paragominas bauxite mine Alunorte alumina refinery CAP alumina refinery project 5% ownership Volume off-take agreement for Vale s 40% stake Capacity 18 million tonnes 60% ownership, 100% by 2016 One of the world s largest bauxite mines 2012 production 9.2 million tonnes Nameplate capacity of 9.9 million tonnes Possible expansion to 15 million tonnes Long-life resource 91% ownership World s largest alumina refinery 2012 production 5.8 million tonnes Nameplate capacity of 6.3 million tonnes Bauxite supplied from Paragominas and MRN World-class conversion cost position 81% ownership Paragominas expansion to be developed in parallel Investment estimates and expansion concepts under evaluation Full utilization of the existing bauxite pipeline Bauxite licenses Refining and mining competencies External supply contracts Sales contract portfolio (50)

51 Strengthening the competitiveness of Bauxite & Alumina From B to A Alunorte Increase productivity and rightsize organization Stabilize performance at nameplate capacity Improve logistics efficiency Paragominas Increase productivity and rightsize organization New methods to support production at nameplate capacity Improve product flow and minimize tailings Improvements in million NOK Commercial Base bauxite and alumina pricing on fundamentals Increase logistical flexibility and optimize scheduling Ambition 2013 Ambition 2014/2015 (51)

52 Paragominas One of the world s largest bauxite mines 2012 production: 9.2 million mt Target to stabilize and continue to deliver production increases Possible expansion: up to 15 million mt Current reserve life: 30 years ~300 million mt Long-life resource (52)

53 Bauxite mining costs in Paragominas Energy cost power and fuel Paragominas bauxite mining costs 2011 Labor cost Influenced by Brazilian wage level Productivity improvements Maintenance and consumables Influenced by Brazilian inflation Large fixed cost base Important to increase production 16% 9% 15% 19% 21% 20% Sustaining capital Energy Maintenance/consumables Labor Support & infrastructure Other costs (53)

54 Alunorte World s largest alumina refinery 2012 production: 5.8 million mt Targeting stable production above 6 million tonnes World-class conversion cost position Modern technology Bauxite supplied from Paragominas and MRN (54)

55 Favorable integrated alumina cash cost position Integrated alumina cash cost position 2012 USD 259 per mt Alunorte, Paragominas and sourced alumina Bauxite Cash cost to be improved as Paragominas increase production and pipeline is fully utilized Energy First-quartile energy consumption 8 MJ/mt Energy mix of heavy fuel oil and coal Caustic soda Competitive caustic soda consumption due to bauxite with low level of reactive silica Other costs Maintenance, labor and other Sourced alumina Alumina purchased for resale Integrated alumina cash cost position % 11% 37% 33% 14% Bauxite Caustic soda Energy Other costs Sourced alumina (55)

56 External alumina sourcing 1.4 million mt of external alumina sourcing in 2012 Long term off-take agreement with Rio Tinto Increasing with mt annually, linked to Yarwun expansion Short- and medium term contracts To balance and optimize position geographically Various pricing mechanisms Older contracts linked to LME New contracts mostly index Fixed USD per mt for short-term contracts (56)

57 Alumina pricing shifting from LME-link to market fundamentals Future pricing should reflect fundamentals of bauxite and alumina value chain Spot market activity is important New norm for the industry Index pricing and short to medium-term contracts Getting wider acceptance in the market Hydro s commercial strategy Move towards index pricing (PAX) Focus on selling to end-users based on a global portfolio Establish a premium for Alunorte quality Relatively minor volumes available for sale before 2016 Selling 2-3 million mt annually of MRN bauxite externally (57)

58 (58) Primary Metal

59 World-wide production network Primary aluminium annual production capacity Canada, tonnes Alouette (20%): tonnes Expansion potential 6% Norway, tonnes Sunndal (100%) : tonnes Årdal (100%): tonnes Karmøy (100%): tonnes Høyanger (100%): tonnes Søral (50%): tonnes Germany, tonnes Neuss (100%): tonnes 42% 11% 2.1 million tonnes Slovakia, tonnes Slovalco (55%): tonnes Qatar, tonnes Qatalum (50%): tonnes Ramping up during 2011 Expansion potential 4% 14% Brazil, tonnes Albras: (51%): tonnes 11% Australia, tonnes Kurri Kurri (100%): tonnes Tomago (20%): tonnes 12% Attributable capacity: 2.1 million mt. Consolidated capacity: 2.4 million tonnes, Slovalco and Albras are consolidated) The smelters have an additional remelt capacity: 0.6 million tonnes. Consolidated casthouse capacity: 3.0 million tonnes. Qatalum and Søral are equity accounted in Hydro s results. (59)

60 Primary Metal improvement program continues USD 300 per mt to be realized within 2013 Operational improvements Improved current efficiency Reduced power consumption Reduced anode consumption Fixed cost reductions and lean operations Further operational improvements Technology costs/spin-offs Investments Maintenance and relining Procurement Logistics Organization and manning Casthouse product margin USD 300 per mt 1 1) Compared to 2009 cost level. USD 300 per mt real term target for fully owned smelters excluding Neuss with 2009 as baseline. Effect of exchange rates and raw materials cost changes are neutralized (60)

61 Develop technology to fulfill ambitions Nextgeneration smelter HAL 300 Operating for several years in Sunndal Ramping up in Qatar Qatalum power outage verified the robustness of the cells Operating at: 13.3 kwh/kg 313 ka 1.6 tonne CO2/tonne aluminium HAL4e Benchmark technology process parameters and environment 30 months of operations in Årdal, Norway First verification period surpassed targets Currently operating at: 12.5 kwh/kg 424 ka 1.5 tonne CO2/tonne aluminium R&D portfolio HAL4e optimization to be ready for next project HAL Ultra future vision Significantly lower kwh/kg Carbon capture-ready cell New materials and cell design Reduced investment costs (61)

62 (62) Metal Markets

63 Preferred partner in casthouse products Capitalizing on value-added casthouse products portfolio Casthouse production Primary production Remelting & recycling Commercial agreements Extrusion ingot 1.6 million mt Foundry alloys 0.6 million mt Sheet ingot 0.5 million mt Enhancing value of market system through margin management Growing market positions in US and Asia with Qatalum volumes Utilizing production flexibility to meet demand Taking advantage of strong market position through sourcing and trading strategies (63)

64 Metal Markets earnings drivers Remelters Revenue impact volume and product premiums above LME Cost impact Scrap and standard ingot premiums above LME Raw material mix Freight cost proximity to market Gas and electricity consumption and prices Other main businesses Physical and LME trading Third-party products High purity aluminium Underlying EBIT excluding currency effects and ingot stock valuation effect, NOK million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Results influenced by currency -100 fluctuations (64)

65 (65) Rolled Products

66 No. 1 flat rolled products producer in Europe External sales in tonnages General engineering 25% Litho 20% Heat exchanger 5% Auto 7% Foil 13% Can 22% Building and other 8% World leader in high-end products foil and litho Strategy of high-grading product portfolio Margin management and cash generation Focus production system on core assets Alunorf (JV 50%) - world s largest rolling mill Grevenbroich plant - world s largest finishing mill External sales of mt in 2012 (66)

67 Attractive market position and customers More than 50% of products with global reach Our products Our customers Our position Litho Global reach Foil World market leader Can Leading position in Europe Regional reach Auto GE/ Building Leading position in Europe (67)

68 Rolled Products earnings drivers Underlying EBIT per tonne, NOK Contract structure Margin business based on conversion price LME element passed on to customers Medium-term contracts Range from spot contracts to multi-year contracts High share of fixed costs - volume sensitive Preferred supplier market position in high-end products Hydro s market position key advantage in cost and volume driven industry (68)

69 (69) Extruded Products Discontinued operations

70 Hydro and Orkla combine extruded aluminium assets Sapa joint venture - facts 50/50 joint venture between Hydro and Orkla, to be named Sapa Creating a stronger company better positioned for value creation No. 1 position in North America and Europe Positioned for restructuring and value creation Strong foothold in emerging markets, including China, India and Brazil Subject to approvals from competition authorities Expected to be completed within first half 2013 Hydro has agreed to supply the new company with extrusion billets on a corresponding level as today ~400 ktpy at market prices (70)

71 Hydro s Extruded Products: European leader with global presence Leading position in Europe External sales in tonnages (2011) Strong position in US and Brazil Global leader in precision tubing Other 11% Transport 9% Strategy of solidifying leading positions Reinforce European extrusion base Specialist in energy-neutral building solutions, including solar Emerging markets expansion External sales of mt in 2012 Domestic & office equipments 18% Renewable energies 7% Building 38% Auto 17% (71)

72 Hydro innovation drives product demand Foil packaging Automotive Beverage cans Consumer electronics Solar parks Building & construction Lithographic plates (72)

73 Extruded Products earnings drivers Classified as discontinued operations Contract structure Mainly short-term contracts Large number of small orders to small/medium-sized customers Produce to order - limited share of commodity type products Strong cost focus Margin management is key Volume sensitive - but flexible production system Support customers in product development Value creation in excess of metal price Underlying EBIT per tonne *, NOK * Pro forma figures, Excluding divested businesses (Structures, Castings, Magnesium) (73)

74 (74) Energy

75 Aiming to lift power production to 10 TWh Power production capacity (TWh), per region and reversion year Normal production 9.5 Telemark No reversion Sogn Røldal-Suldal Power producing assets and ongoing projects Maintain cost control in operations and projects Holsbru project concluded, production start April 1 Vasstøl and Rjukan upgrade completed during 2012 New growth projects Mature new equity growth options Growth potential in excess of 0.5 TWh Framework conditions Reversion regime secures full value of energy assets El-certificates support investments in new capacity Portfolio restructuring through sale of nonstrategic SKS share SKS priced at NOK 3.4 billion per TWh (75)

76 Hydro s energy map Energy consumption in alumina refineries, smelters and rolling mills North America Power 1.6 TWh Europe Power 15.2 TWh Natural gas 2.4 TWh Middle East Power 4.6 TWh South America Power 4.2 TWh Coal 5.6 TWh Fuel oil 7.4 TWh Australia/Asia Power 2.0 TWh Natural gas 0.1 TWh Based on Hydro s equity production 2012 (76)

77 Reversion regime secures Hydro s values Pursue value enhancement strategy Develop and enhance value of power assets Power assets remain an integrated part of aluminium production in Norway Power and smelter portfolio will be reviewed concurrently Participate in restructuring of power sector Actively working on framework conditions (CO2 and grid) Value of assets protected by several possible types of transaction Sell or merge into state or municipality owned entity (minimum 2/3 of asset) Maintaining ownership to Røldal-Suldal assets means owning an option (77)

78 Energy earnings drivers Underlying EBIT * and spot price NOK million NOK/MWh Production and market prices strongly linked to hydrological conditions Relatively stable annual EBIT contribution Large quarterly variations due to volatile spot sales and spot prices Seasonal market variations in demand and supply Underlying EBIT and spot price NOK million NOK/MWh Occasional delink between area prices Power portfolio optimized versus market Stable cost base Underlying EBIT Spot price * Underlying EBIT based on USGAAP (78)

79 (79) Additional information

80 Shareholder and financial policy Hydro aims to give its shareholders competitive returns compared to alternative investments in peers Maintained dividend policy Ordinary dividend: 30% of net income over the cycle Average ordinary pay-out ratio is ~70% NOK 0.75 per share proposed for 2012 Share buybacks and extraordinary dividends as supplement in periods with strong financials Maintain investment-grade rating Currently: BBB (S&P) & Baa2 (Moody s) stable outlook Competitive access to capital and important for Hydro s business model (counterparty risk and partnerships) Financial ratios over the business cycle Funds from operations to net adjusted debt > 40% Net adjusted debt to equity < 0.55 USD 1.7 billion in multi-currency revolving credit facility maturing in 2014 NOK 1.5 billion bond maturing in 2019 (80)

81 Hedging policy Upstream Remain primarily exposed to LME prices Partly off-setting effects through raw material prices and negative currency correlations with LME Operational LME hedging One month forward sales Currency exposure, mainly USD and BRL Policy of maintaining long-term debt in USD Partly natural hedge through negative correlation between LME and major exposed currencies Mid- and downstream Operational LME and currency hedging to secure margin Volatility mitigated by strong balance sheet Flexibility to hedge LME or currency in certain cases (81)

82 Capital allocation mainly upstream NOK billion 10.2 Debt-financed investments Qatalum Investments Qatalum Growth capex Sustaining capex Sustaining capex NOK 3 billion annually No major growth projects planned for ~85% of capital to be allocated upstream in ~3.0 2 Depreciation significantly higher than sustaining capex E 1) Excluding Vale assets acquisition 2) Excluding Extruded Products (82)

83 Price and currency sensitivities Commodity price sensitivity +10%* Currency sensitivities +10%* NOK million EBIT NOK million EBIT Financial items Income before tax Net income** Aluminium USD (850) Oil (170) BRL (760) 720 (40) (25) Pet coke (200) EUR (140) (1 140) (1 280) (910) Caustic soda (110) Coal (40) Annual sensitivities based on expected business volumes for 2013, LME USD 2 100, Oil USD 500 per mt, petroleum coke USD 450 per mt, caustic soda USD 350 per mt, coal USD 90 per mt, NOK/USD 5.50, NOK/BRL 2.75, NOK/EUR Aluminium price sensitivity is net of aluminium price indexed costs and excluding unrealized effects related to operational hedging Currency sensitivity on financial items includes effects from intercompany positions *Excluding extruded products ** Net Income attributable to majority shareholders (83)

84 Items excluded from underlying results NOK million (+=loss/()=gain) Q Q Q Q Unrealized derivative effects on LME related contracts Bauxite & alumina (8) 11 1 (11) (8) Total impact Bauxite & alumina (8) 11 1 (11) (8) Unrealized derivative effects on LME related contracts Primary metal 113 (84) 220 (151) 98 Unrealized derivative effects on power contracts (Søral) Primary metal 11 3 (1) 2 15 Unrealized derivative effects on power contracts Primary metal (152) 72 (221) 61 (240) Unrealized derivative effects on raw material contracts Primary metal Impairment charges Primary metal (110) Impairment charges Qatalum Primary metal Rationalization charges and closure costs Primary metal Total impact Primary metal (54) Unrealized derivative effects on LME related contracts Metal markets (68) (126) 11 Impairment charges Metal markets (Gains)/losses on divestments Metal markets (15) (15) Total impact Metal markets (68) (141) 73 Unrealized derivative effects on LME related contracts Rolled products (78) 52 (179) (27) (232) Metal effect Rolled products 60 (9) 53 (41) 64 Rationalization charges and closure costs Rolled products Total impact Rolled products (18) 43 (126) (51) (151) Unrealized derivative effects on power contracts Energy (1) 11 Total impact Energy (1) 11 Unrealized derivative effects on power contracts Other and eliminations (126) (424) 24 (239) (764) Unrealized derivative effects on LME related contracts Other and eliminations (1) 6 48 (32) 22 Impairment charges Other and eliminations (Gains)/losses on divestments Other and eliminations (40) (4) 6 (4) (42) Pension Other and eliminations - - (68) - (68) Total impact Other and eliminations (166) (422) 74 (274) (788) Total EBIT Hydro (132) (532) 725 Net foreign exchange (gain)/loss Hydro (419) 880 (282) Income (loss) before tax Hydro (551) (34) (430) Calculated income tax effect Hydro 199 (164) Items excluded from discontinued operations Hydro Net income (loss) Hydro (330) (113) (84)

85 Items excluded from underlying results NOK million (+=loss/()=gain) Q Q Q Q Unrealized derivative effects on currency contracts (Alunorte) Bauxite & alumina (1) (1) Derivative effects on LME related contracts (Vale Aluminium) Bauxite & alumina 16 (67) (24) 3 (72) Transaction related effects (Vale Aluminium) Bauxite & alumina (4 421) (4 421) (Gains)/losses on divestments Bauxite & alumina (465) (465) Total impact Bauxite & alumina (4 406) (67) (24) (461) (4 959) Derivative effects on LME related contracts (Vale Aluminium) Primary metal 27 (22) (8) 1 (1) Unrealized derivative effects on LME related contracts (Søral) Primary metal - (3) (3) 3 (3) Unrealized derivative effects on LME related contracts Primary metal (23) (166) (119) 165 (143) Unrealized derivative effects on power contracts (Søral) Primary metal Unrealized derivative effects on power contracts Primary metal (84) Unrealized derivative effects on raw material contracts Primary metal Impairment charges Primary metal Transaction related effects (Vale Aluminium) Primary metal Rationalization charges and closure costs Primary metal Total impact Primary metal 59 (61) (22) Unrealized derivative effects on LME related contracts Metal markets (8) (91) (64) 148 (16) Total impact Metal markets (8) (91) (64) 148 (16) Unrealized derivative effects on LME related contracts Rolled products Metal effect Rolled products (176) (28) Rationalization charges and closure costs Rolled products Total impact Rolled products (117) Unrealized derivative effects on power contracts Energy 7 (6) (2) (7) (8) (Gains)/losses on divestments Energy - - (658) - (658) Total impact Energy 7 (6) (661) (7) (667) Unrealized derivative effects on power contracts Other and eliminations 8 (223) (129) (25) (370) Unrealized derivative effects on LME related contracts Other and eliminations 54 (41) (55) 22 (20) Impairment charges Other and eliminations (Gains)/losses on divestments Other and eliminations - (44) (16) - (60) Total impact Other and eliminations 61 (251) (201) 118 (273) Total EBIT Hydro (4 405) (235) (623) (4 086) Net foreign exchange (gain)/loss Hydro 25 (336) Income (loss) before tax Hydro (4 379) (571) (3 123) Calculated income tax effect Hydro (384) (22) (179) Items excluded from discontinued operations Hydro Net income (loss) Hydro (4 323) (379) (2 801) (85)

86 Operating segment information Underlying EBIT NOK million Q Q Q Q Q Q Q Q Year 2011 Year 2012 Bauxite & Alumina 1) (144) (188) (386) (73) 969 (791) Primary Metal 1) (10) Metal Markets (39) Rolled Products Energy Other and eliminations (344) (65) (73) 92 (137) (166) (64) (305) (389) (672) Total (19) Underlying EBITDA NOK million Q Q Q Q Q Q Q Q Year 2011 Year 2012 Bauxite & Alumina 1) Primary Metal 1) Metal Markets (13) Rolled Products Energy Other and eliminations (328) (62) (57) 106 (122) (150) (11) (288) (341) (570) Total ) Numbers for Q are pro forma (86)

87 Operating segment information EBIT NOK million Q Q Q Q Q Q Q Q Year 2011 Year 2012 Bauxite & Alumina 1) (136) (199) (387) (62) (783) Primary Metal 1) (760) (96) (1 232) (53) (1 275) Metal Markets (187) (247) Rolled Products 349 (12) (223) (49) Energy Other and eliminations (405) (25) (138) (31) (116) 116 Total (645) (267) EBITDA NOK million Q Q Q Q Q Q Q Q Year 2011 Year 2012 Bauxite & Alumina 1) Primary Metal 1) Metal Markets (161) (145) Rolled Products (113) Energy Other and eliminations (389) (85) (14) Total ) Numbers for Q are pro forma and excludes revaluation gain (87)

88 Operating segment information Total revenue NOK million Q Q Q Q Q Q Q Q Year 2011 Year 2012 Bauxite & Alumina Primary Metal Metal Markets Rolled Products Energy Other and eliminations (14 135) (14 964) (13 728) (11 279) (11 668) (10 997) (9 653) (8 157) (54 106) (40 476) Total External revenue NOK million Q Q Q Q Q Q Q Q Year 2011 Year 2012 Bauxite & Alumina Primary Metal Metal Markets Rolled Products Energy Other and eliminations Total (88)

89 Operating segment information Internal revenue NOK million Q Q Q Q Q Q Q Q Year 2011 Year 2012 Bauxite & Alumina Primary Metal Metal Markets Rolled Products 118 (34) (189) (97) (95) 80 Energy Other and eliminations (14 208) (15 040) (13 791) (11 331) (11 712) (11 049) (9 677) (8 225) (54 369) (40 663) Total Share of profit /(loss) in equity accounted investments NOK million Q Q Q Q Q Q Q Q Year 2011 Year 2012 Bauxite & Alumina 13 (3) (5) Primary Metal (6) (7) 43 (17) (105) (6) (138) (74) 13 (324) Metal Markets - 1 (1) 1 - (1) Rolled Products (22) (14) (22) (19) (14) (16) (16) (21) (76) (67) Energy (2) Other and eliminations (15) (74) (14) (132) 2 2 (63) (2) (235) (61) Total (23) (92) 5 (166) (118) (21) (219) (96) (276) (453) (89)

90 Operating segment information Depreciation, amortization and impairment NOK million Q Q Q Q Q Q Q Q Year 2011 Year 2012 Bauxite & Alumina Primary Metal Metal Markets Rolled Products Energy Other and eliminations Total Capital employed upstream focus Extruded Products, 7% Energy, 4% NOK million Dec 31, 2012 Bauxite & Alumina Primary Metal Metal Markets Rolled Products Extruded Products (discontinued operations) Energy Other and eliminations (7 918) Total Graph excludes NOK 7.9 billion in negative capital employed in Other and eliminations Rolled Products, 10% Metal Markets, 3% Primary Metal, 35% Bauxite & Alumina, 41% (90)

91 Income statements NOK million Q Q Q Year2012 Year 2011 Revenue Share of the profit (loss) in equity accounted investments Other income, net (96 257) (219) (166) (453) (276) Total revenue and income Raw material and energy expense Employee benefit expense Depreciation, amortization and impairment Other expenses Earnings before financial items and tax (EBIT) 669 (267) Financial income Financial expense 138 (219) (136) 418 (766) 203 (1 451) Income (loss) from continuing operations before tax Income taxes Tax rate 587 (224) 38 % (16) (48) N/A 33 (179) N/A 85 (803) N/A (1 569) 18% Income (loss) from continuing operations Income (loss) from discontinued operations 364 (251) (64) (167) (147) (603) (718) (528) (502) Net income (loss) 113 (231) (749) (1 246) Net income (loss) attributable to minority interest Net income (loss) attributable to Hydro shareholders (31) (277) (10) (739) (13) (1 233) Earnings per share attributable to Hydro shareholders 0.07 (0.14) (0.36) (0.61) 3.41 NOK million Q Q Q Q Q Q Q Q Year 2011 Year 2012 Reported EBIT (645) (267) Underlying EBIT (19) Net income (loss) (749) 585 (1 712) (231) (1 246) Underlying net income (loss) (20) Earnings per share (0.36) 0.25 (0.78) (0.14) (0.61) Underlying earnings per share (91)

92 Balance sheets NOK million Dec Sep Jun Mar Dec Cash and cash equivalents Short-term investments Accounts receivable Inventories Other current assets Assets held for sale Property, plant and equipment Intangible assets Investments accounted for using the equity method Prepaid pension Other non-current assets Total assets Bank-loans and other interest-bearing short-term debt Trade and other payables Other current liabilities Liabilities included in disposal group Long-term debt Provisions Pension obligation Deferred tax liabilities Other non-current long-term liabilities Equity attributable to Hydro shareholders Minority interest Total liabilities and equity (92)

93 Operational data Pro forma Bauxite & Alumina Q Q Q Q Q Q Q Q Year 2011 Year 2012 Alumina production (kmt) Sourced alumina (kmt) Total alumina sales (kmt) Realized alumina price (USD) 1) Apparent alumina cash cost (USD) 2) Bauxite production (kmt) 3) Sourced bauxite (kmt) 4) Bauxite & Alumina Q Q Q Q Q Q Q Q Year 2011 Year 2012 Alumina production (1 000 mt) ) Weighted average of own production and third party contracts, excluding hedge results. The majority of the alumina is sold linked to the LME prices with a one month delay. 2) Apparent integrated alumina cash production cost based on cost of produced alumina and cost of alumina sourced on contracts. Paragominas bauxite included at cost and MRN bauxite included at contract price. 3) Paragominas on wet basis. 4) 40 percent MRN offtake from Vale and 5 percent Hydro share on wet basis. 5) Dry basis. (93)

94 Operational data Pro forma Primary Metal 1) Q Q Q Q Q Q Q Q Year 2011 Year 2012 Realized aluminium price LME, USD/mt Realized aluminium price LME, NOK/mt Realized premium above LME, USD/mt Realized premium above LME, NOK/mt Realized NOK/USD exchange rate Primary aluminium production, kmt Casthouse production, kmt Casthouse sales, kmt Primary Metal 1) Q Q Q Q Q Q Q Q Year 2011 Year 2012 Realized premium above LME (USD/mt) 2) Realized premium above LME (NOK/mt) 2) Primary aluminium production (1 000 mt) Casthouse production (1 000 mt) Casthouse sales (1 000 mt) LME realized (USD/mt) including hedges NOK/USD realized including hedges 3) LME realized (NOK/mt) including hedges LME realized (USD/mt) excluding hedges NOK/USD realized excluding hedges 3) , LME realized (NOK/mt) excluding hedges ) Operating and financial information includes Hydro's proportionate share of production and sales volumes in equity accounted investments. Realized prices, premiums and exchange rates exclude equity accounted investments. 2) Average realized premium above LME for casthouse sales from Primary Metal. 3) Including effect of strategic LME hedges (hedge accounting applied). Realized aluminium prices lag the LME price developments by approximately 3-4 months. (94)

95 Operational data Metal Markets Q Q Q Q Q Q Q Q Year 2011 Year 2012 Remelt production (1 000 mt) Third-party metal products sales (1 000 mt) Metal products sales excl. ingot trading (1 000 mt) 1) Hereof external sales excl. ingot trading (1 000 mt) External revenue (NOK million) Rolled Products Q Q Q Q Q Q Q Q Year 2011 Year 2012 Rolled Products external shipments (1 000 mt) Rolled Products Underlying EBIT per mt, NOK Extruded Products Discontinued operations Q Q Q Q Q Q Q Q Year 2011 Year 2012 Extruded external shipments (1 000 mt) Extruded underlying EBIT per mt, NOK 2) (743) (670) Energy Q Q Q Q Q Q Q Q Year 2011 Year 2012 Power production, GWh Net spot sales, GWh Nordic spot electricity price, NOK/MWh , Southern Norway spot electricity price (NO2), NOK/MWh ) Includes external and internal sales from primary casthouse operations, remelters and third party metal sources. Volumes from Albras casthouse (51 percent) as of March 1, ) EBIT used for calculations in Q and FY 2012, are pro forma (95)

96 Investor Relations in Hydro Rikard Lindqvist Head of Investor Relations t: e: Pål Kildemo Investor Relations Officer t: e: Irene Alyanakian Kristiansen Investor Relations Assistant t: e: Next event First Quarter Results April 24, 2013 For more information see (96)