Norsk Hydro
oslo : NHY

December 01, 2011 01:11 ET

Norsk Hydro - Capital Markets Day 2011: Performance frontrunner

OSLO, NORWAY--(Marketwire - Dec 1, 2011) - With substantial long positions within bauxite and alumina in a resource-constrained world, ambitious cost improvement programs in place throughout the value chain and the highly competitive Qatalum smelter in full operation, Hydro is now positioned as a performance frontrunner within the aluminium industry.

"The long-term prospects of aluminium remain very promising despite the current economic turbulence, and I am highly encouraged by the strong development of Hydro's operational performance" says Hydro's President and CEO Svein Richard Brandtzæg.

"With our solid financial position and ability to make proactive corrective measures, we aim to come strengthened out from this period of uncertainty and further improve our relative industry position within the metal of the future," Brandtzæg says.

Hydro concluded its transforming transaction in Brazil in 2011, creating a fully integrated aluminium company with world-class assets within bauxite mining and alumina refining that have shown considerable operational improvements in the nine-month period since becoming part of Hydro.

Now with a complete value chain from bauxite to fabricated products and strong fundamentals for aluminium in a longer-term perspective, Hydro also saw Qatalum reaching full production in September, a state-of-the-art smelter with the world's biggest value-added casthouse in a logistically advantageous region.

With the current macroeconomic uncertainty, including the sovereign debt situation in Europe, a slow recovery in the US economy and slowing growth in emerging markets, the consumer sentiment has been negatively affected, which in turn has led to weaker aluminium prices and softer end-markets.

In a forceful response to the uncertain economic environment, Hydro has implemented several proactive improvement measures across the value chain. The USD 300 per mt improvement program within Primary Metal is developing as planned and in accordance with the 2013 completion target, while Hydro's flexible remelting system has been utilized to meet the lower demand seen after the summer.

"Continuous improvement is a core activity within all business areas to establish Hydro as a performance frontrunner. Our operational model has already given impressive results in the Bauxite & Alumina business area, and our strong operational capabilities enable our downstream business to create new business opportunities through technological leadership and innovation," Brandtzæg says.

World aluminum demand has grown strongly over the last two years, rising 19 percent in 2010 and around seven percent in 2011. Growth outside China is expected to continue in 2012, although at a slower pace of around 3-5%. Aluminium fundamentals remain promising due to the metal's many positive qualities, including its light weight and recyclability, and the global aluminium market is expected to show solid long-term growth.

Hydro's Capital Markets Day includes the following highlights:

  * Hydro's strategically important assets within Bauxite & Alumina have
    delivered solid operational improvements since the acquisition in the
    first quarter of 2011. The implementation of Hydro's production system
    continues as a core activity and has already given significant
    improvements.

  * Hydro will seek to capture the full potential of its long position in
    bauxite and alumina in a resource constrained world, which may be
    further strengthened through the CAP and Paragominas projects. As part
    of the strategy, Hydro aims to take advantage of this favorable
    position by considering commercial opportunities and possibilities of
    growing the smelter portfolio.

  * Hydro's USD 300 per mt cash-cost improvement program for its
    fully-owned smelters is on track, with completion planned by the end of
    2013. A real-term accumulated cost improvement of USD 200 per mt is
    expected to be realized by the end of 2011, and a further USD 100 per
    mt is targeted by end-2013. The industry is facing raw material cost
    pressure and strengthening of currencies, offsetting the savings of
    the improvement program and underpinning the importance of the measures
    taken.

  * The Qatalum smelter reached full production in September 2011,
    concluding the USD 5.8 billion project. Qatalum is now producing at
    600 000 mt per year, slightly above its nameplate capacity, and its
    volumes of value-added products are leading to growing market positions
    in the US and Asian markets for Hydro. The focus in 2012 will be on
    streamlining operations and achieving a cost level of USD 1400-1500 per
    mt at 2010 market conditions.

  * In the current uncertain economic climate with high levels of
    volatility, Hydro is in a robust financial position with only NOK 0.1
    billion in net debt and with an ambition of maintaining its financial
    flexibility and upholding its investment-grade rating. Sustaining
    capital expenditures are expected to remain at NOK 3.5 billion in 2012,
    of which approximately NOK 1.0 billion relates to Brazilian assets
    acquired from Vale.

  * Hydro presents three scenarios for earnings potential at the Capital
    Markets Day. The scenarios are not forecasts, but represent earnings
    potential based on selected aluminium prices and NOK/USD exchange
    rates using sensitivities. All non-LME related revenues and costs and
    other currencies are kept constant, and the last four quarters
    pro-forma underlying EBITDA have been used as baseline. All three
    scenarios indicate EBITDA significantly above sustaining capital
    expenditures, illustrating Hydro's cash generation ability.

                                       *********

Certain statements included within this announcement contain forward- looking 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 forward-looking 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 forward- looking statements, whether as a result of new information, future events or otherwise.

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

CMD - Primary and Finance: http://hugin.info/106/R/1567851/487210.pdf

CMD - Market and Bauxite and Alumina : http://hugin.info/106/R/1567851/487208.pdf

CMD - Hydro: http://hugin.info/106/R/1567851/487207.pdf

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that:

(i) the releases contained herein are protected by copyright and other applicable laws; and

(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: Norsk Hydro via Thomson Reuters ONE

[HUG#1567851]

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