Norwegian aluminium company Norsk Hydro ASA is focusing its Capital Markets Day 2015 on the efforts to become better, bigger and greener as a means to create value for shareholders. Industry-leading improvement programs, technological leadership, capital discipline and financial strength contribute to strengthen Hydro's relative position in challenging markets.
As part of the "Better" ambition, Hydro is raising its improvement ambition with an additional 2.9 billion NOK by end-2019, it is realizing the "Bigger" ambition with selective growth projects such as the Karmøy Technology Pilot, and it is on track to become carbon-neutral from a life-cycle perspective as part of the "Greener" ambition. A complete status update on the Better, Bigger, Greener aspiration will be presented at the Capital Markets Day.
A fully-integrated and technology-driven aluminium company, Hydro launched the "Better, Bigger, Greener" aspiration and a set of strategic goals at Capital Markets Day 2014. The aspiration defines strategic priorities for each business area with the overall aim to deliver sustainable shareholder value:
• Better: Operational and commercial improvement drive and technology lead
• Bigger: High-grading and selective growth to improve relative industry position
• Greener: Reducing carbon footprint and turning leading sustainability agenda into competitive advantage
By the end of 2015, operational and commercial improvement efforts have contributed with NOK 4.5 billion since 2011, whereof NOK 0.8 billion is to be delivered in 2015. Building on a strong track record of delivering on improvement goals, Hydro has now introduced a new improvement ambition, Better, which aims to deliver NOK 2.9 billion of added value throughout the value chain in the period from 2016 to 2019, with NOK 1.1 billion of these expected in 2016. The ambition builds on the previous programs, and includes lifting production capacity in the Primary Metal plants through technological developments, high-grading Rolled Products portfolio towards higher margins, and further lifting production backed by robust operations in Bauxite & Alumina.
"Market conditions have deteriorated compared to a year ago, underlining the importance of Hydro's continuous improvement culture," says Hydro President and CEO Svein Richard Brandtzæg. "Hydro views weak markets as an opportunity to become stronger. As we are about to deliver on the ongoing improvement efforts, which have made our operations much leaner, identifying new potential becomes more challenging. Still, through technological advances, debottlenecking efforts and best practice sharing between the business areas, we were able to identify more measures."
"Effective risk management and a prudent financial framework are crucial in the cyclical industry Hydro operates in, which has once again been highlighted by the recent industry developments. A strong balance sheet is the best tool we have to respond to market volatility, in addition to continuously improving our relative industry position. Today, Hydro is a first quartile aluminium and alumina producer with a strong balance sheet. This allows us to offer a safe and reliable dividend to shareholders, as well as enables us to strategically utilize lower parts of the cycle to increase our value creation potential," says Brandtzæg.
Hydro is committed to disciplined capital allocation at all times. The company's long-term sustaining capex guidance remains below depreciation at 3.5 - 4.0 BNOK per year, adjusted somewhat up from the previous level of 3.5 BNOK and reflecting long-term inflationary pressures and a portfolio update.
