Capital Markets Day 2018: Hydro keeps courseVolker Karow
The Norwegian aluminium group Hydro remains committed to its strategy to improve and grow along the full aluminium value chain. At this year’s Capital Markets Day in London at the end of November, Hydro presented its strategic direction and performance, including an update on the situation at Alunorte and details on the market outlook for 2019 and the longer term.
Following the full acquisition of Sapa and its integration in Hydro, president and CEO Svein Richard Brandtzæg said: “I am more confident than ever that the integrated value chain is our path to a Better, Bigger, Greener Hydro. We are encouraged by the positive long-term trend for increased use of aluminium in modern products and solutions globally.”
In the short-term, Hydro is working hard to resume full operations at the Alunorte refinery in Brazil, following nine months of running at 50% production capacity. Hydro is working in close cooperation with the authorities in Brazil to return to full production by “utilizing the best available technology,” he said.
Aluminium continues to be the world’s fastest growing base metal. Global demand for primary aluminium is expected to grow by 2-3% in 2019, with a continued deficit in the global primary market. Global demand is expected to grow by 2-3% per year over the next decade, with global semis demand estimated at 3% and recycling at 3-4% per year over the same period. Aluminium is an increasingly important building block on the way towards a low-carbon, circular economy.
Brandtzæg gave a number of examples of strong performance throughout the company, such as the highly energy-efficient Karmøy technology pilot in Norway, the new automotive line in Germany and the continuous improvements in the Extruded Solutions business. The integration of this business area was on track, he said, to deliver NOK200 million (€20m) in synergies, with NOK100 million already realized in 2018. Due to the situation at Alunorte, Hydro will not be able to deliver on its Better programme with improvements of a total NOK3.0 billion over a four-year period until end-2019.
Hydro is dedicated to ensuring capital discipline and a strong balance sheet, as well as delivering competitive returns to its shareholder. Hydro maintains its dividend policy of returning 40% of net income over the cycle, and NOK1.25 per share is considered a floor. Sustaining capex is estimated at average NO 6.5-7.0 billion 2018-21, including investments to improve robustness at Alunorte. The total capex estimate for 2019 is NOK 10-10.5 billion.