Norsk Hydro Annual Reporting 2015: Creating value by becoming better, bigger, greener

“The world around us has shifted significantly and fast - again. A year ago, we experienced undersupply and record-high aluminium premiums. Shortly after, Chinese oversupply and rising exports pushed aluminium prices to 6-year lows. I am happy to report that Hydro’s improvement efforts has continued independently with undiminished intensity, giving benchmark results and improved ability to stay the course. We have in total delivered NOK 4.5 billion in annual improvements since 2011. That does not mean improvements have come to an end, and we are always seeking the next milestone. On our Capital Markets Day in December we launched a new ambition aiming to realize new annual improvements of another NOK 2.9 billion by 2019,” President and CEO Svein Richard Brandtzæg writes in his letter to shareholders.

“There is nothing wrong with the demand for our products. Light, formable, corrosion resistant and infinitely recyclable, aluminium enters into ever-new applications and the demand continues to show steady growth. Aluminium substitution in the auto industry is the obvious example, as advanced aluminium sheets take the place of welded steel, saving weight, emissions and process costs. But also within copper, and especially cabling, the potential is great. Within heating, ventilation, air-condition and refrigeration, aluminium solutions continue to make their way, and the light metal is also becoming a cost-efficient and preferred alternative in long-distance transmission lines,” Brandtzæg says.

“A strong balance sheet is our best tool 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, and enable us to strategically utilize the lower parts of the cycle to increase our value creation potential,” Brandtzæg continues.

“In Rolled Products we have been actively high-grading our portfolio through our growth projects in automotive and recycling, serving high margin segments and reducing our metal cost. We also acquired the world’s most advanced scrap sorting technology to strengthen our recycling position. In Primary Metal we are making a systematic approach to realize 200,000 t/y creep in our fully-owned and joint-venture smelters at a highly attractive cost pr tonne. By considering to acquire Vale's 40 percent stake in MRN, we may take an important step towards securing ownership of long-term bauxite supply,” Brandtzæg says.

“Two years ago, we announced our goal of becoming carbon-neutral from a life-cycle perspective by 2020. We are still alone in our industry with such an ambitious climate target - and we are on track. We are lifting our capacity for post-consumed scrap, and are aiming to rehabilitate as much forest as we clear for mining at a 1:1 ratio by 2017. We are doing this because it is the right thing to do, but also because we believe we are building a competitive advantage, " Brandtzæg finishes.

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