A2R0MA Norsk Hydro ASA

Hydro is advancing on its 2030 strategy to seize opportunities from the green transition, driving growth in aluminium recycling and extrusions, and executing on renewable power generation and sustainability ambitions. These topics will be key for Hydro’s Capital Markets Day 2024.

Key highlights

• Launching new improvement program to deliver NOK 6.5 billion in improvements by 2030
• Improvement efforts to strengthen Recycling and Extrusions execution towards 2030, reconfirming 2030 adjusted EBITDA potential despite market challenges
• Battery and Havrand businesses to be phased out
• Hydro REDUXA and Hydro CIRCAL sales increasing by more than 20 percent in 2024, amid weak European and North American markets, building capabilities for future contributions with partners
• Reconfirming 2025 and medium-term annual capex guiding of NOK 15 billion, with additional annual flexibility up to NOK 1-2 billion
• Estimating NOK 29 billion working capital by 2024 and additional NOK 1 billion build in 2025, from higher upstream prices and weaker NOK offsetting improved performance
• Shareholder distribution target aligned with dividend policy and capital structure targets

Hydro launched its 2030 strategy one year ago, stepping up growth ambitions in aluminium recycling, extrusions and renewable power generation. Hydro will execute on its decarbonization roadmap, and contribute to nature positive and a just transition, while shaping the market for greener aluminium.

One year into the new strategy, Hydro is now accelerating its strategic focus and will align capital allocation in accordance with the strategy.

“Hydro has a solid foundation to capture the long-term value creation opportunities in the aluminium market. To accelerate and elevate our position as the leading provider of low-carbon, high value aluminium solutions, we are sharpening focus on strategic capital allocation, launching a new improvement program aimed at 2030 and pushing forward profitable growth throughout our value chain, all while continuing to deliver strong returns to our shareholders,” says President and CEO, Eivind Kallevik.

Hydro’s value chain presents a unique advantage in navigating volatile markets. To reinforce this strength, Hydro is launching a new NOK 6.5 billion improvement program to enhance resilience and drive value creation towards 2030.

To strengthen the focus on Hydro’s 2030 strategy and address challenging market conditions in the batteries and green hydrogen sectors, battery materials and green hydrogen will no longer be strategic growth areas for Hydro and no further capital will be allocated. Battery and Havrand businesses will therefore be phased out.

Hydro will continue to support Hydrovolt as an industrial owner in close link with the recycling business and strategic partners. Within green hydrogen, Hydro will continue to test the technology at the recycling unit at Høyanger for internal decarbonization.

”Our 2030 strategy is clear and we are steadily delivering on our ambition to pioneer the green aluminium transition. We are driving growth in aluminium recycling, extrusions and renewable energy, further supported by our commitment to a broader sustainability agenda. We are making Hydro well-positioned to create value and capture new market opportunities as the green transition progresses,” says Kallevik.

The European Commission has put aluminium on the list of critical raw materials for the EU. Aluminium demand is set to increase significantly towards 2050, driven by electrical vehicles, renewable energy, and infrastructure, creating opportunities for Hydro's low-carbon and recycled products. While short-term pressures like weak European extrusion demand persist, Hydro’s integrated value chain, strong market positions, and focus on sustainability uniquely position Hydro to thrive in a decarbonizing world with certified, traceable, and low-carbon solutions.

Executing and positioning for growth in Recycling and Extrusions

Hydro remains confident about Recycling’s long-term value and its role in meeting the growing demand for low-carbon products, despite short-term pressures in the recycling market with tighter scrap supply and softer aluminium demand. Hydro’s expertise in sourcing and processing complex scrap types positions Recycling for profitable growth, while advancing on ambitious 2030 targets. Hydro is on track and estimates to reach 700 kt of post-consumer scrap (PCS) capacity by year end 2024. The approved and planned projects confirm the lower end of the 2030 PCS target of 850 –1,200 kt.

Recycling 2030 growth ambitions extend beyond increasing PCS capacity. Both Aluminium Metal and Extrusions recycling have committed to reduce hot metal costs by USD 20–30 per tonne by 2030, addressing the current cyclical downturn, while building future resilience. Starting from NOK 1.1 billion in earnings over the last 12 months, a market normalization in line with historical levels is expected and necessary to reach ambitions. When markets normalize, uplifts from invested and announced growth initiatives, hot metal cost improvements and Alumetal synergies, are projected to deliver NOK 5 billion in annual recycling earnings. This confirms the lower end of the NOK 5–8 billion adjusted EBITDA potential by 2030. A continued expansion of the Hydro CIRCAL portfolio is expected to add further value and Recycling increased its Hydro CIRCAL sales by 20 percent in 2024, despite weak markets.

Hydro Extrusions sees significant potential for profitable earnings uplift despite current market challenges. By modernizing and optimizing the global Extrusions network through automation, operational enhancements, and strategic investments in fabrication and press consolidation, Extrusions aims to boost capacity and value-added offerings, and deliver NOK 1.7-2.0 billion in improvements, including commercial ambitions by 2030. Reaching the full NOK 10-12 billion adjusted EBITDA potential will partially rely on market share growth, in addition to strengthening performance efforts. Pursuing non-commoditized, high-growth segments is expected to expand market shares and further strengthen the competitive edge in Hydro Extrusions.

Extrusions is expected to face continued weak demand and pressure on recycling margins affecting 2025 results with EBITDA projected between NOK 4.5-5.5 billion based on the latest CRU forecasts. With 2025 as the starting point, in addition to improvement efforts and further growth projects, a demand growth of 30 percent in North America and 20 percent in Europe, and remelt margin normalization are prerequisites for reaching a NOK 10-12 billion adjusted EBITDA in 2030.

Delivering on ambitions within renewable power generation

The green aluminium transition will not be possible without more renewable energy at affordable pricing. Hydro Energy is expanding its renewable portfolio across technologies and markets. In Røldal-Suldal, Hydro and Lyse are maturing a project to add 650 MW of capacity, with Hydro holding a 25.6 percent ownership share in the facilities. In Sogn, Hydro plans to build a new 48 MW Pumped Storage plant. Within onshore wind and solar power, Hydro is developing projects near Norwegian smelters to secure long-term renewable power for its operations and other industrial activities in the region. Hydro Rein, now positioned for growth after partnering with Macquarie, is set to have 1.7 GW of projects in operation by the end of the year, with 8.4 GW in development across Brazil and the Nordics.

Progressing on decarbonization and technology roadmap

Hydro is making strong progress on its roadmap to net-zero by 2050, leveraging its ability to decarbonize across the value chain from bauxite mining to finished products. Key milestones in 2024 include completing Alunorte’s fuel switch to natural gas project, cutting 434,000 tonnes of CO2 annually for Hydro, and the transition from coal to electric boilers, targeting a 70 percent emission reduction at Alunorte by 2030. Across its operations, Hydro is advancing renewable power agreements, emission reducing technologies, and innovative solutions like biomethane, plasma, and green hydrogen. Long-term, Hydro’s R&D focuses on CO2 free aluminium production and carbon capture, with the HalZero pilot on track for 2030.

The green transition in aluminium requires addressing social and environmental impacts alongside carbon reduction. Hydro is advancing efforts like achieving No Net Loss of Biodiversity at Paragominas through expert collaboration, metrics development and exploring biodiversity offsets, with similar initiatives underway at the Illvatn Pumped Storage project in Norway. Globally, Hydro engages partners like Mercedes-Benz in sustainability projects, such as the Corridor Project in Brazil, delivering social, nature and climate benefits. Hydro is progressing on the commitment to halve non-GHG emissions by 2030, and enhancing disclosure transparency through initiatives like the World Economic Forum’s Alliance for Clean Air.

Hydro’s social ambition is to improve lives and livelihoods where the company operates, and focuses on human rights, local development, education, and supply chain standards. Key efforts include continuous due diligence, supporting resilient communities through over 40 local projects in 2024, and aiming to educate 500,000 people by 2030, with 200,000 reached so far through initiatives like UNICEF’s UPSHIFT. Additionally, Hydro drives change across its supply chain, exemplified by a Supplier Development Program in Brazil, while leadership accountability ensures progress remains central to the strategy.

Executing on greener earnings uplift

Hydro is advancing on the NOK 2 billion greener earnings uplift potential by 2030, with 2024 projected sales of Hydro CIRCAL at 60,000 tonnes and Hydro REDUXA at 425,000 tonnes. Key progress includes reducing carbon footprints at Alunorte, expanding Hydro CIRCAL capacity in the U.S., and advancing Hydro REDUXA 3.0 for automotive use. Partnerships with Porsche, Siemens Trains, and Mercedes-Benz further highlight Hydro’s commercial and sustainability leadership, positioning the company to accelerate greener earning uplifts on a growing share of low-carbon primary and recycled aluminium.

Hydro is driving the commercialization of its low-carbon and recycled aluminium products through strategic partnerships with forward thinking customers. This year saw significant progress, including a groundbreaking capacity reservation contract with Porsche and expanded collaboration with Mercedes-Benz on supply chain responsibility through the Corridor Project in Brazil. These initiatives, alongside partnerships with Brompton Bikes, the VELUX Group, and Volvo Group, highlight the growing demand for sustainable materials and demonstrate Hydro’s leadership in creating impactful solutions across the value chain, from mine to consumer, and is further expected to contribute to deliver greener earning uplifts in the years to come.

Focused growth and strong performance drive

Hydro’s adjusted EBITDA Q4 2023 to Q3 2024 was NOK 22.4 billion, compared with NOK 22.3 billion in 2023, with weaker downstream results offset by stronger upstream results. Robust results and capital structure support an adjusted RoaCE of 11.8 percent over the past five years, well above the 10 percent target. Hydro remains committed to delivering consistent shareholder distributions, aligned with the dividend policy and capital structure targets. Distributions will be proposed by the Board of Directors in the fourth quarter release in February 2025 and subject to approval by the Annual General Meeting in May 2025.

The improvement programs are central to Hydro’s strategy for resilience and value creation. Since 2009, Hydro has executed three major multi-year improvement programs, with the current program far exceeding the original target of NOK 7.3 billion. Hydro estimates to deliver NOK 9.9 billion in improvements with this program by end of 2024, with commercial initiatives contributing with an additional NOK 3 billion in value. From 2025, a new NOK 6.5 billion program aimed at 2030, will prioritize high impact areas, ensure transparency in value creation, and link improvements directly to financial and operational outcomes, reinforcing performance and driving strategy execution.

Hydro's new improvement program focuses on three pillars: operational improvements, procurement and commercial excellence, targeting a total impact of NOK 6.5 billion by 2030. Operational initiatives aim to enhance efficiency and drive NOK 2.5 billion in value, while procurement improvements are set to deliver NOK 1 billion through better processes and sourcing. Commercial excellence, with a focus on greener products, targets NOK 3.0 billion in top-line growth. Digital transformation underpins all efforts, with initiatives like predictive maintenance and production optimization, driving innovation, efficiency, and cost reductions.

Hydro’s strategic agenda continues to guide capital allocation and capital discipline remains a key financial priority towards 2030. For 2024, Hydro expects NOK 15 billion in investments, in alignment with guiding from last year. The capex guidance for 2025 and 2026-2029 continues to be NOK 15 billion annually in 2024 real terms, with increasing allocation share towards growth and return seeking investments. Depending on market development and growth capacity, there is potential for accelerated growth investments of NOK 1-2 billion per year, enabling the top of the EBITDA growth target ranges. The long-term sustaining capex is estimated at NOK 9.0 billion for 2025 and NOK 8.5 billion annually for 2026-2029, in real 2024 terms.

In the last three to six months, the alumina price has increased to historically high levels, also providing support to higher aluminium prices. Both are impacting Hydro’s results positively, but also increasing the value of the working capital. As a result, Hydro has raised its year end 2024 guidance on working capital from NOK 28 billion to NOK 29 billion, largely driven by high upstream prices and a weaker NOK. Efforts to optimize working capital are strengthened, with improved inventory levels expected to enhance performance and lowering average working capital days from 47 to 45 from 2024 to 2025. However, based on current forward markets, a net working capital build of NOK 1 billion is expected by 2025.

The proposed capital allocation and improvement targets enhance Hydro’s competitive edge, support earnings resilience across economic cycles, and pave the way for sustained growth and attractive shareholder returns.

Investor contact:
Martine Rambøl Hagen
Martine.Rambol.Hagen@hydro.com
 +47 91708918

Media contact:
Halvor Molland
Halvor.Molland@hydro.com
 +47 92979797

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• NHY Capital Markets Day 2024

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