Norsk Hydro - Announcements on Capital Markets Day
11 December 2003 - 11:41PM
PR Newswire (US)
Norsk Hydro - Announcements on Capital Markets Day OSLO, Norway,
Dec. 11 /PRNewswire-FirstCall/ -- For Hydro, the past year has been
characterized by important strategic decisions and the sound
development of the company's operations. Dedicated efforts to boost
productivity and improve cost positions have produced good results,
which mean that Hydro expects to meet its profitability targets for
2003. Oil and gas production is expected to average 525 000 boe per
day for the year, an increase of 5 000 barrels compared to
previously communicated targets. The improvement program in
Aluminium has achieved its goals for the year and the cost savings
realized are ahead of plan. Hydro has also in 2003 demonstrated its
ability to tackle major expansion projects. The company is now well
under way with its preparations for the development of the Ormen
Lange gas field. A high oil price and a considerably stronger
fertilizer market have helped mitigate the negative effects of a
weaker US dollar and the continued weak markets for some aluminium
activities. "I am very satisfied that we are delivering continuous
improvements in the company's operations throughout the year. Oil
and gas production is impressively strong, the improvement programs
in aluminium are on track, safety developments in both business
areas are very positive and we have also demonstrated this year
that Hydro is really delivering on major projects," says President
and CEO Eivind Reiten. "Alongside our solid operational
development, we have drawn some important conclusions for the
future. Hydro shall be a leading energy and aluminium company; Agri
is being established as a separate listed company. We are now
concentrating our management and financial resources on building
further on our competitive strengths in Oil & Energy and
Aluminium -- both well positioned in strategic industries." In the
course of recent years Hydro has undergone extensive changes. Oil
and gas production has doubled, the aluminium business ranks among
the world's largest following major acquisitions, and Hydro is a
more international company, with two thirds of its employees
outside Norway. After a portfolio review earlier this year the
company decide to concentrate in future on developing Oil &
Energy and Aluminium, while shareholders have been invited to
decide that Agri be demerged to become an independent listed
company. Hydro presents its new logo today, a new symbol that
reflects the major changes in the company. The company's logo and
visual identity have been modernized as part of an extensive
process to strengthen Hydro's identity and profile. The new logo
will be Hydro's official symbol from the New Year and the company
will implement the change at its plants and offices in the course
of 2004. The process of establishing Agri as a separate listed
company is proceeding with full vigor. Following an extensive
turnaround operation, Agri has consolidated its position as the
world's leading fertilizer company and is now ready to pursue new
opportunities for profitable growth. Agri is planned to be listed
on the stock exchange on 25 March 2004. Hydro's shareholders will
own 80 percent of Agri, as a new Agri share will issued for each
Hydro share held. The remaining 20 percent of Agri shares will be
sold, preferably at the time of listing, with the aim of ensuring a
smoothly functioning market for the share after listing. The
company's financial position, measured in terms of the ratio
between net interest-bearing debt and equity, strengthened during
2003. In future the company will include off balance sheet pension
liabilities and operating lease commitments in assessments of the
company's financial position. The company's long-term goal is a
debt/equity ratio, thus defined, of about 0.5. Applying the amended
definition, the ratio stood somewhat below this at the end of the
third quarter. Hydro will continue to concentrate on its core
businesses. Since 1999 the company has sold non-core businesses
valued at NOK 25 billion. A separate divestment program launched in
2002 is nearing completion, with agreements signed worth NOK 9.3
billion. Capital expenditure in 2004 is expected to amount to
roughly NOK 20 billion including exploration. An increasing share
of the investments will in the coming years be allocated to Oil
& Energy. Hydro is expecting to achieve its planned CROGI (Cash
Return on Gross Investment) target for 2003 of 8.5 to 9.5 percent,
based on normalized prices for important products and foreign
currency (oil price of USD 18 per barrel, aluminium price of USD
1500 per tonne, fertilizer price (CAN 27) of USD 113 per tonne and
a USD/NOK exchange rate of 8). From 2004 the company has decided to
use ROACE (Return on Average Capital Employed) when communicating
the company's profitability targets. The future targets will be
announced when the preliminary annual results are presented on 16
February. Both Oil & Energy and Aluminium will have a
profitability goal equivalent to a CROGI of 9 to 10 percent. Oil
& Energy Hydro's oil and gas production continues to develop
vigorously and the 2003 production estimate has been lifted from
520 000 to 525 000 boe per day. This means that fourth quarter
production is expected to be 580 000 boe per day, a 20 000 barrel
increase compared to the previous target. For 2004 production is
expected to attain an average of 560 000 boe per day. Hydro's oil
production outside Norway is increasing and now constitutes 12
percent of the company's overall production. The production
profile, now extended to 2007, still shows average annual growth of
8 percent with base year 2001. Even though resource availability in
the next few years secures the basis for further considerable
production growth, the extensive exploration of recent years has
not resulted in comparable access to reserves enabling future
production growth on this scale. Hydro has completed a thorough
evaluation of its exploration strategy. In future, the company will
seek to reduce the risk profile in its exploration portfolio and
will moreover consider buying into proven petroleum resources in
areas where Hydro's particular strengths in drilling, reservoir
management and field development can contribute to increased added
value. Hydro's level of exploration activity will be reduced. While
standing at around NOK 1 billion in 2004, an expected annual level
of about NOK 1.5 billion is anticipated in the future. This is
considered a normal level for comparable companies. At the same
time, exploration units have been brought together into the one
organization. Hydro is operator for the Grane and Fram Vest fields,
which came on stream in autumn 2003. Both projects have been
delivered on schedule and well under budgeted cost. On 4 December
Hydro submitted its Plan for Development and Operation of the Ormen
Lange gasfield. Recoverable reserves are estimated to be 397
billion cubic meters of gas and 28.5 million cubic meters of
condensate. The total investment for field development and
transport system has been estimated at NOK 66 billion. Hydro is
operator for the development phase and holds an ownership share of
18.0728 percent in the field. The company is also concluding
negotiations for the sale of its share in the Snohvit field.
Aluminium The Aluminium operation is currently completing the
improvement programs started in 2002, which aim to achieve a total
cost reduction of NOK 2.5 billion in 2004 compared with 2001. At
the end of the third quarter of 2003, the pace of improvement had
already outstripped the level planned for the end of the year.
Hydro Aluminium will continue to improve productivity and reduce
costs. The company will continue to invest in profitable projects
in areas that will strengthen its competitive position. Examples
are the expansions at Sunndal in Norway and Alouette in Canada,
both of which will improve the company's cost position within
primary aluminium production. In order to ensure competitive
long-term access to raw materials, Hydro is participating in the
expansion of Alunorte in Brazil, which is one of the world's most
cost-efficient alumina refineries. The company has also signed a
long-term alumina supply agreement with Comalco. Hydro will also
continue to invest in profitable niche opportunities within
semi-manufacturing, for example through the construction of an
automotive component factory in China and an increase in
lithographic plate production capacity in Germany. The
restructuring of Hydro Aluminium's portfolio of operations
continues. Flexible Packaging and VAW-IMCO were sold during the
course of the last year. Both of these operations were part of the
VAW acquisition. The company proposes to close down an automotive
component factory in Leeds in the UK, and has also decided not to
replace the old Soderberg lines at the metal plants in Ardal and
Hoyanger, in Norway, which will have to be closed down before the
end of 2006, due to environmental requirements. The markets for
aluminium remained challenging in 2003. Aluminium demand is highly
sensitive to general economic trends. Low margins, particularly in
the business units Rolled Products, Automotive and North America,
have produced weak results. The fall in the value of the US dollar
in relation to the Euro and Norwegian krone has had a negative
effect, but was partially compensated for by the rising aluminium
price in US dollars during the autumn of 2003. Certain statements
in this press release are or may constitute "forward- looking"
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Statements that are not in the nature of
historical facts may be deemed to be forward-looking statements and
may contain identifying words such as "believes", "anticipates",
"plans", "expects" and similar expressions. These forward looking
statements are based on Hydro's current expectations, assumptions,
estimates and projections about the company and the industries in
which it engages in business. All forward-looking statements
involve risks and uncertainties. For a detailed description of
factors that could cause Hydro's actual results to differ
materially from those expressed in or implied by such statements,
please refer to its annual report on Form 20-F for the year-ended
December 31, 2002 and subsequent filings on Form 6-K with the U.S.
Securities and Exchange Commission. With respect to each non-GAAP
financial measure Hydro uses in connection with its financial
reporting and other public communications, Hydro provides a
presentation of what Hydro believes to be the most directly
comparable GAAP financial measure and a reconciliation between the
non-GAAP and GAAP measures. This information can be found in
Hydro's earnings press releases, quarterly reports and other
written communications, all of which have been posted to Hydro's
website (http://www.hydro.com/).
http://hugin.info/106/R/927969/126708.pdf DATASOURCE: Norsk Hydro
CONTACT: Peik Norenberg, +47-22-53-34-40, or Cellular,
+47-91-76-15-56, , or Tor Steinum, +47-22-53-27-31, or Cellular,
+47-95-08-39-33, , or Cecilie Ditlev-Simonsen, +47-22-53-20-97, or
Cellular, +47-41-55-92-50, , all of Norsk Hydro Web site:
http://www.hydro.com/ http://hugin.info/106/R/927969/126708.pdf
Copyright