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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