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Norsk Hydro (LON: NHY): One of the World's Five Largest Aluminum Companies Outside of China with Annual Revenue Around 10 billion U.S. Dollars

on 1/6/2017
Norsk Hydro (LON: NHY) is an aluminum company founded in 1905 and headquartered in Norway. According to Halvor Molland, VP Media Relations of Norsk Hydro, the company is one of the world's five largest aluminum companies outside of China, with annual revenue around 10 billion U.S. dollars. Today, they are present all along the value chain from bauxite and alumina operations in Brazil, through primary production in Norway, Qatar, Slovakia, Brazil, Australia, Canada and Germany. Hydro also holds 50% share of Sapa AS which is the world's largest extrusion company. We learned from Mr. Molland that the main applications driving the growth of aluminum are automotive, building and construction.

Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-chief of Metals News, interviewing Mr. Halvor Molland, VP Media Relations, Norsk Hydro. Could you tell me a little bit about your country, your company, your aluminum projects and production, what products you make and your operations?

Mr. Halvor Molland: Yeah. I don't know how familiar you are with Hydro, but we are an aluminum company headquartered in Norway. The company was founded in 1905. We have been producing aluminum in Norway for more than 100 years now. Today, we are present all along the value chain from bauxite and alumina operations in Brazil, through primary production in Norway, Qatar, Slovakia, Brazil, Australia, Canada and Germany. We're the primary operations. We also have energy production in Norway, Hydro Electric Power Production. We also have downstream rolling mill production in Germany and in Norway.

Dr. Allen Alper: Are you one of the largest aluminum manufacturing companies?

Mr. Halvor Molland: Outside China, we are one of the five largest in the world.

Dr. Allen Alper: It sounds like you're vertically integrated from bauxite to aluminum products?

Mr. Halvor Molland: Yes, we are. Now we are more or less the only vertically integrated aluminum company outside China. We also hold a 50% share of Sapa AS, the world's largest extrusion company.

Dr. Allen Alper: That's great. Could you give me some of your statistics, sales and number of employees?

Mr. Halvor Molland: Yeah, we have about 13,000 employees. Our annual revenue is 88 billion Norwegian krone, which is around 10 billion U.S. dollars.

Dr. Allen Alper: That's quite large.

Mr. Halvor Molland: Yeah.

Dr. Allen Alper: How is the company's profitability?

Mr. Halvor Molland: We had an EBIT in 2015, which is our last annual EBIT available now. That was 9.7 billion Norwegian krone.

Dr. Allen Alper: That's very good. What is the outlook for the company, your plans for 2017?

Mr. Halvor Molland: In the aluminum industry, we have a positive outlook on the growing demand for aluminum. It's continuing to grow. What we have seen in the past is that the supply side has been even bigger than the demand side. There has been continuous growth. Aluminum is the fastest growing metal. If you compare it to steel and copper and others, the growth of aluminum is the steepest among the key metals in the world. The outlook for the industry is good on the demand side, but over the last few years, growth in demand has been outpaced by growth on the supply side. It has been an over-supply situation, which we expect will come more into balance, with a slight deficit in supply going forward. For Hydro, we are continuing our integrated model. Although we recognize that other companies have gone in the other direction, we believe strongly in the integrated model. We see synergies in the different areas, especially when it comes to research and development and technology development, alloy development and also competence. Our customers on the downstream side have the benefit of competence and technology development, when it comes to production techniques, costing techniques and alloy development.

Dr. Allen Alper: What is driving the demand? What applications are driving the growth of aluminum?

Mr. Halvor Molland: A couple areas. Automotive, where we have Hydro building a new automotive line in our rolling mill in Germany that we are opening next year. When car manufacturers are forced or aiming to reduce CO2 emissions and light-weighting, they need aluminum as a metal to achieve that light-weighting. The amount of aluminum in each car is growing steadily. Some car manufacturers are switching from steel to aluminum. In the U.S. recently, the Ford F-150 made a full switch from steel to aluminum in the body. That will lead to growth in aluminum demand.

Apart from the light-weighting in automotive, in building and construction the benefits of aluminum are being recognized by the architects and the construction companies.

Dr. Allen Alper: That's very good. Why do you think demand will start to increase more than supply?

Mr. Halvor Molland: With the effect on the supply side, we see in the last couple years there have been new smelters coming on line and the appetite for constructing new plants has shrunk, as the aluminum price has been fairly low, historically, the last few years. Some old technology smelters have closed down and fewer new smelters are coming on stream. While the demand continues to grow. It should strike a balance in 2017.

Dr. Allen Alper: I would guess your costs are quite competitive. Is that correct?

Mr. Halvor Molland: We have, over the last few years, had high attention and focus on cost improvement. We have run several cost improvement programs, both on the primary side, but also now all along the value chains. We are now into a 2.9 billion Norwegian krone cost improvement program, from 2016 to 2019. We're on track to deliver. We believe we are competitive among our peers and keeping a constant focus on improving our development cost. We have been successful in achieving the target we have set for this over the last few years.

Dr. Allen Alper: That sounds very good. Where is your stock listed?

Mr. Halvor Molland: We're listed on the Oslo stock exchange. We also have a secondary listing in London. Our stock symbol is NHY.

Dr. Allen Alper: Thank you for all the information. What you are doing is very impressive.

Norsk Hydro ASA
Postboks 980 Skøyen
NO-0240 Oslo

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