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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
Kilde
