Key developments

worker

Underlying EBIT declined substantially to NOK 1,158 million in 2012 compared with NOK 5,982 million in 2011 heavily impacted by low aluminium and alumina prices. Bauxite production reached record levels due to improved operational stability. Qatalum delivered a strong production performance and operating costs within the first quartile on the industry cost curve.

In 2012, Hydro strengthened its ambitious repositioning drive with improvement programs across the value chain. New and existing initiatives delivered significant cost reductions partly offsetting weak market developments and high costs for key raw materials. Following five years of major repositioning initiatives, the construction of Qatalum and the acquisition of Vale Aluminium, Hydro announced a major joint venture agreement, Sapa, aimed at transforming its extrusion operations. The transaction is expected to improve the global reach of the combined operations and generate annual synergies of roughly NOK 1 billion.

Hydro decided to close production at its Kurri Kurri plant in Australia due to the weak economic environment, low metal prices together with the strong Australian dollar. Higher cost remelting at smelter casthouses has been significantly reduced. Substantial curtailments, closures and divestments have been executed within downstream extrusion operations.

Hydro reached its most important target of no fatal accidents in 2012. In March, 2013 a fatal accident occurred involving an external contractor. Total recordable injuries per million hours worked (TRI rate) declined from 3.8 in 2011 to 3.4 in 2012, although the target for 2012 was not reached.

Strategic Direction

The current economic environment represents a significant challenge in obtaining a satisfactory return on capital for the aluminium industry. However, Hydro is well positioned for growth as the global economy evolves. A favorable industry position, captive sources of key raw materials combined with financial strength and flexibility place Hydro in a strong position within an industry with solid long-term fundamentals.

Relentless focus on reducing cost and improving operations will continue. A new improvement program for Bauxite & Alumina, "from B to A", is targeting savings and improvements of NOK 1 billion. The final phase of Primary Metal's "USD 300 program" will be completed in the coming year together with targeted improvements within part-owned smelter operations. Ongoing execution of its expanded improvement program, "Mission 1000", will strengthen Hydro's Extruded Products operations for the planned Sapa joint venture. Securing increasing returns for Rolled Products continues to be a key priority under the segment's "Climb 10" improvement program.

A key priority for our Energy business will be enhancing the value of our power production assets and securing competitive energy sources for Hydro's global activities.

Safe operations continues to be of paramount importance including zero tolerance for fatal accidents. Hydro is targeting further improvement of its TRI rate for 2013 based on leadership, employee involvement and defined risk mitigating activities.

More information about Hydro's Key developments in the Board of Directors' Report
 

  • Annual report 2012

  • Annual report 2012

  • Annual report 2012


Updated: September 15, 2016