Strategy and targets

bauxite mining

Bauxite and Alumina

Delivering on its ambitious improvement program, "from B to A", will be a key priority for Bauxite & Alumina in the coming year. Focus on operational excellence and safe, sustainable practices to promote responsible, cost-effective and stable operations will be reinforced. Optimizing and enhancing the commercial value of our attractive product portfolio will continue to be at the top of our agenda.

2012 targets

  • Continue to stabilize and improve production and operational performance at our sites
  • Further HSE improvements with a focus on high-risk incidents

2012 results

  • Further stabilization of operational performance achieved with record production levels in Paragominas
  • Focus on the prevention of high-risk incidents continued including intensive training and implementation of tools to promote further development of safety culture, however, experienced several serious incidents during the year

2013 targets

  • Continue to improve production stability with the ambition to reach nameplate capacity
  • Deliver approximately NOK 500 million on "from B to A" improvement program
  • Implement CSR stakeholder engagement and action plan
  • Further HSE improvements based on continued reinforcement of safety culture

Ambitions going forward

We are strongly committed to safety and to eliminating high-risk incidents in our operations. Going forward, we intend to capitalize on our strong position in bauxite and alumina in a resource constrained world. We intend to secure and grow our capacity to enhance our position in a profitable bauxite and alumina market. This will increase our attractiveness as a partner in new ventures and our ability to exploit other opportunities which may arise.

 

worker

Primary Aluminium

A key ongoing strategic focus for Primary Metal is the continuous improvement of the efficiency of our smelter system, while constantly addressing the cost challenges facing our business. In order to secure the viability of our operations over time, we intend to focus on business opportunities that enhance our cost position. We will also maintain our technological leadership, which contributes to lower operating costs, reduced emissions, and ensures our attractiveness as a partner for world-class projects within an industry with sound long-term fundamentals.

2012 targets

  • Safe and efficient operations
  • Cost reductions targeted to USD 300 per mt, including USD 235 per mt by end 2012
  • Secure first quartile cost position for Qatalum
  • Continue strong capital discipline

2012 results

  • TRI improved compared with 2011 and better than industry standard.
  • Achieved targeted cost reductions by the end of 2012
  • First quartile cost position for Qatalum confirmed in 2012
  • Strong focus on capital discipline resulting in a substantial reduction of operating capital in addition to continued low level of sustaining capital expenditure

2013 targets

  • Safe and efficient operations
  • Complete USD 300 cost reduction program and maintain strong cost discipline in all smelters
  • Increase improvement efforts within joint venture operations
  • Further streamlining and cost optimization at Qatalum
  • Optimize casthouse operations through further integration of sales and production organizations
  • Continue strong capital discipline; capital expenditure and net operating capital

Ambitions going forward

Hydro has an ambition to expand its upstream activities while maintaining a strong emphasis on sustainable cost development. We will continue to focus on lean smelter operations, operational excellence and safety. The ongoing development of next-generation technology, HAL4e, will provide a strong technological basis for continued organic growth, increased efficiency and lower emissions.

 

aluminium rods

Metal Markets

Hydro's flexible and extensive multi-sourcing system enables us to rapidly adjust our remelt production to market demand. We intend to capitalize on this flexibility going forward to secure our market position and create additional value on top of LME for our primary capacity. We will also exploit this competitive advantage to optimize our casthouse utilization and increase our premium margins. Global optimization of Qatalum sales volumes targeting markets with the strongest demand development will be a key priority for the coming year.

2012 targets

  • Safe operations with continuous TRI rate reduction
  • Pursue optimal market position regarding margin and volume developments
  • Achieve operational improvements in commercial activities and production operations from defined performance programs
  • Gain market share in new high purity aluminium products
  • Progress on execution of Hydro's recycling strategy

2012 results

  • Significant decrease in TRI rate to the target level
  • Due to challenging markets, optimization of market position has resulted in a reduction of cold metal remelting and closure of foundry alloy casthouse capacities
  • Achieved targeted results in profitability increase and cost reduction from improvement programs
  • Due to challenging market conditions, gains in market share in new high purity aluminium products has not been achieved
  • Incremental increase in recycled scrap usage in existing casthouses

2013 targets

  • Safe and efficient operations with further reduction of TRI rate
  • Further integration of production and market organizations for improved value creation
  • Optimization of regional and global metal balances to exploit market opportunities and improve margins
  • Realization of increased volumes from new high purity aluminium products contracts

Ambitions going forward

Our vision is to be the preferred partner for casthouse products and services. Our ambition is to utilize the flexibility of our multi-sourcing system and manage our product portfolio globally in order to optimize margins and our global market share, including developing positions in emerging markets. We will continue a strong focus on safety, and maintain firm discipline on operating costs and capital expenditures.

 

worker with aluminium roll

Rolled Products

Securing increasing returns for our Rolled Products business operations continues to be a key priority. Margins will remain in focus, and measures aimed at increasing efficiency and reducing costs will continue as we pursue innovative product development and close cooperation with our customers.

2012 targets

  • Further HSE improvement, with focus on high risk areas
  • Defend margin level
  • Maintain customer focus with further improvement in delivery reliability and quality
  • Finalization of the product optimization program
  • Operational performance improvements with focus on productivity and higher cost efficiency
  • Improve inventory turnover rate, strong focus on counterparty risk

2012 results

  • TRI-performance well ahead of last year
  • Average margin level defended at 2011 level
  • Improvements achieved within delivery reliability and quality
  • Product optimization program finalized
  • Operational performance impacted by lower demand and shipments
  • Inventory turnover rate improved, no significant counterparty default

2013 targets

  • Continued HSE improvement
  • Continue to defend margin levels within challenging market environment
  • Further operational performance improvements with focus on productivity and cost efficiency
  • Drive cost programs in all plants
  • Improve inventory turnover rate despite market uncertainty
  • Maintain strong focus on counterparty risk

Ambitions going forward

We are committed to safety and to eliminating serious accidents in our operations. We aim to increase the returns of our business, concentrating on margins, cost efficiency and operational excellence - supported by the Rolled Products Business System, involving all employees in continuous improvement. We will stay focused on innovation and technology to sharpen our competitive edge.

 

extruded products

Extruded Products

Execution of our expanded improvement program, "Mission 1000", targeting increased cost reductions and operational improvements will be a key priority to strengthen Hydro's Extruded Products operations for the planned Sapa joint venture.

2012 targets

  • Safe operation with continued focus on TRI reduction
  • Successful implementation of cost improvement program
  • Improve overall cost effectiveness compared to 2011
  • Further development of differentiation strategy and strengthen basis for premium prices
  • Capture growth opportunities, especially in emerging markets

2012 results

  • Reached ambitious TRI target
  • Achieved close to EUR 60 million in savings improving overall cost effectiveness
  • Focused on advanced technology to differentiate our products and insure value creation for our customers
  • Executed investments in new capacity in China and Brazil

2013 targets

  • Continued improvement in TRI rate to secure safe operations
  • Achieve further improvement targets supported by the Mission 1000 program
  • Create a global market leader in extruded aluminium solutions through the Sapa joint venture
  • Capitalize on our new investments in China and Brazil

Ambitions going forward

Hydro's new joint venture, Sapa is expected to improve the global reach of our European centered extrusion business and create a stronger foothold for Hydro in North America and several important emerging markets. Our goal is to remain the clear performance leader in Europe's extrusion-based industries. We focus on innovation and technology to sharpen our competitive edge. We are committed to safety and to eliminating serious accidents in our operations. We will make further capacity adjustments in markets with insufficient demand. We intend to further expand in emerging markets to grow our business and improve the profitability of our operations.

 

water fall

Energy

Hydro is the second-largest power plant operator in Norway, with more than 100 years of experience in hydropower production. We intend to develop the value of our Norwegian assets and to use our extensive energy competence to secure competitive energy sources for our global activities. Operational excellence will continue to be a key priority to secure cost effective, safe and reliable production.

2012 targets

  • Continued operational excellence and strong focus on safe operations
  • Successful completion of two new power stations
  • Continue positive development in the commercial activities
  • Competitive energy sourcing for aluminium operations and development of strategic options in Brazil

2012 results

  • Positive development in operating performance, no recordable injuries
  • Completion ahead of plan on two new power stations
  • Good progress on improvement projects within commercial activities
  • Energy sourcing secured for aluminium operations in Neuss and Søral
  • CO2 compensation scheme supported by EU and national authorities in Germany and Norway
  • Increased competence on Brazilian hydropower system

2013 targets

  • Continued operational excellence and strong focus on safe operations
  • Cost and improvement focus in operations and projects
  • Continue maturing new equity growth options supported by electricity certificates
  • Continued work on securing competitive energy sourcing for aluminium operations
  • Development of strategic options and energy solutions in Brazil

Ambitions going forward

Our goal is to develop our equity power position and capitalize on our energy competence, supporting the sourcing of power to our operations on a global basis.

 

worker

Viability performance

 

2012 targets

  • No fatal accidents. Total recordable injuries per million hours (TRI rate) down 25 percent to 2.85
  • Stabilize at above 90 percent capacity utilization in recycling
  • Internal review of reforestation and wildlife program in the Paragominas mine
  • Establish CSR action plan for community investments in Pará, Brazil
  • Diversity awareness program launched

2012 results

  • No fatal accidents. Total recordable injuries per million hours down by 11 percent to 3.4
  • The electrolysis process of aluminium production emitted 1.62 mt CO2e/mt aluminium, up from 1.61 mt last year, due to a setback in Albras and Slovalco
  • About 95 percent capacity utilization in recycling
  • Intiated development of new biodiversity strategy for the Paragominas mine
  • Diversity awareness program launched

2013 targets

  • No fatal accidents. Total recordable injuries per million hours down by 16 percent to 2.85
  • Stabilize at above 90 percent capacity utilization in recycling
  • Emission of 1.58 mt CO2e/mt aluminium from production
  • Revise Hydro's climate strategy and develop new long-term ambitions. Finalize biodiversity strategy for the Paragominas mine
  • Develop grievance mechanisms for Hydro's activities in Barcarena, Brazil as a pilot for a corporate-wide solution

Ambitions going forward

  • No fatal accidents or other serious injuries and no new work-related illnesses.
  • Minimize our environmental footprint through the life cycle of our products
  • Balance opening of the Paragominas mine with reforestation (1:1) within 2017. Close the reforestation gap by 2020
  • We intend to be a preferred partner worldwide due to our responsible business operations 

Updated: October 11, 2016