• Managing cyclicality through financial strength and flexibility
• Strengthening competitiveness through continuous improvements and portfolio high-grading
• Differentiating through the integrated value chain

In the current uncertain macroeconomic environment, Hydro continues its focus on maintaining capital discipline and a strong balance sheet while ensuring competitive and reliable returns to shareholders.

Hydro continues its efforts to strengthen its relative industry position, and is utilizing its strong financial platform to invest in selected areas to high-grade its portfolio towards higher-margin segments, grow its recycling business and develop new technology to further improve the competitiveness and climate performance of its portfolio.

Finally, Hydro will leverage its unique fully-integrated value-chain model to innovate and differentiate in order to drive customer value, as well as capitalize on one of the global aluminium’s most sustainable portfolios.

“Based on our aspiration Better, Bigger, Greener, we have built a highly competitive position within the global aluminium industry,” Hydro’s President and CEO Svein Richard Brandtzæg says. “We are now using this platform to lift us to the next level, ensuring long-term value creation through our industry-leading improvements drive, portfolio high-grading and selective growth, as well as strengthening our competence.”

Brandtzæg says safety remains Hydro’s top priority, and with a best ever year-to-date TRI-rate of 2.6 the company is on track for its 2020 ambition of a TRI-rate below 2.0 and its long-term aspiration of a truly injury-free working environment. He adds that with its strategy to become carbon-neutral by 2020 and high ambitions in sustainability and compliance, Hydro now ranks among the best companies on HSE and CSR in the entire metals and mining sector.

“For us, being integrated goes beyond the value-chain perspective. We do not distinguish between the financial and extra-financial dimension, but regard all aspects of our activities as part of our efforts to strengthen our competitive edge – be it operational improvements, commercial excellence or sustainability,” Brandtzæg says.

Hydro has continued its strong track record in delivering on promised improvements also in 2016. The company is on track with its NOK 2.9 billion Better improvement ambition by 2019 after reaching its 2016 target of a total NOK 1.1. billion, with stronger-than-expected improvement results in the Bauxite & Alumina business area compensating for slower-than-expected progress in both Primary Metal and Rolled Products.

Hydro is also utilizing technology and innovation to differentiate in the highly competitive environment of global aluminium. The Karmøy technology pilot, expected to be 70% completed by end-2016,  will not only verify the world’s most energy and climate efficient smelter technology, but also serve as spin-off platform for technology-driven improvements throughout Hydro’s production system for primary aluminium.

Both Primary Metal and Rolled Products, as well as extrusion JV Sapa, are pursuing a strategy of high-grading and shifting the product portfolio towards higher-margin segments. In Rolled Products, this has resulted in a special focus on the high-growth automotive market, and trial production has now started at the new automotive line 3 in Grevenbroich, Germany, that will serve European-based car makers with premium products.

Rolled Products also completed construction of the new recycling line for used beverage cans this year, which is expected to reach full capacity during 2017 after experiencing some difficulties during the ramp-up phase.

“With the world moving towards a low-carbon, circular economy, we believe our integrated approach with value chain control, competence and technology transfer across our business areas, is the right model to ensure customer value and position us for further development and growth,” Brandtzæg says.

Global primary aluminum demand is estimated to grow around 5 % in 2016 and 3-5% in 2017, as its inherent qualities as light, strong, highly formable, durable and infinitely recyclable continue to increase the metal’s attractiveness across a wide range of products and applications. Supply and demand for primary aluminium is expected to be broadly balanced in 2016 and 2017.

In the longer-term, global primary demand is expected to rise an average 2-3 % per year for the next decade, while semis demand is projected at 3-4 % and recycling 4-5 % a year over the same 10-year period.

Hydro is highly committed to disciplined capital allocation throughout the business cycle of aluminium, and the long-term sustaining capex guidance remains below depreciation even with the adjustment to around NOK 4 billion from a previous estimate of NOK 3.5-4 billion. Sustainable shareholder returns continue to be a key priority for Hydro, with a dividend policy of returning 40 % of net income over the cycle.