Norsk Hydro ASA

Earnings Release • Nov 27, 2024

Hydro Capital Markets Day 2024: Accelerating the green aluminium transition

Hydro Capital Markets Day 2024: Accelerating the green aluminium transition

Hydro is advancing on its 2030 strategy to seize opportunities from the green

transition, driving growth in aluminium recycling and extrusions, and executing

on renewable power generation and sustainability ambitions. These topics will be

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