Eivind Reiten: "Flexible on structure, but not results"
"Hydro's strategic flexibility is strengthened by the Agri Turnaround and takeover of VAW. We must be flexible towards finding attractive solutions for the company's structure, even if it means adjusting the current configuration," Hydro chief executive Eivind Reiten said today at the opening of the company's Capital Markets Day in Oslo.
Reiten also stressed that Hydro's Oil and Gas business area has established interesting positions during the past year, not least internationally, and that the company's financial capacity is strong. At the same time, he claimed harder work is needed to improve Hydro's financial results.
"I'm not satisfied with our mode of achieving results. Higher levels of performance are needed if we're going to reach an investment return goal (CROGI) of 10 percent during the business cycle. We will hardly reach the target of a normalized CROGI in 2002. Our plans indicate a level of between eight and nine percent. This clearly falls short of the goal. We have to muster renewed strength to improve our results and generate a more dynamic approach to managing the portfolio.
"The takeover of VAW establishes us as Europe's leading aluminium company. From a strategic perspective, the two companies fit hands in gloves. The new company is well positioned as one of the largest integrated aluminium concerns in the world. In the short term, our goal is a successful merging of the two companies. We have the ambition to realize synergies and improvements in our original aluminium operations to the tune of NOK 1.6 billion (€201 million), and expect a total manning reduction of 1,100 employees.
Reiten is very satisified with the Hydro Agri Turnaround process, which was wrapped up at the end of the year. The results are better than first expected. The turnaround has contributed to the the market balance for fertilizer in Europe is considerably better, fixed costs have been reduced by NOK 2.3 billion compared to 1998 and staffing has been reduced by 3,600. At the same time, market positions outside of Europe are stronger. The operation now has a good springboard for achieving sustainable results.
Regarding Oil and Energy, Reiten notes that the production goal of 415,000 tons per day was achieved in 2001. Looking ahead, he sees annual growth of 5 to 6 percent through 2005, increased sales of natural gas and value growth through commercial activities. He characterizes the company's exploration activities in the time ahead as exciting and notes that exploration and development costs are headed toward the company's goal of $5 per barrel within 2003.
He doesn't hide the fact that he is not satisfied with Hydro's share price trend of recent years. In addition to efforts to improve results, he says there will be a new program to sell off activities outside of the comany's core business areas.
"Our goal is to sell operations outside the core for a total of NOK 10 billion by the end of 2003. We will systematically 'fix,' sell off or shut down operations that don't deliver results up to our goals," he says.