Eivind Reiten: Hydro is delivering
Provided that market conditions do not take a turn for the worse, Hydro expects to deliver better results in 2003 than in 2002. President and CEO Eivind Reiten is raising next years CROGI profitability target up from the current years 8-9 to 8.5-9.5 percent. The target for Hydros oil and gas production is increased to 510,000 barrels in 2003.
Eivind Reiten's main message to the financial community at the company's annual Capital Markets Day on Monday was that Hydro is delivering!
"We are delivering results, developing our portfolio and implementing improvements as promised," emphasized Reiten. He pointed out that a lot has happened since he last convened analysts from far and wide to a such a large gathering in Oslo. Market conditions have been adverse since he took over as Hydro's President and CEO 19 ago: Oil prices have been high yet unstable, aluminium prices low and fertilizer prices below the long-term trend.
Hydro's head man stressed the importance of active portfolio management in growing the group's businesses.
"VAW was not only an important acquisition in terms of boosting our aluminium business, but also with regard to our capacity to take over and integrate such a big company," he added.
It was not only the integration that was effected quickly and relatively smoothly. Hydro's financial strength was soon regained and is firmly back on target for a debt/equity ratio of 0.5, largely due to high cash-flows from the company's businesses.
Projects, acquisitions and divestments proceed as planned
Reiten added that VAW was not the only acquisition Hydro made last year, as there was also the French aluminium company Technal and some of the state-owned licenses in North Sea oil fields. On the other hand, a substantial share of the Danish agricultural company KFK has been divested. An agreement has been signed relating to the sale of the aluminium business VAW Flexible Packaging, and certain oil and gas licenses have been sold. In total, Hydro has divested businesses totaling NOK 22 billion since 1999.
"All our major development projects are well underway, while several of them are ahead of schedule in terms of delivery time and cost," stated Reiten, singling out the Grane field in the North Sea, the Qafco expansion in Qatar, the first phase of the new aluminium metal plant in Sunndal, which was opened just a few days ago, plus Alunorte in Brazil.
Eivind Reiten underscored that Hydro also delivers improved safety.
"In the course of the past year we have succeeded in further improving our safety record, which was good at the outset. VAW joined Hydro earlier this year with a considerably higher accident rate. In the course of recent months the number of injuries has been firmly reduced, bringing them gradually into line with the norm for the rest of Hydro.
Oil and Energy is delivering
The Oil and Energy business area is delivering some very good results, due not only to high oil prices.
"I can confirm that we are well on the way to achieving our extended target of oil production totaling 470,000 barrels per day in 2003. This represents an increase of 12 percent compared to the previous year. In 2003 we are counting on producing 510,000 barrels per day, and have prolonged by one more year, to 2006, our target for annual growth of eight percent. Our reserve replacement ratio will be above 1 in both 2003 and 2004.
Reiten referred also to the extensive international drilling program the company is currently carrying out. This program, which has so far been disappointing, will be completed in 2003, and new programs will only be implemented following a rigorous examination of international activities in 2003.
Aluminium and Agri - clear leaders
"In Aluminium we are creating a world-class company. We are aiming for a leading global position and can report good progress in improvements and cost reductions so far this year. For 2003 we have raised our ambitions with a further NOK 350 million."
Regarding Agri, he said that Hydro held a clear, leading international position in the industry, and that the company will direct focus to further production improvements and opportunities that may arise in a further consolidation of the fertilizer industry.