Eivind Reiten: Promises growth and results
Eivind Reiten announces continued strong production growth in Oil & Energy, further restructuring in Aluminium and even greater efficiency Hydro as a whole.
"We shall continue to develop those areas where we have a clear competitive advantage," said Reiten on Thursday to an audience of 200 financial analysts, investors and journalists at the company’s annual Capital Markets Day in Oslo.
"Hydro is demonstrating its technological and innovative ability. I am proud of how we have carried out major projects, such as the North Sea Grane development and the new aluminium metal plant in Sunndal. I am proud of the way in which we are constantly improving our production operations. It’s out there on all our projects, big and small, on oil platforms and at plants throughout the world, that we are at our absolute best. This is confirmed by our safety statistics, where all the indicators point in the right direction. The improvements are proof of the respect we in Hydro are keen to show to one another and society, while our sound safety record also reflects the excellence and dedication of our operations."
He described a company going through major changes. But on one count he promised there would be no more changes:
"Our portfolio strategy review will be completed with the stock exchange listing of Agri next year. From now on, Hydro will build on its strength in Aluminium and Oil & Energy."
There should not be any doubt about this. Reiten also left no trace of doubt that future growth would come about as the result of acquisitions and the continued development of existing businesses.
Growth will continue
He also pointed out that Hydro’s oil production has doubled during the last five years and that growth will continue at a record level in the years to come. The aluminium business has also been given a considerable boost by the 2002 VAW acquisition, with volume now twice the previous level.
"Prior to the listing of Agri in the spring we have, over the last five years, sold non-core businesses for some NOK 25 billion. During the same period we have fundamentally improved the company’s performance culture. We have delivered to shareholders an average annual return of 12 percent. Not many companies are able to claim that," he emphasized.
Hydro’s financial position is solid.
"Our financial position will be even stronger due to the Agri demerger. It’s during such periods of high oil production and good prices that we ought to enhance our financial solidity. All in all, this gives us a solid platform and excellent scope to act strategically." He further announced a continued high level of investment, first and foremost to develop major attractive oil projects. For example, the development of the extensive Ormen Lange gas field will require large investments in 2005 and 2006.
Reiten went on to say the following about the company’s oil business:
"What I find most pleasing is the fact that we are not only one of the fastest-growing oil companies, but that we run our operations so well. Strong growth requires major investments, but it is very satisfying to be able to invest in a business that performs as well as this one."
As far as gas is concerned, the company aims to maximize the value of its unsold gas volumes by means of a targeted drive directed at the ever more "hungry" European energy markets. In addition, there is considerable activity in connection with the sale of gas that Hydro itself does not produce.
He added that Hydro will in future place less emphasis on high risk developments internationally, and instead buy into licences where reserves are already proven, and where the company’s special competence in field development, reservoir management and the application of new technology will be particularly advantageous.
Regarding market prospects, Reiten stated that he expects oil prices to remain relatively high throughout 2004. The company’s planning does however not exclude the possibility of a drop in prices.
He expects the price of aluminium to remain stable and welcomes signs of an upturn in the USA.
"Hydro Aluminium’s costs have been considerably reduced. We are a stronger, more focused and more integrated aluminium company. We are improving our relative position on the cost curve and are on course to becoming very competitive indeed, even though we have still got some ground to cover before we achieve the level we have set ourselves. The potential for added value is considerable, and results continue to be excellent for Extruded Products and Metal, while we still have a number of challenges in Rolled Products and Automotive. The way our results develop will be very dependent on market conditions."
A stronger brand
He announced that the company expects to achieve its normalized CROGI financial target of between 8.5 and 9.5 percent in 2003.
"Big changes require a stronger brand," he said as he presented the company’s new logo.
"The launch of the Hydro Way program has to be seen in the light of the company’s strength and its focus on improved performance, growth through major acquisitions and extensive restructuring, more open business areas and a more international orientation. All these changes have created the need for in-house clarification," he said.
"We already have a strong performance culture in Hydro, but it can be even stronger by the distinct confirmation of our identity and direction."