Norsk Hydro Unveils Ambitious Expansion Plans

Strategic Insights -

Norsk Hydro, Norway's largest listed company, has revealed plans to significantly expand its oil, gas, and aluminium operations as part of a broader corporate strategy. As part of this strategy, the company aims to boost shareholder returns to 15-20 per cent and is selling NKr10bn ($1.28bn) of non-core assets to fund the expansion. Despite the market's initial disappointment, Hydro's chief executive Egil Myklebust emphasized the company's focus on oil, energy, and light metals, with agriculture becoming a third area of emphasis.

Key Takeaways:

  • Norsk Hydro plans to double its oil and gas production to approximately 800,000 barrels of oil equivalent per day.
  • The company seeks to close the gap with the world's leading integrated aluminium companies through significant acquisitions in the aluminium sector.
  • Hydro intends to establish alliances with independent primary producers in the US, Slovakia, Slovenia, and Brazil.
  • The expansion drive will be funded partly by the divestment of NKr10bn in non-core assets over the next two to three years.
  • The company aims to achieve further NKr2.5bn of operating profit improvements by 2001 through shared services and procurement efforts.
  • Norsk Hydro expects the level of annual investments to reach NKr15bn over the next few years, excluding significant acquisitions.
  • The company plans to consider using its stock or a rights issue as acquisition currency for potential deals.

Statistics:

  • NKr10bn: The amount of non-core assets to be sold to fund the expansion.
  • $1.28bn: The equivalent value of NKr10bn in US dollars.
  • 15-20 per cent: The target shareholder return.
  • 800,000 barrels: The planned daily oil and gas production.
  • NKr20.1bn: The amount paid by Hydro in its recent purchase of Saga Petroleum.
  • 6 per cent: The share of the company's total sales accounted for by the petrochemicals business.
  • NKr6bn: The value of the petrochemicals business.
  • NKr2.1bn: The annual sales of Hydro Seafood, its salmon farming business.
  • 38 per cent: The stake in Dyno, a Norwegian chemicals and explosives company.
  • NKr15bn: The expected level of annual investments over the next few years.
  • NKr2.5bn: The target operating profit improvements by 2001.

Sources:

  • Financial Times Limited, 1999 (Copyright reserved)