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Good morning, everyone. Welcome to the presentation of Hydro's Financial Results for first quarter, and welcome also to all of you following us on webcast. As you know, due to the cyberattack, we previously presented the operational and market updates for the first quarter. So today, we will focus on the financial results for the same quarter. And the results will be presented by our new CEO, Hilde Merete Aasheim; and then followed by a detailed financial overview by our CFO, still, Eivind Kallevik. And Hilde will also use the opportunity to present her focus areas for Hydro going forward. And as usual, we will have time for Q&A after the presentation also from the webcast.So with that, Hilde?
Good morning to all of you. Welcome to my first presentation of the quarter as the new CEO. I will come back a little bit to the details of the quarter, but I will start by giving you a walkthrough of my CEO agenda and my priorities moving forward.I'm really excited to have the chance to lead Hydro into the next chapter, such a fine company with such a bright future. Leadership is about setting direction and be clear on expectation. My direction can be expressed very simply. It's about lifting profitability and it's about driving sustainability. Lifting profitability simply because our earnings has been too weak for too long time. We have been heavily influenced by the Brazil situation, the cyberattack, but even beyond that, the earnings has been too low. And that we need to address as a company. We need to lift our ambitions and we need to make sure that each part of the long value chain that we are invested in is -- they are competing in the world championship every day, and they need to be among the best in each part of their businesses.Sustainability is about producing our products and services in a sustainable way, in a responsible way. And that is the requirement from our customers, but it's a requirement from the society at large. And here we have a good position in Hydro, and I would like us to differentiate ourselves among our competitors in terms of bringing to the market green products.Before I continue on how we will work in order to lift profitability and driving sustainability, I will talk about something that will not change, which is our foundation going forward. We have a strong foundation in Hydro. We have the Hydro way, which is about our purpose. It's about creating viable societies and it's about our values, care, courage and collaboration. This is not only fine words. It's about who we are and what we believe in. We have cultivated a strong company culture over the years, and that is something that should sustain also going forward. We have 36,000 people in the organization, top-skilled, very competent, very engaged, and that's a fantastic asset for the company.One of our core strength over all these years has been good operation. And that value and that brand, we should continue to cultivate. We have attractive assets across the whole value chain. We have a good position in the upstream part on the cost curve, but we also have efficient plants in Extruded Solutions part which are producing advanced products to advanced customers every day.We have a leading position in sustainability in terms of our primary production based on renewables. And we are producing more and more products based on post-consumer scrap, and that we should continue to work on in order to differentiate ourselves in the market with green products. I would like the sustainability agenda to be very closely connected to the commercial agenda so that we can stand out and go to the customers and demonstrate that we can be a partner to them in terms of providing their material with a low carbon footprint.We believe in aluminum simply because of the characteristics of the product. Aluminum is the metal of choice. Aluminum is a metal that is growing the most. And we see that substitution also are improving the sort of the plate of products and solutions to the market in transportation and automotive, in packaging and recycling, in building and construction and in more and more applications for end-user products. And that is what I find interesting now that we have included Extruded Solutions in our company. They are working out with [ in Vetlanda ]. Some few days ago, I was talking to designers working with IKEA, I was talking to designers working with the automakers, I was working with designers working on building solutions using aluminum. And that's when we grow the plate of the application of aluminum, when we work in the first end of the market.But we need also to defend aluminum in the market, and that is why the carbon footprint is so important -- the low carbon footprint is important. And as I said, we have a good position here in terms of our low carbon products, and we should continue to work on that to have our green products becoming even greener. I believe that, that will defend and safeguard the metal also for the longer term.But coming back to the profitability challenge. We have had a strong -- severe financial effect of the Brazil situation. We have had a financial effect of the cyberattack. Extraordinary events, but the profitability challenge grow beyond these events. The earnings has simply been too low for a long time, which is also an industry challenge. But we have to face that. We have to face that towards our investors, towards people that invest in Hydro. It's a disappointment when we are not delivering decent returns. And that we have to address. On the top of the situation is also the increasing political unpredictability. We see the world around us has changed quite a lot. We see trade barriers. We see trade wars, even. And we see that, that is influencing the whole global economy. And aluminum is very closely connected to the global GDP. And what we see now is that there is a dampening in the global economy. And we see that in Europe. We see it in Asia. We see it even in China. And we are following U.S. closely. And that we also have to cater for and to prepare for in order to be robust because my ambition for Hydro is to be a robust, profitable industry leader based on innovation and sustainability.On my day 1, I addressed some immediate actions. We simply have to face the brutal fact of not having good enough earnings, of not having been able to deliver the profitability that we should and to create a sense of urgency in the whole organization that we have to lift our ambitions. Obviously, safe and efficient operation is the sort of the base. That is the most cost-effective way to produce. That is the environment we would like to have in terms of an injury-free environment. And it's also the best way to go to the market, to demonstrate to the customers that we can deliver each time, on time, with the quality that the customer has asked for.When I was standing here on the 8th of May, I said that the Brazil situation is so severe for the company that this needs to be fixed. I'm very happy today that we got the embargo lifted on May 20. So to return now Alunorte, Paragominas, and Albras back to full production is of vital importance. And that's what we're working on right now, and I will come back to that in a few moments.Then as many of you know, that has followed us during many years, Rolled Products has simply had too weak performance over too long time. That is why I announced on my first day that we would take a strategic review, a full review of Rolled Products business area to explore all opportunities, to see how this can become a better business for Hydro. It is simply not good enough. And that work has already started. It has started also inside Rolled Products. We are now in the restructuring of part of Grevenbroich simply to adjust to better market segments in order to improve our margins.Then as I said, we have to face the brutal fact and throughout the whole company now -- come back to normal when it comes to Brazil. As you know, we have said for the last quarters that we are not on track on the improvement programs that we had for 2018 and '19. We have to come back to that and we have to even aggressively pursue new improvement efforts in order to improve our cash and improve our earnings. Talking about cash. We will have a much more focus now on cash, being more strict on capital discipline and also on capital allocation simply because the earnings are too low. And that I would also like to comment that throughout the Brazil situation, we have built working capital. Also related to the Rusal sanction last year, we were building working capital. Now we have resolved the Brazil situation in the fact that we're coming back to full production, and we will look very closely to bring down the working capital and to get that cash into -- from an idle situation to cash in the money.Then we will also evaluate the way we work. We see that we are a company invested in the long value chain of Hydro. We will look at how can we be a good owner of Hydro, of the -- all the business areas at the top, and then also look at what kind of autonomy do we have to have in the business areas in order to cater for flexible business models in the long value chain of aluminum. It's very different to operate the mining operation than it is to operate an electrolysis. And an electrolysis is very different from an extruder. And that we would like to look at to see that we have an operating model that fit our agenda, that builds on lifting profitability and driving sustainability.I know that many of you are very eager to know more about this agenda. And that is why we have invited for an Investor Day on September 24 so that we can give you more details on this agenda in order to demonstrate that we are working on lifting profitability and driving sustainability.Then let me now then go to the first quarter. And I will give the highlights and I will come back to more details. The first quarter have an underlying EBIT of NOK 559 million. The first quarter result is heavily influenced by the fact that we have had produced only at 50% capacity in Albras, in Alunorte and in Paragominas. But we were very happy when we got the announcement from the federal court to lift the embargo on Alunorte, which means that we can now start to resume operation in the 3 plants. The financial results for first quarter is also influenced by the cyberattack. As you know, we got a very severe cyberattack in the company on the 9th to 19th of March. We estimate that -- or we have booked NOK 300 million to NOK 300 million (sic) [ NOK 350 million ] in Q1. In the early days after the cyberattack, we guided on roughly NOK 400 million to NOK 450 million. That has come down to NOK 300 million to NOK 350 million for the first quarter. These costs -- or this includes business interruption and costs related to our recovery and to come back in normal operation. The main hit -- or the business area that got the hardest hit on the cyberattack was Extruded Solutions, and that is also where the main impact financially is in the first quarter. Other than the costs related to the cyberattack for Extruded Solutions, I would like to highlight for the first quarter that we have very strong performance in Extruded Solutions, and in particular, in North America with much higher budgets. Primary Metal is suffering from low LMEs as well as high raw material costs compared to Q1 last year. Energy has a strong result on high prices, similar to fourth quarter but much higher than first quarter last year.The global demand -- supply and demand balance, we expect to be still in deficit if we look at the global supply and demand. China is in balance, but the rest of the world is still in deficit. But with the continued macro uncertainty, how the trade barriers plays out, how the trade wars comes out, we have to be cautious about the macro assumptions. So we have taken down the global growth estimate from 2% to 3% to 1% to 3% for the global demand of aluminum.Then coming back to Brazil. Very excited about the fact that the federal court lifted the embargo on May 15 and May 20. There were 2 embargoes to be lifted, one for the civil court and for the criminal court, allowing the full value chain to come back to normal production. Still, we still have an embargo on -- to use -- to be able to use the new DRS2 red mud deposit, and that we have to work on going forward.In terms of operation now and ramp-up, we have started. We estimate to be between 75% to 85% of capacity utilization in Alunorte within the next 2 months. The timing of returning relies very much on how the press filters are working. Remember that when we got the embargoes, we have started on commissioning of the new press filter technology. We did not get that learning curve. So now we are in the learning curve to bring the press filter technology up to full speed. That is why we cannot state when we are back to full capacity. We will bring in the 9th press filter in Q3, and then we will work on that to come back to full operation.We are now using the old deposit at DRS2 -- DRS1, and we estimate that we can use that for 1 year. Having said that, we have geotechnical studies ongoing right now to see how we can verify an extended lifetime. Having said that, what is our main focus is the DRS2 and to get that embargo lifted simply because that is for the longer term, to use the new press filter technology now to be able to have a long-term sustainable solution for Alunorte in the new DRS2. That was the plan back in 2014 when we invested in the press filter technology, and that's what is our main objective. Obviously, when Alunorte now is ramping up, Paragominas is ramping up based on the schedule of Alunorte and also in Albras, which was curtailed 50%. We are now warming up the cells and expect to have a period now within the next 3 to 4 months to bring back Albras to full speed.So going forward, what is the main focus going forward? Well, it's obviously safe ramp-up of Alunorte, Albras and Paragominas. That is our key priority. Then we are fully committed to deliver on obligations that we have put in the technical and social agreements, both within the fence of the plant to make the plant robust but then also to continue to do good in the local society, to be a good force in the local society and have a good dialogue with the local community as well as the government.What is the main focus in terms of the full -- coming back to normal is to continue the dialogue with SEMAS, which is the state environmental agency, together with Ministerio P?blico on creating a common platform to go to the judge and document that we can operate the new DRS2 in a safe and good way. That was successful when we finally were able to lift the embargo -- or we got the lift of the embargo on Alunorte. To join forces, to work hard, to make sure that everybody understand how we have put up this new DRS2 and that we can document that we can operate that in a safe way, that is our main priority. Join forces and lift the embargo. The timing for that, as I know you will ask for, is uncertain. We cannot have even -- we do not have a specific time line for when the judge will lift that embargo.Then a short update on the cyberattack. As is already stated, NOK 300 million to NOK 350 million has been booked in first quarter, of which NOK 200 million to NOK 300 million -- NOK 250 million to NOK 300 million is booked in Extruded Solutions. We are now almost back to normal production in Extruded Solutions as well as the rest of the company. I have to say that I'm very impressed about how the organization has been able to handle such an attack. And very impressive efforts, a lot of creativity -- a lot of creativity related to how to find ways to operate without the normal systems in place, and also, the extra work that we have done in order to have a good dialogue with the customers in order to limit the effect for the customer of the fact that we had this attack. Very important for the long term.And to me, it's really encouraging to see the effort from the organization, which is a documentation also of the strength we have in the Hydro organization. When we mobilize, we mobilize with a full power. And as I've said, if I can use that on improving the profitability of the company, on making the company more robust rather than working on handling incidents, that's the way we should work moving forward.Estimated financial effect of the cyberattack is NOK 200 million to NOK 250 million in the second quarter. That's what has been estimated. And also here, most of the work is ongoing in Extruded Solutions. But having said that, there is still a lot of work in terms of bringing back the IT solutions back to normal.As we have told before, Hydro has a robust insurance policy in place with recognized insurers. We are not taking account of any insurance payments in the first quarter results. So that will come when time is right and when the claims have been dealt with by the insurance companies.As I said going forward, there's still a lot of recovery works towards normal IT operations. There are thousands of service that needs to be recovered, but they are following a plan and they are according to the plan. But while we are working on that, we are also increasing the robustness when it comes to further strengthening of IT infrastructure and cybersecurity. We know that attacks will come also in the future, but with the extra work that we put in now, we hope to see that we are much more robust and that we don't take out the whole company as what's the case on the 19th of March.Let me then move to the global supply/demand balance. As I said, China, largely balanced; world outside China, still in deficit. If we look at world ex China, we -- as I've said, we have taken down the global demand growth to 1% to 3% primarily due to the fact that we see less demand in the world ex China, in particular related to Europe and particularly related to Germany. We also see that the demand growth is less in Asia, exposed to export from China.In terms of supply in the western world ex China, we know that there are plants coming up. But also here, we have taken down the growth projections from 3% to 4% to 2% to 3%. We know that Alba is coming up with their new line. We know that there are some restarts in the U.S., but we also know about disruptions in Venezuela as well as in -- and the situation in Becancour.When it comes to China, we stick to our high growth estimate of 2% to 4%. That is -- we[Audio Gap] we are closely following the inventory levels. Some of the deficit is taken by the reduction of the world inventory levels. We see the graph to the left, which is the total inventory levels, have come down from the very high levels but still higher than what it was prefinancial crisis level. We see now a level of 60 to 7 -- 7 (sic) [ 70 ] days inventories and which are approaching the 50s, but still higher than the 50 days. We believe that, that will continue to take place to reduce the inventory levels going forward. But we also have to keep a very close eye on China. We see to the right on this slide the growth of semis export from China. There's not that much primary growth with primary export. But semis is also dampening the need for primary when China exports at the level they do. They have increased export with 40% -- 14% from Q1 last year to Q1 this year. The last quarter, from fourth quarter to first quarter, was down 7%. And we now see that the Shanghai price has come down, which -- and the arbitrage is then -- also are coming down and which makes this not so competitive to exports from China than what it was when the Shanghai price was lower than in LME. But this we need to focus on. China is an extremely important element in our industry, and so we have to closely follow that. And also with the macro uncertainty with the trade barriers, we -- I don't think any company can be very clear on how this will play out. And this we need to follow going forward.Then let me move to the upstream costs, which I know that you are interested in. We have talked about raw material costs coming down. We haven't seen it yet in the numbers, but now we see it in the first quarter numbers. If I take primary, to the right here, we see that the cost has come down primarily due to lower alumina costs compared to fourth quarter, which was very high. But the fact that LME is much lower than Q4, we see that the LME effect is offsetting the raw material effect or the lower alumina cost, which makes the margin more or less the same as we had in fourth quarter for primary. Compared to first quarter, we see that both LME is much lower than first quarter, and raw material costs are still higher that what we saw in first quarter last year.Then moving to alumina. We see that we do have lower alumina cost in first quarter than we have in fourth quarter. In the fourth quarter, we were sourcing on lot of external alumina simply to make sure that we did have alumina for the smelters and also for the third parties. Sourcing alumina at a very high cost, that, we see now, has come down. We have not sourced so much as we did in fourth quarter and the prices of alumina has come down. That's why the costs has come down in Q1. But we see that prices was also much higher in fourth quarter. When we were outsourcing in the alumina market, prices picked up. That is not the case in Q1. Prices are more now -- more close to normal. And that is what makes the change from Q4 to Q1. Compared to Q1 last year, it's -- still higher raw material prices than we had in Q1 last year.Then let's move to the downstream and the Rolled Products. We see a flat development when it comes to sales compared to Q1 last year: lower demand, lower sales related to foil, we see also some destocking effect in foil, but the foil demand is low. But the automotive segment is expected -- despite the fact that car production is down in Europe, but we see the substitution effect in terms of bringing more aluminum into the cars. It's good news also that we have a better performance on the new automotive line 3. So we have sold 35% more to body-in-white segment compared to first quarter last year. That's good news for the new plant in Grevenbroich.Then when it comes to first quarter, it's more seasonal effects. But I would like to say that it should be -- we should expect a lower demand in the next quarters relating to Rolled Products. We see a lower demand in foil. We see that car production is down. And we see also fierce competition of imports into Europe from China, from Turkey and from the Middle East.Then Extruded Solutions. As you know, Extruded Solutions are following the value-over-volume strategy and are continuously working on net added value per kilo produced of extruded products. And they're very much focused on the value creation after the press. And here we see a good development in all business units in terms of net added value per kilo, positive development in all business units, except for building -- except for Precision Tubing, which is affected by the new acquisition in Brazil, which still are lower than expected but expected to come -- to improve, obviously. But all in all, we are very happy with the performance and the development in Extruded Solutions. As I said to start with, Extruded Solutions had a very good first quarter, and we are encouraged in Extruded Solutions to continue that good development. That's what I had planned to say in detail for the first quarter. And then I leave the floor to Eivind to talk more about in more details of the numbers. Thank you.
Thank you, Hilde. Good morning, everyone, and welcome from me as well. I will then take you through the financial results for the quarter.Now if we start with the high level result development for the quarter. In Q1 this year, we did deliver an online earnings before financial items and tax of roughly NOK 0.6 billion. This is significantly down from the NOK 3.1 billion we delivered in the same quarter last year. In this period, we have seen a continuous increase in raw material costs, which, combined with somewhat higher fixed cost, taken the results down by roughly NOK 1.2 billion. Higher alumina costs account -- in Primary Metal accounts for roughly 1/4 of this, but energy, carbon and bauxite costs adding another NOK 0.5 billion to the cost picture. The increase in fixed costs of NOK 0.4 billion is partly personnel-related costs throughout the business areas of Hydro but also partly related to the cyberattack. The realized alumina price have remained relatively flat over this period, but we have seen an 11% decrease in realized aluminum prices taking the results down some NOK 900 million. We also saw negative effects on the volume side, roughly NOK 0.6 billion, primarily driven by the curtailment situation in Brazil but also partly related to the cyberattack we experienced in March this year. On the positive side, we also have currency effects. The stronger dollar against most of our currencies supported results with roughly 0.6 billion. And finally, the Other net out to a negative 0.5 billion. This is a combination of a positive effect in Energy and improved results and then offset by a negative variation in Other and eliminations as well as loss on power sales in Brazil due to the curtailment situation. If we compare the results to the previous quarter, development is relatively flat. The decline in the upstream results is driven by lower realized prices as both the LME as well as the PAX index has decreased in this period, reducing results with about NOK 600 million on the alumina side and roughly NOK 400 million on the bauxite. This negative affect was partly offset by the reduction in raw material costs with a total effect of NOK 0.6 billion. We saw a significant reduction in the alumina costs for Primary Metal adding up to roughly NOK 500 million in cost relief for this period. Carbon, caustic and coal makes up the rest.At the same time, we see that in our downstream divisions, extruded and rolled, we see good improvement of NOK 0.6 billion, NOK 600 million, which we can mostly attribute to the normal seasonality variations we see between Q4 and Q1. And remember that this also is then including the additional cyber costs, in particular for Extruded Solutions. Finally, the other item is a combination of smaller items, mainly changes in eliminations, again the loss on power sales due to the Albras curtailment in Brazil and some cyber-related costs, all netting out to NOK 0.3 billion negative.We then turn quickly to the key financials for the quarter. We do see revenues down some NOK 2.4 billion versus first quarter of 2018. This is primarily driven by lower volumes on the back of the curtailments in Brazil as well as some lower volumes due to the cyberattack. This quarter, we did exclude from our reported EBIT of NOK 20 million, NOK 539 million in items excluded. This is primarily relating to the normal timing effects that we exclude every quarter. In addition, we have some smaller onetime effects.This quarter, we had a marginal financial income and -- as the interest expense was offset by the net foreign exchange gain of NOK 0.2 billion. This mainly reflects the stronger NOK versus the euro impacting the embedded derivatives we have on our Norwegian power contracts. As a result, the income before tax was also marginal, NOK 26 million, and significantly down then from the NOK 2.8 billion we delivered in the same quarter last year. We have income taxes of NOK 150 million this quarter. That reflects the high proportion of Energy earnings and then subject to the power surtax, which gives this relatively high number. This gives us a net -- negative net income of minus NOK 124 million, down from positive NOK 2.1 billion last year. Consequently also, the underlying EPS is down this quarter and is roughly NOK 0.13 per share.If we then turn to the business areas. Let's start with Bauxite & Alumina. The underlying EBIT for the business area decreased from NOK 741 million Q1 '18 to NOK 153 million in the first quarter of '19. The result is obviously negatively impacted by the 50% curtailment at Alunorte. And consequently, 50% production at Paragominas has a negative effect of roughly NOK 0.5 billion for the quarter. In this quarter, the curtailment effect was not compensated with higher realized prices as we have seen in previous periods, and price effects were then relatively stable between Q1 '18 and Q1 '19.At the same time, we have seen raw material costs continuing to increase, impacting results as we've seen them. Caustic soda started to come down, but these have been offset by higher energy costs for Alunorte in Brazil. On the positive side, we have seen a 16% weaker euro, giving us an earnings lift of some NOK 300 million between the quarters.If we look into second quarter. We are, as Hilde have already said, very happy to see the ramp-up schedule or ramp-up of Alunorte and Paragominas already moving ahead. We do estimate that we will get to 75% to 85% production within the next 2 months. And Paragominas will ramp up at the same speed as we do in Alunorte. When it comes to costs related to this, we will see somewhat higher material and service costs in the second quarter during the ramp-up stage, meaning that absolute numbers will increase somewhat. As we do get capacities up, this will, of course, be diluted by the increased production. So cost per tonne will come down. Let me also remind you that the fixed cost in Alunorte is roughly 15% to 20% of total costs; and in Paragominas, it's much higher at 65% to 75% -- 65% to 70%. On the raw material outlook into second quarter. It is relatively flat overall between the quarters. We do see some alleviation on the caustic side, which we do expect to come down as a cost in Q2. But we -- at the same time, we expect to see somewhat higher energy costs and nothing that benefit that. If we look at the market prices for Q2. Both PAX as well as the LME -- impacting the LME-related contracts, early contracts have come somewhat down compared to the Q1 levels. And we do now expect to realize alumina prices of just north of $360 per tonne.We turn to Primary Metal. The underlying EBIT here decreased significantly by approximately NOK 1.6 billion from NOK 823 million in Q1 '18 to NOK 737 million (sic) [ NOK 771 million ] negative this quarter. This is largely explained by 2 elements. One is, of course, the 11% decrease in LME taking down the results roughly NOK 900 million. In addition, we have seen significant raw material cost increases in this period, primarily on the alumina side but also on energy and carbon costs, altogether adding up to roughly NOK 700 million in this period.Production is somewhat down compared to the first quarter last year. It's primarily driven by Albras, but it's partly offset by the production we have at the Karm?y Technology Pilot. We also had losses on the power sales -- or higher losses on the power sales this quarter in Brazil as prices, as we guided down before, are typically very low in the midst of the rainy season. The stronger dollar had a net positive effect of some NOK 150 million for the business area in this period.If we look into the second quarter. We have started the ramp-up process in Albras. This is expected to take 3 to 4 months. When it comes to ramp-up costs for Albras, that is mostly related to the first fill. And that cost, of course, is capitalized. So in terms of EBIT impact, you shouldn't see a significant consequence for the second quarter. We have sold approximately 85% of the primary alumina production at the end of April at some 18 -- $1,875 per metric tonne. And then, of course, that you've seen that LME prices in May have been below that level. So realized prices, it should be no surprise that, that would be below $1,875 when we close the second quarter. On the premium side, we have booked 75% of the premiums around $360 per tonne, and the estimate then for the complete quarter is in the range of $300 to $350 per tonne.If we look at the raw material side for Primary Metal in the second quarter. We do expect to see a continued alleviation on raw material costs, again in particular on the alumina side. It should give us a good benefit, and also there will be some cost reduction when it comes to energy and carbon costs in the second quarter. Also worth noting, as Alunorte is now ramping up, the need for us to go to the external markets to source more alumina has then ended and we are well covered in the quarters to come.Turning to Metal Markets. The Metal Markets area delivered an online EBIT of NOK 190 million versus NOK 178 million same quarter last year. Again, we have seen very strong performance results out of the remelters, both in Europe as well as in U.S., driven by good and strong margins. This is despite somewhat lower production on the back of the Henderson incident we had earlier this year. Henderson is now back in full production as we speak. In addition, we have also seen good and positive contributions from the sourcing and trading activities in this period.If we exclude NOK 40 million in negative currency effects, the result is NOK 230 million, which is up from NOK 139 million last year and double compared to what we have guided on as normal volume profits of NOK 125 million per quarter or NOK 500 million per year.If we look into the second quarter. We continue to see very good market conditions for the remelters, and we do expect strong contributions also here in the second quarter. But again, as always, let me remind you that the currency and trading results in Metal Markets are, of course, volatile by nature.In Rolled Products. We have delivered an underlying result of NOK 138 million down from the NOK 232 million in the same quarter last year. The results from the rolling mills are relatively stable. Shipments were flat. We did see a somewhat improved margin picture in Q1, but that's been offset by inflationary pressures on the personnel costs of salaries in Germany. At the same time, we have seen that the Neuss smelter results did decline as a result of the lower realized aluminum price as well as higher raw material cost, and that basically explains the variations between the quarter.When we look at the second quarter. We still see a positive demand growth in Europe, but we do notice some softening in some of the key areas where we operate like foil as well as in general engineering. We also see increased margin pressure going into the second quarter and probably also a somewhat less fortunate product mix when we now look at result expectations for the second quarter. So -- and that's one we, from a shipment perspective, should also expect that to be relatively flat between Q1 and Q2 and not necessarily expect a normal seasonal offtake in volumes. Well, the cost of the Neuss smelter for the second quarter, remember that this is driven, as I've said, with metal prices and raw material costs. We do expect to get some raw material relief also on the Neuss smelter, but that will principally be offset by the lower metal price as we observed.Turning to Extruded Solutions. The result did decline from NOK 734 million last year to NOK 593 million this quarter. As explained before, Extruded Solutions were clearly hit hardest in Hydro by the cyberattack. We do estimate that the impact here is NOK 200 million to NOK 250 million. So if we haven't had this unfortunate incident, we would have seen a continued improvement year-over-year in Extruded Solutions. Also happy to see that the net added value per kilo, the value-over-volume strategy within Extruded Solutions do continue, and we do see a year-on-year improvement. In particular, happy to see the very strong results in North America, delivering better results -- even if they've had a cyberattack, better results than what they delivered in Q1 2018.If we look into the second quarter, still some effects of the cyberattack in the second quarter. We are basically back to normal operations in terms of production and deliveries in Extruded Solutions now, which is a good speed out of the second quarter. So we should be at the tail end of the effects. On the market side, we do expect to see still good positive growth both in Europe as well as in North America, albeit probably at a slightly slower pace than what we saw in 2018, but still good markets.On the Energy side. We saw a significant increase in the results from NOK 278 million last year to NOK 517 million this quarter. The main driver for this is price-driven. We saw a 30% increase in power spot prices, increasing from NOK 361 per megawatt hour last year to NOK 468 per megawatt hour in the NO2 pricing area this year. The price effect alone lifted the results with roughly NOK 100 million. The second big contributor is very strong results within the trading and hedging area of Energy, again lifting the results with close to NOK 100 million.Production, somewhat up to 2.6 terawatt hours, up from 2.4 last year. And that spot sales is not up to the same extent, and that is because we consume more of the power internally in the company in Primary Metal. Important when we look forward and look into Q2, we see relatively low levels in Hydro's reservoir systems both in terms of snow as well as in water. And there has been relatively low inflows so far in Q2. So you should expect production to come significantly down in the second quarter compared to similar periods in 2018 and forward, and also, with the way we look at this today, also relatively low production levels for the year as such.Our pricing scheme or pricing set so far in Q2 in NO2, prices have come down and averaged around NOK 397 per megawatt hour.Quickly turning to Other and eliminations, netted to negative NOK 261 million this quarter compared to a positive NOK 161 million same quarter last year. The Other line mainly comprises corporate costs in addition to other elements like Sapa integration costs as well as results out of the industrial insurance area of Hydro. This quarter, this was NOK 307 million, NOK 100 million higher than what we had last year, and certainly somewhat above the guidance that we gave of NOK 175 million to NOK 200 million per quarter, partly reflecting some costs relating to the cyberattack but also lower results in the industrial insurance company within Hydro. Also in the second quarter, we do expect the cyber costs to come in on the corporate line, again, giving us an elevated cost level for the quarter compared to the NOK 175 million to NOK 200 million.Turning to debt. First of all, the net debt position that we reported at the end of Q4 of NOK 8.7 billion has now been restated to reflect the implementation of the IFRS 16 standard on leases. This has increased as we have guided, the net debt, with NOK 3.1 billion up to NOK 11.7 billion. Also, this effect to net debt between the quarters have remained relatively stable, up NOK 0.4 billion. We've generated an EBITDA of NOK 2.6 billion. There was a flat development on net operating capital. What we see here is that we have started to realize a bit of the excess inventory we built in 2019 -- 2018, and we will continue to deliver that improvement during the year. And that offsets the normal seasonal increase that we see in Q1. Taxes and other, negative NOK 1.9 billion. This is, amongst others, include a large tax payment of NOK 1.1 billion. We have investments this quarter of NOK 1.6 billion. We still maintain the guidance of CapEx for the year of roughly NOK 10 billion to NOK 10.5 billion.And then finally, on the adjusted net debt. Here we see an increase of adjusted net debt of NOK 1.4 billion. And this is mainly driven by the changes in net debt that I've just been through and the changes in IFRS 16. The increase is partly -- the NOK 3.1 billion increase we saw in net debt is partly alleviated by changes we see in what we call other adjustments, where we previously have included the lease obligations. So the net effect is then much smaller, almost NOK 1.4 billion. And this is also in line with what we have guided on before.Let me also just comment quickly on P&L impacts on IFRS 16. In Q1, we have then seen as a consequence an increase in depreciation of NOK 160 million, and we see an increase in finance costs of roughly NOK 20 million. And this should be a recurring item as we go through the year. Net pension liabilities decreased by NOK 0.4 billion. It's partly due to the strengthening of the NOK versus the euro as well as increased returns on the planned assets and also somewhat lower -- offsetting then lower interest rates that we see in Germany.Then we have fairly stable debt in Qatalum equity accounted investments, and that leaves us with net adjusted debt at the end of the quarter with at NOK 30.1 billion. Then, Hilde, I will leave it up to you to summarize.
Thank you. So then we have presented the first quarter result, heavily influenced by the Brazil situation, influenced by the cyberattack and low prices. The good thing is that we are now resuming operation in Brazil, and we hope that with the mitigating measures we are taking now, that we will not be hit by a cyberattack as we did this year. So our focus now is what we can influence and that is very much along with the immediate measures that I talked about earlier: It's about safe and efficient operation. It's to get the Brazil assets up in a safe way and to bring also -- to lift the embargo on the DRS2. That will be a high priority for us. Then to continue now with the strategic review of Rolled Products and then create a new momentum for an improvement drive throughout the whole company, raising the ambitions, facing the brutal fact of a situation which we need to turn into a better profitability and really focusing on cash in the short term. That is the agenda that we will work on. And I hope to see as many of you on the Investor Day on the 24th of September, that we can go through more in details about the measures that we are now taking in order to improve profitability but also to drive sustainability. Thank you very much.
Thank you very much. Then we open for questions from the audience for Hilde or Eivind.
And there's a question in the back. Please introduce yourselves.
Eivind Veddeng, DNB Markets. Two questions, one on rolled and one on B&A. You mentioned that you started restructuring in Grevenbroich. Can you elaborate on what exactly you are doing and what you expect of results financially and also on the time line? Further, Bauxite & Alumina, can you help us understand the ongoing discussions with authorities on DRS2? What's keeping the embargo from being lifted?
Should I start with the Rolled Products? Well, we have started a strategic review of Rolled Products. And I hope that we can come back to that on the Investor Day on the 24th of September, what that means. When I mentioned the restructuring, there has already been taken a decision to take down one line related to foil production in order to take into effect the lower demand and the fierce competition in a market segment -- or a product segment that are more a commodity product. That is ongoing right now.
Then on the B&A side in terms of DRS2. I think what we've learned over this last year, Eivind, is that it is very important to get this resolution in place and to then have a -- in a way, solve the resolution that we can live with for some time. It is important to find a common foothold or common ground together with Ministerio P?blico before we go to the court system. So in the same way we worked on lifting the production embargo, we're working on then lifting the production or the embargo on DRS2. There is good dialogue on this and good confidence between the parties. But the time it will take to get there is absolutely not certain, which is why it's important for us then to finish the geotechnical studies on DRS1 to ensure that we have capacities beyond this 1 year lifetime that we talked about today.
Yes, in the front. [ Elizabeth ], in the front here to Hans-Erik.
Hans-Erik Jacobsen, Nordea. Given reduced amount of growth for aluminum and the pressure we are seeing on aluminum prices, did you consider not to restart Albras?
We -- Albras is very closely connected to the [ nucleus ] in Brazil, and it was -- we closed it down. We said that it was due to shortage of alumina or the fact that we couldn't store its alumina. And it was obvious that we -- also in the dialogue with the authorities, that it was about ramping up the 3 plants.
Also on the downstream activities, you're guiding on continued strong development for extrusions. While Rolled Products, seems like we are going to see further margin pressure. I understand it's 2 quite different businesses, but could you understand why the margin pressure continues within one area and continues to increase in the other area?
[ Anything there? ]
I'll try to answer. I think it's different business. When we talk about the margin pressure and the weaknesses coming into second quarter, we in particular talk about foil and the general engineering market. Well, the front market is subject to increased pressures from exports also out of China and to a certain extent Turkey, putting a dampening on both the demand for European-produced products but also a dampening on the price development. Extruded Solutions, of course, is much more protected against the Chinese imports due to the uniqueness of the products that we produce, which is one product line, one customer, small volumes. So there is very different market dynamics, and that is one of the big drivers behind it.
Morten Normann, Carnegie. Two questions, one simple one for Eivind and maybe a nasty one for Hilde.
EBITDA?
What was the -- yes, these are EBITDA effects in Q1.
Sorry? What was...
EBITDA, IFSR (sic) [ IFRS ] effect in Q1.
In 16 -- or IFRS 16? Roughly NOK 200 million.
NOK 200 million?
Yes.
Okay. And then the one for Hilde. You mentioned a bright future. The capital employed is very, very low. The capital intensity is very, very high. Hydro is trading at 70% of its book values. No one really understand why the aluminum price is so low despite 2 years with huge deficit. And the cost curve has never been flatter as long as I have studied this aluminum market about 30 years. So where do you see the brightness?
In the metal. We believe that we have the capabilities to be the best in the industry and there is still a lot of opportunities, Morten, to make this brighter than it is today. And I agree with you, that the -- that is why on my first day, stating that we have to lift the profitability, we have to lift our ambitions in order to be in the robust situation in the industry. The situation is the same in the whole industry, but why shouldn't Hydro stand out? And that's my belief, that we can do that based on the capabilities we have, based on the products we have, based on the position we have. But we have to do much better.
If I can add just one comment. And Morten, of course, you're correct that from a production demand perspective, we have been in a deficit for the last 3 years. But we still have -- or the industry or the world still have ample inventory sitting around, which should come in to fill in that gap. What we're seeing now and have seen for the last few years is that, that inventory is coming down. It's trading down towards probably at the end of this year beginning of next towards the 50 days, which were viewed, at least before the financial crisis, as tight. And then when we get there, then let's see what the market acts like.
Good question. Any other questions from the audience? No, then we have questions from the webcast that Stian will present.
Question from Liam Fitzpatrick in Deutsche. Could you give some guidance on alumina and primary cash costs towards the end of 2019 when volumes normalized and current input costs are fully reflected?
I'll leave that to you.
Could you repeat it, Stian? I might have...
The question on the alumina and primary cash costs growing into Q2, Q3 towards the end of this year. Could you talk a bit about how they will develop?
Yes. When it comes to -- on the alumina, if you think about the alumina production cash costs, we do expect -- well, let me start in a different way. We have roughly 15% to 20% of the cost base in Alunorte as fixed cost base. As we have said, we haven't really taken out a lot of people in this period, keeping them around, keeping the lines warm so we can ramp up as quickly as possible when we do get production back. That cost is, of course, scalable. So you should see quite a bit of an effect on the fixed cost per tonne basis as we get towards the end of the year or when we get to 75% to 85% in a couple of months' time. And then I will be careful in giving a number. We can talk more about that at the Investor Day, I think, when we have clarity on the ramp-up speed.
All right. Can you say something about the extension options at DRS1 and guidance on how long life could potentially be extended?
That's what the geotechnical assessments will give us guidance on, for how we can extend the lifetime above the 1 year. That's a -- to see exactly what that is and the time line for that. Perhaps you have more details, Eivind?
Yes. Well, first of all, we are conducting some of these geotechnical studies as we speak. Some of them will be concluded in the near term and some will take a little bit longer time. But we see several years of production -- or deposit capacity at DRS1 when we get the approvals in place. But as Hilde said, the most important part and the only long-term viable solution is to get the embargo on DRS2 lifted.
A question from Menno Sanderse, Morgan Stanley. The biggest lever in general to earnings and cash flow is the metal price. The metal price suggests the market is materially oversupplied. What will Hydro do to help balance that market?
Right now, we are focusing on bringing Brazil back to normal, that we can normalize the situation also in primary. We have good assets in primary. We are well positioned on the cost curve. And at this point, we have not discussed the capacity adjustment. But that will -- that we always will have to review based on the development in the market and on the price levels.
And also from Menno, what measures can Hydro take to improve cash generation?
That's what I've been talking about during this presentation, that we will have -- we'll lift cash as one of the main objectives. And we will implement capital -- a stricter capital discipline, which is about CapEx and it's about working capital, and then the improvement programs to bring them back into cash. And so that is one of our main focuses.
And then question from Daniel Major, UBS. Can you give any detail on timing, amount of the insurance claim from the cyberattack?
When it comes to amounts, we are not allowed to talk about the amounts. It's actually prohibited in the insurance agreement. What we have said is that we have a robust insurance in place with reputable and good insurance companies. As far as timing is concerned, to use the proper accounting phrase, we will recognize this in the books when we are virtually certain, which means that probably very little is going to come in Q2. And I think, most likely, we'll start to see this coming into Q3 as the most realistic option.
Last question from Daniel Major. Can you give an indication of what proportion of smelters are EBITDA-negative? And how long would you keep EBITDA-negative smelters running for?
I think we're -- on a portfolio basis, we are well placed in the second quarter. So we're quite comfortable with the portfolio of assets we have today. When it comes to shutting down smelters, it's not something that we do on a short-term margin squeeze. That very much depends to have a very negative outlook or for an extended period of time because it costs money to take smelters down and it is costly to take them back up. So you need to do that on long-term management decisions. I think what we partly see, at least in our own results in Q4 and to a certain extent in Q1, is that you see a time squeeze on raw material cost because you carry old inventories of alumina at high prices while you've seen a decline at the LME price at the same time. We do believe that this will normalize over time. Then it's the question, again, what you believe that LME prices is going to be over time, which we, of course, never speculate in. But there is a fundamental deficit in the market between production and demand. The inventories are coming down, both reported and unreported, which should mean at some point, if the world behaves normally at the end of this year, beginning of 2020, that you will have a much more balanced situation both in the cost of production and when it comes to inventory situations.
Okay. Thank you very much. Any other questions from Oslo? No? Then I would like to thank you all for joining us this morning and have a nice day.
Thank you.