Good morning, everyone. Welcome to Hydro's presentation of 4th Quarter Results 2019. They will be presented by our CEO, Hilde Ozan and CFO, Paul Hildemore. And after the presentation, we will, as usual, have time for Q and As from you here in Oslo and also from the people following us on webcast this morning. So Hilde?
Thank you, Inger, and good morning to you here in Oslo and also good morning to the ones that are following us on webcast. As always in Hydro, safety first. On December 11, we received the worst possible news from our joint venture, Katalum. A contractor tragically lost his life at work for Katalum. Safety of our people remains our top priority always.
Let me then turn to the 4th quarter highlights. The underlying EBIT for the 4th quarter was NOK 560,000,000, more or less at the same level as we had in Q4 2018, and the EBIT for the whole year is NOK 3,400,000,000. Challenging markets weighing heavily on our result this quarter with lower prices for both aluminum and alumina and also lower volumes. Last autumn at the Investor Day, we launched an ambitious improvement program, and we targeted a result from this improvement program in 2019 of SEK 500,000,000. Today, we report SEK 1,000,000,000 from the improvement efforts during 2019.
We also set ourselves a target of releasing cash or releasing cash from working capital of SEK 4,000,000,000. We have released cash in 2019. From net operating capital, we have released SEK 5,600,000,000. And then when it comes to CapEx, we have spent SEK 900,000,000 less than what we guided on at the Investor Day. Despite the challenging markets, we see increasing pull for our low carbon footprint products and which I consider to be a highlight for the quarter.
The board has proposed a dividend for 2019 of SEK 1.25, which reflects a robust financial situation for the company, but also taking into account that we have been through a demanding year in 2019 and the volatility of the aluminum industry. And yes, indeed, it is a volatile business environment. The macroeconomic uncertainty affects our market and affects the demand for aluminum. The ongoing trade war between U. S.
And China has created a lot of uncertainty and has impacted global growth. Brexit is now a fact, but there's still a lot of questions out there for how this will play out. And lately, the coronavirus has hit the world, and it's a lot of insecurity out there for how this would develop. But let me add one positive development. We believe that the green deal that EU announced in December will stimulate the development of low carbon products.
And here, I see an opportunity for Hydro. But back to the market sentiment. The industrial production in Europe has declined every month over the last 13 months, driven very much by Germany, which has reduced their industrial production by 4% compared to 2018. U. S.
Was positive at the start of the year, but we have now seen in the last 4 months that also U. S. Is in a decline in terms of industrial production. And this development hits our main markets where we have seen negative growth demand growth in 2019 compared to 20 18 in our main markets, in the transport and automotive segment, in the building and construction, in the industrial segment, and the only segment that is holding up is in packaging. This we see very clearly in the sales from extruded solution in 2019.
To the left, I show the sales in 2019 compared to 2018, a decline of 9%. And the decline is sort of in all market segments and also both in U. S. As well as Europe. There might be some effect of the cyber attack, but the main impact is the lower demand for aluminum.
It's even more extraordinary when you look at the Q4, the Q4 versus Q4 last year, where we see a decline of 14%. We did guide that we would see negative growth in when we were standing here at the Q3, but it has been more than that. The main drivers for this negative development is, as I said, it's the weak transport and automotive market. Lower production of cars, but more and more, we also see the decline in the commercial segment of the transport segment, the truck and trailers. And Hydro and Extruded Solutions is heavily exposed in both of these market segments.
On the top of that, we see weak demand in the building and construction, particularly in Western Europe, in Germany as well as in the U. S. And then general lower industrial activity impacting the demand. Looking into 2020, we have a speed out of 2019, which has it is where the demand has declined. So we believe that the 1st part of 2020 will be affected by lower demand.
But here, I should make a cautionary note that the visibility in the Extrusion segment is low. The contracts in Extrusion Solutions are short term only for a month or so. So the visibility is low, but that is how we see it at the moment. Moving to Rolled Products. The Rolled Products is not so cyclical, and here we see more flat development compared to the year before.
Here, I also show the total sales from our Rolled Products business. And for 2019, we see a change towards moving out of the low margin segment that we talked about at the Investor Day that is part of the restructuring of Rolled Products going out of the foil business and also the litho and move our capacity towards more high growth segments in automotive and cans where we also see the substitution effect. The same picture as for the whole year we saw in Q4, even more so to move volumes towards the can market, which has been very strong, while the automotive has been weaker in the last part of the year. The outlook for 2020 is more a flat fairly flat development. We see light weighting of the automotives.
We see the substitution effect, but still affected by the current economic development. And we see solid growth in the packaging segment, driven also by substitution. But we at the same time see continued soft demands in engineering, foil and litho. And in the foil and litho, we are also exposed to fierce competition from China. Moving to the supplydemand balance when it comes to primary.
Out of the year, over 2019 turned out to be in deficit, primarily due to the disruption of several of the big plants in China, but also due to the fact that both in the world ex China and China, the demand was low. Looking into 2020, we see we expect a surplus. In the world ex China, we still expect lower demands, minus 1% to 1%, while we also see a supply growth in the Western world ex China. Alba is coming up at full speed in the full year, and we have brought back we'll bring back Albras to full capacity and also Bekan Kour in Kamada. So in the world ex China, we will see a supply growth of 2% to 3% in surplus.
When it comes to China, we estimate low growth, 1% to 3%, slightly higher than what we saw last year. But here, we see higher surplus higher supply of primary capacity. We expect that the plants that was disrupted in 2,009 will come back on stream, and we also have heard of several new builds on new capacity in China. The timing for that is not precise. So we expect that we will see a 4% to 6% growth, which will also make China in surplus.
And in total, we expect a surplus of 500,000,000 to 1,000,000 tonnes in the primary supply demand balance for 2020. In tough times, headwinds from the market, what we can do is to focus on what we can influence. And as I already mentioned at the Investor Day last autumn, we announced an ambition improvement program in the areas where we can influence, SEK 7,300,000,000 to be delivered by 2023. The program was front loaded. SEK 2.7 billion of these should be delivered by the fact that we reverse the curtailment in the Brazilian assets and then but then improvement initiatives throughout the whole company.
We expected to deliver SEK 500,000,000 from this program, as I said, and we have delivered SEK 1,000,000,000. One of the reasons for being ahead of the program is that we have had a successful and faster ramp up of Alunorte during the course of the year, which support the program this year in 2019, but also support the program for next year. But as I said, all business areas have made progress towards the 2023 program, and I'm really encouraged to see all the good initiatives throughout the whole organization. But let me give you some more details into each business area in terms of the improvement programs. And I'll start well, before I do that, I will also talk about the target that we have in terms of the cash release.
As you know, we built quite a lot of inventories during the Alunorte embargo simply because to make sure that we did have alumina for the plants. But we also built quite a lot of inventories due to the Rusal sanction where there was insecurity about delivery of metal. And that was why we set ourselves the target of releasing that working capital of SEK 4,000,000,000 We have had a lot of focus on cash during 2019 also for the fact that in a weak market, we have to make sure that we don't put the metal in inventory and that the cash stays idle in the inventories. And so we have had quite some efforts during throughout the all the business areas to really release cash. And it has turned out that we have released SEK 5,600,000,000 by the end of 2019, particularly in the inventories.
But there's also some seasonal effects in the Q4, so I should make the comment that we will perhaps see seasonal increases in net operating capital expected for Q1. Strict capital discipline, we have enforced during the year. And as I said, we came out with SEK 900,000,000 less spend CapEx in 2019 that we guided on. It's still early days to see if that result in the same reduction in 2020. There might be postponement, but we will scrutinize every CapEx going forward in the situation we have with low earnings and low cash generation.
Then to each business area, and let me start with Boxlight alumina, which is a major contributor to the improvement program. SEK 2,700,000,000 to be delivered by 2023, SEK2 1,000,000,000 relates to the reversal of the embargo. I'm happy to stand here to tell you that we in Q4, we were operating Alunorte at 90% capacity, building that up during the half year, 83% in Q3. We have installed a 9th press filter, commissioned a 9th press filter, and that is in operation. And we believe that we will be at a level of 90% to 95% in total for the 2020.
But during 2020, we will be back in full speed. To bring back the capacity at Alunorte has also a lot to do with the cost position in terms of fully utilizing the plant at its capacity. We have seen that the implied alumina cost has come down compared to the pre embargo level. We are at a level of SEK 255,000,000 at the end of Q4 versus SEK 265,000,000 in Q4 2017. But there is still opportunities to get costs down.
These numbers are also influenced by lower cost on raw materials and also a favorable currency. But to bring to get to the 100% will improve the cost position. And also when you are at the full speed, there are also possibilities to optimize the cost level and improve the stability of Alunorte. As such, we are out of the crisis. We have come up to almost full speed, but now it's to optimize and to get costs down to really demonstrate the position that we have in Alunorte.
We have also scrutinized investments in the bauxite alumina area, and we have postponed some large investments. And I hope also that, that will develop also into CapEx reduction as we go forward. Boxeda Lumina has worked also on their cash positions and realized SEK 900,000,000 of working capital during the course of the year. Then to primary metal, which is also a major contributor to the improvement program. To deliver SEK 1,600,000,000 by 2023, SEK 700,000,000 relates to the reversal of the embargo situation.
Primary metal was heavily affected by the embargo. Albras was closed down to 50%, but also the fact that we had to source many different qualities of alumina from around the world, and we saw how that affected the operation. And the curve I show here is the current efficiency for the Norwegian smelters where you see the efficiency going down as we had to mix different alumina qualities and are now heading towards back to the level where we were in 2017. To operate Smelkers, it's very much about stability. And stability has a lot to do with being cost effective.
And still, there are room for improvements in primary metals, but the cost has come down. As you see to the all implied primary cost curve, the cost has come down to below the Q4 2017 level, but very much also driven by reduced raw material cost and a favorable currency. Primary metal has also experienced a tough market. And here, primary metal has managed the market situation by using the flexibility that we have in the casthouses. We have taken out cold metal from the casthouses.
We have had longer stops in the remelters. And as you also probably saw, we announced the curtailment 20% curtailment of Schrovalco just before Christmas, and we have taken out 30,000 tonnes by the curtailment of 20% at Slovelko. To avoid to bring to put metal in the inventories because it was also evident that Primary Metal had to release inventories, and they have released SEK 2,800,000,000 of working capital. Then to Rolled Products. As you know, we put Rolled Products under strategic review last year, and we also performed a full potential review of Rolled simply because the performance had been too low.
The full potential review came out with an improvement ambition of SEK 900,000,000 and also a target of releasing NOK 900,000,000 in working capital. The fact that we, at this at the last autumn, saw that it could be difficult to realize effects from this program in 2019, we did not target any effect from 2019, but we have really worked on the initiatives in terms of improving and turning around the Rolled Products business. The restructuring in Grevenbroich, the German cluster we have, is well underway. We have announced that we would close down one foil line before Christmas, and we did that. And we are now about to close the next the second foil line during 2020.
We have announced quite substantial mining reductions, and we are executing on that mining reduction as we speak. In Grevenbroich, 35% of the manning reduction are already signed up. We have a good dialogue union. The Works Council in Germany has accepted the framework for the voluntary packages And in the total 7.35 FT feet feet
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Es that we announced to be released, 25% has signed up. We have significant improvements initiatives relating to procurement, maturing, the implementation and first saving has been confirmed. We are also looking into the share of recycling within rolled products, which could reduce the hot metal costs quite substantially, and that is ongoing and planning as we speak. And I'm also happy to talk about the used beverage can plant, which has been lagging for quite some time that we see now good improvements in this plant. Shifting volumes from foil and litho, I already talked about, to more attractive markets has been an important part of the restructuring of the Grevenbroich activities, and that is also why we have started to close down the foil lines.
All these initiatives will be supporting to take out to start to take out the full potential, And the first target is SEK 150,000,000 in 2020. In terms of cash release, also Rolled Products has worked hard to release cash from inventories and has released SEK 600,000,000 during the course of the year. The strategic review is ongoing. The restructuring is no regret. It's to really demonstrate the potential of this business area that we do continue the strategic review, looking for more value creating opportunities, including also alternative ownership.
And I will report back on that when I have something to tell on that particular subject. Then to Extruded Solutions. Extruded Solutions had a net EBIT improvement target, and Extruded Solutions already, last autumn, realized that, that will be tough in a weak market. That was why the management of Extruded Solutions started to look for alternative measures in order to support the SEK 1,000,000,000 improvement program. And the business area has had a number of initiatives in terms of improving the robustness of the portfolio as well as improving the effect on the bottom line.
We have seen closures, plant closures, both in the UK, in Spain and in the U. S. We have closed down warehouses. We have closed down offices, and we have done considerable simplification and demanding in plants in Europe, in plants in the U. S.
And we have also divested 3 plants, 1 in Spain, 1 in Vietnam and 1 in Romania. The effect of all these initiatives is around SEK 150,000,000 in 2019, but will give a full effect of SEK 300,000,000 in 2020. But as we speak, we, Extruded Solutions, are working on additional restructuring and improvement initiatives to support the SEK 1,000,000,000 program. Cash release has also taken place in Extruded Solutions. They have realized SEK 2,100,000,000 of working capital.
And the sale proceeds from the 3 plants is SEK 300,000,000. They will come in, in 2020. As I said, the board has proposed a dividend of NOK 1.25 million earlier. The proposed payment demonstrates our commitments to provide competitive shareholder return compared to comparable companies, and it also represents a dividend yield well ahead of the pay of our peer group. When we pay out this dividend, we will have an average 5 year payout ratio of 68%, which is well above the target of 40% over the cycle.
It represents SEK 2,600,000,000 in payout, which will be done after the general assembly this spring. At the Capital Markets Day or the Investor Day, we set a clear direction for the company, lifting profitability, driving sustainability. This slide shows some of the targets that we have set ourselves within the area of sustainability, and we will continue to report on these areas going forward. It's about safe operation. It's about being a good force in the local community, bringing prosperity, bringing education, bringing people out of poverty.
It's about our footprint in terms of biodiversity and climate footprint. And it's about recycling and producing low carbon products. And here, we are very excited about our 2 new brands, the Reducer and the Silkal. And the Silkal is really getting traction in the market these days. You probably remember that silcal is produced based on maximum or minimum 75% post consumer scrap.
And it's interesting to see how this product get traction and grow in demand. We have, during the last year, made 60 contracts to prestige buildings around the world in 16 different countries in the U. S, in the Middle East and in Europe. And the key to the demand from the builders is the fact that potential tenants increasingly factor in the carbon footprint in their location sites. And we expect this to grow significantly in coming years.
But the speed will be dependent on how quickly authorities set new standards when it comes to the buildings and also incentivize to buy greener products and, of course, also the public opinion willing to pay for greener products. We expect to double our sales next year and also further in 2021. We have increased our production capacity relating to the Silcal, both in our Spain remelters as well as in our Luxembourg Clervaux
remelter.
And then by that, I give the word to you, Paul, and then I'll make the summary at the end. Thank you.
Good morning, everybody, and welcome from me as well. In my presentation today, I will walk you through our Q4 'nineteen results, but also our full year 2019 results. Let me first then start with a high level result overview. Comparing to the same quarter last year, the results were fairly stable. On the positive side, we have ramped up our operations in Brazil, contributing with NOK 1,200,000,000 higher of upstream volumes.
We also saw a significant decline in raw material costs of around NOK 2,000,000,000 with lower alumina costs lifting smelter results with NOK 1,600,000,000 and the rest coming mainly from lower carbon prices but also lower caustic soda prices in B and A. In addition, currency developments have been positive, NOK 400,000,000 mainly due to a stronger dollar compared to our main cost currencies, BRL and the NOK. And these positive developments were, however, offset by significantly lower sales prices. Lower alumina price took the B and A result down NOK 1,900,000,000, while lower LME and premiums reduced PM earnings with a further NOK 1,700,000,000. Downstream results between these two periods, if you look at both our downstream operations, were overall stable.
Earnings in energy decreased but were largely offset by several positive effects compared to negatives in the Q4 last year. Examples of these include less embargo related costs, less special items in B and A and no loss on sales of excess power at Albras for this quarter. If we then compare to the previous quarter, which is more relevant and more to market for our upstream part of our operations, then the results declined by around NOK 800,000,000 from NOK 1,400,000,000 in the 3rd quarter to NOK 0.6 in the Q4 of 'nineteen. And if we then start with upstream first, then we again see a negative effect of declining aluminum and alumina prices of NOK0.7 billion in total. These declining raw material prices, especially alumina, also help on the cost side for primary metal and together with other cost reliefs, somewhat offset by higher fixed costs, which we typically see in the Q4 due to maintenance, we lifted results due to costs by around NOK 300,000,000 Upstream production was up in both bauxite and alumina and primary metal, but sales volumes were fairly stable.
So we are not seeing the full result of increased production in this quarter. When it comes to downstream earnings, then Q4 is nearly always weaker than Q3 due to seasonal weaker demand, customer destocking and maintenance activities. This was also the case this year. However, we saw a steeper than usual decline, especially in excluded solutions, reflecting the weaker markets that we see in the world around us. Overall, downstream results decreased with NOK 600,000,000 from Q3 to Q4.
Finally, we have some other items which netted out to a positive NOK0.2 billion, including mainly a positive deviation in eliminations of NOK0.4 billion offset by weaker results in metal markets of around NOK0.2 billion. If we also briefly look at the full year result development, then underlying EBIT in 2019 of NOK 3,400,000,000 is nearly 3x lower than the NOK9.1 billion we achieved in 2018. And if we start with the right hand side of the bridge, then this shows the results of the improvement initiatives of SEK 1,000,000,000 that we delivered in 2019. This is mainly bauxite and alumina and is partly offset by negative effects in Excluded Solutions, which have been more hit by the market impacting the net EBIT program. Half of the SEK 1,000,000,000 is related to faster than planned ramp up at Dalenorche, and the other half reflects cost savings, primarily bauxite and alumina, but also cost savings in business areas as well as our above plant cost ambitions.
However, our results were affected by significant market movements during the year. Lower prices took earnings down by NOK 10,000,000,000 with about NOK 6,000,000,000 of these coming from lower LME and premiums. Lower alumina sales prices for bauxite and alumina reduced the results with NOK 4,000,000,000. And again, the flip side of this is lower alumina costs lifting smelter earnings with almost NOK 2,000,000,000 and decline in other raw material prices, mainly caustic soda and carbon, added an additional SEK 400,000,000. Currency has also moved in our favor on a full year basis, lifting earnings with NOK 2,000,000,000 as a result of the stronger dollar.
Further, we had several negative effects taking the results down with NOK1.3 billion. Lower volumes in energy account for around NOK0.7 billion of these. And other effects of NOK0.6 billion include significantly lower gains on sales of our power from Albras, significant negative eliminations, mainly on increased internal volumes. As you all know, our earnings were also negatively impacted by the cyber attack, with total estimated negative effects of NOK 650,000,000 to NOK 750,000,000 for the full year. This was mainly incurred in the first half of the year, and the majority of this hits our Excluded Solutions results.
So far, we've progressed a bit further on insurance compensation, and we have received NOK 200,000,000 in 2019 on external company basis. These negatives were partly offset by positive contributions from metal markets and less embargo related costs and other special effects in B and A. And it's also important to me to highlight that there are no major recurring negative cost elements included in the other category that will go against the effects of our improvement programs. If we then took a look at the key financials for the quarter, then revenues were down by around SEK 3,000,000,000 compared to the Q4 of 2018, driven by declining prices and lower volumes in Excluded Solutions, partly offset by a positive currency development as well as higher upstream volumes. This quarter, we excluded a loss of NOK 1,000,000,000 from the reported EBIT of negative NOK 399,000,000, and I will get back to that on the next slide.
But this related resulted in an underlying EBIT of NOK 560,000,000. With depreciation of NOK 2,200,000,000 in the 4th quarter, underlying EBITDA amounted to NOK 2,800,000,000. The financial income of NOK 200,000,000 is due to a net foreign exchange gain, mainly unrealized, of NOK 400,000,000, which offsets the net interest expense. The currency gain mainly reflects a stronger NOK versus euro rate, affecting the embedded derivative in our Norwegian power contracts, which are denominated in euro. Despite the negative income before tax of NOK 200,000,000, the tax expense in the quarter amounted to NOK 500,000,000, reflecting the power surtax in energy as well as a write down of deferred tax assets, mainly in Germany.
This gives us a negative net income of NOK0.7 billion, slightly up from NOK0.8 billion in the same quarter of last year. Adjusting mainly for the net foreign exchange gain, underlying net income was negative NOK303 1,000,000 compared to the negative NOK 175 1,000,000 of last year. And consequently, underlying EPS was reduced to minus NOK0.12 per share from minus NOK0.6 per share in Q4 of 2018. If we then get back to the loss of around NOK1 1,000,000,000 that we excluded from underlying EBIT this quarter, then as usual, we exclude some timing effects of a limited amount in Q4. But for this quarter, we also had several one off items.
The major of these one off items are impairment charges of NOK 783,000,000. Most of this is around NOK 500,000,000 write down of the Slovalko smelter in primary metal, which reflects the relative high position on the cost curve, uncertainty regarding a new power contract after 2021 and the newly decided curtailment decision reflecting the current weak market conditions. And as a reminder, Stovallco JV is fully consolidated in Hydro's financials with Hydro's ownership of 55%. In addition, we wrote down an undeveloped mining area in Paragominas, Brazil, which we will not be developing. We also had further NOK 267,000,000 in impairments, rationalization charges and closure costs, which are related to the ongoing portfolio optimization in Excluded Solutions.
And for the full year of 2019, these charges amounted to around NOK 650,000,000. Finally, we also have other effects of NOK 125,000,000, which includes an environmental provision related to a closed legacy site. If we then move over to the more detailed business area explanations, I will start with bauxite and alumina. Underlying EBIT for bauxite and alumina decreased from NOK493,000,000 in Q4 'eighteen to a negative result of NOK75 1,000,000 in Q4 'nineteen. By far, the main reason behind the lower result is a significantly 40% lower realized alumina price, driven by both lower packs but also lower LME.
The negative price effect between the periods was around NOK 2,000,000,000. At the same time, as the ramp up is progressing faster than planned, there was a positive volume effect due to higher alumina and bauxite production, which lifts results with around NOK 800,000,000. Production cost per town at Alunorte also decreased significantly by positive scale effects on fixed costs as well as by declining raw material prices. Caustic soda and coal prices also came down into the 4th quarter and the positive effect from cost relief compared to the Q4 last year was around NOK 400,000,000. There were also a positive currency effect due to stronger USD against the BRL.
We had one special effect. As communicated earlier, Paragominas experienced a power outage in late December for about 10 days, and this negatively affected our results due to the additional costs and temporary production disruption in both Paragominas and Alunorte of around SEK 70,000,000, which only affects Q4 without a continued impact into the Q1. If we look into the next quarter, now that the 9th press filter is in place, we will continue to optimize production capacity at Alunorte, and we are expecting it to run at a rate of around 90% to 95% in the Q1, and it should gradually reach full capacity of 6,300,000 tonnes towards the end of the year. Bauxite production will also ramp up accordingly, and we should also recover from the power outage in the Q4. Overall, we expect a fairly flat cost per tonne development compared to the Q4, partly due to higher fuel oil prices, which are offsetting other decline in cost elements, which have just been mentioned.
If we move to primary metal, then underlying results for primary metal improved by around NOK 800,000,000 from a loss of NOK677,000,000 in the Q4 of 'eighteen to a positive result of SEK 155,000,000 in Q4 'nineteen. By far, the main reason behind the improved results were significantly lower raw material costs. These contributed with SEK1.6 billion between the quarters, with SEK1.4 billion of these coming from alumina and the rest from lower carbon costs. The positive effects were entirely offset by 14% lower realized alumina prices as well as 29% lower realized premiums, which take the results down by NOK 1,600,000,000. On the other hand, higher volumes on successful completed ramp up at Albras lifted our earnings with around NOK 300,000,000.
And in addition, the stronger USD against our main cost currency in primary metal contributed positively. When it comes to the outlook for the Q1 in primary metal, we have, by the end of December, sold around 50% of our primary aluminium production at a price level of around $70.50 per tonne, which is similar to where the market is currently trading. On the premium side, we have secured around 55 percent at around $2.60 per tonne. And as a consequence, we expect a further decline in realized premiums in Q1 towards the range of $200 to $2.50 per tonne. So the decline in extrusion ingot has continued through the year of 2019, impacting our Q1 bookings also.
As we have eaten up most of the high cost alumina inventories and alumina costs in primary metal are returning towards a normal 2 to 3 month lag to the market, we expect to see a significant cost relief compared to last year. But if you compare it to Q4, the decrease is moderating as alumina market prices have been fairly stable as of lately, hovering around the $2.70 to $2.80 per tonne lever. So overall, we estimate around $100,000,000 lower costs in primary metal in Q1 compared to Q4 on the back of movement in alumina and carbon prices. When it comes to portfolio changes, as we announced earlier, the 20% Stivalco curtailment started in January and will reduce production by around 30,000 tonnes on an annual basis. But at the same time, we are ramping up the Husnes project, which sits better on the cost curve, which will be completed with 1st metal expected in the first half of twenty twenty, adding 95,000 tonnes of primary metal production at Husnes.
This quarter, metal markets delivered an underlying EBIT of SEK 130 2,000,000, about half compared to the NOK 275,000,000 in the Q4 last year, but in line with our guidance of around NOK 125,000,000 per quarter. Results from remelters decreased due to weak market demand and planned curtailments in December, which resulted in lower sales volumes in both Europe and in North America. In addition, the spread between extrusion ingot and standard ingot premiums as well as scrap discounts has tightened further in Q4, which impacts our remelt margins, both in primary metal and metal markets as well as in Excluded Solutions. Currency effects were negative NOK51 1,000,000 compared to positive NOK58 1,000,000 reflecting opposite movements in currency rates and leading to a negative deviation of around $110,000,000 from currency movements between the two periods. But if we exclude the currency and inventory valuation effects, the result was around SEK 184 1,000,000, somewhat below SEK 217,000,000 in Q4 last year.
If we look into the next quarter, we continue to see declining market demand, putting pressure on product premiums and negatively impacting our remelt operations. As such, we expect metal market results to be more in line with our usual guidance of around NOK 125,000,000 per quarter, excluding currency and ingot inventory valuation effects. But as always, remember that trading results and currency effects in metal markets are, by nature, volatile and move with the prices in the market. For Rolled Products, results improved to SEK 34,000,000 in the Q4 of 'nineteen compared to negative SEK113,000,000 in Q4 'eighteen. The improvement was driven by the noise smelter results that have increased despite lower aluminum prices, also here mainly due to the lower alumina costs.
In addition, Rolled Products received further insurance compensation of about NOK 35,000,000 related to the exhaust duct incident that we had at Noyes earlier this year. The results from our rolling mill operations were stable on flat volumes as lower margins were largely offset by positive currency effects. If we look into the Q1, we are expecting negative demand growth across segments as well as increasing competition from Chinese imports. And while the market developments will be partly compensated by the strategic shift to higher growth segments, auto and especially can, which is going well now. They will also be mitigated by somewhat lower contract duration.
Rolled product sales in Q1 are still likely to be negatively affected compared to what we saw in Q1 2019. When it comes to the Nois smelter, remember that as always, the results are driven by metal prices and raw material price development. As in primary metal, we expect further relief from raw material costs, mainly alumina in the Q1, while the market LME prices so far in the quarter have been trading around $1700 mark. For Excluded Solutions, underlying EBIT decreased from NOK 202,000,000 in the Q4 of 'eighteen to NOK 85,000,000 in the Q4 of 'nineteen. But please note that these results include almost NOK 100,000,000 in cyber insurance compensation allocated mainly to our Extrusion Europe operations.
If you adjust for that, underlying EBIT was negative NOK 100,000,000, significantly worse than what we experienced last year. The main reason for this decline is 14% lower volumes due to significantly weaker market demand affecting all our business units in exclusion. At the same time though, margins improved further, driven by the continued value over volume strategy that we have, which partly offset the volume decline. If we look into the next quarter, we expect to see quite challenging markets with shrinking demand across segments and regions. This will be reflected in our next quarterly results through the expected continued decline in sales volumes compared to the Q1 of 2019.
That said, also please remember that in our Q1 2018 results, we were affected by the cyber attack with an estimated financial impact of NOK 150,000,000 to NOK 200,000,000 in Extruded Solutions for Q1 2019. At the same time, Extruded Solutions are working hard to support their earnings in challenging markets with ongoing portfolio optimization, fixed cost reduction initiatives and procurement optimization. Finishing off the business areas with energy. Underlying EBIT for energy decreased by 40% from NOK 500,000,000 in Q4 'eighteen to NOK296,000,000 in the Q4 of 2019. 55 percent lower net spot sales due to lower production as well as higher concession sales explains around SEK 300,000,000 of this decline.
In addition, power prices also declined by 14% between these two quarters. On the other hand, contributions from Energy's commercial activities supported the quarterly results in Q4 'nineteen. When it comes to the outlook, keep in mind that the prices and production volumes can change fairly quickly in response to hydrological developments. And based on what we are seeing today, spot prices in our main pricing area, NO2, have declined from the average Q4 levels of around NOK 3.92 per megawatt hour to NOK 2.44 per megawatt hour as average in January and currently are trading below between NOK 150 NOK 200 per megawatt hour. At the same time, due to the wet weather and production optimization, our reservoir levels are quite full, indicating higher volumes into the Q1.
Other eliminations netted out to negative NOK67 1,000,000 in Q4, reduced from negative NOK140 5,000,000 in Q4 last year and NOK417 1,000,000 in the last quarter. The other line mainly contains corporate costs in addition to costs in holding companies and industrial insurance. This quarter, we have NOK223,000,000 down from NOK299 in the same quarter last year. We have positive eliminations of NOK156,000,000, mainly reflecting lower margins on internal alumina sales between bauxite and alumina and primary metal. If we then move over to my favorite slide this quarter, it is the debt development compared to the 3rd quarter.
Overall, our net debt position has decreased by NOK 2,700,000,000 on higher cash generation and release of cash. We started Q4 with NOK 14,500,000,000 in net debt. We generated underlying EBITDA of NOK 2,800,000,000 and then we had a significant release of net operating capital of NOK 3,300,000,000 in the quarter. This release is partly due to lower prices and seasonal destocking at the end of the year. But at the same time, we have worked structurally to reduce inventory in all business areas to take out the safety stock we built in 2018 in addition to new improvement initiatives to further reduce stocks in the challenging markets that we are facing.
It is tough to reduce stocks into weaker markets, and I'm very pleased with the achievements underlying our high cash focus for the quarter. Taxes and other adjustments of negative NOK 400,000,000 includes reversal of several noncash effects from EBITDA as well as cash effects on provisions and net interest payments. As a result, we generated net cash flow from operations of a positive NOK 5,700,000,000 in the 4th quarter. Finally, investment came in at around NOK 2,900,000,000 for this quarter, below our guidance of around SEK 4,000,000,000 in remaining CapEx. And with that, we ended Q4 with SEK 11,800,000,000 in net debt.
And for the full year, we started the year with NOK11.7 billion at the end of 2018. And if we adjust for the NOK3.1 billion increase related to the new IFRS 16 standards on leases, net debt position was stable at the end of 2019. Underlying EBITDA for the full year was NOK 11,800,000,000. We released NOK 5,600,000,000 in net operating capital during the year, And taxes and other adjustments of a negative NOK4.9 billion included tax payments of NOK2.4 billion as well as a reversal of several noncash elements in the EBITDA. In addition, cash effects on provisions of NOK1.41 billion for the year and net interest payments of NOK 0.7 billion are also included in this line.
We spent NOK 9,100,000,000 in investments when we net off leases, asset retirement obligations and other noncash effects. And we paid NOK 2,600,000,000 in dividends to our shareholders. Finally, the other SEK 0.8 billion is related to new lease agreements and the currency translation effects on cash and debt. If we also look at the adjusted net debt at the end of 2019, then it decreased by nearly NOK 5,000,000,000 compared to NOK35 1,000,000,000 in Q3 2019. Net debt decreased by NOK2.7 billion, as I've just explained, and net pension liabilities also decreased by NOK1.7 billion as a result of higher discount rates in both Germany and Norway as well as high return on Plaidon assets in Q4.
Other adjustments increased somewhat with higher asset retirement obligation, and this line also contains the downstream restructuring provisions that we have booked after tax. Our net debt in Katalum decreased by NOK 700,000,000 mainly due to improved cash generation but also positive currency translation effects from dollar to NOK. And with that, the total adjusted debt, including equity accounted investments at the end of 2019, amounted to NOK 31,100,000,000 stable compared to the end of 2018. So let me then finish the financial highlights with an update on our capital return dashboards, which summarizes our key financial targets and priorities. We have a somewhat reduced capital employed of SEK 96,000,000,000 at the end of 2019, and we have delivered a poor underlying ROACE of 1.3%.
This reflects the low earnings in the period on the back of the Alunorte situation, the cyber attack, but also the weakening markets and high macro uncertainty. But we are, of course, not satisfied with the performance given that we have a target of 10% for Arcea over the cycle. And we will continue to work on our roadmaps to profitability for Hydro and for each business area to improve our returns on capital. If you look at our balance sheet and key ratio of funds from operations to net adjusted debt, then we have seen 27% in the last 12 months compared to our target of 40% over the cycle. This again reflects our poor cash generation, but if we look at the 20.20 ratio using spot prices and adjusted for the targeted improvements as well as other special effects we had in 2019, such as cyber attack, loss on Albus power sales, then we are at around 40% according to target on our balance sheet metrics.
And our second balance sheet ratio, adjusted net debt to equity, is well within the target of below 55%. As we have said many times before, maintaining a strong balance sheet and strong liquidity is key in our volatile industry. And to ensure liquidity, we have renewed the expiring revolving credit facility with a new $1,600,000,000 facility, which expires in 2025. This facility also highlights a link between our sustainability and profitability agenda as the margin is linked to our CO2 emissions reduction target, thereby reducing our financing costs if we are able to deliver on our main climate ambition of reducing CO2 emissions by 30%. In 2019, we generated SEK 3,400,000,000 in free cash flow, and this was all returned to the shareholders via dividends when you also subtract the currency translation effects.
If we then turn to the measures that will turn this around, then I'm happy that on the improvement program, as Hilde has mentioned, we have realized NOK 1,000,000,000, delivering faster than our original target of NOK 500,000,000. On operating capital, we delivered NOK 5,600,000,000 by the end of 2019, strengthening our cash flow generation. And on the CapEx side, we have spent NOK 9 point 6 billion, almost NOK 1,000,000,000 below our original 2019 guidance of NOK 10,500,000,000. Behind the CapEx figure, sustaining CapEx ended up at NOK 6,200,000,000, around NOK 500,000,000 lower than planned and well below our underlying depreciation of NOK8.4 billion. So far, we have reallocated CapEx to 2020, adjusting our guidance for 2020 from 9% to 9.5% to 10%.
But in line with our new capital allocation framework, we are continuously reviewing projects and reallocating a capital and looking for ways to reduce the sustaining CapEx for the longer term. And on that, I would like to give the word back to Hilde for a summary.
Thank you, Paul. Well, as Paul also said, the financial result is weak, and we are not happy about that. But we have taken firm measures in weak in the weak market, and we have delivered on our improvement target for 2019. But our improvements have to continue with full force in order to lift the profitability of the company and drive our sustainability agenda. The 2020 priorities will then be safe and efficient operation.
That's the fundament. We will engage the whole organization to deliver on the improvement progress for 2020, which is about SEK 3,000,000,000 effect. And then we will continue our strong cash focus and capital allocation throughout the year, and we will proactively implement measures to adapt for further challenging markets. But we will also continue to commercialize on our low carbon position, and we buy the pool from the market itself, but also on the new EU climate policy and green deal that I just mentioned. Thank you very much.
Thank you, Ilija and Paul. And then we open for questions from the audience here in Oslo and also from the webcast. Any questions? Do we have any questions from the webcast?
From Connor Rowley in Credit Suisse. With B and A production expected higher in Q1, do you expect costs to reduce as well in Q1 versus Q4?
I guess we said we expect largely stable cost development into the Q1, excluding one off items that we had in the Q4. We've seen somewhat increase in fuel oil prices, which eats up some of the declines you should expect from lower or higher production.
From Liam Fitzpatrick in Deutsche. Can you provide a guiding range on volumes for Extruded Solutions in Q1 2019 given the weaker markets?
Well, as I said, the visibility is rather low when we have very short term contracts. So that is hard to say. But as I said, with the declining demand that we had in Q4, this will also we will also see that in the Q1.
But if you compare those figures to Q4, then of course, you have a seasonality effect into the Q1.
Then from Dan Major, UBS. The weakness in Extruded Solutions in Q4 was concerning. Can you give any more detail on the outlook? Do you still believe in the improvement targets? Will demand weakness cause you to move to more drastic restructuring?
Well, I think there is quite a lot of restructuring ongoing. And I think with the initiatives that has been taken, there is a substantial effect from that going into 2020, which will support the SEK 1,000,000,000 program.
A question from Jason Fairclough, Bank of America Merrill Lynch. Your earnings in Q4 were much worse than the Street was expecting. Do you think that the market is fundamentally overvaluing the business? Or was this a one off bad quarter?
Well, I think what we have explained is the weak markets and how that have evolved. And I think the Q4 was extraordinary in the sense of lower demand than what we anticipated after Q3.
Okay. Any more questions from here? No? That's great. Then I would like to say thank you very much for coming, and have a great day.