Good morning, everyone. Welcome to the presentation of Hydro's Financial Results for the First quarter, and welcome also to all of you following us on webcast. As you know, and due to the cyber attack, we have previously presented the operational and market update for the Q1. So today, we will focus on the financial results for the same quarter. And the results will be presented by our new CEO, Hilide Merete Olfeld, and then followed by a detailed financial overview by our CFO, Phil, Ivan Kollovic.
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 and 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 walk through of my CEO agenda and my priorities going 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 cyber attack, 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 complete 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 a 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 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 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 strengths overall 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 the extruded solution 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 postconsumed 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 the 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 solution in our company. They are working. I was in Wettlunder some few days ago.
I was talking to the signers working with IKEA. I was talking to the signers working with the automakers. I was working with the signers 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 effects of the Brazil situation.
We have had financial effect of the cyber attack, extraordinary events, but the profitability challenge go beyond these events. The earnings have 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 follow 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 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 our 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 will 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 'nineteen. We have to come back to that and we have to even aggressively pursue new improvements effort 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. In that, I would also like to comment that throughout the Brazil situation, we have built working capital. Also related to the results sanctioned 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 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 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 a 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, 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 24th, 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 then go to the Q1. And I will give the highlights, and Eivind will come back to more details. The first quarter have an underlying EBIT of NOK 559,000,000.
The first quarter result is heavily influenced by the fact that we have produced only at 50% capacity in Alberas, in Alunorte and in Pergamynas. 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 Q1 is also influenced by the cyber attack. As you know, we got a very severe cyber attack on the company on the 19th March. We estimate that or we have booked NOK 300,000,000 to NOK 300,000,000 in Q1.
In the early days after the cyber attack, we guided on roughly NOK 400,000,000 to NOK 450,000,000 that has come down to NOK300,000,000 to NOK350,000,000 for the Q1. These costs or this includes business interruption and costs related to recovery and to come back in normal operation. The main hit or the business area that got the hardest hit on the cyber attack was Extruded Solutions and that is also where the main impact financially is in the Q1. Other than the cost related to the cyber attack for Extruded Solutions, I would like to highlight for the Q1 that we have very strong performance in Extruded Solutions and in particular in North America with much higher margins. Primary metal is suffering from low LMS as well as high raw material costs compared to Q1 last year.
Energy has a strong result on high prices, similar to Q4, but much higher than Q1 last year. The global demand supply and demand balance, we expect to be still in deficit if we look at the global supply demand. China is in balance, but the Western 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.
But coming back to Brazil, very excited about the fact that the federal court lifted the embargo on the May 15 May 20. There were 2 embargoes to be lifted, 1 for the civil court and one 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 retinal 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% 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 we when we got the embargoes, we started on the commissioning of the new press filter technology. We did not get that learning curve. So now we are in a 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 a nice press filter in Q3 and then we will work on that to come back to full operation.
We are now using the old deposit, the 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 percale 50%, we are now warming up the sales 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 Pergomenals 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 sense 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 SEMBAS, which is the state environmental agency, together with Ministerio Publico on creating a common platform to go to the judge and document that we can operate the new DSR2 in a safe and good way.
That was successful when we finally were able to lift the embargo or 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 we will ask for, is uncertain. We cannot have we do not have a specific time line for when the judge will lift that embargo. Then a short update on the cyber attack.
As I already stated, NOK 300,000,000 to NOK 350,000,000 has been booked in the Q1, of which NOK 200,000,000 to NOK 350,000,000 to NOK 300,000,000 is booked in Extruded Solutions. We are now almost back to normal production in Extruded Solution 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. Very impressive efforts, 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 have 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 the full power. And if 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 going forward. A strategic financial effect of the cyber attack is SEK200,000,000 to SEK 250,000,000 in the second quarter. That's what has been estimated.
And also here, the 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 insurance. We are not taking account of any insurance payments in the Q1 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 is a lot of recovery works towards a normal IT operations. There are thousands of service that need 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 will 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 was the case on the 19th March.
Let me then move to the global supplydemand balance. As I said, China largely balanced, world outside China still in deficit. If we look at world ex China, we as I 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 are taking 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 the situation in Bekan Kour. When it comes to China, we stick to our growth estimate of 2% to 4%. That is in deficit.
But we have to 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 pre financial crisis level. We see now a level of 60 to 7 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 export at the level they do. They have increased export with 40%, 14% from Q1 last year to Q1 this year.
The last quarter from Q4 to Q1 was down 7%. And we now see that the Shanghai price has come down, which and the arbitrage is then also have coming down and which makes this not so competitive to export from China than what it was when the Shanghai price was lower than LMEA. 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 cost, which I know that you are interested in. We have talked about raw material cost coming down. We haven't seen it yet in the numbers, but now we see it in the Q1 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 4th quarter, which was very high.
But the fact that LMEA is much lower than Q4, we see that the LMEA 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 Q4 for primary. Compared to Q1, we see that both EMEA is much lower than Q1 and raw materials costs are still higher than what we saw in Q1 last year. Then moving to alumina, we see that we do have lower alumina cost in Q1 than we had in Q4. In the Q4, we were sourcing a lot of external alumina simply to make sure that we did have alumina for the smelters and also for the 3rd 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 Q4 and the prices of alumina has come down. That's why the cost has come down in Q1. But we see that prices was also much higher in 4th 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 what 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 better 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 are we have a better performance on this new automotive line 3. So we have sold 35% more to Body and White segment compared to Q1 last year. That's good news for the new plant in Grevenbroich. Then when it comes to Q1, it's more seasonal effects.
But I would like to say that we should be we should expect a lower demand in the next quarters relating to Rolled Products. We see 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 solution, As you know, extruded solution are following the value over volume strategy and are continuously working on net added value per kilo produced extruded products. And they are 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 system 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 Q1, and we are encouraging Extruded Solutions to continue that good development. That's what I had planned to say in details for the Q1, and then I'll leave the floor to Eivind to talk more about the 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 of tax of roughly SEK600,000,000 This is significantly down from the SEK3.1 billion we delivered in the same quarter last year.
In this period, we've seen a continuous increase in raw material costs, which combined with somewhat higher fixed costs, taken the results down by roughly SEK1.2 billion. Higher alumina costs account in primary metal accounts for roughly a quarter of this, with energy, carbon and bauxite cost adding another SEK 500,000,000 to the cost picture. The increase in fixed costs of SEK 400,000,000 is partly personnel related costs throughout the business areas of Hydro, but also partly related to the cyber attack. The realized alumina price have remained relatively flat over this period, but we have seen a 11% decrease in realized aluminum prices, taking the results down some SEK 900,000,000. We also saw negative effects on the volume side, roughly SEK 600,000,000, primarily driven by the curtailment situation in Brazil, but also partly related to the cyber attack 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 SEK 600,000,000. And finally, the other nets out to a negative SEK 500,000,000. This is a combination of a positive effect in energy and improved results and then offset by negative variation in other eliminations as well as loss on power cells 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 SEK 600,000,000 on the LME side and roughly SEK 400,000,000 on the POC side. This negative effect was partly offset by the reduction in raw material costs with a total effect of SEK600,000,000. We saw a significant reduction in the alumina cost for primary metal adding up to roughly SEK 500,000,000 in cost relief for this period. Carbon, caustic and coal makes up to rest. At the same time, we see that in our downstream divisions, extruded and rolled, we see a good improvement of SEK600,000,000, which we can mostly attribute to And remember that this also is 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 loss on power sales due to the Albrasco Terje in Brazil and some cyber related costs, all netting out SEK 2,300,000,000 negative. We then turn quickly to the key financials for the quarter. We do see revenues down some SEK 2,400,000,000 versus Q1 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 cyber attack.
This quarter, we did exclude from a reported EBIT of SEK 20,000,000, 539,000,000 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 SEK200 1,000,000,000. 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, SEK26 1,000,000 and significantly down then from the SEK2.8 billion we delivered in the same quarter last year. We have income taxes of SEK 150,000,000 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 SEK 124,000,000, down from positive SEK2.1 billion last year. Consequently, also the underlying EPS is down this quarter and is roughly SEK0.13 per share.
We then turn to the business areas and start with bauxite and alumina. The underlying EBIT for the business area decreased from SEK 741,000,000 Q1 'eighteen to SEK 153,000,000 in the Q1 of 'nineteen. The results are obviously negatively impacted by the 50% curtailment at Alunorte and consequently 50% production at Paragominas has a negative effect of roughly SEK 500,000,000 for the quarter. In this quarter, the curtailment effect was not compensated with higher realized prices as we've seen in previous periods, and price effects were then relatively stable between Q1 'eighteen and Q1 'nineteen. At the same time, we have seen raw material costs continuing to increase, impacting results as we've seen.
Caustic and soda started to come down, but these have been offset by higher energy costs for Alunorte in Brazil. On the positive side, we've seen a 16% weaker BRL, giving us an earnings lift of some NOK 300,000,000 between the quarters. If we look into Q2, we are, as Hilde has 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 Q2 during the ramp up stage, meaning that the absolute numbers will increase somewhat. But 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 cost. And in Paragominas, it's much higher at 65% to 70%. On the raw material outlook into 2nd 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 expect to see somewhat higher energy costs and nothing that benefit us. If we look at the market prices for Q2, both PAX as well as the LME impacting the LME related contracts, oil linked contracts have come somewhat down compared to the Q1 levels, and we do now expect to realize alumina prices of just north of $3.60 per tonne. If we turn to Primary Metal, the underlying EBIT here decreased significantly by approximately SEK1.6 billion from SEK823 million in Q1 'eighteen to SEK 737,000,000 negative this quarter. This is largely explained by 2 elements. 1 is, of course, the 11 percent decrease in LME, taking down the results roughly SEK900,000,000.
In addition, we've 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 SEK 700,000,000 in this period. Production is somewhat down compared to the Q1 last year. It's primarily driven by Albras, but it's partly offset by the production we have at the Kaame Technology Pilot. We also had losses on the power cells or higher losses on the power cells this quarter in Brazil as prices as we typically very low in the midst of the rainy season. The stronger dollar had a net positive effect of some SEK150 1,000,000 for the business area in this period.
If we look into the Q2, 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 Q2. We have sold approximately 85 percent of the primary alumina production at the end of April at some $18.75 per metric tonne.
And then, of course, that you've seen that LME prices in May have been below that level. So realized prices should be no surprise that, that would be below $18.75 when we close the Q2. On the premium side, we have booked 75% of the premiums, around $3.60 per tonne and the estimate then for the complete quarter is in the range of 300 to $3.50 per tonne. If you 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, should give us a good benefit. And also, there will be some cost reduction when it comes to energy and carbon cost 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 ended and we are well covered in the quarters to come. Turning to metal markets. The metal markets area delivered an underlying EBIT of SEK 190,000,000 versus SEK 178,000,000 same quarter last year. Again, we have seen very strong performance and results out of the remelters both in Europe as well as in the U. S, driven by good and strong margins.
This is despite somewhat lower production on the back of the Handelsen incident we had earlier this year. Handelsen 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. We exclude SEK 40,000,000 in negative currency effects. The result is SEK 230,000,000, which is up from SEK 139,000,000 last year and double compared to what we have guided on as normal running profits of SEK 125,000,000 per quarter or SEK 500,000,000 per year.
If we look into the Q2, 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've delivered an underlying result of SEK 138,000,000, down from the SEK232,000,000 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 cost 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 general engineering. We also see increased margin pressure going into the second quarter and probably also a somewhat less fortunate product mix when we know look at result expectations for the Q2.
So in that point, we from a shipment perspective, you should also expect that to be relatively flat between Q1 and Q2 and not necessarily expect a normal seasonal uptick in volumes. When it comes to the Neuss smelter for the 2nd 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 in on the Neuss matter, but that will principally be offset by the lower metal price as we observe it. Turning to Extruded Solutions. The result did decline from SEK 7 34,000,000 last year to SEK 593,000,000 this quarter.
As explained before, Extruded Solutions were clearly hit hardest in Hydro by the cyber attack. We do estimate that the impact here is 200 to 250. So if we hadn'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. I'm particularly happy to see the very strong results in North America, delivering better results even if they've had a cyber attack, better results than what they delivered in Q1 2018.
If we look into the Q2, still some effects of the cyber attack in the second quarter. We are back to normal operations in terms of production and deliveries in Extruded Solutions now, which is a good speed out of the Q2. 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 results from SEK 278,000,000 last year to SEK517,000,000 this quarter.
The main driver for this is price driven. We saw a 30% increase in power spot prices, increasing from NOK361 per megawatt hour last year to NOK468 per megawatt hour in the NO2 pricing area this year. The price effect alone lifted the results with roughly NOK100 1,000,000. The second big contributor is very strong results within the trading and hedging area of energy, again lifting the results with close to NOK 100,000,000. Production somewhat up to 2.6 terawatt hours, up from 2.4 last year.
Net 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 Q2 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. On the pricing scheme, our pricing set.
So far in Q2, in NO2, prices have gone down and averaged around NOK397 per megawatt hour. Quickly turning to other eliminations, netted to negative NOK 261 1 this quarter compared to a positive NOK161 percent 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 307,000,000, NOK 100,000,000 higher than what we had last year and certainly somewhat above the guidance that we give of NOK 175,000,000 to NOK 200,000,000 per quarter, partly reflecting the some costs relating to the cyber attack, but also lower results in the industrial insurance company within Hydro. Also in the Q2, 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 175,000,000 to 200,000,000.
Turning to debt. First of all, the net debt position that we reported at the end of Q4 of SEK8.7 billion has now been restated to reflect the implementation of the IFRS 16 standard on leases. This has increased as we've guided the net debt to SEK 3,100,000,000 up to SEK11.7 billion. Outside this effect, the net debt between the quarters have remained relatively stable of SEK400,000,000. We've generated an EBITDA of SEK2.6 billion.
There is 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 SEK1.9 billion. This, amongst others, include a large tax payment of SEK1.1 billion. We have investments this quarter of SEK 1,600,000,000.
We still maintain the guidance of CapEx for the year of roughly SEK 10,000,000,000 to SEK 10,500,000,000. And then finally, on the adjusted net debt. Here, we see an increase of adjusted net debt of SEK 1,400,000,000 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 SEK 3,100,000,000 increase we saw in net debt is partly alleviated by changes we see in what we call other adjustments where we previously have included lease obligations. So the net effect is then much smaller on as SEK1.4 billion.
And this is also in line with what we have guided on before. Let me also just comment quickly on P and L impacts on IFRS 16. In Q1, we have then seen as a consequence an increase in depreciation of NOK 160,000,000 and we see an increase in finance cost of roughly NOK 20,000,000 and this should be a recurring item as we go through the year. Net pension liabilities decreased by SEK 400,000,000. It's partly due to the strengthening of the NOK versus euro as well as increased returns on the planned assets and also somewhat lower offsetting than the lower interest rates that we see in Germany.
Then we have fairly stable debt in Katalum, Equity Accounted Investments, and that leaves us with net adjusted debt at the end of the quarter with at SEK30.1 billion. Danhilde, I will leave it up to you to summarize. Thank you.
So then we have presented the Q1 results heavily influenced by the Brazil situation, influenced by the cyber attack and low prices. The good thing is that we are now resuming operation in Brazil, and we hope that with the mitigating measures we have taken now that we will not be hit by a cyber attack 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 lease 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 as on the Investor Day on 24th 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 Eddeng, DNB Markets. Two questions, 1 on rolled and 1 on B and A. You mentioned that you started restructuring in Gevenbroich. Can you elaborate on what exactly you are doing and what you expect of results financially, also on a time line? Further, bauxite and alumina, can you help us understand the ongoing discussions with authorities on DRS2?
What's keeping the embargo from being lifted? Thank you.
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 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 the market segments or a product segment that are more a commodity product. That is ongoing right now.
Then on the B and A side in terms of DRS2, I think what we've learned over this last year, Ivan, is that it is very important to get this resolution in place and to then have a, in a way, a solid resolution we can live with for some time, it is important to find a common foothold or common ground together with Ministero Publico 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 DRS 2. 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 geotechnical studies on DRS-one to ensure that we have capacities beyond this 1 year lifetime that we're talking about today.
Yes, in the front. Elizabeth, in the front here to Hans Erik.
Hans Erik Jacobsen, Nordea. Given the reduced demand grab for aluminum and pressure we are seeing on aluminum prices, did you consider not to restart Albras?
Albras is very closely connected to the nucleus in Brazil. And it was when we closed it down, we said that it was due to a shortage of alumina or the fact that we couldn't storage 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 these 2 are quite different businesses, but could you understand why the margin pressure continues within one area and continues to increase in the other area?
I'll
try to answer. I think it's different business. When we talk about the margin pressure and the Q2, we, in particular, talk about foil and the general engineering market. Now the foil market is subject to increased pressures from exports also out of China and, to a certain extent, Turkey, putting a dampening on the 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 uniqueness of the products that you produce, which is 1 profile, 1 customer, small volumes.
So there is very different market dynamics, and that is one of the big drivers behind
it.
Two questions. One simple one for Eivind and maybe a nasty one for Hilde.
What was that?
Did you change?
EFSR EBITDA effect in Q1. Sorry, once more. EBITDA, IFSR effect in Q1.
In 2016 or IFRS 16, roughly SEK 200,000,000.
SEK 200,000,000? 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 6%, 70% of its book values. No one really understands why the aluminum price is so low despite 2 years with a 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's still a lot of opportunities, Martin, to make this brighter than it is today. And I agree with you that that is why my first on my first day stating that we have to lift the profitability, we have to lift our ambitions in order to be in a 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 Maarten, of course, you're correct that from a production demand perspective, we have been in a deficit for the last few years. But we have still had or the industry of the world still had ample inventory sitting around, which has come in to fill that gap. What we're seeing now and have seen for the last few years is that, that inventory is coming down. It's trailing 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 looks like.
Good question. Any other questions from the audience? No. We have questions from the webcast that Jan 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 normalize and current input costs are fully reflected?
I'll leave that to you.
Will you repeat it, Stianna?
The question on the alumina and primary cash cost going into Q2, Q3 towards the end of this year. Could you talk a bit about how they would develop?
Yes. When it comes to on the alumina, if you think about the alumina production cash cost, we do expect well, let me start in a different way. We have roughly 15% to 20% of the cost base in Alunorte is 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 up speed.
Can you say something about the extension options at ERS1 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 just to see exactly what that is and the time line for that. Perhaps you have more details, Ivan. 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 DRS-one 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 DRS 2 lifted. A question
from Menno Sanders, 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 capacity adjustments. But that will that we always will have to view 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, strictly 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 a question from Daniel Major, UBS. Can you give any detail on timing, amount of the insurance claim from the cyber attack?
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 in 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're well placed in the 2nd 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, do you have a very negative outlook 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 decisions.
I think what we partly see at least on 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 when it comes to 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.