Good morning everyone. Welcome to Hydro's presentation of fourth quarter results for 2017. Welcome also to all of you following us on webcast today. The results will, as usual, be presented by our CEO, Svein Richard Brandtzæg, and CFO, Eivind Kallevik. We will have time afterwards for a Q&A. Let's start then, Svein Richard.
Thank you, Inga. Safety is always first priority in Hydro. In spite of that, we had 2 fatalities in 2017, which means that we have to work even harder to make sure that each and everyone in Hydro come home safe every day. From the financial, on the financial side, 2017 was the best result since Hydro became a streamlined aluminum company in 2007. Best results in a decade. If you move over to the quarterly results, we had the underlying EBIT of 3.6 billion NOK, up from 2.4 billion NOK in the third quarter of 2017. The result was supported by higher prices in alumina and aluminum, but partly offset by higher costs, both variable costs and also fixed costs.
We had normal seasonal variation also in this quarter with the lower demand as normal in the fourth quarter. That was what we also experienced in the downstream area. This is also the first quarter where Extruded Solutions is consolidated into our accounts. Energy delivered better results due to higher production and also somewhat higher prices. The improvement program, the Better program, is moving according to plan with regard to the 2019 target, despite setback in 2017. I'm happy that we have now started the Karmøy technology pilot, and we will spend first half 2018 to ramp up this technology pilot where we are producing aluminum with the lowest energy consumption in the world.
The board are proposing a dividend for 2017 of NOK 1.75 per share, up from NOK 1.25 per share in the previous year. With regard to the market, we see 2018 as a largely balanced market. We expect growth in demand of about 4%-5%. If you take a closer look at the market situation in 2017, we had a 5.8% growth globally in demand, but also 7.7% growth in supply. If you add this up, and as you see on the right-hand side of this slide, we had a largely balanced market also in 2017. If you compare Q4 2017 with Q4 2016, the growth was 5.6%.
We saw almost 7% growth in China and a bit above 4% growth outside China. Looking into the details of the quarter, we saw in the fourth quarter 0.8% higher demand in China and 0.7% lower growth outside China, or negative growth outside China. With regard to inventories, due to the fact that we saw a largely balanced market in 2017, the market, the inventories were quite stable, but we saw some build-up in China and some reduction of inventories outside China. If you take a look into the market situation as we expect for 2018, we expect the demand development outside China of 3%-4%.
In China, 4%-6% growth in 2018, but also a similar development on the supply side. All in all, largely balanced market is expected also for 2018. If you move over to LME and the development in the quarter, we had LME in the third quarter of $1,921 per ton as a realized price. The realized price increased with $171 per ton in the quarter to $2,092 per ton. Market price in the third in the fourth quarter increased with 4.5% from the third to the fourth quarter. The oil and metal price increased due to the price increases of LME, but also due to the higher standard ingot premiums.
In the European market, we saw standard ingot premiums increasing from $141 per ton to $159, and now trading around $168 per ton. In the US market, the Midwest premium increased from $173 per ton to about $209 per ton in the fourth quarter, and now trading at $287 per ton. Quite some increases in the standard ingot premiums. With regard to export of semi-fabricated products from China, if you compare 2017 with 2016, it was about a 5% higher export of semi-fabricated products out of China.
If you take a look, a closer look at the percentage of the volume, exported volume compared to the production of semi-fabricated products in China, it has been quite stable previously, but it went down in 2017. The arbitrage window is open due to the fact that the Chinese prices is has not developed in the same way as the LME. Also in a situation where China is producing more metal than what they consume, and there is a deficit also China, it is not a big surprise that there is export of volumes from China into the market elsewhere. If you now move over to alumina, the alumina price went up $101 per ton from the third to the fourth quarter.
We had a peak in October, about $480 per ton. It was a very tight Chinese market in that situation. It was expectations of logistical constraints as we had in 2016. It was a restocking among consumers, smelters, aluminum smelters, build up their inventories, and also traders holding back alumina. The prices went up, but the situation became less tight in November and December, and the prices came down again. Ended up at around $380 per ton. The alumina price is trading around $360-$365 per ton. If you look at the import of bauxite to China, we see clearly the effect of bauxite from Guinea now.
If we add up Guinea with the rest of the Atlantic volumes, the Atlantic region now correspond to 48% of the total imported bauxite to China. It was 35% in the year before and only 7% in 2015. Guinea comes up as one of the main source beside Australia. Indonesia has lifted the ban, the export ban, but there are small volumes coming out of Indonesia. Malaysia has prolonged the moratorium, but we still see some volumes also coming from Malaysia into the Chinese market. With regard to the total export, import balance in China, to and from China, we see higher levels of aluminum unit imports to China in 2017 compared to 2016.
Quite stable on scrap primary aluminum at low levels. Some higher export of semis, but is really the higher import of the bauxites, and especially from Guinea, that is the main difference between 2017 and 2016. On the operational side, we are on track with regard to the Better program, where we have lifted the target to NOK 3 billion in as improvements that should be de-delivered until the end of 2019. We are ahead of plan in Bauxite & Alumina. Strong operations delivered all together NOK 1.1 billion in improvements until the end of 2017. We have lifted the bar now to NOK 1.3 billion as a target for 2019 for Bauxite & Alumina.
There are contribution, of course, from the good operation, but also from commercial and procurement in, this business area. In Primary Metal, we did not achieve the target last year. Very good operations in all smelters except one, that is Albras in Brazil, where we are upgrading. We have some maintenance activities ongoing there to lift the performance of the Albras smelter going forward. Primary Metal is on track with regard to the 2019 target. In the Rolled Products, the target has been reduced from NOK 0.9 billion-NOK 0.7 billion in 2019. It is a delay of, the ramp-up of the used beverage can line and also the Automotive Line 3. That is the main reasons for this.
We expect to reach the 0.9 billion target with 1 year delay in the Rolled Products. This slide shows the production development in Paragominas, the bauxite mine in Brazil, and also the alumina refinery, Alunorte. Alunorte is the world's largest alumina refinery, and we have a very positive development in both of these assets. Record production in 2017, both in Paragominas and Alunorte. If we take the fourth quarter production in Alunorte, we had a speed of 6.7 million tons. The speed of bauxite production in the fourth quarter in Paragominas was 12.1 million tons. Good production, a good stability.
This is a result of solid and efficient implementation of the Bauxite Alumina business system, which is very similar to the business system and production system we have implemented in Primary Metal. Looking into the margins and the cost development in alumina, we had, as I said, $101 per ton higher prices, the realized prices, from $297-$398 per ton in the quarter, from the third to the fourth quarter. Also some higher cost. This is due to higher input cost of sodium hydroxide or caustic soda. Energy cost was up. It was also some effect of higher sourcing cost. We also had some benefits from consumption factors and also some currencies.
The margin was $133 per ton as average in the quarter. On the metal side, we had the realized price that went up $171 per ton from the third to the fourth quarter. $500 per ton in margins in average. The cost also here went up from $14,725 to $15,750 due to higher alumina costs, higher petcoke cost, and also pitch cost went up during the quarter, and also some increased fixed costs. If you look at the situation for Rolled Products and the market, development and sales, seasonal variation was 5% in the quarter, which is not unexpected.
Uh, if you look at, uh, fourth quarter, uh, 2017 , uh, compared to the fourth quarter 2016 , we had, uh, a 5% higher sales, uh, altogether, uh, flat on foil, higher can, uh, down on litho. And if you look at the body and white sheet for automotive, it, it increased with 17% , uh, from the quarter, same quarter in 2016 . If you look at year on year, 3% higher sales, uh, similar development between the product, uh, areas, product mix as we had in the, in the, when we compare the quarter by quarter. In, uh, extrusion, uh, the market, uh, variation here, the seasonal variation was 7, 7% down in the US market and, uh, similar in the European market.
If you look on the demand, year-over-year, it increased with 7% in the U.S. market and 3% in the European market, very much driven by automotive and transport, building and construction. In the U.S. market, we also saw some development in the commercial transport market that was weak in the beginning but improved in the end of the year. We expect that the first quarter will be stronger than the fourth quarter last year as not normal seasonal variation.
Innovation, product development, application development is very important for us. We have several good examples and some recent examples from Extruded Solutions is for example, acoustic windows, which is built, well, there is built-in noise reduction, so you can sleep with the open windows in a city with a lot of traffic. We have a long cooperation with IKEA, where we have developed a new sofa that was launched last week. We're also now delivering aluminum to the London Electric Vehicle Company that are going to build the new taxis for London, for London and in U.K. Interesting developments on the innovation side, and that continues, of course, going forward.
Energy had higher prices, as I mentioned, supported by higher consumption, but also lower availability of nuclear power plants in Sweden and also some higher prices on the continent, which led to exports. We all know that the electrons are moving in direction, but the prices are highest. On the hydrological side, we had higher and a better hydrological balance in the end of the fourth quarter compared to the third quarter. It ended up 14 TWh above normal, while the end of the third quarter was 9 TWh below normal. There has been a lot, enough snow and rain in this Nordic market lately. We are happy that we are now ramping up the Karmøy technology pilot. We have now sales in operation, and it looks very promising.
The ramp-up will take the next months, and we expect to be finished within the first half this year. Of course, here we are now testing out technology elements that we are also planning to benefit from in the other smelters that can strengthen the competitiveness of the other smelters in future. The total CapEx is, as communicated previously, NOK 4.3 billion, with support from Enova of NOK 1.6. Until the end of the year, we have spent NOK 4.1 altogether, and with support from Enova, NOK 1.2 billion Norwegian kroner. We have also announced that we have made an investment decision to upgrade and restart the Husnes smelter in the west coast of Norway. That will add 95,000 tons to the volumes.
This is a plant producing extrusion ingots. We are planning to start the production in 2020, which allows us to implement new technology elements from the pilot that we are testing out. The investment of this restart will be NOK 1.3 billion. We have also announced that we have acquired 2 extruders in Brazil. We had the one extruder in E2 previously, and now we have added another 2. We expect the deal to be closed within next weeks and months. This is according to the strategy of extrusion to grow with low investments. It will give us a leading position in the Brazilian market of the extrusion market.
These extruders has together 7 presses, 1 casters, and 600 employees that we are going to welcome to Hydro after closing. As you see, the location of these extruders are close to the market in Brazil, while we have our upstream assets in the Northeast, which is quite far away from the extruders. With these extruders, we of course have a full value chain in the Brazilian market. The board has proposed a dividend of NOK 1.75 per share, which shows also the commitment for, from Hydro to deliver cash return to shareholders. NOK 1.75 in itself means about 41% of the net income.
If you take the dividend over the last 5 years, we have a payout rate of 70%, while the policy for us is to have 40% dividend over the cycle. We are still maintaining 1.25 as a floor. This is subject to approval of the general meeting in May, and subject to approval, it will, the consequence is a cash payout of NOK 3.6 billion. Please, Eivind.
Thank you, Svein Eivind. Good morning, everyone, and warm welcome from me as well. I will take you through the financial results for the quarter. This quarter, we've delivered an underlying result before financial items and tax of roughly $3.6 billion, up $1 billion compared to the previous quarter and a doubling compared to the same quarter last year. The main factors contributing positively this quarter is the higher realized aluminum as well as the alumina prices. The realized alumina prices increased just $101, up from $297 to $398 per ton. The reason realized aluminum price then increased from $1,921 to $2,092 per ton.
Also, as explained in guide for last quarter, both Hydro and the industry in general has also experienced higher input cost in this quarter. This quarter, raw material costs took down the result by approximately NOK 600 million, and the majority of this is coming from the primary business area, with especially a cost push on alumina as well as power. We also experienced some higher fixed cost in Q4, and this is primarily driven by higher maintenance cost, which is a normal seasonal variation for the fourth quarter and again, particularly within Primary Metal. Altogether, this reduced the results with roughly NOK 400 million. The other box of NOK 100 consists of several items.
We have margins, foreign exchange, Energy results pushing the results up, this is, for the most part, been offset by higher effects from other eliminations, bringing the totality down to a positive effect of NOK 100. I will get back to other eliminations in some more detail later on in the presentation. If we take a quick look on the key financials, revenues in this quarter is of course impacted from the fact that we consolidate Sapa for the first full quarter, adding roughly NOK 14 billion to the revenue side. The rest of the increase on the revenues is explained by higher alumina and aluminum prices. This quarter, we've excluded from reported EBIT of NOK four and a half billion, roughly NOK 1 billion in items excluded, which I will get back to in more detail on the next slide.
Financial expenses amounted to NOK 0.8 billion for this quarter. This is predominantly driven by unrealized effects, partly from the strengthening of the euro versus NOK, having an impact on the embedded derivatives in the euro-denominated power contracts. Also the weakening of the BRL versus dollar, having an impact on the dollar debt that we carry in Brazil. Financial or interest expense in this quarter is also somewhat up compared to Q3. That of course is explained by the higher debt level we carry as a consequence of the Sapa transaction. If we look forward for 2018, we expect that this level that we see in Q4 is what we will also realize per quarter during 2018, everything else being equal, roughly NOK 500 million on an annual basis.
As a result of this, income before tax was NOK 3.7 billion, up from NOK 2.8 billion in Q3. If we look at income taxes this quarter, it is very low. It is roughly 4%, so it's far below what we guide on a going basis of roughly 30%. The largest effect this quarter is related to the Sapa transaction, where we had a non-taxable holding gain for Sapa shares of roughly NOK 2.2 billion. There is also a positive effect from the US tax reform, of a few hundred million NOK, hitting this quarter. This gives us a net income of NOK 3.6 billion, up from NOK 2.2 billion in the third quarter.
Underlying net income is also up from NOK 1.8 billion in the 3rd quarter to NOK 2.8 billion in this quarter. As a consequence, the earnings per share is also up to 1.33 NOK. As mentioned, this quarter, we've excluded NOK 956 million from reported EBIT as items excluded. This is of course related to ordinary items that we normally do every quarter. For instance, the metal effect in Rolled Products, where the increasing LME is reflected in revenues faster than in cost of goods sold, timing effects, and unrealized derivative effects on LME and power projects. It also includes rationalization and environmental accruals. This quarter primarily related to an updated environmental accrual in Kurri Kurri of roughly NOK 180 million. The main effect, as I mentioned, is the Sapa transaction.
The net amount is roughly NOK one and a half billion. It includes 2 factors. First, it's the NOK 2.2 billion gain related to the re-evaluation of the shares we previously had in Sapa. That is partly offset by NOK 700 million related to a fair value adjustment of inventory, which we are obliged to do when we create the opening balance. If we then move on and to the business area and start with the Bauxite & Alumina. The underlying EBIT for B&A saw a significant improvement between the 2 quarters, up from NOK 430 million in Q3 to roughly NOK 1.9 billion in the fourth quarter. A good and strong quarterly performance for this business area.
As guided for in Q3, the realized alumina prices increased significantly, roughly $100 per ton to close to $400 per ton. This, of course, is primarily driven by the increase in the PAX index prices, but is also helped by the increase in LME, which impacts the LME-linked sales contracts that we do have. From a production perspective, there was good performance in Brazil this quarter, both for Alunorte and Paragominas, producing 6.7 million and 12 million tons respectively, well above the nameplate capacities of both plants. Raw material costs for Alunorte increased this quarter, mainly due to an approximate 10% increase in fuel as well as caustic costs. Also some increases for bauxite.
This was partly offset by better consumption factors this quarter, based on the higher quality bauxite we got delivered to the plant. If we look into the next quarter, we estimate that both Alunorte and Paragominas will have somewhat lower production for Q1. That is partly related to the fact that we will take the plants down for maintenance for some days during the quarter, all planned maintenance. We'll also see a continued increase in raw material costs for Q1. We expect caustic soda to increase a further 20%, coal prices to come up some 10%, as well as energy cost to come up roughly 10%. We also expect some increased depreciation for Q1, roughly NOK 70 million.
That is partly driven by capitalizing the investments that we've done during 2017, but also due to a re-evaluation of useful life of some of our assets. Worth noting also for 2018 is that we will again increase the amount of alumina sales on the index price. For 2018 as a whole, this will be roughly 75%, up from the 65% that we realized in 2017. When we take all of this into account, and the roughly 1 month delay we have on both the index and the LME-linked prices that we have, you should expect somewhat lower alumina price being realized in the first quarter compared to the fourth quarter. Turning to Primary, the underlying EBIT for Primary Metal increased from NOK 1.3 billion in Q3 up to NOK 1.4 billion in the fourth quarter.
This increase is primarily driven by a 10% increase in the realized LME. On the other side, the positive price effect is also to a large extent offset by an increase in raw material costs, in particular due to alumina and higher power cost. In this quarter, lesser extent to, related to carbon costs. Fixed costs from a seasonal perspective also increased somewhat in Q4. Looking into Q1, on the pricing side, we have sold roughly 40% or 50% of the production at the end of Q1 at the price of approximately $2,100 per ton.
We also booked 65% of the premiums for the first quarter, at approximately $325 a ton, which means that we, for totality for the quarter, we will realize premiums in the range of $275-$325 per ton. On the raw material side, we do expect a continued cost push into Q1. Given the time lag for alumina costs, these prices will go up quite significantly in the first quarter, roughly 10%-15%. We also expect to realize more increases in carbon costs in the first quarter, and they are expected to go up roughly 15%.
We also expect some higher energy costs in Q1, partly driven by higher grid tariffs in Norway, but also with the full quarter effect of the new power contract in Tomago that started towards the end of 2017. Turning to metal markets, they delivered an underlying EBIT of NOK 185 million, up from NOK 91 million in the previous quarter. If we exclude the currency and inventory valuation effects, the results increased from NOK 107 million up to NOK 157 million this quarter. This is driven by strong contributions from our metal sourcing and trading activities, but also good profitabilities in the remelters, driven by higher contribution margins, both within the European as well as the US system.
If we look into the first quarter, we do expect increased sales out of the remelters, as seasonally demand typically picks up early Q1. It's, at the same time, let me just again, and as always, remind you that currency and derivative effects within metal markets by nature are volatile. If we turn to downstream and start with Rolled, the Q4 results. We're very much online with what we realized in Q3 at NOK 95 million from an EBIT perspective. As normal, in Rolled, we had the negative seasonal effects, reducing volumes, as well as higher maintenance costs within the quarter. However, for Q4, this was partly offset by improved margins driven by the product mix that we realized in the quarter.
Let me also mention that in Q4, we had a positive one-time effect on inventory revaluation at one of the plants, adding NOK 45 million positive into this result. Higher raw material costs, mainly aluminum carbon, more than offset the increased all-in aluminum price for the noise manager. If we look at 2017 as a whole for Rolled, they delivered significantly, roughly 46% lower result for 2017 compared to 2016. As you know, 2017 was significantly and substantially impacted by the operational challenges that we had in Rolled, in particular for the first 6 months of 2017, but also in the delays of the ramp-up of the Automotive Line 3, as well as the used beverage can recycling line in Germany.
Operating margins, as a consequence, was also negatively impacted in 2017, given the product, the mix development as a consequence of the operational challenges. If you look into Q1, you should expect higher volumes, very much in line with the normal seasonal development. You should also be aware and remember that there is strong margin pressure in some of our key market segments. Let me also remind you on the positive effect that we will start realizing in 2018 of the new power contract that we have enrolled, adding roughly NOK 400 million on an annual basis for this business area. As Sveinrik had mentioned, this is the first quarter that we fully consolidate the Extruded Solutions business area. To make previous quarters' numbers comparable, I will then discuss the quarterly figures on a pro forma basis.
This means that the figures that we show you here will not be comparable, and you will not find them like for like in previous reporting from the Sapa segment. The main major difference is, of course, the excess value depreciation that comes after we created the opening balance and implemented this as a business area in Hydro. The annual effect of the excess value depreciation is estimated to be around 300 million NOK, slightly below what we guided on in the information memorandum. As such, the historical underlying EBIT here for Q1 to Q3 2017, as well as Q4 2016, is all pro forma figures, including the excess value depreciation effects. If we then move to the results, I think first and foremost, we're all very happy to see that the underlying performance improvements in Sapa or Extruded Solutions is continuing.
This quarter versus same quarter last year, we see a 10% improvement in the underlying EBIT. The performance record continues. For Q4, the business here delivered an underlying EBIT of NOK 283 million, down from NOK 510 in Q3, again, reflecting the normal seasonal decline from a volume perspective. Margins, as we know them as net added value per kilo, continues to improve, very much still proving that the implementation of a value or volume strategy continues to be a success in Extruded Solutions. If you look into Q1 2018, you should expect a normal seasonal uptick in terms of volumes when we close up Q1 in some months.
If we look to Energy, we saw a good result improvement in Energy, up from NOK 368 million in Q3 to NOK 457 million in Q4. The main result driver this quarter is higher production. We are up by roughly 0.6 TWh, driven by high reservoir levels and good inflow, but also preparing for maintenance outages that we will have now in Q1. Prices were also somewhat up in the quarter, driven by higher consumption, as well as increasing prices in continental Europe. Production costs somewhat up in Q4, partly driven by higher maintenance activity, and higher transmission costs, only partly offset by lower property tax for this quarter. As always, let's just remind ourselves that price and volume development is uncertain for the next quarters for Energy.
As I said, there will be fundamentally somewhat lower production capacity given the maintenance project that I just mentioned. Also here, let me remind you of the parts of the offsetting effect of the positive effect we have in Rolled on the energy contract. In Energy, we expect a NOK 250 million negative annual effect, partly offsetting the NOK 400 million that we realized in Rolled. Turning to other eliminations. This has now a negative contribution of NOK 715 million compared to a positive NOK 181 in Q3. One factor reducing the result is of course now that Sapa is reported as a separate business area. It's no longer reported as an equity accounted investment under other eliminations. That's part of the explanation.
The other line contains other corporate costs and earnings from industrial insurance. It is negative this quarter with NOK 297 million, quite above the normal quarterly guidance that we give for NOK 150 million. We have to remember that this line varies as we go throughout the year. We're still in line with the annual guidance of NOK 600, as the total cost and charges this year is NOK 586. Finally, when you look at eliminations, which in this quarter is NOK 436 million versus a positive NOK 98 million in the third quarter. Fundamentally, the way we see this, if you have negative eliminations, it's actually a good indicator, the business is going well.
The negative eliminations reflect the higher margins that we have in Bauxite & Alumina, and reflects the part or the portion of the B&A volumes that's been sold to Primary Metal, and either sits in the silos or in the metal production and haven't been released externally yet. This will, of course, be realized as we go forward. The typical rule of thumb, negative eliminations indicates a positive earnings development in B&A, and the flip side, if it was positive. If we look further into 2018, we do expect a somewhat higher cost level going forward. It's partly driven by IS/IT projects, digitalization efforts, but also the inclusion of certain a certain amount of Sapa employees into the corporate center.
We do lift the quarterly guidance for corporate costs in the other line from NOK 150 million to roughly NOK 175 million-NOK 200 million per quarter. Also, when it comes to reporting formats going forward, so far we've always focused on this quarter versus the previous quarter. Starting in Q1, we will focus on Q1 versus first quarter in the previous year. That will give us, we believe, more ability to focus on real underlying improvements in the business and spend less time on focusing on seasonal changes between the quarters. As we already mentioned several times in this presentation, as well as the Capital Markets Day and the last quarterly presentation, both Hydro and the industry in general are experiencing a significant cost push coming from raw materials needed both for primary production as well as for alumina production.
Before going into the details here, it's just important to note that this slide reflects the market prices. They may differ for what's realized in our books, in particular due to the time lag between the acquisition of the raw material until it's actually consumed and sold out of our business. We start with primary aluminium. Petcoke is one of the most important factors when we produce carbon anodes. We produce or use roughly 0.4 ton of carbon per ton of aluminium produced. Here we've seen strong price increases in 2017, given the fairly tight market that's been around, and also, the shutdowns that we've seen in China during the winter heating season. Here we typically carry 1 quarter lag between market prices and what we realize in our books.
Again, we expect a significant increase in costs in Q1. Pitch is the other factor that's used in carbon anode production. Here we use roughly 0.08 per ton of aluminum produced. We also see, and for the same reason, also here a strong price increase in 2017. If you look at primary and primary production isolation, the alumina cost, of course, is a significant part of the cost basis for producing primary. We saw a significant price increase in Q3 and the start of the Q4 before it came off again towards the end of the quarter. This will also lead then, due to the time lag, to a significant cost increase for primary and isolation for Q1.
Remember, as a company, we are not long, so increasing alumina cost may be a negative for primary, but for the company it is actually a very good thing. If we move to alumina production, and starting with the one of the most important input factors that we have, which is caustic soda, we use roughly 0.1 tons of caustic soda per ton of alumina produced. This price has more than doubled in the last 2 years. It's driven by strong demand, but is also driven by not so much new capacity coming in stream, and also due to environmental restrictions in Europe, where some of the producers have used mercury in the production process. They've had to shut that production down in the beginning of 2018 at the latest.
This should also, in our view, lead to a relatively tight market as we go during the year. Fuel oil gone up, driven by global oil prices. We use 0.11 tons of fuel oil per ton of aluminium used. Also for coal, we saw a significant price hike in the summer of 2016, when Chinese government reduced the number of working days for Chinese mines, and the coal prices has held up pretty strongly since then. We use 0.12 tons of coal per ton of alumina produced. All in all, it's quite clear that there is a cost push for us. More importantly, there is a cost push for the whole industry, lifting the cash cost for all producers.
If we then turn to the net cash developments, not surprisingly, we turn from a net cash position of NOK 7.7 billion in the beginning of the quarter to a net debt position of NOK 4.1 billion at the end of the quarter. This, of course, is primarily driven by the Sapa transaction. We had a positive contributing factor of NOK five and a half billion in underlying EBITDA. We released NOK 1.8 billion in working capital for the most part driven by seasonality as is normal in the fourth quarter. Giving us an operating cash flow of NOK 6.3 billion for the quarter. Taxes and other, it is primarily related to tax payments of NOK half a billion, reversal of results in equity accounted investees, and the receipt of Catalum dividends of roughly NOK 300 million.
Investments include then the payment for Sapa shares, as well as roughly $3.2 billion in what you can call normal CapEx and investments in our operations. The other box then includes the consolidation of the debt that was carried in Sapa at the day of the acquisition. Finally, just a quick look on adjusted net debt. As explained on the previous slide, we end the quarter with a net debt of $4.1 billion. If you look at the lines below the net debt, these are also, for the most part, impacted from effects from the Sapa transactions. Pensions and other adjustments, which is typically leases and asset retirement obligations, respectively increased with $1.4 billion and $1.9 billion post the transaction. The net debt and equity accounted investees is now purely debt carried within Catalum.
As a result of these developments, the net adjusted debt then ends at NOK 23.8 billion at the end of the year. If you look at this from an overall perspective, 2017 has been in all respects a good year for Hydro. Not at least evident when you look at the cash flow from operations for the whole year as well as the quarter that I've just been through. Even after acquiring the outstanding 50% shares of Sapa and paying NOK 11.8 billion for these, we are in a very comfortable financial position and well within the rating targets that we have funds from operations to net adjusted debt and net adjusted debt to equity. With that, Svane.
Thank you, Eivind. 2017 was a year with increases in prices and both for products and raw materials. Also, positive sentiment driven by the Chinese supply side reform. All of these are factors that we cannot control ourselves. With regard to accomplishments that we like to highlight for 2017 was, first of all, the acquisition of Sapa that created Hydro as the leading global integrated aluminum company. We have record production in Brazil, in Paragominas and Alunorte, that has been quite important for us over the last years. The development in the Better program improvements of NOK 350 million.
We have also addressed the ramp-up situation in Germany with regard to the Used Beverage Can Line and also the Automotive Line 3, which is now moving in the right direction. For 2018, there are also a lot of uncertainties with regard to supply, demand, balance, currencies, and other factors that we cannot influence on. We will continue to have safety first as the main priority. We will continue the value integration, value creating integration of Sapa. We will ramp up the technology pilot, Automotive Line 3, and Used Beverage Can Line that we have talked about, and also deliver on the Better program. We also have a high focus on innovation and technology to improve the competitiveness of the company going forward. Thank you very much for your attention.
Thank you. Thank you, Svein and Eivind. We open for questions from the audience here in Oslo or from webcast. Any questions from you here? I'll leave it. Yeah, we have one here. You're getting a microphone behind you.
Thank you. Bent Inge Olsen from ABG. On the books at alumina side, on the current production levels we see, and we also see last year, Q4 last year, I think we set new record high production at that time. Obviously, Q4 is obviously a strong quarter on the production. What do you think about nameplate capacity both on Paragominas and Alunorte in that respect? On the Energy side, how long will the maintenance shutdown be, and how will that impact the production compared to Q1 2017? Finally, Yeah, I think I'll leave it at that. I don't remember my third question.
With regard to the alumina production in Brazil, as I mentioned, we had 6.7 million tons speed in the fourth quarter in Alunorte, and 12.1 million tons speed in Paragominas. These are definitely above nameplate capacity. The nameplate capacity is 6.3 in Alunorte and 9.9 in Paragominas. It seems that we are now stabilizing production at higher levels. I think we should be able to run also in 2018 with the production levels above the nameplate capacity, both Alunorte and Paragominas.
When it comes to the energy side, we expect the maintenance to be completed within the first half year of 2018. Of course, production and energy fluctuates with hydrology and prices and demand. If you look at the absolute production of this line that's out, that was roughly 360 GWh in Q4, which is then taken off.
I remember my third question now. If you look at the internal projects, you have the Husnes that's going to be restarted, and you also the Karmøy pilot that is now in ramp-up.
Are there any other things that you look at internally on the upstream segments that we can look at, or could expect going into 2018 and 2019? Or are you now looking more externally on the upstream side?
I mentioned already what you're doing in Årdal. Årdal need an upgrade on maintenance, so that is ongoing. When you go to a new project, it's, we have mentioned, the press filter in Brazil previously. That is also on the way to be ramped up. It's really the technology pilot at Karmøy and automotive line in Germany and the UBC line in Neuss that is the most important now going forward. Husnes is something that comes later.
I think when you, we should also remember the projects we have within BNA, where we are working on a project to debottleneck Alunorte to annual capacity of 7 million tons. That will come closer to the end of this decade.
Mm-hmm.
Not necessarily in 2018. Yeah.
Okay. We have some questions from webcast again.
Yes, please.
First question from Jason Fairclough, Bank of America Merrill Lynch. How should we think about the ramp of Karmøy and its impact on cost in Primary Metal portfolio in total?
Okay. With regard to ramp up, as I mentioned, we are spending the first half 2018 to ramp up the line, and then it will be stabilized, and then going forward, produce 75,000 tons. Maybe you can elaborate on that, Eivind.
Yeah. I think most of the investments and project costs has been taken, so this is basically, what you can call a normal ramp-up phase. As we produce more, you will also get the contribution margins in place to cover the cost.
Question from Menno Sanderse in Morgan Stanley. You mentioned higher fixed cost in 4Q during the remarks. Can you please elaborate on what these are and how sticky they will be in 2018 and beyond?
Sure. In general for primary, or...?
No, in total.
In total. Well, I think you have to split this. In many of the business area, we have a significant portion of the maintenance programs done in Q4. That also normally relates into, translate into what we define as fixed cost. This will come down as maintenance periods are lower in Q1 and Q2. We do see somewhat increased fixed cost on a corporate level. It's partly driven by, as I mentioned, the IS/IT projects that we're running, digitalization efforts, but also from inclusion of certain parts of the corporate structure in from Sapa into the corporate structure in Hydro.
RUCRA in Rolling remains poor. This is the 6th year in a row that it's far below 10%. How much patience will Norsk Hydro have with this business until it explores alternative options to achieve a reasonable return?
We are not happy with the profitability in Rolled Products, and it is right. Over several years it has been below cost of capital. Of course, we are now going to see the benefits of the investments that we have done. I think going forward, we also will look at how we can for long, on long-term improve the total profitability in this business area going forward. We see it's a general issue for the industry's low margins. We also see that we have been able to successfully move volumes into high, high-graded products that gives better profits. That is something we are, of course, focusing on going forward.
Question from Dan Major, UBS. The tax rate was very low in Q4. What's the guiding going forward?
We continue to keep the guiding of 30% on an overall group level. Again, Q4 was in particularly impacted from the fact that we had a US tax reform from 35% to 21% having a impact on our deferred taxes. It was the non-taxable holding gain from Sapa.
We have one from Jatinder Goel in Citi. While deciding the 2017 dividend of NOK 1.75, was there much discussion with the board about revisiting the dividend policy and potentially committing to a higher future floor payout?
The board has decided the 1.75 NOK per share this year and also decided to keep the floor of 1.25 NOK, and also maintaining the dividend policy of 40% over the cycle.
One from Daniel Lurch, Exane BNP. Could you provide an update on the integration of Sapa, and what are the key initiatives for 2018, and also an update on synergies?
Well, the integration is continuing. It has been a successful integration so far. We expect that also to be the case going forward. There are synergies that have been identified that is mainly beyond within remelting, recycling area. There, we see clear synergies. We are confirming that, yeah, the synergies are NOK 200 million. Maybe you can comment further on this, Eivind.
No, I think, Sveinrik, as you say, the $200 million has been confirmed. We have working plans on how to get there. Not all of that will be realized in 2018, but a portion of it will be. We should come back to more detailed granularity on the synergy timeline.
We have one from James Gurry, Credit Suisse. Rolling appears to be making the first signs of recovery in operational performance. Has any of the lower power contract benefited results already, or is it just better performance and ramp-up of volumes? How can we look at, how do we look at this into 2018?
The power contract is from 2018, but we have also seen improvements in operational performance. I mentioned earlier that it was operational issues related to Hamburg and also to Alunorte, and there we have solved the issues. We still have slower ramp-up on the investments we did on the recycling line, as I mentioned, on also the automotive line that we are now focusing on. Now also what we see is moving in the right direction but behind schedule.
We have a final question from Fraser Jamieson in JP Morgan. Cost control in both B&A and Primary looked quite strong during Q4 relative to what peers have reported. What do you see in terms of 2018? Will cost inflation continue, or have you seen the most of the raw material price increase now?
We will see quite a bit of cost inflation coming in into Q1. Both when you look at the alumina side or alumina production when it comes to caustic costs should come up. When you look to the primary side, the primary or biggest cost driver for Q1 will be on the alumina side, probably adding some NOK 300 million-NOK 400 million in increased cost, but also on the energy side and on the carbon or the black material side.
Okay. Thank you very much. No further questions. We would like to say thank you very much for joining us here this morning, and have a wonderful day. Bye.