Welcome to Hydro's Q4 Presentation. Also, a w arm welcome to those of you following us on webcast. As you already have seen, Hydro's board of directors has taken the final build decision on the Karmøy technology pilot. Therefore, the presentations today will be slightly different from what you are used to. The presentation by CEO Svein Richard Brandtzæg will be done from Karmøy, followed by a presentation by CFO Eivind Kallevik in this room. Since we cannot take all of you to Karmøy on short notice, we'll do it the other way around and bring Karmøy to you, both in the auditorium and on the webcast. After the presentation, we'll continue with questions and answers by CFO Eivind Kallevik in this room. Now, it's a pleasure to bring in an excited crowd at Karmøy. Welcome, Karmøy, and welcome, Inger.
Thank you, everyone. Before I give the word to our CEO, Svein Richard Brandtzæg, to present the results for you, I would like to show you guys in Oslo and the people following us on webcast a little bit about how the atmosphere is here at Karmøy today. If you all have a look at this great gang who's gonna take this pilot into the future, let me ask you one question. Are you ready?
Yes
Thank you. I'll leave the floor to CEO Svein Richard Brandtzæg.
Thank you very much, Inger. It's a great pleasure to present the quarterly results here from Karmøy, following the decision of the board of directors last night to make a final build decision on the Karmøy Technology Pilot. Let me move over to the main results from the Q4 and also the annual result, where we ended up with the earnings EBIT of NOK 9.7 billion last year, which is the best result Hydro has achieved since Hydro became a pure aluminum company in 2007. The quarterly result ended up at approximately NOK 1.66 billion, which is NOK 600 million below the Q3 result of 2015, and NOK 1.3 billion below the Q4 result of 2014.
Due to the improvement and the cash flow in the company, the board of directors decided to maintain the steady dividend of 1 NOK. That will be the final decision for that will be taken by general meeting in May. Operationally, this quarter went very well, and especially in Brazil, where we had record production of bauxite at 11.7 million ton speed, and also record production of alumina, which ended up at the speed of 6.3 million tons annually for the Q4 . This implies lower costs, but also we experienced weakening prices both on alumina and also in metal. This also was followed by some advantages on the currency area with the weakening Norwegian kroner and also weakening Brazilian reais.
We had higher Nordic energy prices and also good production which influenced the result in energy. Also, the build decision has been announced already, and we had, in the end of the fourth quarter, delivered NOK 800 million in 2015 of improvements in total. That means that, up to 2015, from 2011, we have achieved NOK 4.5 billion in improvements in total. We have taken down the expectation for the demand in 2016 from 4%-5% to 3%-4%. When we look at the supply-demand balance, we see improvements, and we expect that the market will be largely balanced in the end of 2016.
If you then take a further look into the supply-demand balance, we saw in the fourth quarter somewhat weaker demand than the previous quarter. Still 4% growth in total on demand compared to 2014. Also in the Q4 of 2015, compared to the Q4 of 2014, we experienced 4% growth with regional differences, with China growing in demand 6%. We experienced 2% in North America. If you exclude Mexico, it was 3%, and we experienced 3% growth in Europe. The weakest markets were in Southern South America with a 16% negative growth.
When we add up the supply-demand balance, we see that there is oversupply in China of 2.1 million tons and undersupply outside China of about 0.9 million tons, ending up with about 1.2 million tons oversupply, which means that there has been a buildup of the global inventories during 2015. When we then take a further look into the supply balance for 2016, we have seen that China has implemented more curtailments than expected since the Capital Markets Day in December. It was announced 1 million tons additional curtailments. All in all, we see that there are about 1.4 million tons more curtailments in China that we announced in a Capital Markets Day.
If you include then what has been announced and also what CRU is expecting of curtailments going forward, we see that there is a significant deficit of 1.5-2 million tons outside China, and a surplus in China of a similar 1.5-2 million tons. All in all, we expect 2016 to be balanced ±0.5 million tons. The surplus of aluminum production in China also leads to export out of China, and we see that there has been increased exports during the quarter, also driven by higher incentives due to the fact that all-in prices outside China is higher than the prices in China. There are some correlations there.
Some weakening in the incentives lately, but still quite high export of semi-fabricated and fabricated products, and also some primary metal is a part of this picture. When we then look into the metal prices, we see that the prices has come down from about $1,623 per ton in the Q3 to $1,509 per ton in the Q4 . The achieved price was about $1,555 per ton. Get some. I think I need some water here. Sorry. The realized aluminum price in the quarter was $1,555 per ton. We see now that aluminum is trading around $1,520 per ton. All-in metal prices has also been reduced.
This shows that there is again result of oversupply with some tightening in the quarter. This has also led to lower premiums of metal products, and as you know, Hydro is mainly exporting metal products as extrusion ingots, sheet ingots, and foundry alloys. The steepest drop in prices we saw in alumina. We have alumina prices drop from $292 per ton to all the way down to $208 per ton, and even went down to $197 per ton during the quarter. At this level, we expect that about half of the alumina production globally is below water. If we then move over to the supply-demand balance in China or the export-import balance, we see quite steady import of bauxite.
A lot of that bauxite come from Malaysia, but Malaysia has now introduced a moratorium of export of bauxite, which is not critical short term for China. Because China has quite some inventories in bauxite. We also see some higher import of alumina in the quarter. Export of semi-fabricated, as I mentioned, is higher. We see also some lower import of scrap in the quarter. On the operational side, I'm very happy to see that we have a very steady and good development in Brazil. As I mentioned, record high production of bauxite of 11.7 million tons and also 6.3 million tons of alumina production is the best we have had since we took over the Vale assets in 2011.
This implies a reduction of cost, but also we saw lower sourcing cost of alumina and also low currency in Brazil that is helping us on the cost side. The margins on EBITDA margins on alumina is even a bit higher this quarter than the previous quarter, even with a significant reduction in prices. We finalized the B2A program in the end of last year, but we have now lifted the bar and established a new program of NOK 1 billion and half a billion Norwegian kroner will be the improvement program for 2016. On the Primary side, we continue with the improvements.
There are some lower variable costs during the quarter, mainly alumina as the alumina prices is going down, but also here we are helped by weakening currencies. EBITDA margin in the quarter, $275 per ton. Early in the first quarter this year, we experienced a power outage in Årdal. We were able to maintain the production with 90% of the cells, but 10% of the electrolyzer cells has to be shut down, and we have already restarted some of these cells. We are back in full production in the Q2 of 2016.
Customers will not be affected as we compensate the loss of the 10% electrolysis metal with the extended remelting of cold metal. The $180 program, as we have mentioned before, is continuing, but that will be part of the total package of $2.9 billion improvements. That is a program that goes from 2016 to 2019. The decision about the Hydro technology pilot here at Karmøy was made yesterday, and that is a pilot where we are going to produce 75,000 tons. It is not the volume itself that is important with the pilot, but the importance here is that we are going to test the most advanced aluminum production technology the world have ever seen.
We all have targeted the world's lowest energy consumption, but we are now having cells that will produce aluminum at 11.5-11.8 kWh per kg aluminum. There will be significant spin-off effects from this pilot into the existing capacity that we have in Norway and also the joint venture abroad. We will then verify the next generation production technology through this pilot. Net CapEx is NOK 2.7 billion, and we are very happy with the support from Enova, and the total amount of support from Enova was NOK 1.6 billion, and the total CapEx is NOK 4.3 billion.
If you then can move downstream and, as normal, seasonal variation in the Q4 , 8% lower sales in the fourth quarter compared to Q3 . If you look at the Q4 of 2015 with one year before, it was 7% higher sales. Good development in packaging. Good development in auto, but lower in litho and heat exchanger, and also very good development in general engineering. We should remember that the Q4 of 2014 was very weak in general engineering. In total, 7% higher sales. In extrusion, also there, significant seasonal effects, 9% down in North America and 7% in Europe. In total, 5% growth in extrusion in 2015 in North America, and quite stable growth situation in Europe.
Our joint venture partner, our joint venture company, Sapa, where we have 50% ownership, has now delivered the synergy program of NOK 1 billion, but also added additional programs, which means they have now moved into higher added-value products, improved capacity utilization and productivity, which reduces the fixed cost with NOK 400 million. This work continues in Sapa, and we see the progress continuously. If you move over to hydropower production, we started a reservoir level in the Nordic area with 6 TWh above normal and ended up 12 TWh above normal. Prices improved from the third quarter from NOK 122 to NOK 204 per MWh.
Influence, of course, the result of energy in the quarter. Just a summary of the improvements. As I mentioned, NOK 4.5 billion has been delivered in improvements in Hydro from 2011 to 2015, and we have now established a program of NOK 2.9 billion that goes up from 2016 to 2019. The different business areas are going to deliver respectively, Bauxite & Alumina, NOK 1 billion, Primary Metal, NOK 1 billion, and Rolled Products, NOK 0.9 billion in improvements in the coming years. The proposed dividend from the board of directors yesterday is 1 NOK per share, which is again showing our commitment to return cash to shareholders. It's also a clear signal of the strong financial situation, a result of our improvements.
The reported result of earnings per share was 0.99 Norwegian kroner per share in 2015. Here we are talking about 101% dividend, but underlying it will be about 34% compared to earnings per share. Dividend over the last five years is 110% payout ratio, and the policy is, as we established last year, 40% dividend over the cycle. Dividend this year for NOK 1 represents about NOK 2 billion in payout. Again, the decision will be taken at the general meeting in May. That concludes the quarterly presentation here from Karmøy, and then I leave the floor to my CFO, Eivind Kallevik, in Oslo. Thank you very much for your attention. Okay. It's about that.
Yeah.
Good morning also from me. I will take you through in more detail the financial results for theQ4 . This quarter, we delivered an underlying result before financial items and tax of NOK 1.6 billion, which is NOK 600 million below the third quarter result and a little bit more than half of what we delivered in the Q4 last year.
Falling prices affected revenues were by far the major negative influence of this quarter, reducing the result by some NOK 1.2 billion. The LME price came further down, impacting both the realized metal price as well as the alumina price. In addition, the realized PAX index continued a downward trend and was down $54 per ton compared to the third quarter. Realized premiums also declined that period, but have started to stabilize, and we also saw a small uptick during the quarter. Overall, these developments led to a 9% decrease in realized alumina and metal prices and a 10% decline in the realized alumina price.
On the other hand, we got some support from currency as it continued to move in our favor, in both the Brazilian Real as well as the Norwegian Krone continued to weaken against the US dollar. The net currency effect this quarter was less profound than what we've seen in the previous quarters, but this still contributed with roughly NOK 300 million, or this quarter, with approximately half of this coming from the Real. We had lower costs, also contributing positively with roughly NOK 400 million between the quarters. This is primarily a result of declining raw material costs due to the fall in LME and the PAX, in addition to lower fixed costs both in Primary Metal as well as in Energy.
The operating costs in Paragominas and Alunorte were somewhat higher, while cost in Rolled Products stayed relatively flat despite the fact that we're in the midst of the maintenance season. We had positive cost developments driven very much by the improvement programs as we completed the B2A program in Bauxite & Alumina, we completed the Climb program in Rolled Products, and we continue to deliver according to plan on the $180 program in our primary joint ventures. Higher power prices and energy contributed positively together with some small uptick in volumes of roughly NOK 150 million. Finally, there is a combination of other effects, the largest which includes higher depreciation in Bauxite & Alumina of around NOK 200 million. This together with some negative currency effects in Metal Markets took the results down by some NOK 300 million.
I will get back to the different business areas in some more details later on in the presentation. If we take a quick look at the key financials for the quarter, the revenues for the fourth quarter were down by approximately NOK 1.2 billion compared to the third quarter. This, of course, is a result of the weakening alumina and aluminum prices, which has partly been offset about with the strengthening of the dollar as well as the higher energy prices, or the prices realized in the energy segments. Metals and downstream products and the shipments were seasonally lower, as should be expected, while bauxite and alumina sales increased somewhat.
This quarter, we have excluded a loss of NOK 841 million in non-recurring and timing effects from the reported EBIT of NOK 700 million, and I will get back to these on the next slide. Financial items for this quarter were negative NOK 70 million, compared to the negative NOK 3.3 billion in Q3. This reflects the change in net currency effects from a loss of NOK 3.2 billion in the third quarter to a small gain this quarter of NOK 48 million. This, of course, mainly reflects the marginal currency fluctuations for this period. As a result, the income before tax for the quarter was positive NOK 655 million compared to the negative NOK 1.7 billion in the Q3 .
The income tax amounted to NOK 113 million in the fourth quarter, compared to a tax income of NOK 367 million in the third quarter, which was primarily related then to the large negative currency losses, unrealized currency losses in that period. That gives us a net income of NOK 541 million positive, up from the NOK 1.3 billion in the last quarter. The underlying net income excluded the currency gain for the period amounted to NOK 1.3 billion positive, some NOK 80 million or relatively flat from the NOK 1.4 billion in the previous quarter. Consequently, earnings per share declined slightly from last quarter to 0.59 per share.
For the full year of 2015, the underlying EPS almost doubled to 2.98 from the 1.55 delivered in 2014. We get back to the items excluded of NOK 841 million that we exclude to get a better grip on and better describe the actual performance for the business. Now we'll just go through the main items. In Rolled Products, we had a negative metal effect of NOK 177 million, which reflects then the negative development in LME and premiums when you measure this in euro. We had a net divestment amount of NOK 365 million this quarter.
That reflects the sale of the rolling mill in Slim of NOK 434 million in the loss, partly offset by some smaller transaction gains on several small divestments. Other effects include an accrual of NOK 285 million related to the termination of the lease agreement here at Vækerø Park office buildings. That means that when we go forward, we now have a new lease agreement in place covering Hydro's actual needs. Items excluded in Sapa amounted to a net charge of NOK 53 million after tax. It includes some restructuring charges as well as unrealized derivative gains and some net currency losses. Now that we've been through the financials, let's start looking at the different business areas.
In BNA, we have delivered an underlying EBIT of NOK 532 million, which is approximately NOK 100 million down compared to the Q3 . To a large extent, the Q4 results were negatively impacted by the 10% lower realized alumina price. This has been driven both by the drop in LME as well as in the PAX index. LME has dropped about 7%, while the PAX, relevant PAX index in the period has dropped some 17% between the quarters. On the positive side, both alumina output as well as bauxite production increased significantly in the fourth quarter. Paragominas continues to produce stable and well above the nameplate capacity at the new record rate of annual speed of 11.7 million tons.
Alunorte also finally reached its nameplate capacity of 6.3 million tons, which is the first time since the acquisition back in 2011. In BRL terms, fixed cost in Brazilian operations were negatively impacted by the high inflation in the country. On the other hand, there was also some higher bauxite and caustic prices for the period, which was partly offset by lower energy prices as well as a better caustic and energy consumption in the quarter. Exchange rates developments continue to impact the costs in BNA positively as approximately 50%-60% of the cost base in BNA on a short term basis are impacted by the BRL development. The 8% weakening of the BRL against the dollar had a positive impact about NOK 175 million for the quarter.
In Q4, we also realized the historically low implied alumina cost of $187 per ton, a reduction of $30 per ton compared to the previous quarter. Higher production, together with lower alumina sourcing costs in the period due to the declining prices, helped to bring this number down. Let me just spend a few words on the higher depreciation that you see this quarter, in BNA. It increased some NOK 200 million compared to Q3. During the quarter, we have performed a reassessment of the useful life of certain assets in order to more accurately reflect the lifetime of these assets. As a result, we have shortened the lifetime of the existing tailings dam, the existing red mud deposit area and certain mining equipment.
The depreciation in the Q4 then also reflects some corrections and catch-ups from previous periods. If we look into the Q1 of 2016, then you should be aware that we will continue to shift our sales portfolio from LME-linked contracts into PAX contracts. For 2016 on average, we expect to have about 50% linked to the PAX compared to 35% for 2015. When it comes to production, we are at nameplate capacity in Alunorte. The target is now to stabilize around that level. In Paragominas, we are significantly above the nameplate capacity, and there the target will be to stabilize, but then there is a possibility for slightly lower production in the next quarter.
Also, in the bauxite sales, we do expect sales margins to come somewhat down in Q1 with approximately $5 per ton as well as somewhat lower sales volumes. We turn to Primary Metal. We see an EBIT that almost halved from the 762 million in the third quarter to 407 million in the fourth quarter. Now the drop in Primary Metal is largely explained, of course, by the fall in all-in prices. LME prices fell by some 7%, while the average realized premium fell by 15%. Overall, the decline in the all-in price reduced results by some NOK 900 million between the quarters, including Qatalum. The negative price effect somewhat offset by changes in currency.
We had a 3% weaker NOK versus the dollar, giving a result improvement of some NOK 100 million net. At the same time, we've seen positive cost developments in local currency. Fixed costs are lower, raw material costs decreased primarily due to falling alumina prices, and this had a positive impact of some NOK 400 million. Also, as normally in Q4, slightly lower sales volumes. If you look into Q1, we have sold approximately 50% of the LME or metal production in Q1 at around $1,500 per ton. If you look to premiums, we expect them to be largely stable compared to what we have in Q3. We guide on a range of between $250 and $300 per ton.
Seasonally uptake should be expected in terms of sales volumes, as the downstream markets come back in full speed. For the cost side, bear in mind that aluminum prices have come further down and that this should have a positive impact on the cost side in Primary Metal. If we quickly turn to Qatalum, our share of net income declined from NOK 26 million positive in Q3 to NOK 167 million negative in Q4. On the operational side, the Qatalum plant is operating stable and well above the nameplate capacity. We also had somewhat higher sales volumes at that plant and slightly lower cost in Q4. However, the plant was impacted by the falling all-in prices for the quarter.
Qatalum saw a significantly steeper decline in realized premiums in the fourth quarter due to a time lag in the recognition of the realized premiums. The Qatalum results for the next quarters will continue to be affected by the development, of course, of the all-in metal price, partly offset by the falling and declining alumina costs. Sales volumes are expected to be slightly lower in Q1 than in Q4. In Metal Markets, we delivered an underlying EBIT of $152 million, down from $291 million in the Q3 . Now, if we exclude currency and inventory valuation effects, the result was $180 million, pretty much in line with the $189 million we delivered in Q3. Remelters delivered a stronger result against expectations for a weaker Q4 .
Both volumes and margins increased from the third quarter on the back of better market conditions at the end of 2015. In addition, the slight increase in standard ingot premiums during the Q4 also supported the Metal Markets results. If you look into the next quarter, we do expect seasonally higher volume, sales volumes at the remelters, both in Europe as well as in the U.S. We still maintain the quarterly guiding of about $100 million in underlying EBIT for this segment. At the same time, and as we always do, please be reminded that the results, due to the currency and the trading effects in this area, are by nature volatile.
In Rolled Products, we saw a seasonal decline also in results, down by $127 million from the Q3 , down to $204 million for the quarter. Shipments in the fourth quarter were down some 20,000 tons due to the seasonal activities. Margins, though, were relatively stable, helped by a strong performance within the general engineering segment, partly offsetting the seasonal weakness in the other segments. Costs were also stable for Rolled Products in the Q4 , despite the fact that the Q4 is the higher maintenance season. In addition, the Rolled Products results were reduced with lower Rheinwerk contribution in the fourth quarter compared to Q3, reflecting the fall in all-in metal prices, only partly offset by the improved sourcing cost for aluminum. Looking into Q1, we do expect seasonally higher shipments for the quarter.
At the same time, we also expect cost to come somewhat up compared to the Q4 . During 2015, Rolled Products saw stronger margins, which were partly supported by the strengthening dollar to the euro. However, when we get to Q1, we do expect margins to decline somewhat from what we realized in the fourth quarter. In Energy, we saw an EBIT that almost doubled from the $191 million in Q3 to the $353 million we delivered in Q4. This increase is primarily driven by the higher spot prices that we've seen in Q4, which almost doubled from Q3, despite the fact that we had very high reservoir levels and high power generation in the Nordics. The price effect alone lifted the results by approximately $130 million. From a historical context, the price level still remains low.
The production in Q4 remained strong and high, same level as we had in Q3, around 2.9 TWh. There was also some positive cost developments contributing to the results. First of all, the production costs decreased in Q4, which is mainly driven by the lower property tax in the quarter. The property tax and the periodization of this will be in 2016, following the same pattern as we've seen in 2015. Secondly, the pricing area cost was also lower in Q4, as the price differential between the main pricing areas in Norway, or our main pricing areas, were more narrow, compared to Q3. Looking into Q1 , we do expect continued high production and strong production, as indicated by the high reservoir levels. Property taxes will then also go up somewhat in Q1 compared to Q4, driving production costs higher.
Last but not least, there is as always large uncertainty around the power prices. We started the quarter with high reservoir levels, and average prices so far this quarter is 225 NOK per MWh in Southwestern Norway, and some 240 NOK per MWh in the NO3 area. Also very low price levels for the quarter or for this period of the year. In Sapa, the underlying EBIT declined seasonally compared to the previous quarter by lower demand, both in Europe as well as in North America. However, compared to the same quarter last year, underlying EBIT improved by $91 million to positive $64 million.
This improvement clearly demonstrates the synergy work that was the synergy target of NOK 1 billion, which was completed in 2015, one year ahead of time. Bear also in mind that at the same time, the underlying EBIT for the fourth quarter was also negatively affected and impacted by Sapa's measures to address the consequences of the unsanctioned quality testing practices that we've uncovered in North America. During the quarter, we have announced the sale of Herøya Industrial Park to Oslo Pensjonsforsikring, and we do expect to close this transaction within the first half of 2016. The industrial park is part of the legacy assets in Hydro from the time when Hydro was an industrial conglomerate.
As we no longer have any production at the park, it is part of streamlining Hydro even more to become a pure play aluminum company. The sale is expected to result in a book gain of around NOK 350 million, and is expected to have a cash contribution of about NOK 450 million. If we turn to other eliminations, they declined during the quarter from a small positive NOK 12 million in Q3 to negative NOK 83 million in fourth quarter. We've already been through the Sapa results, and then let's just have a quick look on internal gains and losses on inventories.
Eliminations was, in this quarter, positive NOK 17 million in the Q4 , which was an increase from the NOK 13 million negative in theQ3 , and as such remains at relatively low levels. Now, if you adjust for the eliminations and the Sapa results, there is a NOK 169 million charge for common services and other businesses for this quarter. This is an increase from the NOK 95 million that we saw in Q3, but it's very much in line with the NOK 150 million guidance that we've given per quarter in the past, which is also a guidance that we will uphold for 2016. We look at the net cash development since the last quarter.
I am very happy to say that we've increased the net cash position for Hydro up to NOK 5.1 billion at the end of the year. As you know, we started the quarter with NOK 3.3 billion in net cash. We've delivered an underlying EBITDA of NOK 3 billion. Also very happy to see that we now have a release of net operating capital of NOK 1.7 billion, of course, partly driven by the falling prices of our products, but also driven by optimization and release of inventory and working capital in the different business areas. Taxes and other adjustments, non-cash items in EBITDA, reduced in that cash by some NOK 300 million.
We have invested NOK 2.1 billion, which is above the NOK 1.2 billion in Q3, but very much in line with the guidance that we gave at Capital Markets Day at the beginning of December. Finally, there is a combination of currency effects on dollar-denominated net debt and dividends paid to minorities of some NOK 400 million. When you put all these factors together, we then get to the net cash position of NOK 5 billion. We then take a quick look for the year. We started with a negative net debt of NOK 100 million at the beginning of 2015. We generated an EBITDA for the year of NOK 15 billion, approximately, which is approximately NOK 5 billion more than what we generated in 2014.
We reduced net operating capital compared to 2014 with NOK 800 million, following the inventory build-up above normal operating levels that we saw in the beginning of 2015. We have worked hard to release this. It's partly, of course, again, price driven, but it's also very much about taking out inventory, in particular, successful in Metal Markets as well as in Rolled Products. Taxes and adjustments for non-cash items in EBITDA reduced net cash by NOK 1.1 billion. Please remember that this number includes a positive NOK 1.5 billion of reimbursed VAT taxes in Brazil.
Investments in 2015 amounted to NOK 5.4 billion, net of divestments, and this is also very much in line with the guidance that we gave at Capital Markets Day when you adjust for the divestments and non-cash items such as asset retirement obligations. We have paid NOK 2 billion to the shareholders in dividends. Finally, a combination of mainly currency effects on the net debt in dollars, but also dividends paid to minorities added up to a negative effect of NOK 1.7 billion. Again, we get to a net cash at the end of period of NOK 5.1 billion or a cash flow generation of NOK 5.2 billion during 2015. Very quickly, just a few words on adjusted net debt.
This was further reduced by NOK 1.1 billion to NOK 8.2 billion at the end of fourth quarter. The main reason for the decline is of course the higher net cash position that I've just been through on the previous slide. This has been partly offset by a higher net pension liability, which increased from NOK 7.1 billion to NOK 8 billion at the end of fourth quarter, primarily driven by the lower discount rates in Norway. If we include the net debt in Qatalum and Sapa, which remain unchanged between Q3 and Q4, the total adjusted net debt is also down NOK 1.1 billion to NOK 16.2 billion at the end of the quarter. I would then like to end today's presentation by summing up 2015 and looking a little bit into 2016.
2015 for us has been a year of many records. We've had a record B&A result. We had record downstream results. We had record low implied cash costs in Alunorte and record production at Alunorte as well as Paragominas. Some of these effects, of course, driven by market effects, or supported by market effects, but many of those are also driven on the things that we control ourselves. That brings me a little bit further on to what we believe is key part of Hydro story. That, of course, is continuous improvement. Since 2011, we have delivered NOK 4.5 billion in improvement across the value chain. These have been both operational as well as commercial improvements.
These are not just simple cost-cutting measures, but it's also finding better and improved ways, and more structured ways to work, always looking to find that extra kilo of products or that extra knock to take to the bottom line. This year this has been in particular valid for bauxite and alumina. The 63 million tons at Alunorte in the fourth quarter and 11.7 million tons in annual speed at Paragominas are large contributors together with currency to the implied cost of $187 per ton. This, in combination with the secured ICMS framework in July this year, allows for significant value creation also going forward. Currently, as you know, we're experiencing low alumina index prices, but as the markets rebalance, as they typically do on the alumina side, we expect the upside potential for moving alumina prices over to index again to reappear.
We look into 2016, we will continue to work hard on the factors that we control ourselves. We are in the first quartile position, both on the alumina side as well as the primary side, and we will deliver the NOK 1.1 billion out of the Better Ambition in Hydro until 2019 of NOK 2.9 billion. The decision to build a Karmøy technology pilot is an important part of maintaining and strengthening the technology position that we have, as well as securing the position we have on the cost curve. Both on the bauxite side and the energy side, securing of resources is crucial and important. A potential milestone in 2016 would be a decision to go ahead with the MRN transaction, but as the due diligence is still ongoing, there are of course two outcomes, two potential outcomes of that.
On the energy side, we still have a sourcing gap to fill after the Statkraft contract expires in 2020. A potential positive decision on the industrial ownership law proposal for us to secure our capital portfolio for long-term industrial use and will increase our flexibility for the future. We will continue to high-grade the portfolio in Rolled Products, and at the end of this year, we should be ready to produce the first automotive body sheet from the Automotive Line three in Grevenbroich to satisfy the large and growing need for aluminum for the car consumers and car companies in Europe. Then finally, as the last and recent months have reminded us, we do operate in cyclical markets, and the importance of having a strong financial position in a is a clear competitive advantage for us in our industry.
We continue to have this as a main priority, also allowing us to pay a safe and reliable dividend also going forward. Thank you, all. We open up for questions.
Yes, please. We will have question and answers from both the auditorium and also from the web. There's a microphone in this room, and please state your name and affiliations. Any questions from the room? Over here.
Yes. Good morning, Even Vatne from DNB Markets. Two questions. First, on the global market outlook, you're taking down your demand expectation to 3%-4%, but you're seeing a more balanced market. How should we look at that? Should we interpret that as you're now becoming a bit more positive on the markets versus Capital Markets Day? Any color on that is appreciated. Also, secondly, on Rolled Products, can you maybe bridge the year-on-year development in terms of cost prices and also the trend in the Rheinwerk segment? Thank you.
On your first question, you're right, we've taken down the demand expectations from 5% to 4%, or 4%-5% to 3%-4%. The primary driver behind that is the economic development in China. Outside China, we're still at the same growth expectations as we had in the Capital Markets Day. I think when you look inside China, you still see very positive developments within the transportation sectors and other segments. Where you're starting to see weakening is within the building construction or continued weakening is within the building and construction. Now, the building and construction amounts to some 35% of the total market of aluminum in China, so that's where you're starting to see the weakening.
The good parts, when we look into 2016, is that a lot of the discussions on curtailing capacity actually starts to appear. We've seen curtailment starting to take place in China. We see quite a lot of announcement in North America, of course, and some other smaller delays on projects. Meaning that compared to what we have had at the Capital Markets Day at the beginning of December, we actually expect that there's a larger likelihood for a more balanced market in 2016 compared to what we expected in December, giving it a little bit more of a positive viewpoint on 2016 compared to what we had two months ago.
It's still, as Svein Richard Brandtzæg has said, you know, it's in the range of ±500,000 tons, so there's still uncertainty around this. Then your question on rolled. More specifically, after the mine.
We have a question in the front, and then on the side.
Hans-Erik Jacobsen, Swedbank. You have given some guidance on production volumes in bauxite and alumina in the first quarter. Could you give us some guidance going a little bit further into the future? Also, how much of the potential increase in production from current levels is made up by the NOK 1 billion cost improvement development in that division?
If you look at the production levels in Alunorte, we have now had one quarter of 6.3 million tons. A lot of the mantra that we've been talking about when it comes to Alunorte has been to stabilize the production. Get down the variability on a day-by-day production level. That we're starting to see, and that's what we reap the benefits of in Q4. When we look into Q1, Q2, the target is still to keep that level. Then we have a longer-term target when you look towards 2017, 2018 to lift that more towards 6.7, 6.6.7 million tons. That's a longer-term target. I think for now, the key focus is to stabilize the production.
At Paragominas, again, we produce, you know, 1.7 or 17% above nameplate capacity. It is hard to foresee that we can take major steps beyond that, but there will always be continuous operational improvements, of course. Again, it's about stabilizing and securing operations. Then your second question, Hans-Erik?
You have a NOK 1 billion improvement program. How much of that is related to increased production from current levels?
There is some, but when you look at this from a 2016 perspective, it's not necessarily production. It also has a lot to do with energy efficiency and the energy matrix that we do. We're currently revamping the coal boilers that we have in Alunorte. We've completed one is in the process of being completed, and the third one will be completed a little bit later first half. That will improve the energy mix and energy usage in Alunorte, significant impact on the costs.
On this side, and then Paul.
Eirik Melle, Danske Markets. Good morning. Two questions regarding volumes. One is follow-up from Hans-Erik Jacobsen. How sustainable is it, apart from the targets of increasing the nameplate capacity at Paragominas to sustain at levels like 11.7, not just one or two quarters, but in the years coming? The second one is on the Rolled Products volumes. Even though the seasonality level than Q3 is quite much better than the Q4 last year, can you comment something? Was the Q4 last year weak, or can we kind of interpret some positives into these Q4 2015 figures?
I think when it comes to Paragominas, we've had several good production quarters, and we think it is. I'm not getting sort of into the decimals if it's 11.6 or 11.8. But we do believe it's sustainable to keep the production levels north of 11 million tons over time. Of course, you will get into maintenance periods where you have to take out capacity for shorter periods of times to clean the pipeline. That will have an impact. From an operational perspective, yes, we believe that is sustainable. When it comes to the rolled results, it is fair to assume that the fourth quarter results last year was relatively weak, also from a performance perspective and shipping perspective.
That explains part of the uptick in the results Q4.
We have one in the back here.
Yes. Good morning. Bengt Jonassen from Carnegie. I have three questions. On the bauxite alumina, is there an increased time lag on realized prices? Secondly, on the increased depreciation, should that affect the normalized CapEx levels going forward and increase them? Finally, the judgments around the dividends, is that more related to the actual net profit line or the adjusted net profit line? If it's adjusted net profit line, it's 34% payout. Does that mean that the last year was an over the cycle performance for you guys?
Okay. I'll see if I remember all three of the questions. Thank you. The first one was in terms of delay in prices in bauxite and alumina. No, there's no change in that. It follows the same pattern as we've had in the past. When it comes to the increase in depreciation in Alunorte and Paragominas, no, we should not expect that to have any significant or meaningful impact on CapEx levels going forward. The last question was, huh?
Dividend.
The dividend. The question was if
Is it related to the net profit line or the net profit adjusted line?
Normally, when we communicate the 40% over the cycle, we relate it to the reported line, not the underlying line. That's the way we think about it.
We have some questions from the web with Paul.
First I have a question, which both James Gurry in Credit Suisse and Menno Sanderse in Morgan Stanley has asked. Is it possible to give any additional update on the MRN process?
We are in the middle of the due diligence process. As we've said along the way since we announced the LOI, is that we will do a good and thorough due diligence process. We've had teams in place. There's no other update and the process is going according to plan, and we will announce something, as soon as we have more concrete messages to give.
A question from Jason Fairclough in Merrill Lynch. How much of the alumina price fall is reflected in Q4 numbers? Is there still quite a bit to come?
There is still a bit to come, also in Q1. It was down to $54 on the plus side in Q3. There are still some tens of dollars to come in Q1.
A final question from Hjalmar Ahlberg in Kepler Cheuvreux. What are your expectations for premium into the first quarter?
We booked approximately 50% of the premium for Q1 at some $335 per ton. The other half of that is more related to the standard ingot premiums. That will drag that $335 down. There is a guidance at approximately the same level as we delivered in Q4, in the range of $250-$300 per ton.
Are there any other questions from the audience here in Vækerø? It seems not. I thank you all for coming. Thank you for following us on the webcast. We will continue with one-on-ones interviews with media here on the scene.