Welcome everyone to Hydro's second quarter results. Welcome also to all of you following us on webcast. The results will be presented as usual by our CEO, Svein Richard Brandtzæg, and CFO, Eivind Kallevik. We'll have a little bit of time in the end for one-on-ones and interviews. Let's start. Svein Richard?
Thank you, Inger, and good morning, everybody. Second quarter results are affected by lower prices, but demand is growing, and I'm pleased to see that aluminum is used in more and more applications and products. The second quarter result ended up at NOK 2.7 billion, which is NOK 2.1 billion better than the second quarter last year, and half a billion below the previous quarter. There are several elements that are affecting the results along the value chain. If we start with Bauxite & Alumina, this result is affected by lower prices. We had also lower index prices in the quarter than the previous quarter and lower LME-linked prices.
I will come back to Paragominas, but after the maintenance stop in April, we have had record production in Paragominas. In the Primary Metal, also there affected by lower LME levels, but more than that, affected by a significant reduction in product premiums, in standard ingot premiums, and I will come back to that. I'm pleased to see that the product optimization and high grading of products is, and also the improvement efforts is showing good results in downstream. We have had record results in Rolled Products, and I will also revert to that later.
In energy, we have had low production and low prices due to slow snow melting in the mountains, and I will show also some pictures related to that. I'm happy that we have now, after 15 years deferral of ICMS in Brazil, entered into a new 15-year agreement with authorities in Brazil, where we now have predictable framework conditions, which is a prerequisite for operations, sustainable operations in Brazil. In Rheinwerk, we have entered into a new power contract with the Axpo, and that will take down the costs of this smelter significantly on the cost curve, based on much more effective power prices as we have been able to achieve today. The market is challenging.
We have also commented on that in the previous quarter, but this situation continues with oversupply and export from China. That also makes our view on the coming quarters now and also with regard to the growth going forward. We have said that in the previous quarter, we expected 6% growth. We are now expecting around 5% global growth of demand due to the market situation as we see it now. With regard to the supply-demand balance globally, we are in a seasonally strong quarter. The second quarter is normally the strongest quarter, and we have had more demand than production globally in the quarter. Looking at the total picture, there is still oversupply globally.
As I said, we expected for this year from 6%- 5%. We expect, when we look at all the changes in the production and also the demand development in the different regions and add everything up, we expect that there is an oversupply globally today of about 500,000, between 0.5 and 1 million tons. It was 5% higher growth from second quarter this year, if you compare with the second quarter last year, but it was 15% increase in demand if you look at from first quarter to second quarter, which is again a typical seasonal effect that we see every year, but even, maybe even stronger this year.
If you take a closer look at the situation outside China closer to our home turf, then we have seen also here that we are in a situation with higher demand than supply. We have seen a demand growth of 2% from the second quarter last year to second quarter this year with quite some regional differences. Europe, about 1% improvement in demand. We see 3% in Asia with some variations where, for example, Japan is down 5%. US up 6%, driven very much by not only automotive and trucks but also building activities picking up.
In Central and South America, a negative growth of 3% from the second quarter last year, with Brazil also - 4% or 5% growth as we see it. There are quite some differences. Russia had negative growth of 12% in the previous quarter, and we see negative growth of 7% this quarter in Russia. Going forward, we expect that in the world outside China, we will have a growth of about 2%-3%. That means we have reduced it from 3% to 2%-3%. Again, if you look at the deficit, still 1 million tons as we reported also in the previous quarter for this year.
If you take a closer look at exports from China, this was very much driven by price differentials between the world outside China and China, and with strong incentives for Chinese players to export. We are painfully aware of the fact that the dynamics have changed quite a lot, and there are today very little price differentials between China and the world outside China. As you see on the blue curve on this slide, the incentives also is now close to zero. China has removed the 15% export barrier for some primary metal products, not all of them. There are still higher incentives for Chinese producers to export downstream products than primary products.
We have seen some disguised primary metal that has been registered as downstream material or fabricated material into our markets. With a 13% rebate which is included in this curve, there's still a situation today where there is not much incentives to export. Still, we have registered very high export volumes in June, and with 450,000 tons out of China, and we expect that can be partly ascribed to a delay in the process there with orders that could have been enter into this in the first quarter that now have been sold out of China in the second quarter. It's too early to make any conclusion of what is the consequence of these changes in China.
We have seen higher exports, and we will reveal to that in the next quarter, of course, when we see now what is happening with the volumes after the incentives now is down to zero. This is also again having an effect on the standard ingot premiums, which in the US and Europe were traded around $525 per ton. That's now trading between $150 and $200 per ton. Same in Japan, from $380, and now trading around $100 per ton. This is absolutely an effect of export from China, and we are now more or less down to normal historic levels on premiums.
This is also affecting the product premiums for the metal products like extrusion ingots, for example, which is shown here. This is a premium that is on top of the standard ingot premium, and we see the standard ingot premium going down on this curve, but also the premium for extrusion ingots going down. The blue curve here is showing the margin above standard ingot. We see that for the extrusion ingot situation, the margins are also now reduced during the quarter. We are coming down to also more normal levels on premiums for extrusion ingots above standard ingots. This is then the total picture where LME is now trading below $1,700 per ton. It was trading between $1,680 and $1,940 in the quarter.
The realized price was $1,803 per ton, coming down from $1,897 per ton in the first quarter. We have sold half of the production in the third quarter at $1,750 per ton at a premium of $425 per ton for 50% of the volumes. We see similar development in alumina as in LME, but with lower variation, weakening situation during the quarter. We had four dollars realized price lower, realized price in the second quarter compared to the first quarter, ending up at $337 per ton for the alumina. The alumina is now trading around $309 per ton in the market, which is significantly lower.
If you look at the alumina price in percentage of LME, that has been quite stable, increased from 18.4%-18.8% of LME in the second quarter. This is quite stable. If you then move over to China again and look at export-import balance, we see strong increase in import of metal units to China, which is mainly an increase in the import of bauxite, 25% increase in bauxite import to China in the second quarter compared to the first quarter. A significant part, a bit more than 6 million tons, is coming from Malaysia.
If you look at alumina import, that has been quite stable, and we see that the scrap import is now back to normal levels after some dock strikes in the U.S., and buildup of inventory in U.S. that has probably been sent to China later. Scrap import is similar as we have seen before. Our Primary Metal quite stable, but on semi-fabricated and fabricated products, we also see stable but on a much higher level than what we had in 2014. If you then move over to operations and look into the bauxite alumina production.
First of all, bauxite, you all know that we had the maintenance stop in Paragominas in the first quarter. We started up again after the ball mill repair, and we are now producing at record high level. We are now having a speed in the bauxite production of 10.4 million tons per year, which is above nameplate capacity, and we are very happy with the operational development there. The B&A program continues, but we had somewhat higher cost in the second quarter compared to the first quarter, driven by LME linked bauxite prices that has a time delay, which is now affecting us in the quarter. The volumes are improving. The B&A program is in fact ahead of plan.
We have seen through the B&A program that there are still potentials for improvement beyond what we have seen so far. We have seen that there is also a possibility for debottlenecking of Alunorte to take Alunorte volumes up to 6.6 million tons per year. The realized LME in percentage of LME was of alumina sales 16.1%. As you know, we are selling quite some volumes due to the old volume contracts which is linked directly to LME. This year these volumes is corresponding to about 70% of the total production. I'm then happy to announce that we have entered into a new framework conditions with the ICMS now settled in Brazil.
The practical implication of this is that we will continue to have to pay ICMS on fuel oil and diesel at the rate of BRL 250 million per year. We will also then be exposed to 50% on ICMS on 50% of the electricity supplied to Albras. That can be offset by domestic sales by selling somewhat higher volumes to domestically in Brazil. All other interstate purchases are subject to full deferral. If you then move over to primary and the implied primary cost and margins, we see that the margins has gone down from the first quarter to second quarter due to lower prices.
We have also taken down the cost by an additional $25 per ton during the period from the first to second quarter, which is very much linked to lower fixed cost and also some lower variable costs. If you take a look at implied cost from the second quarter this year to the second quarter last year, we have reduced cost by $150 per ton, which is significant. Here we should also include that there are some currency effects. We have now an EBITDA margin of $550 per ton. Of course, this is influenced heavily by the reduction in premiums and LME.
It's good to see that we are still a ways to go with regard to the $180 program, and we are expecting to deliver lower costs from that effort in the coming quarters. In downstream, we had very positive development in the quarter, 7% increase in sales compared to the first quarter. This is, I think we can say more than normal seasonal variation. We have a strong development in can, for example. We sell more cans in the hot summer period than in the cold winter period, of course. Also General Engineering has picked up significantly in the quarter. If you compare then the second quarter this year with the second quarter last year, somewhat lower sales, 1% lower sales.
Packaging, we saw improvement also due to the fact that we are taking back some market share that we lost in the previous year, but also that was compensated by lower building activities in Europe. Litho is somewhat down, and also export of heat exchanger materials to Korea and other countries has been going down during the quarter. We are running automotive more or less full speed, and we deliver all the volumes of body in white material that we possibly can from our German operations. This is running flat out. We saw some increase in general engineering as a positive sign in the European market, with also some improvements in margins.
If you then move on to Rheinwerk and the contract that was signed, this is part of the replacement of the old energy contract that is expiring in 2017. We're now talking about a 100 MW contract from 2018 to 2025. The smelter needs 2.2 TWh, which is 250 MW. We still need 150 MW on top of what we have done so far. If you, without disclosing the contract, you can calculate the effect of this by looking at the forward curve in the German energy market.
You will see that we have moved down the cost significantly, about 20 EUR per megawatt hour, which means that for the full smelter and for the full package that will take the smelter down on the cost curve at a level of $300 per ton. Which is significant improvement. We are still working with the next 150 megawatts. We have now entered into 100-megawatt contract for the period up to 2025. Rheinwerk again is a smelter that has a capacity of 235,000 tons, and we're running the smelter at 150,000 tons. There we have 100% value-added products in this smelter.
If we then move over to Sapa and Extrusion, we see definitely positive developments in the results, but also in the markets for Sapa. Strong development in North America, 4% increase since the previous quarter. If we compare the second quarter again with this year, with the previous one last year, with the same quarter last year, we had 8% increase in demand, which is quite strong. We had 5% increase in Europe, seasonally this quarter compared to first quarter, and quite stable situation compared to the second quarter last year.
We are expecting that the third quarter could be somewhat weaker because at least in Europe, seasonally, the third quarter is normally weaker than the second quarter, while in the U.S. market, we expect a positive development to continue. If we then end up with energy, we have included a picture here of the mountains of Southern Norway. We have two-thirds of our power production in the NO2 region and 1/3 in the NO5. We have marked here the snow levels, which is now marked according to how much it is over a normal situation at this time of the year.
In fact, we have more than 300% higher snow levels in the Norwegian mountains now than what we have had before due to a cold spring and early summer, and this is now going to melt. It has affected the prices because there's no incentive to hold back water because we have to give place for all the water that is coming now. The prices has gone down from NOK 238 to NOK 178, 171 per megawatt hour during the quarter. We were on a reservoir level touching the minimum, 10-year minimum curve before the relief from snow melting in the mountains. Now the reservoir level is picking up.
This is again quite a special quarter for energy and of course affecting our results. With that, I give the word to Eivind.
Thank you, Svein Richard. Good morning, everyone. We have no special effects this quarter, no special accounting issues, so let's get straight into the numbers. This quarter, we've delivered an underlying EBIT, or result before financial items and tax, of NOK 2.7 billion, roughly five times higher than what we delivered in the same quarter last year. However, when we compare this to the first quarter this year, we're down roughly NOK 0.5 billion. Now, this NOK 0.5 billion reduction primarily then reflects the falling LME, and in particular, the premiums. While the downstream operations, Rolled Products and Sapa, delivered a record quarterly result. Now, if we take a closer look at the main elements that caused this quarter-on-quarter change, we see that falling prices were by far the major driver, this quarter, reducing results by approximately NOK 1.2 billion.
Now, in addition to the continued decline in premiums that we've seen, also the LME prices came down in the second quarter, also impacting the alumina prices where we have contracts, indexed to the LME. Also, the realized PAX alumina index price came down, with roughly $7 compared to Q1. Overall, this led to an 8% lower realized all-in price for the Metal Markets and 3% lower price for the alumina production. The energy price and volume reduced Hydro's total underlying EBIT with roughly NOK 300 million, driven by a combination of lower production and also, lower prices on the back of the reduced or the very low inflow into the market, into the reservoirs on the back of the low snow melt in the period.
On the positive side, we had a combination of lower costs and higher volumes, adding nearly NOK 200 million to the profitability. This is attributed partly to the lower fixed costs that we see in Primary Metal, but also lower volume-related costs in Energy, as well as lower property taxes in Energy. In addition, we also had higher sales volumes in Primary Metal Markets, as well as in Rolled Products in the quarter. Hydro continued to benefit from the currency tailwinds in the period, although at a smaller extent compared to what we saw in Q1. Nevertheless, the combined currency effects gave us a result impact of close to NOK 300 million. Finally, other eliminations contributed with approximately NOK 500 million in variation between the quarters.
This is mainly due to the positive eliminations that we have realized when we have now reduced the inventory in the company. I will get back to other eliminations a little bit further back in the presentation. If we take a quick look at the key financials, we see that revenues decreased for the second quarter of 2015 with roughly NOK 850 million compared to the first quarter. The positive effects from the higher sales volumes, as mentioned, was more than offset by the weakening LME prices and the further decline in premiums. This quarter, we have excluded NOK 31 million in non-recurring and timing effects from the underlying EBIT, and I will get back to those on the next page.
Financial items for this quarter was a positive NOK 258 million compared to the large negative of NOK 1.7 billion in the first quarter. These include a net foreign currency exchange gain of NOK 346 million this quarter related to the unrealized currency gains, primarily on the dollar debt that we carry in Brazil. Income before tax for the second quarter doubled from the NOK 1.5 billion in Q1 to NOK 3 billion in this quarter. Income tax expense, NOK 891 million, 30%, very much in line with the guidance that we give on a running rate. This gives us a net income of approximately NOK 2 billion, up from the NOK 1 billion last quarter.
However, if you look at the underlying net income last quarter, that amounted to NOK 2.2 billion when you exclude the large unrealized currency loss. This quarter, when you exclude the unrealized currency gain, we have an underlying net income of NOK 1.8 billion or roughly NOK 400 million lower than what we saw last quarter. As a result, there is a small decline in the underlying earnings per share to 83.83 NOK per share. Now if we quickly get back to the NOK 31 million that we excluded from underlying EBIT to more accurately describe the business areas.
The unrealized effects on power and raw material contracts of a positive NOK 161 million is primarily comprised of NOK 150 million relating to the Statkraft power contract and is related to the embedded derivative gains on this contract, driven by the lower LME prices at the end of the quarter. The unrealized derivative effects on LME-related contracts amounted to a -NOK 31 million, compared to a - NOK 140 million in Q1. This is the net effect from unrealized gains and losses on short and long positions within Rolled Products, Metal Markets and Primary Metal. This is primarily as a result then of the falling LME prices in the period. Compared to the last quarter, we only had minor rationalization charges in Sapa.
This quarter, we had a loss of NOK 130 million, NOK 39 million net of taxes. This is primarily related to restructuring charges in Europe, in extrusion activities in Europe, in Spain and France. The last point, NOK 37 million, which is other effects, relates to a insurance compensation that we received in Qatalum. If we now turn to the specifics of the business areas. The underlying EBIT for bauxite and alumina amounted to NOK 482 million for this quarter, a decrease of some NOK 300 million compared to the record high result that we realized in the first quarter.
The main negative driver for second quarter is the lower realized alumina prices due to both the falling LME price, but also as well as the lower PAX index price that we realized. In addition, this quarter, we also had somewhat lower alumina sales compared to first quarter, and also lower relative portion of index exposure. The lower sales partly came from the slightly lower production that we realized, but also the fact that we had high sales in Q1 from volume carryovers from fourth quarter in 2014. Just to remind you on the index exposure, on average, we do expect to sell roughly 30% on index pricing in 2015.
When it comes to production, bauxite production have accelerated, as Svein mentioned, up to a speed of 10.4 million tons per year after the maintenance period that ended at the end of April. When it comes to alumina production, slightly down compared to Q1. The implied alumina costs increased by $8 in the second quarter compared to first quarter, partly as a result of higher energy consumption at Alunorte, but also as a result of higher bauxite prices given the pricing formula for bauxite. On the positive side, we saw somewhat lower energy price per energy unit, as well as a further weakening of the BRL against the dollar, giving us some tailwind.
Also, as we guided on in last quarter, we have seen a lower contribution from what we call the Reintegra tax refund program due to a reduction in the tax credit rate from 3% to 1%. That change took effect as of March first, so it had partly effect in Q1 but full effect for second quarter. The reduction itself has then a negative value of NOK 30 million or NOK 30 million less in refund. Last but not least, as I said, the currency development continued to support the results in B&A, and the strengthening of the dollar versus the BRL by 8% from Q1 to Q2 lifted the results by some NOK 135 million between the quarters.
If you look into the next quarter, we do expect higher bauxite production and also somewhat higher alumina production from Alunorte. As a result of the increasing alumina production, and that we expect to source some more volumes based on LME, we also expect higher alumina sales, but also a higher proportion of index exposure in the third quarter. As Svein mentioned, the B&A program is progressing according to plan or ahead of plan. We do expect to deliver NOK 1 billion savings by the end of 2015. We turn to Primary Metal. The underlying EBIT for Primary Metal declined by a little bit more than NOK 500 million to NOK 1.4 billion for this quarter.
The largest contributor in the negative direction was the decline in the realized all-in metal prices due to both the lower LME, but also in particular, due to the continued decline in premiums. The overall decline in all-in prices, which include Qatalum, reduced the results by approximately NOK 800 million between Q1 and Q2. This was partly offset by the currency developments contributing with approximately NOK 200 million net effect. We also have some other positive effects. We have seasonally lower fixed costs in Primary Metal. We also have somewhat higher production and somewhat higher sales. Also for Primary Metal through the Alunorte, we also have some negative effects coming from the reduced Reintegra refund program.
For next quarter, we have sold approximately 50% of the production at $1,750 per ton, excluding Qatalum. If we look to premiums, we also expect that this will be more visible when we get into Q3 compared to what we see in Q2. So far, we have booked approximately 50% of the premiums for the third quarter at $425 per ton. However, you have to remember that the majority of the current booking consists of the value-added premiums or the upcharge of both standard ingots. Because they have a longer lag profile than the standard ingot sales.
Therefore, the unbooked volume has a higher share of standard ingot element in it and indicates that the final realized premium for the third quarter will be lower than the Q3, than the 425, even if ingot stays at the level where we see it today. We quickly touch on the Qatalum financials. We have an underlying net income of NOK 245 million, pretty much a sideways move compared to Q1. The increase in sales volumes that we've seen in Qatalum offset the lower realized aluminum prices and premiums for the plant. On the positive side, the operational performance in Qatalum continues to be solid, and we continue to deliver a performance well above nameplate capacity. Metal Markets delivered a second quarter in a row, a weak result.
The underlying EBIT for this business area declined with NOK 113 million compared to the previous quarter. Now, if we exclude the currency and the inventory valuation effects, the result was NOK 21 million or down NOK 39 million compared to the previous quarter, and thus significantly below NOK 100 million that we guide on as average over time. As in Q1, the sourcing and trading operations continued to incur underlying losses, reflecting the further decline in the standard ingot premiums. On the other side, we see that our remelt operations delivered another quarter of very strong earnings, partly due to higher volumes, but also due to the fact that the sourcing of raw material for that part, the premiums have fallen more sharply and quicker than what we've seen on the sales side.
If you look into the next quarter, on the remelt side, we do expect somewhat weaker margins, and we also expect seasonally lower volumes at the remelters. On the metal or the sourcing and trading side, let me just remind you, first of all, that the trading results and the currency effects are by nature volatile, that we've seen in the last few quarters. However, now that standard ingot premiums appear to have stabilized, we do expect Metal Markets to be back closer to the guided levels or approximately NOK 100 million per quarter. If we move into the downstream parts, the Rolled Products, we see that underlying EBIT increased by NOK 23 million from the first quarter of 292 million to 315 million for the second quarter.
Shipments were higher, compared to Q1 and approximately at the same level as we saw in the second quarter last year. The increase in shipments were driven by beverage can and also the General Engineering segments. This is a result of a combination of factors, including seasonality, but also partly substitution of some steel can lines in Europe moving over to aluminum. The body in white segment in automotive also represented, continued good growth as we've seen in the past. We see less imports of metal into Europe, giving us a better competitive situation. The operating margins also improved, compared to the first quarter, partly due to product mix, but also partly due to the fixed premium contracts, being then partly alleviated by the falling standard ingot premiums.
On the negative side, results were affected by the lower Rheinwerk contribution in the second quarter compared to Q1, reflecting the lower LME and the fall in premiums. If you look into Q3, we do in fact expect to see slightly higher sales volumes compared to the second quarter. Of course, Rheinwerk results will continue to be impacted and follow the development in LME and premium. For energy, we saw that the underlying EBIT decreased by approximately NOK 200 million between the quarters, giving us a result this quarter of NOK 179 million. The main driver behind this is the lower production as the snow melt in the mountains was delayed given the relatively cold weather that we experienced during the spring, and I would admit also so far this summer.
This has led to snow reservoirs reaching, as Svein Richard has said, roughly 300% above the normal levels in parts of Western Norway. This gave us a power production in the period of 2.1 TWh, down from 3 in Q1. Furthermore, the anticipation of the increased inflow and the risk of flooding during the summer months capped the power prices. The delayed snow melt that began in June brought spot prices down in the NO2 price area to 170 NOK per MWh from 238 in Q1. The volume-related transmission costs were down in the quarter, as were also the property taxes invoiced in the second quarter compared to Q1.
Bear in mind that the property taxes for 2015 will be at the same level as for 2014, but we do experience swings in these amounts this year. There's roughly NOK 50 million in swings between the quarters, Q1, Q3 being the higher quarters, and then Q2, Q4 being the lower quarters. If you're looking into Q3, we do expect higher production as a result of the snow melt finally starting to take effect. Let me just remind you that with the higher expected production, it's not unreasonable to assume that there will be a continued pressure on power prices in the NO2 pricing area. We also have significant production in NO3 pricing area where we have to buy power back.
They do not have the same snow reservoir situation, so it is not unlikely that there will be continued area price risk in the Q3 results. Prices so far in the quarter, we have started with the prices in Southwestern Norway approximately 50% level of what we realized in the second quarter. In Sapa, we saw improved results, partly driven by seasonality, but also partly driven by the improvement programs that we have in place for the entity. Also driven by the very strong North American markets, and as I said, the improvement programs are progressing well across the organization. If you compare Q2 to Q1, in particular in the U.S., we were also impacted by with the falling metal premiums impacting the results from the North American operations.
This is typically a time effect, and when premiums start rising, then you will have the opposite effect. Compared to the same quarter last year, the underlying EBIT for Sapa was in addition supported by the currency developments in the period. Let me give you some comments on other eliminations. It's really the elimination of internal gains and losses on inventories that drives the attention on this slide. This quarter, they amounted to NOK 338 million, compared to a -NOK 284 million in the first quarter, which is an increase of more than NOK 600 million between the quarters.
Now remember that eliminations are to a large extent the timing effect, that appears when gains and losses on internal transactions are realized by business areas, but they are not sold out of the company. The corporation cannot realize these gains and losses until the inventory is actually sold out. Through the reduction of inventory that we've seen this year, we can then take out the negative eliminations that we saw to a large extent in Q2, and then realize this profit in Q1, and then realize the profit in Q2. That is the explanation behind the NOK 338 million. If you adjust for the internal eliminations in Sapa, the result is NOK 150 million in charges for common services and other businesses.
Somewhat higher than Q1, but in line with the long-term guidance of NOK 150 million per quarter. If you look at the net cash and debt development between the quarters, we started the quarter with a net debt position of roughly NOK 300 million. We've generated in this period NOK 3.9 billion of underlying EBITDA, a major contributor, although it's down some NOK 500 million compared to Q1. When it comes to net operating capital here, you see that it is zero. We need to spend just a few seconds on that. If you look at the actual inventory level in this period, we have reduced the physical inventory with some 60,000 tons, releasing NOK 800 million in positive operating capital.
Due to some shipping patterns, the accounts payable had the opposite effect, eliminating the NOK 800 million that we've delivered on physical inventory release. We have NOK 300 million in positive taxes this quarter. We've paid half a million NOK, but then we have received NOK 800 million in indirect tax reimbursement from the Brazilian state in this period, lifting the net effect to NOK 300 million. We invested NOK 1.2 billion in this quarter, so still a relatively low run rate compared to the annual guidance of NOK 6.5 billion, including growth CapEx, so more investments are to be expected in the second half of this year. As you all know, we have paid dividends to the shareholders, NOK 1 per share, NOK 2 billion in aggregate for the company.
Also in this period, and the end result then is that we leave the quarter with NOK 700 million in net cash for the company. I would like to spend just two seconds finally on the adjusted net debt development. We've just been through the net cash change. Other adjustments fairly stable between the quarters. That takes us to the net pension liability that you will see has improved by some NOK 1.5 billion between the quarters. This comes from the fact that interest rates in both Germany and Norway has increased, and particularly in the long end of the curve. That reduces the discount rate, and it reduces then the net pension obligations for the company.
These things in combination reduces the net debt or net adjusted debt for Hydro with NOK 2.4 billion between the quarters, from NOK 13.4 billion in Q1 down to NOK 11 billion in the second quarter. With that positive note on that financial record, I'll leave the word to you.
Thank you, Eivind. Just to restart. The main priorities for Hydro going forward is first of all to deliver on the improvement efforts. We still have elements included in the NOK 1.5 billion improvement programs that are running up to the end of 2016. We are also looking at additional efforts. As Eivind mentioned, we are now also focusing very much on releasing cash and reducing net operating capital. As you mentioned, also the NOK 800 million in reduction of inventories, that is something we have in focus also going forward. As the ICMS discussion is now settled in Brazil, there are several other targets that we have to deliver on.
First of all, Alunorte volumes is something we have as a top priority and also to continue to deliver on the P2A program in Brazil. We are working with the very interesting downstream projects in Germany. We have growth projects in Neuss at a used beverage can, UBC, project in Neuss will help us to reduce the metal cost and also to increase our recycling capacity. We are also now progressing as planned with the body in white line in Grevenbroich, which will increase substantially the capacity we have for delivering aluminum to the automotive industry in Europe. Our target is to deliver these projects on time and on budget.
Prices are low and an increasing share of the global aluminum industry now is moving into neutral or cash negative territory. We have now delivered on our improvements programs, and we are continuing our improvements over the years. We are in a much better shape today than what we were five years ago to take on these markets, and there are still more to be delivered. Thank you very much for your attention.
Okay, we open for questions, either from here in Oslo or from webcast. Any questions here? Apparently, we have lots of questions from webcast. Should we start with that, Paul?
Yeah.
Yeah.
If we start with a question from James Gurry in Credit Suisse. He says that the negotiations with Brazil tax authorities appears to be a small victory for your operations. Can you please outline the growth in assets and investments expected to come there over the coming years, including the new auto product line or PFA as he relates to?
Well, with regard to the projects in Brazil, we have already talked about the CAP project. We also said that the time is not right now, the market is not there yet. This is probably one of the most attractive alumina projects in the world. We are still preparing for that, and we are waiting for the right time to continue the development of this project. This is a very attractive project. I also mentioned earlier in our presentation that there is a possibility to lift up Alunorte to 6.6 million tons, and also the expansion of Paragominas has been mentioned previously.
The PFA line in Albras is also an interesting project, which, where we can produce high-graded special alloys, which we are doing also at Sunndalsøra in Norway, for example. This is a technology that we have, and this is a market that we also see as a possibility to develop in Brazil.
Any other questions? Nothing from the audience here. Paul, do you have another one?
I have one from Menno Sanderse in Morgan Stanley. The full year CapEx guidance appears unchanged at NOK 6.8 billion. However, in the first half, you've only done one-third of that. What is driving the increased spending in the second half?
This is very much related to the timing of the projects. You also have seasonal effects, typically meaning that Q4 you spend more capital than what you do in the first half of the year.
Okay, last one maybe from webcast. Yeah.
The final question from Jason Fairclough in Merrill Lynch. To what extent do you think your second quarter results reflect the fall in LME premiums? How much do you expect it could come in the third quarter?
Well, as I said, we booked so far 50% of the premiums for the third quarter at $424. With the remaining 50% much more exposed to the continued fall in the standard premium. Probably somewhere between $325 and $375 is what you should expect on average for the third quarter.
Okay. I think we'll leave it there and say thank you.