Welcome, everyone. Good morning. Welcome to all of you in Oslo, and welcome also to those of you following us on webcast today. The first quarter results will be presented as usual by our CEO, Svein Richard Brandtzæg, and by our CFO, Eivind Kallevik. We'll start by the result presentation, and then have one-on-ones afterwards. Svein Richard?
Thank you, Inger. It's a great pleasure to present record-high results for Hydro, the best results we have had since we became a pure aluminum company in 2007. It is no reason for us to relax and lean back and enjoy the flight. We know with the market uncertainties, especially with regard to China, we will continue our efforts every day to strengthen the competitiveness of Hydro, so our improvement program continues as planned. We delivered NOK 3.2 billion EBIT this quarter, which is NOK 2.4 billion better than the first quarter last year, and NOK 300 million better than the fourth quarter last year. There are several elements that is contributing to this results along the whole value chain.
If we start with bauxite alumina, we have had higher sales and revenues. We have had sales in dollars and cost in Brazilian reals, and with that also cost advantage. In primary metal, similar effects. We have had currency effects, even though we have seen lower LMEs, also lower premiums in standard ingot premiums. This has been compensated by the advantage of currency development. Also, we have had higher costs in dollars as raw material cost is priced in dollars. Also in our two downstream segments, we have had higher volumes due to the seasonal variations as first quarter is always better than fourth quarter on volumes. Also there we had positive currency effects.
I'm also happy to inform you that we have acquired a German recycling company, WMR Recycling in Germany, which has the world's most advanced sorting technology, which will give us a competitive advantage in recycling. This company is located in Dormagen in Germany, has a good location with regard to scrap availability. We had a tight market in Europe last year, but the tightness has been reduced a bit due to export from China. We have seen primary metal, or at least metal from China, disguised primary metal, I would say, that is entering into our markets. Also with the announcement last week that China is now going to reduce the export tax on some aluminum products, it's also adding to the uncertainty.
We are following very carefully now the total supply-demand balance going forward, and I will come back to that also in my presentation. If you take a look at the supply-demand balance outside China, again, we had market situation with higher volumes in the first quarter compared to the fourth quarter. We saw in total 6% higher volumes than in the previous quarter. 10% better in Europe and 6.5% better in the U.S. market. In Europe, of course, the fourth quarter was very weak, so the big step there is, in fact, as I mentioned, 10%. If you look year-on-year, first quarter last year until first quarter this year, the growth has been 1.5%.
5% in U.S., stable in Europe, -5% in Brazil, and +5% in Southeast Asia. If you take a look then on the supply-demand balance now, we have about 1,000,000 tons deficit in the world outside China. We expect the growth in this part of the world outside China to be about around 3% this year. If you take a look at the inventories and especially the LME inventories, we saw 4% reduction in the quarter, about 250,000 tons. In total, LME inventories are now below 4 ,000,000 tons, and there are some years since we saw that.
There has been a lot of discussions about changing warehousing rules, and that's why we are showing now the graph on the right side, where you see the development in the two most important warehouses in Vlissingen in Europe and Detroit in the U.S. As you see from the graph, these two warehouses have acted as if the warehousing rules was already introduced one year ago. We don't expect a dramatic change now. This is going to continue. We see that there are still queues out of the warehouses. Some metal has been re-warranted that goes into the warehouses again.
We see that this has not been a dramatic change, as some expected in the market, at least from 1st of February this year. It is important now to take the global view and take a look at the total global supply demand balance. This graph shows the difference between supply and demand in the world with the blue line as production, which is shown higher than demand, which is the green area. As you see now for the first quarter every year first quarter has lower demand than supply mainly due to the effects in China. The Chinese New Year is a period where downstream in China is closing down and the primary metal production is continuing, so that is an effect that happens every year.
The second quarter is a big jump from the first quarter, and we are expecting the same this year. If you take the total situation now with the oversupply in China and the deficit outside China, and look at the total picture, we have seen tightening in the market over some time globally. With overproduction in China, now we are expecting that we will have in total about 500,000 ton surplus this year. That is based on growth outside China, as I mentioned, at 3% level. Growth in China of primary metal of about 9%. That means you can calculate yourself, but that ends up at 6% growth totally in the world this year.
We are following carefully the incentives for Chinese producers to export out of China. This graph shows the advantage. The blue line shows the metal advantage for export of downstream industries in China. The volumes that are exported is shown here in the dark green area. You see there has been a quite steep increase in export during the last quarters. We are now seeing a reduction in this quarter, very much also linked to the fact that the premiums has been going down and price differential between Chinese market and the market outside China has been tightened. The incentives now are reduced significantly.
If you then think about the changes in the duty and the reduction of duties for metal products, that was decided last week, that will come into action from 1st of May is even lower incentives than what is shown here. Also there we still don't know the full effect of the change in duties, but it is not a dramatic change when we look at the incentives here. If you then move over to the physical market, where we also see the effects on the standard ingot premiums, and we have related the development and the tightening of the market also to the increased standard ingot premium. Now we see a sharp fall in ingot premiums in the different markets.
We have seen from in the U.S. and Europe coming from above $500 per ton now to $320 in U.S. and $220 per ton in Europe. It's a bit higher in Japan at $425, but now trading at lower levels. This means that we see the clear effect that the market has been less tight due to export from China during the last few months. Again, this is also what we expected, but we also discussed previously that a reduction in standard ingot premium could also end up with a higher LME. That has not happened, and I will come back to that.
Due to the fact that we are producing our main products as metal products, extrusion ingots, primary foundry alloys, and sheet ingots, we're also following of course carefully the market development in these areas. Also there we have seen a quite steep reduction in premiums. If you look into our accounts, you will see that we have $39 per ton better premiums this quarter than the previous. This is due to time lag of one to two months. The effect of the reduction will now come into place more in the second quarter. You see that the ingot premiums going down, that also is as a consequence of the metal products premiums, that is also now coming down.
If you look at the premium for extrusion ingot above standard ingot, it is keeping up quite well. Then over to the LME and the consequences of the currencies. Because if you look at the 15 countries that is listed here, they are representing 80% of the aluminum production volume outside China. Several of these countries are also oil exporting countries. With the oil price that is, as you know, been reduced to the extent we have seen now, this has a consequence on the currency of these countries. That means that the cost curve has come down. What we have seen now is a reduction of the cost curve and also a corresponding reduction of LME.
For these countries that are now at the so-called benefit of the currency, the margin has not been reduced, but there are some countries that are selling and have a cost in dollars and/or pegged on dollars. They don't have the same benefits as other countries that now have been seeing that the dollars has been appreciated quite a lot. If you then go further and look at the situation on the LME, you saw LME was trading between $750-$1,900 per ton in the quarter. The realized price in the quarter was $1,897 per ton, coming down from $1,997 per ton.
We have sold now 50% for the second quarter at around $1,800, $1,850, and $1,800 per ton. That is, of course, a result of the latest developments here. If we take a look at alumina, it is quite different from several other raw materials, as many raw materials, iron ore and other raw materials, has come down quite dramatically during the last months, while alumina is keeping up quite well. China is dependent on import of bauxite to produce alumina. With the export ban from Indonesia, China has been searching around to different countries. We see that, in addition to Australia, that has been an important export country of bauxite and serving Chinese aluminum industry with bauxite.
We also see now that Malaysia has come up as a very big exporter of bauxite to China. The diversification has happened, and China has now several countries where they have access to bauxite. We have also seen that the bauxite price has come down somewhat due to this situation. That has an implication on the cost of production of alumina, so the alumina price has come down somewhat. Recently, we're also seeing an increase in the alumina price due to production problems in India. That is also affecting this picture. In general, we are now trading alumina around $340 per ton and at quite high levels on percentage of LME.
As you probably know, we are selling about 30% now on index this year. Last year, it was 25%. The 70%, we are not selling on the index price is locked in the old contracts that Vale entered into some years ago. If you now move into operations and take a look at the alumina production, we have now reduced the cost of production further, but this is mainly a currency effect in Alunorte now this quarter. Alunorte is running at around 6 ,000,000 tons production speed. We had a maintenance stop in Paragominas on our bauxite mine this quarter.
This maintenance stop took a bit longer time than originally expected, due to some elements that had to be maintained for longer time. We sent out a message about that. Now the ball mill last weekend came into full operation, and the Paragominas mine is now operated at a yearly speed of around 10 ,000,000 tons bauxite per year. We have a strong focus on the improvement program also in Brazil, and B2A program, which still have to deliver NOK 300 million within the end of 2015. 2016 is progressing ahead of plan. As you know, we have the ICMS deferral law to be revisited in July this year. We communicated that also previously.
We are already now paying ICMS tax on fuel oil, which has a total amount of BRL 200 million per year. ICMS for procurement in power is now for revisiting the 15th or in July 2015. This is a situation where aluminum, as well as iron ore, manganese, other industries has been exempted before. There has been no dialogue with authorities. We continue the good dialogue and the constructive dialogue with our authorities to make sure that we still get a situation as we have today. We still are going to also have a dialogue on the fuel oil, but that will come later.
If we just take a look at the margins that we are looking at now in alumina, $75 per ton on the quarter on EBITDA margin. That was due to the realized price of $300 per ton, which corresponds to 16.1% of LME in the quarter. Let us move over to metal production. Now we have changed the metrics a bit due to the fact that we have got the inputs from you that you want to see the all-in metal cost and all-in metal price together. This is what we are reporting here.
We have seen results of improvement efforts, but also the positive currency effects, but also increasing raw material cost as raw materials are priced in dollars. Margins are still at $700 per ton, quite healthy, but we still continue with our improvement efforts in connection with our primary production. There are still $60 to be delivered on the $180 program for the joint ventures, and also for the fully-owned smelters, we continue our improvement efforts to strengthen the competitiveness. We also show in the previous metrics the LME implied EBITDA cost, which is at $1,150 this quarter. All implied EBITDA cost was $1,800 in total, and that gives the margin of $700 with LME that was realized this quarter.
As I mentioned, we have acquired WMR Recycling in Germany, which has the most advanced recycling technology in the world. When we are buying scrap, the scrap is sometimes mixed with different materials, and this technology can sort the different materials easily. It's not only to sort different metals from each other, but also able to differentiate the different aluminum alloys. Which then is creating value to the sorting process, but also to recycling process. This has a capacity now of 36,000 tons per year, and we will utilize this also in connection with the UBC line that we announced last year to be built in our Rheinfelden smelter. Where we are increasing the capacity from 50,000 to 100,000 tons per year.
This is a part of our strategy to become carbon neutral in 2020 from a life cycle perspective. Today, Hydro is recycling and remelting 1.1 million tons per year. We are already a big player in this market, and we see this as also an interesting business development for us going forward, and that is the reason why we are investing in recycling. If you then look into downstream and start with the rolled products, we saw 7% higher volumes in the first quarter compared to the fourth quarter, and again, very much due to seasonal variations. If you look at the first quarter last year with first quarter this year, we had 6% lower sales.
If you go through the different market areas, packaging and building, we had a very negative on building, positive on packaging, especially positive on can end, which is a high margin product. A little automotive and heat exchanger also down. Here, very positive on automotive. In fact, 15% higher sales. Now we are running at full capacity. So even the market gives us even more opportunities. We are not able to produce more for automotive as it is now, and that is also the background for the investment decision we made last year, where we are building a new line in Germany, which takes capacity from 50,000 to 200,000 tons for automotive body in white sheet. General engineering, -10% also due to competition from China on some low margin products. Over to Extrusion and Sapa.
Quite strong effect in North America and Europe in the first quarter. Again, based on the seasonal peak of fourth quarter. Also year-on-year, U.S. is showing very healthy development, 11% growth. In Europe, the market is more stable, moving sideways. Weak building, but other markets developing positively. In U.S., the strong growth is driven by automotive, but also a quite healthy development in building and construction, where aluminum is used on facades, windows and doors. Another important message from Sapa is that we have entered into a cooperation with Ford. Not only are we delivering structural aluminum tubing to the Ford F-150, but also we have entered into a partnership where we are supporting Ford in metallurgical developments.
Our experts are sitting with experts from Ford and developing materials for next models. The Ford F-150 has been talked a lot about in the market, because this is one of the few cars where Ford has decided to change completely from steel to 100% aluminum. This is a big step. So far, we have only got good feedback from Ford on this one. It will be interesting to see if more models are following. In Europe, it moves in a bit different way because there we see body in white is gradually coming into production in some models.
Also hang on parts are gradually shifted from steel to aluminum as some car models comes now with aluminum doors and bonnets and roofs, while it's combined with some steel components. Ford F-150 is a big change. It's moving directly from steel to 100% aluminum, and it makes the car 700 lbs lighter compared to the previous model. Finally, energy. If you look at the reservoir level, ending first quarter with 10% above normal in the southwestern Norway. A bit down from 11% above normal in end of fourth quarter. If you take the whole Norwegian situation, it's coming from 2% below normal to 1% below normal in the end of the quarter.
Price levels has been moving a bit sideways, a bit weaker in the first quarter than the fourth quarter, coming down in our main area from NOK 248 to NOK 3,238 per MWh. With that, I leave it over to Eivind, please.
Specific accounting issues are the special effect this quarter, so let's just go straight to the financial results. Let me first start by saying that, I'm very happy to then announce another record high quarterly result for the second quarter in a row since Hydro became a pure play aluminum company back in 2007. This quarter, we have delivered an underlying EBIT of some NOK 3.2 billion, NOK 300 million up compared to the fourth quarter, NOK 2.4 billion up compared to the same quarter last year, or 4 x the result. We've seen some seasonally higher sales in all business areas, with the exception of metal markets, lifting the results with approximately NOK 200 million between the quarters. As you all know, the currency movements have a material impact on Hydro's results.
This quarter, we've seen further favorable currency developments lifting the results with approximately NOK 900 million between the quarters. This, of course, is primarily attributed to the strengthening dollar throughout the quarter. The dollar strengthened some 13% against the Norwegian kroner, roughly the same level as towards the Brazilian reals, and 7% against the euro. Just as a reminder, the strengthening of the currencies, of course, has a positive effect on the revenue side, but it also lifts the dollar cost base, as Svein Richard also mentioned. Therefore, the NOK 900 million is the net effect of the revenue improvements and the cost inflation that we see on the dollar-denominated costs. Furthermore, the costs have increased in the business area, resulting in a negative development of NOK 300 million.
This includes a negative development of raw material and fixed costs in primary metal. We see somewhat higher cost in rolled product due to the higher production, in addition to somewhat higher production costs in energy. Prices and margins brought results down by roughly NOK 200 million. This is primarily related to two effects. One, the lower LME price in the quarter, and a negative result from the ingot trading within metal markets. The negative effects on the other side was partly offset by record high product premiums, improving margins both in B&A rolled products as well as in Sapa. Finally, other than eliminations brought the result down by some NOK 300 million. This is partly driven by other than elimination, but also some other one-time effects. I will get back to some more details later on in the presentation.
If we take a quick look on the key financials for the quarter, we see that revenues for the first quarter lifted with approximately NOK 2 billion compared to the fourth quarter of 2014. Increase was driven by two major effects. One, the increased sales throughout the value chain, and second part, of course, the strengthening of the dollar versus Norwegian kroner. We had a combination of offsetting items in excluded items, bringing the net amounts to approximately zero, giving us a underlying EBIT this quarter being largely equal to the reported EBIT. I will get back to these items more in the next slide. Financial items this quarter, NOK -1.7 billion, compared to a NOK -2.3 billion in the fourth quarter. These are largely driven by unrealized currency losses related to our U.S.
Dollar debt carried primarily in Brazil, but also somewhat in Norway. The income before tax NOK + 1.5 billion, which is a large improvement compared to the NOK -46 million that we had in the last quarter. Remember, the last quarter was impacted by the unrealized currency losses to a larger extent. The income tax expense this quarter amounted to NOK 455 million, which is a 30% income or close to what we guide of the net income of the income. This gives us a net income of approximately NOK 1 billion for the quarter, up from a loss of NOK 168 million last quarter.
The underlying net income improved with NOK 227 million compared to fourth quarter, reaching a positive NOK 2.2 billion, also having a lift on the underlying EPS, getting us to NOK 0.95 per share. As mentioned in previous quarters, when we do discuss ongoing performance, we exclude certain elements and timing effects that does not really reflect ongoing business. In this quarter, as I mentioned, the items excluded netted to almost zero. This quarter, all the items excluded comprise of mark-to-market effects on derivatives as well as some adjustments for timing differences in inventories. This compares to a loss of NOK 591 million in the last quarter, which the fourth quarter was, to a large extent, affected by impairment and rationalization charges.
If you look to unrealized effects on power and raw material contracts, this was a positive NOK 151 million this quarter. That primarily relates to embedded derivative gains on the falling coal and LME prices in the Statkraft contract, which was only partly offset by the strengthening dollar. We have some unrealized effects on LME-related contracts, amounting to NOK 140 million this quarter, compared to a net zero in the fourth quarter. We have some positive metal effects in Rolled Products of NOK 61 million. That's NOK 128 million lower than what we had in Q4, and this is driven by the increasing prices in euro. We had a loss of NOK 74 million in items excluded in equity accounted investments being Sapa, and this is again, mainly related to mark to market effects on derivatives and some currency effects.
We now turn to the business areas and start with bauxite alumina . Again, I'm very happy to say that Q1 continues the trend of record high results in B&A, which started in Q4 last year. Of course, after quite a few challenging quarters. These performance improvements that we've seen over the last few quarters are largely attributed to the B2A program, showing results through reducing costs, higher efficiency, and a much more stable production level in our sites in Brazil. The underlying EBIT for the quarter was NOK 780 million, which is a significant improvement of NOK 252 million compared to the result in the fourth quarter. We see higher alumina sales and higher index exposure in Q1 compared to fourth quarter, being a positive driver for the result development.
Now the increased sales in the quarter is primarily a timing difference as we move some shipments that was intended for Q4 2014 into the first quarter of this year. That has given us some higher sales on index, which also contributed to a higher average realized price as the flat index price have remained largely flat in the period, while the LME price in dollars continued to fall, impacting the LME-linked alumina sales. Just to remind you, we will realize about 30% of our portfolio on index sales this quarter or this year, compared to 25% last year. The bauxite production in Q1 declined due to the extended maintenance period, reducing available capacity about 50% since the beginning of March.
As Svein Richard mentioned, the ball mill is now back in operation and producing at full speed. Due to the bauxite stocks that we had built in preparation for the maintenance and due to some additional shipments from MRN, we were able to keep the Alunorte production of alumina unaffected for the period. When it comes to operating costs, implied cost at Alunorte decreased slightly as it was supported by the weakening BRL against the dollar. However, at the same time, Alunorte had a somewhat higher consumption of fuel oil, coal, as well as caustic soda, in addition to somewhat higher prices for the bauxite that they sourced from MRN. That effect was alleviated by lower caustic costs in addition to lower fuel oil prices for the quarter.
In Paragominas, we also saw somewhat higher operating costs, partly because of the extended maintenance period that we saw, but also because we've entered into new power contracts as we also guided on in the fourth quarter. That brings us on to the most important contributor for the result development being the currency development. The dollar strengthened roughly 3% against the BRL, and the total net currency effect for the business area then is approximately NOK 200 million positive between the quarters. Now if we look into the second quarter, we expect somewhat lower alumina sales and somewhat lower index exposure than what we saw in Q1. Bauxite production is picking up, as I said. The ball mill was back in full operation at the end of April.
Remember that the bauxite production for Q2 is probably on a quarterly basis on the same level as in Q1 on a tonnage basis. Lastly, on B&A, let me also just inform you that the Reintegra tax credit scheme that were in place in Brazil has been reduced from 3% to 1% of export revenues effective of March 1st, 2015. This will reduce the expected benefit from Reintegra by about 2/3 for the year and will bring the total contribution for the year to approximately BRL 50 million, down roughly BRL 70 million, compared to what we guided on at Capital Markets Day. If we turn to primary metal, we've seen a slight increase in underlying EBIT of NOK 23 million, but again, delivering record results and reaching just north of NOK 2 billion in EBIT.
The largest contributor in a positive direction is a continued increase in the realized all-in metal prices, aided by a further strengthening of the dollar. Now measured in dollars, the LME has fallen roughly 5% in dollar terms, but it's been offset by the 13% weaker NOK, again lifting the LME 8% measured in Norwegian kroner. The realized premiums has reached historical peak levels in the quarter. Overall, the realized all-in metal prices lifted the results by some NOK 700 million. That includes a positive currency effect of NOK 900 million and a NOK -200 million in all-in metal prices when measured in dollars. Despite flat production, sales volumes were seasonally higher and contributed with roughly NOK 100 million positive including Qatalum.
Now working in the other direction, we have higher raw material and fixed costs, which reduced results by roughly NOK 600 million. About half of that is the cost inflation driven by the dollar development. The remaining NOK 300 million reflects an increase in alumina price, power cost, as well as carbon prices, and somewhat higher fixed costs for the business area. As expected this quarter, we also seen a lower power contribution from power sales in Brazil. As you may remember, gains from power, excess power in the fourth quarter, as well as the interregional power compensation in Brazil contributed roughly NOK 100 billion in addition in Q4, which was not brought forward into Q1, also as we guided on.
Looking into second quarter, we have, as Svein Richard said, we had sold roughly 50% of our primary production at around $1,800 per ton if you exclude Qatalum. If you look to the premium side, we have booked roughly 50% of the premiums for the second quarter at approximately $650 per metric ton, excluding Qatalum. However, it is worth repeating that our lag profile on premiums has been narrowed to one to two months from the previous two to four months, reflecting our efforts to bring the results closer to the market and the customer purchasing pattern. This means that less premiums have been booked for second quarter than what we've seen in previous quarters.
In addition, the market has also been moving to pricing value-adding products more as an upcharge above standard ingots compared to what we've seen in the past. Although you see a higher premium on the first 50% booked, you should expect that there is the second half of that is much more exposed to the standard ingot development, as such indicating that there is a significant downside risk to the $650, as mentioned. Last but not least, on the primary side, let me just give you an update on the hydrological balance in Brazil, as we've talked about before. As you remember, the reservoir situation in 2014 was quite severe given the droughts that we had for the year.
The rainy season so far has been quite good, improving the reservoir levels somewhat and reducing the risk for immediate rationing. However, the outlook for the rest of the year remains uncertain. We quickly turn to Qatalum. We see an ongoing net income of NOK 246 million, which is a decrease of NOK 71 million from the fourth quarter. The reduction in these results is primarily driven by lower sales volumes compared to the high sales that we were delivering in Q4. The fall in the all-in aluminum prices in dollars were also here offset by positive exchange rate developments when translated to Norwegian kroner. From an operational perspective, Qatalum continues to deliver high and stable production well north of nameplate capacity of 585,000 tons, and this quarter at roughly 660.
If you look into the second quarter, we expect somewhat higher sales volumes, but also somewhat higher costs at Qatalum. For metal markets, it is fair to say that we have delivered a fairly weak underlying EBIT of NOK 24 million versus NOK 221 million in the fourth quarter of last year. Now if you exclude currency and inventory valuation effects, the result is NOK 60 million and well below the quarterly guidance of NOK 100 million that we have given you. Now the main driver for the weak performance this quarter is a negative result from the sourcing and trading activities due to losses of long positions following a drop in the standard ingot premiums.
On a positive note, we have very strong results at the remelters driven by seasonally higher volumes in addition to the further improved margins carried by the by the increase in product premiums. If you look into the second quarter, we still see high volumes at the remelters. However, margins will be affected by the lower premiums that we do expect to realize. Also fair to note, for the next quarter, that reflecting the development on the standard ingot premiums we have seen post Q1 and the buildup of inventories that we've seen in metal markets, we should expect a further weak result from the sourcing and trading activities when looking into the quarter. However, let me again just remind you that the results from this segment and trading activities can and will be volatile.
In rolled products, we have delivered an underlying EBIT of NOK 292 million, which is an increase from NOK 196 million compared to the fourth quarter. We had higher shipments, as Svein Richard indicated, for most product segments, primarily driven by the seasonality. We also realized a quite good development on operating margins, but this is primarily due to lower freight costs in this quarter compared to what we had in the fourth. Furthermore, also here, the export sales that we have in dollars has now been positively influenced by the currency developments when converted into euro. Looking into second quarter, as normal, you should expect to see somewhat higher sales volumes due to the seasonality. On the other hand, we do expect a lower operating margin in the second quarter due to a less favorable product mix.
The results in Rheinwerk will, of course, continue to be dependent on the development on LME and premiums. If we look to energy, we had an increase in EBIT of NOK 22 million compared to fourth quarter, giving us an underlying EBIT of NOK 382 million. The effect here or the result development is clearly influenced by a production above 3 TWh, which is clearly above the 10-year average of production for a first quarter. As a result, spot sales increased more than 20% compared to fourth quarter. On the other hand, spot prices decreased with roughly around NOK 10 per MWh to NOK 238 per MWh.
This, of course, is backed on the wet, mild and windy weather that we saw during the quarter period. Also the fact that we had good export capacities out of Southern Norway, helping us to have a relatively good price in the Southern parts. We had somewhat higher operational costs in Q1 compared to Q4. It's partly driven by the higher production volumes that we had. We also have higher property taxes in Q1 compared to what we had in Q4. Now, this is related to an accounting change where we have to book taxes as when we receive the invoice, which is a difference than what we did in the past when we had an accrual making the property taxes equal throughout the year.
Important to know that the total property tax on a yearly basis remains the same. Looking into second quarter, we still have high snow levels or high snow reservoirs in the mountains. Remember that production in Q2 is typically seasonally lower than what we see in Q1. On the price side, we have so far in the quarter started the pricing with approximately 12% lower prices in southwest Norway than what we realized as an average in the first quarter. In addition, we expect production costs to come somewhat down. As I said, we carried a lot of the property taxes in Q1. There will be less in the second quarter. For Sapa, the results improved significantly compared to the previous quarter, mainly due to seasonality.
We also saw some improvements on shipments beyond the normal seasonality, you know, supported by the continued strong demand in North America, in addition to continued positive effects from the improvement and restructuring activities that we have in the Sapa joint venture. Restructuring program initiated by the company in 2013, which targets an annual synergy savings of around NOK 1 billion, by the end of 2016, continues well ahead of plan. As I communicated earlier, about half of the targeted synergies was reflected in the underlying results for the full year of 2014. Let me, however, also just remind you that there will be a conference call with Sapa management on May 18 at 3:00 P.M. Central European Time. If we turn to other and eliminations.
This quarter, we had an underlying EBIT of NOK -281 million, versus a NOK -308 million in the previous quarter. We've already been through the Sapa results, bringing us to the remaining quarter and quarter changes. Now, the elimination of internal gains and losses on inventories, was NOK -284 million this quarter, compared to NOK -168 million in the previous quarter. As you may remember that I've said before, negative eliminations, is typically, a good thing as we see widening margins, in the internal sales, which we have to eliminate until sales are realized externally.
This was also the case in Q1, but on top of this, it also reflects a further increase in negative eliminations as we had an inventory build between Q4 and Q1, again, making the eliminations more negative. Adjusting for the eliminations, the result is NOK 117 million in charges for common services and other activities, which is pretty much a sideways development compared to Q4. Let me end up with the net cash developments. We started Q1 with roughly NOK 100 million in net debt. We've delivered a record high NOK 4.4 billion positive EBITDA, which was clearly the positive contributor for the quarter. On the other hand, we have a big negative effect of NOK 2.9 billion of buildup of net operating capital.
This is primarily as a result of inventory accumulation within the primary metal markets as well as in tolled products business areas. As you know, we should expect the seasonal buildup of of net operating capital in Q1. That is not uncommon. However, this year we have experienced a larger buildup than what is normal what than what normal seasonality should indicate. This is of course not a very satisfactory situation, and we will continue to look into how to optimize our net operating capital also in the coming quarters. In the first quarter, we paid NOK 700 million in taxes. Offsetting that, we have received NOK 600 million in reimbursement of indirect taxes related to former periods in Brazil, bringing the net tax down to NOK 0.1 billion or NOK 100 million for the period.
Total investments this quarter roughly NOK 900 million, which is fairly low given the CapEx guidance of NOK 6.8 billion for the year, including the growth projects. Those implying higher CapEx investments or higher investments in the following quarters. Now please note that NOK 6.8 billion is roughly NOK 300 million higher than what we gave as guidance on Capital Markets Day. The NOK 300 million is then comprised of the two growth projects bringing us further into our technology lead position. We have accrued the Karmøy pilot, and we also acquired the WMR advanced scrap sorting technology in Germany, as Svein Richard mentioned.
The last category, currency, and other relates primarily to currency translation effects due to the strengthening of the dollar affecting our U.S. dollar denominated debt, leaving us with roughly $300 million, a small debt position at the end of the quarter. With that, Svein Richard, I leave the floor to you.
In the second quarter, we will continue to deliver on the improvement program of NOK 1.5 billion for 2015 and 2016, and we will have special focus this quarter on working capital, reducing inventories and release capital. As we are approaching July, we will continue the dialogue with the authorities in Brazil regarding the ICMS, the federal law. We see uncertainty in the markets, enhanced by the export from China, which again proves the importance of the improvement programs and where the efforts to make Hydro more competitive in the aluminum markets.
We are high-grading our portfolio with a couple of projects with the UBC recycling line and the automotive line in Germany, which will improve the margins for our business. As premiums are falling, and we see trade flow shifts, and the market dynamics change, continuous efforts on margin management will be important as ever. Thank you very much for your attention.
Okay, we open for questions from the audience if there are any here. Yeah, let's have a question here.
Yes, good morning. Is this on? Good morning. Thank you. One question on the acquisition. How much did you pay for it, and what has been the historical performance of the company?
We have not published the acquisition price. This is a company which has been developing a technology over some years. The reason for us to find this very attractive is not only attractive price but also the technology which can be widely used. The capacity of 39,000 tons of the facility itself today is the starting point, and we see that we can use that technology in connection with the remelting and recycling facilities that we have in many places in the U.S. and European markets.
If I can add to that, Svein Richard. One of the benefits, of course, is that you can dive deeper into the scrap pool buying more dirty scrap, which you then get at a better discount compared to clean scrap than lowering the metal cost of the remelters and recyclers.
Yeah, another question here.
Eirik Melle , Danske Markets. The removal of tax on certain Chinese products seem to have little effect on a standalone basis, but it has increased the fear in the market. Has it changed your view on what the Chinese would or could do in the longer term, looking at the Chinese semis export, which is, you know, some of it is disguised primary aluminum, and yeah, more like what the total effect on the Chinese situation?
It is too early to talk about the total effect. As you said already, there are also metal that is disguised as primary metal that we see in our markets that has been trying to circumvent the duties and export tax. With the new regulation that will be more open. We have still observed that there will be 15% export tax on standard ingots, but there are some other products where the export tax has now been taken down to zero. As I showed you also on one of my graphs, the attractiveness of exporting is limited.
We have already seen a quite big drop in the net advantage of exporting out of China for the Chinese producers due to the falling premium. It was a quite special situation where we have $500 standard ingot premium in Europe and U.S. That gives them strong incentives, but with drop in premium, these incentives are diminishing and reduced significantly.
Any other questions from here? We have a question from webcast.
Start with a question from Jason Fairclough, Bank of America Merrill Lynch. Would you consider a growth in downstream through mergers and acquisitions?
As you all know, we have a very long value chain that gives us a lot of opportunities in different parts of the markets and along the value chain, there are always opportunities. We don't comment on these opportunities before we have made decisions. It's clear that this is one of the advantages we have with this long value chain, that there are different opportunities that appears at different times.
We have one from Jeff Largey in Macquarie. Are you seeing any signs of improvement into Q2 in Europe?
I guess the European aluminum market in general is moving sideways, I would say. We see still a weak situation in building and construction. Packaging, of course, is quite stable. People are eating and drinking as before. Automotive is really the driver. As I mentioned, we are producing full speed on our automotive lines in Germany to supply the German OEMs that, of course, want to have more aluminum from Hydro already today, but we are not able to produce more. We are working on the project, and we are going to deliver the project according to time. That will come into effect when they are ready.
The European market, we are not very optimistic with the high growth levels there compared to the situation in U.S., where we really see a healthy growth development. That growth is not only based on automotive, but we also see good development in U.S. building and construction markets.
Okay. Any other questions? No. I would like to say thank you very much for coming, and have a wonderful day.