Welcome everyone here in Oslo, and welcome also to all of you following us on webcast. We are going to present Q1 results from Hydro, and they will be presented by CEO Svein Richard Brandtzæg, and our new CFO, Eivind Kallevik. After the presentation, we will, as usual, have time for Q&A, and then one-on-one interviews after that. Vær så god, Svein Richard.
Thank you very much, Inger. The three first months of the year is normally marked with higher activity, with the higher demand for aluminum and aluminum products. Whether that is automotive, aluminum for body-in-white, heat exchanger, or packaging, this is impacting the market. Higher prices is a result of higher demand and also more volumes. All in all, higher prices and more volumes are impacting significantly the improvement of the result in the Q1 . The global economy is gloomy, and we don't see a quick recovery. We have to focus on what we do best, on improvements and also making sure that we get more for less. Let's then move over to the Q1 .
Bottom line underlying NOK 1,077 million, NOK 900 million better than the previous quarter, and about NOK 500 million better than the Q1 in 2012. Seasonal effect of sales, higher volumes, higher prices in aluminum and alumina. In energy, we had higher production and also higher prices due to cold and dry weather conditions. Again, there is uncertainty in the market and also this is impacting the commodity markets. With regard to the global economy, there are several questions that could be answered. We are seeing an improvement in the U.S. market, but there is a question about the speed of the recovery of the U.S. economy since the financial crisis. The sentiment is impacting our markets in the U.S. In Europe, there are several areas, several countries that are still struggling.
The focus now is on the attention or in the direction of Cyprus and Portugal. We have the unsolved political situation in Italy, and we are still awaiting the reforms in France that have to come at a certain time. Also in Europe, there is a high degree of uncertainty. In China, we see lower GDP growth figures that are also impacting aluminum, although you can say that aluminum is balanced in China. Still, China is important for us and with the change in the focus in the economy in China going from very much dependent on investments and dependent on exports to a more consumption-driven economy, there are a few experts that believe that China can maintain the same speed, the same growth as we have seen in the last decade.
All these questions I cannot answer, but it is clear that these are impacting our markets and the aluminum prices and demand. Let us then turn to the supply-demand balance. This is showing the situation outside China, where we had a higher demand in the quarter, but also somewhat higher production. A balanced market in the Q1 . We maintain 2%-4% growth outside China in 2013. If you take that into the equation together with the fact that there will be some more capacity, there are some ramp-ups, but also announced curtailments, we believe that the market will be in balance this year. Looking at the inventories, on the left side, you see the registered inventories. There is increasing inventories in China.
This we have seen before in the Q1 , where there is a celebration of Chinese New Year that does have an impact. In the markets outside China, there is a stable situation with regard to the inventories. Regional ingot premiums is keeping up at the record high level, stable in U.S., in the Midwest premium, and also the Japanese premiums, stable moving sideways. Some reduction or just a few dollars in Europe, but still at very high levels. All in all, this is now impacting the premiums of metal products. This has taken some time, but now we get an effect of premiums of extrusion ingots and primary foundry alloys that are also contributing positively to the results in the Q1 .
Looking at the LME, weak levels, the market price in the quarter was NOK 240 per ton. It is a realized price we had for our sales in the Q1 of NOK 243 per ton. The LME price of aluminum went down about 6% in dollar terms, but due to weakening of the Norwegian krone, the reduction was about 3% in Norwegian currency. The alumina price increased in the beginning of the quarter due to supply concerns from Australia due to the heavy weather conditions there. This has eased, and we have seen a reduction in alumina price during the second part of the quarter. We are now seeing the alumina trading around $320-$330 per ton.
Average price was about NOK 340 per ton. It's interesting to see that in percentage of LME, alumina is keeping up at around 17%. We follow carefully the export-import balance from China, and in and out of China. If you look, start at the bottom of this slide, we see that semi-fabricated and semis and fabricated products are quite stable when they got export out of China. Similar level this quarter as we have seen the last quarters. There is no net export or import of primary metal, so this is kept balanced in China. There's somewhat lower import of alumina compared to previous quarter. Scrap is quite stable, import from western countries, Europe, among them.
There is a very steep increase in bauxite import to China. This is again showing the dependency China has on importing raw materials. There is not enough raw materials of the right quality in China, so they are increasing import of bauxite. That was an issue last year where there were a ban on import that was introduced in Indonesia. That has now been lifted, and at least we see temporary exports of bauxite from Indonesia to China. This is again showing that's a very steep increase in the Q1 this year. We have a strong focus on our assets in Brazil. The Paragominas bauxite mine is running at around nine million tons capacity.
In Alunorte, we have a stable situation from the Q4 , same volumes. It is not according to our ambitions, so we would like to see better performance in Alunorte. It is impacted by power outages in the Q4 last year, which has caused some power instability in Alunorte. We also have some issues with coal boilers that we are now attacking. In general, we are focusing a lot on systematic maintenance in Alunorte, which I also have mentioned before. We have introduced an improvement program, a cost-cutting program in Brazil from B2A, that has been also communicated previously. The ambition is to reduce cost with NOK 1 billion, and our target is to achieve half of that in 2030.
The NOK 300 program for the fully owned smelters are continuing, and it is moving according to plan. We are going to deliver the last NOK 65 per ton in 2030. We delivered NOK 235 of that plan until the end of last year. We have also now introduced the improvement program for the joint venture, which is the second half of our primary capacity. If you take a look at cash cost, the parent cash cost that is shown here, which is then taking into account the premiums from the cast houses, the level is at NOK 1,625 per ton, which gives us a margin, an EBITDA margin of NOK 425 per ton.
NOK 1,625 per ton is impacted by higher premiums for metal products that I mentioned, that gives better customer margins, but also Qatalum is contributing very positively in this respect. If you look at downstream market in Rolled Products, we delivered 5% higher volumes in this quarter compared to the previous quarter. This is very much higher deliveries in litho, automotive, and general engineering heat exchanger. Somewhat lower export of can sheet out of Europe is impacting that market segment. If you look at comparison of the Q1 this year compared to Q1 last year, we had 4% higher sales.
This is a mixed picture, in fact, lower sales this quarter compared to the Q1 last year on automotive and heat exchanger due to lower car sales in Europe, but a good development in packaging and litho and general engineering. Energy, Q1 is typically a period of increased prices, cold weather, but it was also a dry period, so the prices increased all the way through the quarter. The hydrological balance went in a negative direction with about 26 TWh below normal level in the Nordic market. In Norway, about 15 TWh below normal level.
This is leading to a somewhat constrained situation in the western part of Norway, but we are still far away from the situation we had in the beginning of 2011 when it was 39 TWh a bit below normal level. The prices went from about NOK 268 per MWh to NOK 311 through the quarter. In a situation where we have a high degree of uncertainty in the market, it is important for us to continue with our improvement programs. We have improvement programs in all parts of the value chain in Hydro, and we are now delivering according to plan on the NOK 300 program, and we are going to deliver also NOK 0.5 billion on the B2A program this year.
Another part that we have influenced on in our value chain is of course the joint venture, Sapa joint venture, which has then the plan is to join together with the Orkla assets to create the world's biggest and the best extrusion company. The closing is expected to be in the first half this year. There are some concerns in Europe, but we have proposed remedies, and we maintain the expectation that this will be now closed in the first half. We have a flexible remelt production in our system, and we have taken down the production last year, and this is a way to balance the market, and we will continue to do so also in 2013.
In downstream, we are focusing on high grading the product portfolio, and in Rolled Products, we are going to invest in increased capacity for automotive body-in-white, which is the fastest-growing market as we see in Europe now. It's my pleasure to introduce my new CFO, Eivind Kallevik. He's a young man but has a long experience in Hydro, has been working along the whole value chain and have a deep experience and knowledge about the company. Please, Eivind.
Thank you. Thank you very much, Svein Richard Brandtzæg, for that introduction. I will then have the pleasure of taking you through a somewhat more detailed financial review, both of the overall Hydro financial results, as well as a review of the individual business areas. Let's start. As Svein Richard Brandtzæg mentioned, we saw an improvement in the underlying EBIT between Q4 and Q1 2013, from NOK 172 million to approximately NOK 1.1 billion, an improvement of a little bit more than NOK 900 million between the quarters. This basically reflects an improvement within all business areas of our operations.
From an overall perspective, it is so that we have seen seasonal stronger volumes in all the business areas with the exception of Bauxite & Alumina, which we will come back to. In addition, we have also realized higher prices for all of our primary products like alumina, aluminum, and energy. I will get back to more details on the individual business areas at the end or later. Let me give some comments to the line called Other and Eliminations. We have an underlying EBIT in this period of - NOK 38 million, compared to a - NOK 275 million in the previous quarter, plus a change of NOK 238 million.
The quarter-on-quarter change mainly relates to changes in the elimination of gains and losses in inventories, meaning that if you adjust for this, we get an underlying result of roughly -NOK 150 million, representing the common service and other businesses coming into this line, which is basically in line with what we have guided on as a going rate in the past. One more thing that I would like to draw your attention to on this slide is a change in the way we do report our figures now in the Q1 . We have a change driven by the International Financial Reporting Standards, and we have implemented IAS 19R as of Q1.
At the same time, Hydro decided to split out the interest component of the net periodic pension benefits and moved that to financial items. The net periodic pension benefits, as we've guided on in the past, is approximately NOK 600 million for the year. Of this, about 25% will be moved to financial items. I will come back to this also in a little bit more detail afterwards. If we look quickly at the high level quarterly result development, as I said, we improved by about NOK 900 million between the quarters. Of that, roughly NOK 200 million came out of energy, one-third driven by positive price effects and approximately two-thirds driven by higher seasonal production.
On the alumina and aluminum volume and price, for this quarter, it is pretty much all from the Metals area, where we have seen a NOK 100 improvement in alumina. We have seen increased sales by 36,000, altogether giving us an improvement of roughly NOK 300 million. On top of that, we have good contribution from the joint ventures. It is up roughly NOK 104 million between the quarters. Offsetting that to a certain degree, is an increase in raw material costs and fixed costs of roughly NOK 70 million, and the majority of that is driven by higher alumina prices for the quarter. The last block on this picture is called Other.
It's NOK 300 million, and as I explained on the previous slide, that is pretty much all, driven by changes in other eliminations, and changes on eliminations of gain and profits in inventory. On key financials, we see a increase in revenue of about NOK 0.5 Billion, roughly 3% between the quarters. This is primarily driven by increased metal sales as well as increased revenues in the Energy sector. If you compare it to the Q1 2012, we have a decrease of close to NOK 1 billion, which is in part driven by the fact that we have closed the Kurri Kurri smelter during the year in Australia, but it's also helped by higher energy prices in Q2 offsetting that effect.
We have, for this period, excluded NOK 372 million in items excluded, which I will come back to on a separate slide to give some more details on. Financial items of NOK 171 million. Of this, -NOK 150 million is driven by Forex losses for the period driven by the net effect that we have net USD by the appreciating US dollar versus NOK at the end of the quarter. This gives us a positive income before tax of NOK 535 million. On that, we have calculated a tax expense for the period of NOK 281 million. This gives us a tax rate of roughly 53%, which is relatively high.
As most of you will know, and understand, this is driven by the relatively higher share of earnings from Energy, which has the higher power surtax of roughly 30% in addition to normal corporate taxation. All in all, this gives us a positive development on the reported net income from NOK 87 million in 2012 Q4 to NOK 263 million in the Q1 of 2013. I have already given some comments on the financial income and financial items. It is NOK -171 million for the quarter. Let me draw your attention to a new line in this reporting, which is called net interest on pension liabilities.
This is the fact, as I said, of the change on our implementation of IAS 19R, and here it was decision then to move the interest component down to financial items. If you look at the 2012 spread, we had NOK 280 million on this line for 2012. If you divide that by four, you get 70, which is NOK 38 million higher cost in 2012 per quarter compared to what we saw in first quarter 2013. The main reason for this is of course that we had significant lower pension liabilities going into 2013 compared to 2012, driven by the assumption changes by using the covered bonds in the Norwegian market instead of the government bonds as we had done in the past.
The other effects within the financial items area remain relatively stable. If we then look at the items excluded from underlying EBIT, and as we have mentioned previously in earlier quarters, we do exclude certain items when we discuss underlying performance to give you a better understanding of how we as management and administration look at the underlying business. In this quarter, we have excluded roughly NOK 370 million from our underlying result versus NOK 530 million positive in the previous quarter, so quite a big change quarter-over-quarter. If we try to work our way down the table, we see a negative unrealized effect on the embedded derivatives in the raw material and power contracts.
This quarter, the effect is mainly driven by the LME, changes in LME, but we also see some minor effects from currency and coal development. On the second line, unrealized derivative effects on LME related contracts, the effect this quarter is relatively small. Where we see the effects in the different parts basically offsetting each other to a large degree. In general, you can say that this is a combination of negative effects or positive effects on short positions, close in time due to falling LME prices, which is partly offset as we have some long positions out in time, then negatively affected by the fall in LME every quarter. The third item on this slide of any size is what we call rationalization charges and closure costs.
In this quarter, that is primarily driven by accruals for the corporate center improvement project, while in fourth quarter 2012, it was all related to the closure of our smelter Kurri Kurri in Australia. If we then move into our business areas and start with Bauxite and Alumina. The underlying EBIT for the quarter was NOK 63 million, which is roughly sideways movement from the fourth quarter 2012. As Svein Richard Brandtzæg mentioned, we saw a somewhat improvement in the realized prices, but this was more than offset by increased energy costs and sourcing costs for third-party alumina for the period. Our daily production, adjusted for fewer production days in the period, was relatively stable, but remains at the same weak level as we saw in fourth quarter.
As Svein Richard Brandtzæg said, it is something that we will continue to focus on going forward. Paragominas remained relatively stable on an annual run rate, compared to fourth quarter, which is quite a good achievement considering that the first quarter is also the rainy season in that part of Brazil. The realized prices, as I said, were up roughly 4%, for the quarter, having a positive impact on our prices, and results. As most of you know, roughly 20% of the volumes that we sell is now linked to the index price. This is a number that will gradually increase until 2016 when a larger portion of our portfolio will be open for, resale and new pricing structures.
The positive impact from the realized alumina price was rather more than offset by increasing operational costs, as Svenn-Åge mentioned, largely as a result of the issues related to higher oil consumption at the plant. In addition to these effects, it is also worth mentioning that this quarter had a positive impact from a settled insurance case, business interruption case, which had a positive contribution for the quarter. If we look into second quarter, we do expect stable production volumes, but we also expect somewhat increased maintenance activities, which should have some effect on volumes.
Let me also remind you that the alumina prices is basically priced with one month LME lag to LME, which represent a significant downside, or at least a downside, in terms of earnings for the second quarter, compared to what we saw as realized prices in the first. On Primary Metal, we saw a good increase in the underlying EBIT from NOK 58 million to NOK 364 million for the first quarter. As we've said, we saw an increase of roughly NOK 100 per ton from 1,940 to 2,043 between the periods. We also saw an increase in sales of roughly 36,000 tons, due to somewhat increased production, but also due to selling out of inventory. Combined, these two effects gives us an improvement of around NOK 300 million.
We're also happy to see continued good and improved contributions from Qatalum, up roughly 100 million compared to the previous quarter. Offsetting this, as I said, there is slight increases in variable costs of about 70 million, which most of that is due to increasing alumina prices. At the end of Q1, we have priced approximately 50% of our second quarter sales at NOK 1,975 per ton, excluding the Qatalum volumes. Let me also remind you that, as most of you will know, Q1 was the first quarter where we introduced the new pricing mechanisms in Primary Metal. Meaning that, in second quarter, it will be fully implemented for the whole period.
This means that on the liquid basis, we sell all the production on an LME one month lag. Due to inventory and timing effects, the realized price for the quarter will lag LME spot prices with roughly 1.5 to two months. If we look to Qatalum, we are very happy to see stable and high production levels in Qatalum. Also, in first quarter, we see on an annualized basis production above nameplate capacity, and we also see some increased cost of sales. The underlying net income for the quarter is improved by more than NOK 100 million compared to fourth quarter, reflecting both higher sales price, higher premiums, in addition to somewhat less maintenance than what we saw in the fourth quarter.
If we look into second quarter, we expect, of course, to see continued good production. Compared to Q1, we expect to see slightly higher maintenance activity as some of the activity was moved from Q1 to Q2. Metal Markets delivered an underlying EBIT of NOK 146 million versus NOK 70 million for the fourth quarter. If we exclude currency and inventory valuation, ingot valuation effects, which was relatively stable between the quarters, we delivered NOK 110 million, which is a sizable increase from the NOK 40 million in fourth quarter. This result was primarily driven by a 13% increase in remelt volumes in addition to stronger margins compared to the fourth quarter. We also, in this period, had good and strong contributions from our sourcing and trading activities.
Looking into second quarter, also in this area, we expect stable volumes from the remelt side. As we always do, let's remind ourselves that these numbers can be volatile, driven by the sourcing and trading activities, where we do have LME and currency effects impacting the results quarter- by- quarter. Rolled Products, we saw a good development, helped by the seasonal increase in sales, with EBIT up from NOK 70 million in fourth quarter to NOK 153 million in the first. For most product groups, we saw seasonal improvement in sales, but as Svein Richard Brandtzæg said, with the exception of can sheet, where there was somewhat lower export out of Europe in the quarter. We saw an improvement in the average margin, for this area, compared to fourth quarter.
As we've said, I suspect for many quarters in a row is that we do see a pressure on margins, in particular in the standard or general engineering segment. The improvement programs in also in Rolled Products are getting traction. I'll make a comment on the B2A and the 300 programs. In Rolled, we have a improvement program that is getting traction, and we see quite good improvements when it comes to productivity and costs matches measured either through kilos per man hour or cost per produced ton. It's a good start to the year. On the outlook, we expect stable volumes in the second quarter. We do expect margins to remain under pressure given the market situation in our markets.
For Energy, we had an improved underlying EBIT of NOK 195 million compared to Q4, giving us a result of NOK 517 million for the quarter. Prices went up from NOK 268 per MWh to NOK 311 in the first quarter in the NO2 pricing area where we have two-thirds of our production. The price was also driven partly by the cold and dry weather, which when it got so, led to a somewhat constrained hydrological situation at the end of the quarter. We were also helped by improved and increased seasonal production. It was up by 456 GWh , the production, and spot sales increased by 419 GWh between the quarters.
As normal, we expect somewhat seasonal lower production for second quarter that is also impacted by the low snow levels in the mountains. On pricing, the quarter is off to a good start. We have average prices for second quarter so far above the average realized prices in the first. On discontinued operations, which is in its entirety Extruded Products, we will continue to treat that as discontinued operations until we close the Sapa transaction, which we still expect to be closed in the first half of 2013. All previous periods remain restated to reflect this change. The underlying income from Extruded Products in this period is NOK 49 million, reflecting excluded items of a - NOK 40 million for the business area.
If we adjust for depreciation of financial items and tax of NOK -71 million, this leads to a pro forma EBIT, underlying EBIT for the business area of NOK -22 million. This is an improvement of about NOK 50 million compared to the pro forma figure for Q4. Needless to say, it is still a very weak result, reflecting the weak markets that we operate in. We have somewhat higher sales volumes compared to Q4, but if you compare it to first quarter 2012, it is below that level, and again reflecting the challenging markets. Looking at the second quarter, we do expect the challenging markets to continue. We do not see any quick turnarounds in this business area.
Finally, a quick look on the net cash and debt development for first quarter 2013. As most of you will remember, we started the year with a cash balance of NOK 1.7 billion. We have an underlying EBITDA of NOK 2.2 billion for this period, which is up NOK 900 million compared to fourth quarter. We had a negative change in net operating capital of NOK 700 million, driven in part by increased sales and higher prices. We also have a big change in what we call other adjustments of NOK 1 billion. Two major factors in that. One is that we have paid taxes in the period, in particular, the power surtax has been paid.
This is also where we back out the non-cash effects from the underlying EBITDA. Those three elements gives us a positive net cash flow from operations of NOK 0.5 Billion for the period. As we guided in 2012, we will keep a tight ship when it comes to capital and capital usage. So far this year, we have used NOK 0.5 Billion in investment, so we are very much in line with the yearly guiding of NOK 3 billion. From one perspective, you can see that the cash flow from continuing operations, including investments, is basically break even for the first quarter for 2013.
We have a negative contribution from the discontinued operations of NOK 0.5 billion, that is driven by the poor results in extruded activities in addition to some increase in net operating capital. Next is the financial lease. Some of you will remember, in the fourth quarter when we discussed, bauxite vessels in Brazil. One of those have now been delivered, and is actually on the water, and has now been moved into the balance sheet of Norsk Hydro, as a financial lease. Used to be part of adjusted net debt. It's been taken out there. From a net adjusted debt perspective, this is neutral, for Hydro. We have NOK 300 million in negative development and other, that is driven by negative currency translation effects, due to the weakening NOK versus U.S. dollars between the quarters.
All this together, we are left at the end of the quarter with a somewhat lower cash balance, but still at a positive NOK 400 million at the end of Q1.
Eivind, as I mentioned at the beginning of my presentation, there is no quick fix to the challenges in the market, so we have to continue to focus on what we can influence on, which is to improve our operations and focus on our customers. Continuous improvements are a trademark of Hydro, and operational excellence is a prerequisite for success in this business. We are well positioned. We are well on track, and we are also then position ourself for the future when the market picks up again. Thank you very much for your attention.
Okay, we open up for questions from the audience here in Oslo. We have a microphone coming around, and we have a question here from Hans-Erik Jacobsen on the second row here, Astrid. Please introduce yourself for the people online.
Hans-Erik Jacobsen, Swedbank. Demand for aluminum is quite healthy given the economic status of the world. Prices continue to fall and earnings from Norsk Hydro and for all other aluminum players have been at a sustainable level so many years. Is it possible to give any sensible explanation for why this is happening year in and year out?
That's a very fundamental question, and of course, if you look at demand, I agree with you. It is not a demand problem in aluminum. Aluminum is growing faster than any other metal. Given that growth, I think we can say that the appetite for building capacity has been bigger than the appetite for consuming aluminum. There has been a supply situation that has impacted on the price development of aluminum. Because if you look at all other metals, they have benefited from quite different price development. Aluminum price is very much related to the cost curve of aluminum, which then means that it is the supply that has been the big issue here. It's not a fundamental demand problem. It's a supply problem.
Still one should expect that somebody would be like you and close more capacity, in order to balance the market and drive prices back up.
Yeah. I cannot comment on what our competitors should do here, but we have reduced our capacity over the years. The last capacity cut we did was the Kurri Kurri smelter last year, which was shut down, a curtailment of 180,000 tons.
Okay, there is a question in the back.
A couple of questions. Bengt Jonassen from Carnegie. Just to follow up on the question from Hans-Erik Jacobsen, because if you look at, in your report, you're stating that primary production outside China was down 1% and demand was up 2%, and demand exceeding supply. Still, aluminum prices fell, so still not because it makes no sense in that way. Secondly, on your performance for the quarter, if you look at the trend in alumina production, it's quite negative for the last four quarters. I'm starting to get concerned if there's an underlying change in your assets. Have some comments on that. Second question is the announcement of a possible expansion at Karmøy of 70,000 tons, which works out to be a very high capital cost. Let's say, the fundamental precedent on the long-term aluminum price to defend such a capital expansion.
I can answer the first and the last question, so maybe Eivind is coming directly from Brazil, so he can answer the Alunorte question. Again, you also have to take into account the inventory in aluminum here. Whether it's ±1%, I don't think that gives a big price signal to the market. There is in total 12 to 13 million tons of aluminum in the global inventories with registered and unregistered inventories. Even if this metal is not physically available in the market, I believe it has some impact on pricing of the metal. Maybe you can take the Alunorte question.
The Alunorte question. I think, you know, one of the most important things that we're working on in Brazil now is really the B2A program, which is improving production stability among many other things. The effect that you see now, which we agree and commented upon is quite disappointing, is that it is at a low level, lower level than expected. Part of the reason or primary driver for this reason is the power outage that was in Northern Brazil, which gave instability to our site in fourth quarter. It takes time to get the production stability back, in such a plant when that happens. This is the after effects or the effects that we are struggling with a little bit now in fourth quarter or in first quarter of 2013.
It will come back. As Svein Richard Brandtzæg said, you know, going into second quarter, it is very much about preventive maintenance in order to be prepared for these activities if they should happen again, to minimize the effects of such incidents.
With regard to the technology pilot at Karmøy, this is a research project for new technology of electrolysis cells that are producing aluminum with a significant lower energy consumption. We are not going to do that unless we get significant support from Enova. There is a technology fund that has been established, and which can give up to 50% support on the additional cost for such a project. In addition to that, there is also a condition upon energy contracts, not only for the pilot, but for possible expansion long term. This is a long-term project. The first time, if everything falls into place, we can get metal from that pilot is in 2017. This is long term.
There are a lot of decision gates that has to be passed before we are ending up with production there. The first stage is 70,000 tons. Of course, we are not going to do it if it's not profitable in that term.
Okay. Any other questions over here? Astrid, you have to run.
Knud A. Bakken, DNB Markets. You have been doing well on cost reductions, but could you please give an update on the potential and the timing of cost reductions in joint ventures?
We will revert to the details at a later stage. We are not talking about a 300 program in joint venture, because there we are also dependent on partners and there are different potentials. We are targeting a significant improvement in our joint ventures, and we will revert to that at a later stage when we have the confirmed figures on board. There is clear potentials also in the joint ventures. The experience that we have learned from our 300 program for the fully owned smelters will, of course, also be taken into account when we are now moving into the joint ventures.
We have already started in several areas, even in Qatalum, where the performance is at the highest level globally you can find. We still see potential also there to cut costs. We have Albras, another joint venture where we really see good potentials. We will come back to the details later.
Thank you.
Okay. Any other questions? No. We will have some Q&As down here in the pits afterwards. Thank you very much for coming. See you next time.