Welcome everyone to presentation of Hydro's fourth quarter results for 2012. Welcome also to all of you following us on webcast. The results will be presented, as usual, by the CEO, Svein Richard Brandtzæg, and CFO, Jørgen Rostrup. Afterwards, we will have time for Q&A, as usual. Svein Richard?
Thank you, Inger. 2012 has been a challenging year for the company. The gloomy economy was creating weak markets, low aluminum prices, and our response to that situation is to react swiftly and significantly and adapt to the situation and the markets. For 2013, our efforts to improve our operations will continue. In the first quarter, the underlying result of NOK 138 million is about NOK 157 million better than the previous quarter and the third quarter last year. It is about NOK 1 billion below the fourth quarter in 2011.
It was impacted by lower aluminum prices, higher alumina prices, but we also had lower input costs, and even lower energy costs for Bauxite & Alumina, and also a lower energy cost and cost for petroleum coke in Primary Metals. In Rolled Products, we had impact of weaker markets, seasonally, lower demand in the fourth quarter. That is normal, but also supported by export. Also in the fourth quarter, we normally do the maintenance in Rolled Products, which means that we also had higher cost in Rolled Products. Energy was impacted by higher production and also better prices due to the colder weather, higher consumption. The improvement programs that I will come back to later are on track in all areas.
The board of directors are proposing a dividend of NOK 0.75 per share, in light of the strong or robust financial situation of the company. I'm not going to comment on the global economy, but I think it could be worthwhile to give some comments on the implications on aluminum. Let's start with Europe. The demand in Europe has been weakening in 2012, on the back of the weak situation in Europe, of course. We saw Germany better, helped by export, and we see that in 2013 we should expect a stable situation, but of course, with high degree of uncertainty. The U.S. market had a strong growth in 2012. We expect that will continue.
It is helped by transportation, but we also see now that there is also a good development in the construction market that will also support the growth in the U.S. market going forward. China is very important for us. 8% growth in demand in aluminum in 2012. We see that the new administration in place are now ready for a new double-digit growth period. We expect for aluminum that the growth will continue at a similar level as we saw in 2012. Rolled Products 2% below 2011 in total for the year. 1% lower in the fourth quarter compared to the third quarter, supported by export especially to South America and Asia.
If you compare the fourth quarter 2012 with the previous year fourth quarter, 5% better, because fourth quarter of 2011 was a specifically weak quarter in the Rolled Products. If you look at the different market segments, we have taken some production capacity from heat exchanger, which is part of the automotive segment into can because this helped us to improve the value creation. There are higher margins in the can business. We reduced the total volumes in litho and can, although litho itself is a strong market. We are a global leader in litho.
General Engineering, a weak market, low margins, and we have also reduced the production of General Engineering, reflecting very much the situation for the building and construction and general engineering market in Europe. We are a leader in foil. That has been quite stable. Can business has improved during the quarter. This figure shows the supply-demand balance. The green area is the demand. As you see, some weakening in the quarter, which is a normal seasonal effect, but also some small adjustment of capacity increase in the end of the quarter, due to restoring or restart of disrupted capacity, which was very much related to the production problems in Hillside, in South Africa and Alma in Canada. They are back on stream now.
We expect the global growth in aluminum, ex-China, to be about 2%-4% in 2013. We also expect the market to be balanced going forward in this year. We have previously shown you the situation on inventories. What you see here on the left side is the global registered inventories. There are some changes between unregistered and registered inventories here. If you take a total picture, it is moving sideways in the quarter. Very much also reflecting the balanced situation on supply and demand in the quarter. On the other hand, we see strong premiums on standard ingots, P1020, at record highs this quarter, reflecting a tight physical market.
The fact that we have these high ingot premiums means that we are taking down remelt of standard ingots because the profitability of that business now is significantly reduced due to the fact that we have to pay very high price for standard ingots. Of course, this is helping the primary production. Volatile aluminum prices, you have seen it before, that continues at low level in the quarter. We see that we have realized LME of $1,940 per ton in the quarter. We have already now priced about 60% of the volumes in the first quarter at a level of $2,050. The realized price for the whole year in 2012 was $2,080 per ton. Alumina, however, is moving more stable than aluminum metal price.
In percentage of LME of course, that varies according to the variation of the metal price. The index price of alumina is stable, moving from about $315- $327 per ton during the quarter. It is now trading at about $350 per ton. If you calculate the percentages, it is about 15%-17%. We are supporting very much index pricing, and we see now that contracts are more and more moving into index pricing instead of pricing of contracts related directly to the LME price. The next figure here shows the export-import balance in China.
It has been very interesting now to follow the bauxite import to China from Indonesia, after Indonesia installed a ban of export of bauxite from 2014, and had temporary restrictions already that came in effect in May last year. We have seen now that the export of bauxite from Indonesia to China is now increasing again. We still believe that the ban is valid from 2014. It confirms what we have said before, that fight for raw materials are continuing, and that China is now looking for new sources. We have also announced that we have also sold bauxite to China from Brazil, so it shows the situation. There are also some disruptions short-term, creating some concern, which may also, in fact, supporting the price development of alumina.
On top of that, also of course, then long-term concerns with regard to supply of bauxite to China longer term. Semis and fabricated products quite stable, and we also see that, China still continues to balance the supply-demand on primary metal. China is not a net importer or net exporter of primary metal. I mentioned in my introduction that we saw lower input cost of raw materials for bauxite, alumina, and also for primary metal. But if you look at the market prices, they are quite stable. Looking at the development of LME compared to the raw material prices, LME aluminum price is lagging behind. There is no relief, especially on caustic soda, which has increased substantially since the reference first quarter 2010.
In energy, we saw, as expected, a positive development of energy price in the Nordic market after a weakening price during the first three quarters. Of course, due to colder weather, we also had a short peak due to very high consumption due to cold weather. We started up with 6 terawatt hour higher than normal in the Nordic system. We ended up somewhat below the normal level after a reduction in total of 13 terawatt hour. We are now in the Norwegian reservoir level of about 70% of the capacity.
I'm happy to confirm that, Paragominas volumes are continuing to improve, and, we increased the volumes of bauxite production in Paragominas with 13% in the last year. We are now producing, at the speed of 9.2 million tons. In Alunorte, the production has been stable. We have identified both internal and external factors that we are now attacking to increase the production there. The main job for us now in Brazil is to stabilize the production at, similar levels as we had in Paragominas, to stabilize at higher levels in Alunorte and reduce the cost. The program that we have called From B to A in Brazil is moving forward according to plan.
The target is to reduce the cost with NOK 1 billion, and most, or at least more than half of it will be executed and delivered this year. If you then take a look at the Primary Metal, we continue with the $300 program. We are moving according to plan. We have now reduced the cost at the end of 2012 of $235 per ton for our fully-owned smelters. If you look at the situation for total portfolio in Primary Metal, we have reduced the cost of $225 per ton. Of course, here Qatalum is also helping a lot after it was included in this equation from 2012.
The EBITDA margin now is $300 per ton at current situation and in what we had in 2012. This concludes my part, so I leave the word to Jørgen to go to the numbers.
Thank you, Svein Richard. It's good to see you all here today. We're going then to run through the numbers as we always do. Let me start with underlying EBIT. I would like to draw your attention first to some reporting issues. That's always a good start in the morning to talk about reporting issues. These are related to the joint venture work that we are carrying out with Orkla on Extruded Products and Sapa. We are reporting Extruded Products as discontinued operation from this quarter, from the date we signed the agreement, which was, I believe, 15th October. With the implication that we have a separate line after income from continuing operations called Discontinued Operations.
We have not depreciated the assets since we signed the agreement the 15th of October, according to IFRS. Also quarterly and financial year information has been reclassified for 2011 and 2012, and many of you should have received that a few weeks back in preparation for the quarter. The extruded product assets are present and liabilities are presented as assets held for sale in the consolidated balance sheet for 2012. The Q4 report is amended and to reflect the new structure, excluding extruded products. This goes for group underlying EBIT and EBITDA, and it goes for market operational and overview information.
In the back of that quarterly report, there is a separate Extruded Products pro forma section, which means that we are presenting it as if it was ordinary business with condensed market, operational and financial information. Much for accounting information this morning. Let me continue with Hydro going forward. We had a result, as Svein Richard said, of NOK 138 million. It's up NOK 157 million quarter-over-quarter. I'm coming back to the business areas. Just draw your attention to other and eliminations, where you see a significant change in the quarter. We have numbers of NOK 305 million versus NOK 64 million minus as a charge in this area or this reporting area in third quarter. That's NOK 240 million change.
The underlying charges for the businesses and the common services in this reporting area is at the same level in both quarters, around NOK 150 million, according to also our guidance over a longer period. The difference are these elimination on gains and losses of internal inventory, meaning goods in production moved through the value chain that has not been sold externally. Last quarter, we had, again, a positive effect here of NOK 90 million. This quarter, we have a negative effect of NOK 150 million. That's a delta of NOK 240 million higher charge this quarter. The business area above this line, the Bauxite & Alumina, the Primary Metal, et cetera, et cetera, is actually performing NOK 400 million better this quarter than last quarter. Let's move to the high level waterfall analysis.
Again, the change quarter-on-quarter net are limited, so it's a little bit awkward to talk about billions here. Still we keep the same format. Variable cost, as Svein Richard said, there is a relief of NOK 0.3 billion. Two-thirds of this is related to Primary Metal, I will revert to that later, and one-third is related then to Bauxite & Alumina. Energy volume and prices constitute of NOK 0.2 billion+ . This is predominantly energy prices through a more wintry quarter, fourth quarter than the previous quarter. The other way around is alumina and aluminum volume and prices.
There is actually a positive contribution on alumina from Bauxite & Alumina, so these are a large negative development through the quarter on the Primary Metal due to the LME and the contract structure we have there. Other several effects obviously, but the largest is the elimination of the gains and losses on inventory, and we are rounding that off to NOK 0.2 billion. Let's look at some key financial numbers. Revenue is in the quarter up NOK 0.9 billion or approximately 6%. This is due to higher prices and volumes in Bauxite & Alumina and Energy, while the other areas are seeing reduced volume and prices in the quarter.
We have talked about the reported underlying EBIT, while the reported EBIT is positive NOK 669 million, which implies that we are excluding NOK 550 million, approximately NOK 530 million, from reported EBIT deriving at the underlying EBIT, which we think is more representative for the performance in the quarter. Reporting-wise, result is NOK 669 million, but we think that the number that we are showing you, NOK 138 million, is more representative for the performance in the quarter. These NOK 532 million items excluded, I would give two comments to. One is that on Kurri Kurri there are some impairment effects and restructuring effects that are netting each other out. You will see some effects in the details on Kurri Kurri, but basically we are running.
We have closed down Kurri Kurri and the job is done, and then there are some netted numbers equaling in total to zero, which leave the full positive effect on the item excluded explained entirely by derivative effects in the quarter. One third of these NOK 532 million, derivative effects, it's all related to the Statkraft, predominantly to the Statkraft contract, which is an embedded derivative contract, meaning that we have seen a decline in dollar, a decline in LME and decline in coal through the quarter. The contract factors are so on that contract that give us a lower expected future cost in that contract, and we take that as an item excluded in the quarter. That's one third. Two thirds are related to operational hedges.
Simply the fact that we have entered these hedges as we do every day through the quarter. We have entered them on a higher LME than what we see at the end of the quarter, and you simply get that positive hedge effect on that. Going further down on the list, financial income has a charge of NOK 82 million for the quarter, including a currency loss of NOK 102 million. We should expect a gain from the development of Norwegian krone compared to US dollar in the quarter, and that we see. We also have external loans in dollar versus Brazilian reais, and there has been an opposite effect there, so that is netting each other out. The losses here is related to intercompany loans in the relationship of euro and US dollar.
EUR has strengthened in the quarter, and therefore we see a loss of EUR 102 million. It's all without cash. We are back to the non-cash effects, where you have the opposite effect on the over the equity on the balance sheet. Income before tax, positive NOK 582 million. Tax expense of NOK 224 million, which is approximately a little bit less than 40%, related to the fact that we have a higher share of income from the power surtax area. Gives a net income of NOK 113 million and up from negative NOK 231 million in the third quarter. You see the line loss from discontinued operation in this slide, and I will revert to some more explanation of that. I need to say two words then on the year.
It has been, as Svein Richard Brandtzæg said, a challenging year for the industry, and therefore also for Hydro, a negative development from the year before, obviously. The LME has been down 16%-17% on the year, in total versus 2011, from close to 2,500 to just above 2,000 level that we have seen as an average for 2012. Therefore we also have a significant drop in underlying EBIT of altogether NOK 4.8 billion year on year. When you compare the bottom line numbers, remember the gain we had due to the reclassification of the Alunorte assets. That was a special accounting impact in 2011. Okay, let's move over to the business areas. We start, as we always do, with the Bauxite and Alumina.
Underlying EBIT of NOK -73 million, but an improvement of more than NOK 300 million from a very weak third quarter, as we said last time we met. It is related to higher LME-linked alumina prices. It is linked to lower energy costs, Alunorte, and it's linked to higher results from our commercial operations. You can divide that NOK 300 million approximately one third each on those three elements. Prices were up in the range of 6% in the quarter. They moved from $270 to $285 in the quarter, and that is approximately one third of the total improvement of NOK 300 million.
Bear in mind, as Svein Richard Brandtzæg said, that prices on the spot index are now in the range of $340-$350, which is 16%-18% higher than the price we have achieved through our sales mix. Our sales mix constitute of only 20% of volume sold on this index, the rest on legacy contracts where the alumina price is priced to the LME. As we guided for in second quarter, cost at Alunorte came down, cash costs came down. It came down by $22 from $261 to $239 per ton, primarily due to the fact that state of Pará decided to once again reinstate the ICMS tax exemption on fuel oil.
You will remember that we talked about that in second and third quarter, but we have once again got the exemption on that special tax. This together with the cost improvements in Paragominas accounts for then as I said, one third of the improved results. The final part is better commercial results in the commercial operations for two reasons. We have sold more high margin bauxite in the high premium bauxite in the period. We also had a better sourcing mix on alumina from third parties, which has brought up a higher margin in our business. Stable production levels Paragominas. We are producing at through the quarter at the rate of 5.6 million tons annualized, which is quite satisfying.
Sorry, 9.5 for Paragominas, but only 5.6 for Alunorte, with which Svein Richard addressed earlier. We assume for first quarter a stable production will continue to work on Alunorte production issues of course. There should be a small, should I say, upside on the alumina price in first quarter due to the LME development through this quarter. Primary Metal, an improvement of NOK 63 million in the quarter to positive 53 million. It's still low results due to the price level in that part of our business. We see significantly lower realized prices through the quarter, and the effect of going from $2,020 to $1,940 USD per ton is all in all, plus some volume effects more than NOK 250 million negative on the quarter.
When we have an improvement, they constitute of two main elements. One is a raw material side. It goes from everything alumina, power, carbon, also other input factors, which is in the range of NOK 200 million. We also have an expected improved, but still quite satisfying result in Qatalum. I will revert to Qatalum on the next slide. We have sold about 60% of our primary production, or we have priced it, affecting the Q1 result at a level of $2,050, and this exclude the volumes from Qatalum, as you know, in the calculation. We are changing the pricing formula as we talked about on Capital Markets Day. We are now fixing the price one month ahead of production.
There are some inventory effects which means that we on average will see our prices hit the P&L 1.5-2 months after the spot price notification on the LME. This is primarily due to align more to the new customer pricing patterns that we see in the market and that we have encouraged very much to have a shorter pricing horizon. Let's talk about Qatalum. First of all, it's very satisfying to see that we have achieved on our share more than 300 kilotons of production in a year where we still have had a start up training and concentration on a large unit, and also the unfortunate fire in the cooling towers.
All in all, production of 604 kilotons on 100% basis, which is 3.5% above nameplate capacity in the second year of operation. This is quite satisfying. We have an underlying net income improvement of NOK 90 million compared to third quarter, mostly reflecting that we are now back to generating all the power we need through our own system. The increased energy cost that we saw in second and third quarter, and we call that approximately NOK 70 million in effect in third quarter, that has now gone. And that's the main reason for the explanation. There are also some increased prices, costs are quite stable. Let me comment one word on the cash cost of Qatalum.
We have for many years talked about where we believe the cash cost will be on Qatalum and where we are positioning in this new plant. We have discussed with you that we believe we should aim at between $1,400 and $1,500 in cash cost when you have a reference on the LME of between $2,000 and $2,500. When we are looking at this number here, and we are taking the average LME for 2012, we reach an apparent cash cost around $1,450 for 2012. Then I can also tell you that what we have seen of development is that has not been a flat curve throughout the year. It has been a curve sliding downwards.
Meaning we were a little bit over 1,450, and we believe we now are a little bit below 1,450. We feel that we very much are close to the targets that we set out. We still have work to do. It's still a new plant and a new organization, et cetera, et cetera. All in all, it's all reasons to be pleased with the work that Primary Metal and our partner, Qatar Petroleum is carrying out in the Qatalum joint venture. For Q1, some increases in sales premiums hopefully on Qatalum. Based on what I just said, I should also hope, and we believe on fairly stable costs in the quarter. Metal Markets has an improvement in underlying EBIT of NOK 62 million-NOK 69 million underlying EBIT for the quarter.
However, you will see a large shift in currency and inventory valuation effects. If you withdraw that and look at the underlying performance result in this business, I think it's fair to say that the business is performing less good in a way as expected in fourth quarter. The performance-related result went from NOK 100 million and then down to NOK 40 million. This is for two reasons, as would be normal, seasonal effects in the quarter, lower volumes, and also somewhat lower margins. Also, due to the fairly tough extrusion billet market in Europe is one large effect. The other large effect is a weak trading result in this quarter, positive results, but weak trading results. As we know, trading results will fluctuate from quarter to quarter.
We believe some increased remelt volumes in next quarter. We believe the quarter will be seasonally stronger. Again, bear in mind that in particular Europe is in general weak. We see that partly compensated outside Europe, both in the North American market and also in the Asian market. We will get some effect from that. Rolled Products, last quarter, we put up a small warning on earnings for fourth quarter Rolled Products. Also due to the fact that third quarter was quite strong. We said that the shift quarter-on-quarter could be somewhat larger than what we had seen historically. I think that was a fair description.
We are down NOK 143 million to NOK 71 million from a very robust third quarter. As Svein Richard Brandtzæg said, interestingly enough, sales volumes fairly stable quarter-over-quarter. The seasonality effect that we could expect was less. It was only 1% down from Svein Richard Brandtzæg's slide. There is a shift in mix of products sold, so therefore there is a higher degree of lower margin volumes sold in fourth quarter, and that is influencing the results. We have said that a couple of quarters now, we have benefited in Rolled Products from our overseas sales, in particular to North America, where the dollar has been strong and we get an extra margin through the currency relationship. That has shifted now, so the overseas sales has also given less of a margin in the quarter.
Another explanation is, of course, as always, fourth quarter is a heavy maintenance quarter in Rolled Products, so operational cost is increasing in the quarter, and that's the second reason. Again, seasonally should be higher volumes in Q1. But also here, we're putting a slight warning on it. It is a softer market, although nothing near what we see in Extruded Products. It's totally different market, and it continues to be so into first quarter, but we should be prepared for some weakness in the first quarter compared to earlier first quarters going back. Energy, we have an improvement of NOK 112 million to NOK 322 million in fourth quarter.
Volumes are up, prices are up, and obviously related to volumes, also some cost is up, partly production related, partly and not least maintenance related in the quarter. Prices are more than the NOK 100 million that you see in net effect, quarter on quarter. Production is up 300 gigawatt, approximately, but only 100 gigawatt more in net spot sale into the market, and that is because concession sales has been seasonally higher. Our concession holders are typically taking out larger volumes when the power prices are high, and we can't blame them for doing so. Volume production-wise has been high in the year in total. We have had a production of 10.3 terawatt-hours. It's 7% up from the 9.6 terawatt-hours normalized production in 2011.
While prices has been significantly lower, 40% year-over-year to NOK 218 per megawatt-hour, compared to NOK 360 in 2011. It's the normal balance, high production, lower prices, and this is the way it works. We believe in higher production in first quarter. Prices are higher. They have been up north of NOK 400 . They are now down to 340, 320, 340 NOK again. But high production and good earnings, and a more normalized first quarter, the rest of our levels are close to normal. We will show you one slide on discontinued operations, which is entirely Extruded Products.
As I said, this is the IFRS handling of an asset that is going out of the business and waiting for final approvals. We will just take you back to the pro forma underlying EBIT number, which you also have a specific table for in the quarterly report. Loss from discontinued operations we saw earlier was NOK 251 million in the quarter, which is the reported number, including what we call restructuring and rationalization charges. It's including what we normalize, what we call item excluded. A reported net loss of NOK 251 million in the quarter.
If you then deduct NOK 193 million in item excluded, meaning the effect of the rationalization program, primarily in Europe still taking place, and you add a little bit more or you deduct a little bit more for depreciation and taxes, you arrive at an underlying EBIT number pro forma of negative NOK 75 million. This NOK 75 million you can compare to the underlying EBIT that we reported the last quarter of plus NOK 23 million. It's approximately NOK 100 million worsening in the underlying operational result of Extruded Products quarter four compared to quarter three. Quarter four is always weaker for Extruded Products. Again, it's predominantly seasonality that makes this. But again, this is due to a 10%-12% lower volume in Europe, primarily within general extrusion.
Fourth quarter has been a low quarter, volume-wise. If we look at net cash development, we started the quarter at zero net cash, net debt situation. We have generated from our operations NOK 2.8 billion in the quarter. That is NOK 1.2 billion in EBITDA, so operating result before depreciation. We have a change in operating capital of NOK 1 billion. It's partly prices obviously and volumes, but it's also inventory build down to some extent. We this time have a positive other adjustment effect of NOK 0.6 billion. It is partly derivative effects, and it's also reimbursement of previously paid taxes, re-sales, sales-related taxes in Brazil.
We have an investment of NOK 1 billion for the quarter, and this is excluding Extruded Products. If you take the annualized number of this, we have invested, excluding Extruded Products, around NOK 3.4 billion for the year 2012. If you then include NOK 0.7 billion for Extruded Products, we have invested approximately NOK 4.3 billion, sorry, NOK 4.1 billion in the full year 2012. This is obviously again somewhat lower than what we guided for also at Capital Markets Day last time we met. A couple of words about pension liabilities. We are seeing a significant decrease in our net pension liability as we account for it at the end of 2012 compared to 2011. 2011 here is including Extruded Products.
2012 is excluding Extruded Products. That is obviously one effect. If we look at the benefit obligations, projected benefit obligations first, they are down in the range of NOK 5 billion year-on-year. Almost half of this is related to Extruded Products. The other half of this is related to what we discussed at length at Capital Markets Day, namely that we have used covered bonds as the reference for our discount rate as opposed to governmental bonds due to the discussions that have taken place and the conclusions drawn from that discussion externally, as you all know. Covered bonds are deep enough.
There is enough market for it to allow us to use that, and we feel that is a more representative discount factor than the government bonds. That means that we have gone from 2.5% discount factor to 3.75% discount factor. The discount factor in Germany has gone the opposite way, and there are some other elements, but these are the main elements. All in all, this takes down the projected obligation by in order of NOK 5 billion. If we look at the plan assets, they have decreased, and that is entirely due to the fact that we are taking out Extruded Products from this. There is a NOK 1.7 billion decrease, and that is Extruded Products.
All in all, this is going from 8.4 on the net pension liability at fair value to 4.8. If you go to the bottom of the slide and see net of tax, the change is not of the same magnitude simply because the tax calculation in 2012 comes out a little bit different. It's still a significant drop of NOK 2.6 billion. That NOK 4.3 billion that you see at the bottom of the slide is the number that we apply in the next. I will show you the adjusted debt number for the company. Just mention that we believe in a pension cost lower than what we guided for at Capital Markets Day, also primarily due to the change in assumptions that I just talked about.
We believe in the range of NOK 600 million in total pension costs for the year. One quarter of this, 25%, will be financial items, and three quarters will be on the underlying EBIT level. The next slide is the adjusted net debt. We believe this is confirming what Svein Richard said. We have a robust balance sheet and a robust overall financial position, we believe. We also, by the way, believe that that is necessary in an industry like aluminum right now. The adjusted net debt is down, the way we see it by NOK 12 billion, from end 2011 to 2012. This is not due to the net cash/net debt situation.
You would see that that was approximately at the same level, NOK 1.7 billion both in December 2011 and in December 2012. We have the pension liability at fair value significantly down NOK 2.6 billion. We have also taken out Qatalum from this definition now, simply because there is no longer any completion guarantee towards the owners related to the project financing of Qatalum. That has been signed off. There is no completion guarantee on us or on QP, and therefore we believe it should no longer be included in adjusted net debt. This is also obviously the same way the rating company would do it. We have some lease arrangements and some Extruded Products elements and effects on the last item.
All in all, leading to this development and an adjusted net debt of NOK 8.3 billion. I think Svein Richard said what needed to be said. The board of directors are proposing a dividend of NOK 70.75 a share for 2012, reflecting what we think is a fairly good operational performance in total and a robust financial position. However, also taking into consideration the weak markets and uncertain market outlook. I think you will see on the calculation basis, the average five-year payout ratio is high. It's 172% or whatever, compared to the policy of being through the cycle around 30%.
This is obviously reflecting that maintaining a dividend is crucial for us, and there has been weak earnings in this period, so we should be above the average number. Earnings have been very, very weak. It represent a payout of approximately NOK 1.5 billion, if approved by the annual general meeting. Thank you, Svein Richard.
To Jørgen.
If I sum up the year we have been through, it is definitely the fact that it's been in a challenging situation for the Aluminum industry and also for Hydro with the weak markets, especially in Southern Europe, pressure on margins, low LME, and low and reduced volumes for some of our business areas. This calls for new actions with regard to adapting to the situation. At the same time, we see that there is a robust growth of Aluminum consumption globally. That, I must also say I'm quite optimistic with regard to the long-term development of the Aluminum market globally.
It doesn't change the fact that there is a need to continue our efforts to create a global leader in aluminum, to continue our efforts to reduce the costs like we have done with regard to the $300 program that will be finished in 2013, that we also continue now with the B2A program in the Bauxite & Alumina business area. Finally, our first priority is to create competitive shareholders' returns. Thank you very much for your attention.
Okay. We open for questions, if there are any questions from the audience here today. Seems to have been very clear, Svein Richard and Jørgen. Before we finish up, it is the last quarterly results presentation for Jørgen or for Hydro at least that is. How does that feel, Jørgen?
Well, it feels sad and good at the same time. Of course, I should probably say here that the finest moments have obviously been together with the financial community, so it's good to end it here. I think we leave it there.
Yeah. Let's leave it there.
Good. Oh, good.
Thank you. Thank you.
Thank you. Let me also introduce our new CFO, Eivind Kallevik, that comes directly from Brazil and has been working through the whole value chain and lately, head of finance in the Bauxite & Alumina business in Brazil and now taking over as the CFO from the fifteenth of February.
Okay. Thank you. We'll finish it off. Questions to the CFO, current CFO or the CEO will be taken down here in the pit.