Norsk Hydro ASA (NHYDY) CEO Hilde Merete Aasheim on Q3 2020 Results – Earnings Call Transcript

Norsk Hydro ASA (OTCQX:NHYDY) Q3 2020 Results Conference Call October 23, 2020 2:30 AM ET

Company Participants

Line Haugetraa – Head of IR

Hilde Merete Aasheim – President & CEO

Pal Kildemo – Executive VP of Finance, CFO

Conference Call Participants

Liam Fitzpatrick – DB

Conor Rowley – Crédit Suisse

Jason Fairclough – Bank of America

Ioannis Masvoulas – Morgan Stanley

Amos Fletcher – Barclays

Jatinder Goel – BNP Paribas

Daniel Major – UBS

Line Haugetraa

Good morning, and welcome to Hydro’s Q3 Presentation and Conference Call. Today will run similar to last quarter where we will start with the presentation by CEO, Hilde Merete Aasheim; followed by CFO, Pal Kildemo, before we end with a Q&A session.

The presentation slides we will walk through can be seen on the webcast. The link to the webcast as well as the slides can be found on hydro.com. Please note that you will need to dial into the conference call to be able to ask questions at the end. It will not be possible to ask questions over the webcast.

If there are any media inquiries or one-on-ones with either Hilde or Pal after the presentation, please contact Head of Media, Halvor Molland. Now change to the next slide, please.

With that, I turn the microphone over to you, Hilde.

Hilde Merete Aasheim

Good morning, and welcome from me as well. Before getting into the quarter, I would like to first highlight the photo to the right on the slide. The photo shows the new B line at our Husnes primary smelter in Norway. After running at half capacity nearly a decade, we will restart production next month. Line B has been upgraded with technology elements from our primary technology pilots and can produce aluminum at world-class operational and environmental standards.

We expect this next line B to contribute nearly 100,000 tons of primary aluminum a year once fully ramped up. Our decision to reach our Husnes line B is the result of a strong market development than expected in Q3 with the aluminum oversupply expected for 2020 gradually declining. And while downstream demand is still down year-on-year, the trend is improving, supporting our results this quarter.

Underlying EBIT for third quarter was NOK1,407,000,000, up from NOK1,366,000,000 in third quarter last year, while our free cash flow doubled from last year, ending up at NOK3.1 billion for the quarter, reflecting our key focus on cash release. Within our downstream businesses, Extruded Solutions recorded a strong quarter with underlying EBITDA of NOK1.4 billion, representing a 28% increase compared to Q3 last year. The result in Extruded Solutions is supported by strong cost focus, but also temporary cost reductions in light of lower volumes and reduced activity levels.

For Bauxite & Alumina, we are happy to report that with extended pipeline maintenance, which led to a temporary closure of alumina’s bauxite mine and reduced capacity at Alunorte has been completed as of October 8. We expect to return to full nameplate capacity at Alunorte by the end of Q4, in line with earlier targeted ambitions. Within Energy, on Wednesday, October 21, we announced a deal with Lyse to merge almost all of their power assets with Hydro’s — Hydro power plant and rolled out into a stronger joint Hydro power company.

As a consequence of the transaction, the Aresco assets will not revert to state ownership at the end of 2022, meaning we have secured long-term access to renewable power for our operations in Norway. In addition to these internal developments, we are also encouraged to see positive development within the regulatory environment, in particular in Europe, which I will refer to later in my presentation.

Then next slide, please. Then let me comment on our key performance metrics. If we start with EBITDA, the underlying EBITDA declined by 3% compared to the third quarter last year, but improved 11% compared to Q2 this year. On free cash flow, I’m very pleased that we are able to deliver significant improvement, both from last year, but also from last quarter, with a doubling from last year and a tripling from the previous quarter.

We have a strict focus on working capital and CapEx in addition to our ongoing improvement efforts, supported by a high degree of flexibility as well as creativity demonstrated throughout the organization, which has been utilized to the full extent in the face of the challenges created by COVID-19.

On the business area key indicators, in the upstream, we have experienced a slightly higher cost base compared to the previous quarter when B&A was at record-low cost, influenced by the extended pipeline maintenance and higher raw material costs. In primary, we see a slight uptick in cost, which is mostly driven by currency development. Downstream, we see increased volumes compared to Q2, but still lower than Q3 from last year, in general reflecting the underlying market development with some differences across our product factories.

Our results are supported by cost reduction from our improvement program. However, we categorized the current status of the improvement program as yellow, or slightly behind, due to the reduced production at Alunorte in Q3. Going out of 2020, the improvement run rate should be ahead of target with Alunorte at nameplate capacity and downstream improvement efforts ahead of plan. Please move to the next slide, please.

Before I go into further into the market and results, I would like to highlight our safety performance and reiterate that health and safety of our people always be our top priority. This is part of our DNA and perhaps even more important now during the COVID-19 pandemic. On the left-hand side, you see our safety record in total reported injuries 5 million hours worked, and I’m happy to report that the current 2020 levels of 2.6 injuries, 5 million hours worked is among our lowest level in years.

And I’m particularly happy that we have managed to maintain a good development despite the challenging COVID situation, which is a credit to the whole organization. Since the outbreak of the pandemic, our top priority has been the health and safety for our employees, contractors, customers, suppliers and local communities. And we have followed the advice of authorities and implemented strict precautionary measures throughout the Company.

The result of this can be seen on the chart to the right, where the green line at the bottom show the number of our employees that are currently impacted. The number has increased over the last week, in particular, in U.S. and Europe. But overall, the red line shows that the number of employees that have been in quarantine has reduced significantly, and more our workforce is recovering as visualized by the dark blue line.

We have also reduced temporary layoffs and short-term working schemes as markets are improving again, visualized by the purple and orange lines, which most operating — with most operations now running close to normal.

Let’s now move to the market on the next slide. The global aluminum market is expected to be in surplus through 2020, driven by COVID-19. However, the surplus is now lower than earlier forecasted based on an improving market. Starting with the left-hand side where we look at the quarterly supply-demand balances.

We see the oversupply in the world ex-China has fallen, as demand for aluminum recovers from record lows in the second quarter. In the second quarter, China’s V-shaped recovery outpaced capacity ramp-ups, resulting in a deficit. In Q3, we see that China has now ramped up supply and imported record amounts of primary to support its recovery, resulting in a surplus.

The global demand recovery and financial demand have resulted in the positive LME development we witnessed in recent months with price per ton of aluminum rising from USD 600 per ton in early July to around USD 1,850 per ton today. Looking at the balance for the full year 2020. On the right-hand side, we point to the balance estimate from the three different consultancies, which are in the range of 3.3 million to 4 million tons with surplus both in China and the world outside China.

As you saw last quarter, this remains — there remains some variations between the consultancies, indicating the uncertainty currently in the market. However, the variation and average oversupply now expected is lower than we observed in Q1 and Q2 due to the improving market outlook. Looking forward, when most analysis, including ourselves, expected oversupply to further reduce in 2021 has remained higher-than-anticipated before COVID-19. Now let’s take a look at the downstream market and move to the next slide.

The market for our downstream business areas is on the path to recovery, but continues to be uncertain. Starting with Extruded Solutions, we saw a 12% decline in our sales volume compared to third quarter last year. The overall decline in Extruded Solutions exceeding the market decline of minus 7% and minus 11% for Europe and North America, respectively; however, this market development was much better than what we expected three months ago when it was predicted, declines of 22% and 14% in Europe and North America markets, respectively.

In Europe, we are more or less in line with the market with a 6% decline in Q3 in Extrusion Europe. We see that demand in the transport segment has started to improve as OEMs restarted production, while the building and construction demand has been more stable. In North America, we are behind the overall market development with a 16% decline in Q3. This is driven by our relative larger-than-market exposure to the transport segment, which is still weaker than the other segments compared to last year, despite signs of improvement.

Building and construction markets are also improved drastically in Q3, evident by a 12% increase in new housing starts. When it comes to the specific Q4 outlook, external market expectations are indicating further improvements as you see on the right-hand side. Leading indicators are trending upwards again, as can be seen in the very important North American trailer market, where build rates contracted 49% in July and August compared to last year, that with orders for new trailers are now up 120% compared to last year.

In total, we expect a slightly strong development than the external market in Q4. But important to keep in mind, fourth quarter 2019 was weaker than usual. Now let’s take a special deep dive into Excluded Solutions’ financial results this quarter, giving the large improvements.

Please change to the next slide. I am pleased with the positive development in earnings in Extruded Solutions this quarter. Though volumes were down Q3 over Q3, underlying EBITDA increased by 28% compared to Q3 last year to NOK1.4 billion. This represents an EBITDA margin improvement from 7.1% to 10.6%.

In addition, of Hydro’s total free cash flow this quarter, more than half came from Extruded Solutions. Results are positively impacted by cyber tech compensation, government grants and currency. But the key driver for the result this quarter has been Extrusion’s ability to reduce cost amid weaker demand with lower SG&A costs linked to ongoing improvement initiatives, lower travel costs and lower fixed and variable production costs as planned.

Our procurement initiatives are also progressing as planned. I’m also pleased to see that the restructuring and portfolio optimization efforts, which began in 2019, are positively impacting 2020 results, with the bottom line impacting — increasing quarter by quarter. During 2019 and 2020, we have closed 10 plants, sold four and reduced staff by 1,300 people on top of investments. Some of these costs will come back with improving demand and a hopeful global recovery, but we will work hard to increase the share of the cost outs, which are sustainable.

We have learned new ways of working and gotten to test our fixed cost base through this crisis, and we will utilize this learning to the full extent. Let’s now move to Rolled Products and third quarter market development.

Next slide, please. Within Rolled Products, we saw a 13% decline in our sales volumes from the level of Q3 2019. Here, our volumes slightly unperformed the market estimates of an 11% decline for Europe, and this underperformance is primarily due to our litho business, which is lower as we shift volumes from that business segment toward other segments like automotive and cans.

Without the Lyse development, Q3 shipments would have declined 7% compared to Q3 last year, exceeding the market performance. Similar to the Extrusion market, we see indicators that the Rolled Products market is continuing its recovery into Q4, though still weaker than Q4 last year. Also for Q4, our outlook for our products is lower than the market, and this is once again driven mainly by loss volumes in litho. Adjusting for this, we would expect to be in line or slightly better than market also for Q4.

Now let’s take a look at upstream development starting with Bauxite & Alumina. In August, during planned maintenance work on the pipeline connecting Paragominas and Alunorte, we discovered that we needed to move forward some of the planned maintenance scheduled for November due to the condition of certain parts of the pipeline. From an asset integrity perspective, risk mitigation and safe and compliant operation is a top priority in Brazil. Work on the pipeline, therefore, commenced immediately.

And the extended maintenance resulted in the hold of production at Paragominas and a reduction of production at Alunorte to around 50% of capacity during the pipeline outage period. Earlier this month, we announced that the extended maintenance had been completed ahead of schedule and over the past two weeks, Alunorte has been ramping up. The refinery is currently running at 85% to 90%.

As targeted, we expect a return to nameplate production capacity at Alunorte by year-end and an overall production level of around 90% for the fourth quarter. We will continuously — to closely monitor and inspect the pipeline in order to ensure the integrity of the pipeline as well as follow our long-term pipeline replacement plans. Now let’s move to our upstream costs and margin development.

Next slide, please. In upstream this quarter, we saw margin pressures driven by lower alumina production, rising raw material costs, currency and relatively flat realized prices. If we start with B&A on the left-hand side, then our realized alumina prices remained stable from Q2 to Q3. This implied alumina cost increased in Q3 compared to the record-low cost we saw in the second quarter. This is driven by higher fixed cost per ton due to the extended pipeline maintenance, higher sourced alumina costs and higher energy and caustic soda costs. In terms of primary on the right-hand side, we also experienced reduced margins.

Realized prices remained relatively flat at the — with the slight increases in realized LME prices, were tempered with a slight decrease in realized premiums. It is worth noting our realized LME prices have a one- to two-month lag compared to LME spot prices, which is why the LME increased in the quarter is not yet fully reflected in our realized prices. Primary Metal’s raw material cost rate increased slightly, mainly driven by currency.

In Q3, we also saw the product mix trending closer to our historic 70% to 75% value-added products after this in second quarter, showing also our flexibility to readjust our production to where we see demand. In Q4, we anticipate this trend to continue and come closer to our traditional mix of value-added products. Let’s now move on to the improvement program and next slide, please. The extended maintenance on the pipeline at Paragominas has negatively affected the full year volume gains anticipated from Alunorte.

And due to this, we are currently behind on the expected improvements for 2020. However, we expect Alunorte to reach nameplate capacity by year-end. And as such, this delay does not affect the overall 2023 goal, and the 2020 targets will be delivered with full year effect in 2021. On the positive side, cost initiatives remain well on track in all of our business areas as well as our staff functions.

Within Rolled Products, for example, we see good momentum behind our cost initiatives in procurement, metal cost optimization and organizational rightsizing. And Extruded Solutions has successfully managed to take out fixed costs through restructuring efforts, SG&A efforts and other initiatives such as procurement, contributing to this quarter results improvement.

Primary Metal is also delivering fixed cost reductions well ahead of plan, where its operational parameters are behind, driven mainly by the Albras power outage in the beginning of the year and the Husnes line B ramp-up later than planned due to the COVID-related market downturn. Albras is now ramped up and Husnes line B ramp-up will start in November.

Next slide, please. Now let me move on to the regulatory developments, which has taken place in Europe during the quarter. The EU has identified an ambitious climate ambition, and we are pleased to see that this ambition will support the demand for low-carbon aluminum. There are several proof points supporting this. First of all, the EU has recently launched the European Raw Material Alliance, where aluminum is defined as one of the raw materials critical for the transition towards a green economy and to EU’s security, sustainability and industrial leadership.

I am pleased to announce that Hydro has joined as a member of the alliance. It is also comforting to see that EU is implementing several measures that will contribute to secure level playing field for our industry and to protect our main markets from unfair competition. The first is the CO2 compensation. The EU Commission has adopted the revised guideline on EU ETS, continuing the CO2 compensation mechanism for the period from 2021 to 2030. The revised guidelines are largely in line with Hydro’s priorities, and it is our expectation that all European primary plants will be eligible for compensation.

Next step now is for the government to establish regulation within these guidelines that support the continued production of low-carbon aluminum in Europe. The next is trade measures. During the past decade, we have seen a steady growth in import of aluminum products from China, both in terms of volume and market share. China’s aluminum imports into Europe had nearly doubled from 2011 to 2020. The effect of this is both depressed prices and carbon leakage in the European market. Therefore, we are satisfied that EU recently have implemented several measures to protect the European market from unfair competition.

First of all, the EU has decided to implement antidumping duties on extruded products from China. These duties varies from 30% to 48% and took effect as of October 14. Following the announcement of EU’s decision to conduct antidumping investigations on China’s extrusions, we have seen volumes decrease by around 30% year-to-date, with Chinese companies citing an antidumping measures as the complete recent for pulling out.

Secondly, the EU opened on August 14 antidumping investigations into import of certain flat rolled products from China. And finally, EU announced yesterday that they’re also opening antidumping investigations into import of foil from China. These investigations are ongoing and will be concluded during the first half of 2021. It is yet too early to determine the financial impact of such paved defense measures. However, we believe it is likely to see a price and volume effects in the market as a result of antidumping duties.

Next slide, please. Now that we have covered the main highlights of the third quarter, I would like to take this opportunity to talk about a few examples of initiatives that support our strategic direction going forward. As previously announced, our ambition is to lift profitability and drive sustainability and thereby create value for all our stakeholders. Our strategic direction towards 2025 is twofold.

Firstly, to strengthen our position in low-carbon aluminum. And secondly, diversifying and growing into recycling and new energy. Next slide, please. The first example that I would give is from Bauxite & Alumina. The generation of tailings is a challenge in our industry, not just for the aluminum sector, but for mining in general. In the processing and washing of the raw material from the mine, large volume of tailings byproducts are often generated and typically store in permanent dam structures.

This approach carries both environmental and safety risk that can have serious consequences if not correctly managed. In recognition of this industry challenge, Hydro is now piloting and testing an alternative approach to tailing management that seeks to avoid and minimize the generation of new tailings storage structures and thereby reducing this risk. This initiative aligns very well with the new global industry standard for tailing management recently announced by International Council on Mining & Metals, which seeks to raise the benchmark for safe and sustainable management of tailings.

The tailings’ dry backfill technology allows inner tailings from bauxite mining to return to the already opened and mined areas instead of being deposited in separate permanent storage areas. After drying in temporary storage for 60 days, the bauxite tailings are put back in the mined areas. Overburden and bauxite are put on the top before the area is rehabilitated and reforested. This will further reduce the environmental footprint of bauxite mining. This project is leading within our sector and brings us in the forefront with new global industry standard on tailing management. From a sustainability standpoint, this means eliminating the need for new — permanent tailings story stand in bauxite mining.

And from a profitability standpoint, this eliminates the need to build new dams over time. This technology has the potential to save Hydro substantial amounts when balancing the CapEx reduction with additional OpEx. The application of this methodology in Brazil represents the end of the use of large dams for permanent storage of bauxite tailings, an important step in terms of sustainability in the industry bringing more operational security and a significant step towards reducing Hydro’s environmental footprint.

We have already been testing the best locations and rules for this process since July 2019. We hope to receive the license from local authorities to begin implementing this methodology in full by year-end. Next slide, please. Our second example is in the Energy business area. On Wednesday this week, we announced an industry-shaping deal in the Norwegian hydropower market. When we combine our RSK power assets with Lyse’s super power assets, creating the new renewable energy production company, Lyse Kraft DA. This delivers on three key priorities for us.

Firstly, we secure asset value as the transaction removes uncertainty by following the reversion issue for Hydro, which all else equal, would have happened by the end of 2022. After the transaction, the reversal will no longer be an issue since Lyse, which is publicly owned, controls more than 2/3 of the joint company that we are establishing, Lyse Kraft DA. Basically, we convert our shares from public to private, evergreen shares that user owns and can be sold to private owners after a lockup period.

And although we reduced our volumetric equity position through this deal, this is compensated by higher-quality assets with flexibility to produce at the highest prices over the year, a large tax shield through well invested assets and synergies both in the new company, but also for Hydro on a stand-alone basis.

Secondly, it’s a good deal for Hydro because this secures the long-term industrial ownership, of equity Hydro power assets, and we maintain a robust foundation for long-term production of low-carbon aluminum in Norway. And last but not least, this strengthened our ability to grow in attractive segments connected to renewables and storage because it gives us scale and a good platform for future opportunities

Next slide, please. My last example is from Rolled Products. Recycling is a growth area in Rolled Products as in Primary Metal and in Extruded Solutions. Bringing scrap and post-consumer scrap back in the loop is supporting both our profitability and sustainability agenda. These examples from our Rolled Products business show how Hydro is positioned to capture a growing global megatrend, increased use of post-consumer scrap.

A key contributor to our Rolled Products improvement program is metal cost optimization, the reduction of metal costs through increased scrap recycling. Our used beverage can line at Neuss in Germany is a good example of how we lower our metal cost in Rolled Products. This line has the annual capacity to handle all of the used beverage cans in Germany or 20% of Europe’s used beverage can production. The plant is now running at nameplate capacity at approximately 4,000 tons per month in production and is also now certified to produce Hydro CIRCAL. Beginning in 2021, the UBC line will fill our first CIRCAL order to the beverage can industry in a partnership signed with HELL ENERGY drink.

And with that, I’ll turn the word over to you, Pal, our CFO, for a financial update.

Pal Kildemo

Thank you. Next slide, please. Good morning, everyone, and welcome from me as well. In my presentation, I will walk you through Hydro’s financial results for the third quarter 2020.

Next slide. Let me then start with a high level result overview. Comparing to the same quarter last year, Q3 results were fairly stable. On the positive side, we have experienced lower raw material costs than one year ago, and this is mainly driven by lower alumina prices for Primary Metal, but also supported by lower carbon prices as well as somewhat lower bauxite, caustic and fuel oil prices in B&A.

We also saw a currency gain as NOK and BRL weakened against the dollar. These positive developments were offset by lower realized sales prices. Lower realized alumina price had an impact of NOK450 million, while lower realized LME prices and premium took the results in Primary Metal, down by NOK1.4 billion.

The lower upstream production, reflecting the extended pipeline maintenance and lower electrolysis production in Primary Metal negatively impacted results, as did the lower downstream volumes and margins compared to Q3 2019, largely driven by the COVID effects. Other eliminations included positive eliminations effects as well as NOK200 million in cyber insurance payments, partly offset by lower gains on external power sales in Primary Metal. Next slide. If we then compare results to the second quarter of 2020, we see a larger improvement.

Upstream, we also here — saw lower volumes, mainly in B&A, due to the extended maintenance of the pipeline connecting Paragominas and Alunorte. And in addition, currency development added a decline of NOK400 million, mainly due to a stronger NOK. These negative developments were offset by volume and margin gains, primarily in Extruded Solutions, thanks to volumes, which rose 24% from second quarter and better margins, driven by cost savings in the organization.

The other category primarily includes positive eliminations with other smaller positive and negatives offsetting each other out. Next slide, please. If we then take a look at the key financials for the quarter, then revenues were down by more than NOK4 billion compared to the third quarter of 2019, mainly reflecting volumes and prices across the business areas. Underlying EBIT came in at NOK1.4 billion, as explained on the previous slide.

And if you add depreciation of around NOK2 billion, then an underlying EBITDA amounted to NOK3.4 billion, our financial losses amounted to NOK1.7 billion for the third quarter, which included a net foreign exchange loss of NOK1.5 billion. This is primarily reflected by a weaker NOK versus euro, affecting the embedded derivatives in Norwegian power contracts and other liabilities denominated in Europe as well as currency losses on dollar-denominated debt in Brazil due to a weaker BRL versus the dollar.

The tax expense amounted to NOK256 million, reflecting a relatively high share of reported income before tax, which is subject to power surtax as well as impairments of deferred tax assets. Overall, this provides a negative net income of NOK0.2 billion, up from negative NOK1.4 billion in the same quarter last year. Underlying net income was positive NOK0.6 billion compared to NOK0.6 billion last year. Consequently, underlying EPS was NOK0.26 per share, down from NOK0.33 per share in Q3 2019.

Next slide, please. Now let’s review items excluded during Q3, which totaled around NOK400 million positive in the third quarter. As usual, we have excluded some timing effects, which sums up to close to the NOK400 million for the quarter. But we also have other elements which are more or less offsetting each other with impairments related to the ongoing restructuring in Extruded Solutions and Rolled Products being offset by positive insurance settlements and gains on property sales.

If we then move to the next slide, I’ll start with Bauxite & Alumina. Then Bauxite & Alumina’s underlying EBIT fell from NOK481 million in the third quarter to NOK108 million in the third quarter of 2020. This is largely attributable to extended maintenance on the pipeline, which began in mid-August and ran until October 8. During that time, Alunorte produced at an annualized level of around 50%, reducing the volumes for Q3 to around 1.1 million tons.

Lower realized alumina prices by around $50, also negatively impacted the quarterly results by NOK450 million. These negative effects were offset by positive currency gains due to the BRL’s weakening against dollar, contributing around NOK600 million as well as lower raw material prices, primarily bauxite, caustic and fuel oil.

If we look into the fourth quarter, the Alunorte production is currently a ramp-up mode following the completion of extended maintenance. We expect to reach nameplate capacity by the month of December with a quarterly production, around 90% of nameplate capacity. In addition, we expect a relatively flat development in raw material prices in comparison to Q3, given today’s market prices, while current alumina prices indicate somewhat higher realized alumina prices than achieved in the third quarter.

Next slide, please. If we move to Primary Metal. Then underlying EBIT for primary metals fell from a loss of NOK39 million in the third quarter of ’19 to a loss of NOK156 million in the third quarter of 2010. The weaker result was driven mainly by lower all-in metal prices, which accounted for a loss of negative NOK1.4 billion in total. This was offset by relief on raw material costs mainly coming from lower alumina costs, contributing NOK900 million, but also lower energy and carbon costs, which contributed around NOK300 million.

In addition, positive currency effects from depreciating NOK contributed with approximately NOK0.2 billion positively. When it comes to the outlook for Q4, we have, by the end of September, sold approximately 62% of our primary aluminum production forward at a price level of around $1,750 per ton.

On the premium side, we have secured about 53% at a range — at around $260. And as a consequence, we expect a premium level in line with Q3 within the range of $175 to $225 per ton. When it comes to the cost side, then we are expecting somewhat higher fixed cost and seasonality should indicate of around NOK100 million, driven by the Husnes ramp-up, retirement-related costs, higher project activity levels and some other minor elements.

At current market prices, we also expect slightly higher raw material costs, primarily due to the alumina, but also with marginally higher levels in energy and carbon. Next slide, please. This quarter, metal markets delivered an underlying EBIT of NOK198 million compared to NOK362 million in Q3 last year. Excluding the currency and inventory valuation effects, primarily currency, the result for the quarter was NOK262 million, which is down still from the NOK362 million in Q3 ’19.

Results were lower from our recycling facilities, primarily driven by lower margins in the U.S. as well as a positive insurance refund in Q3 ’19. Results from outsourcing and trading activities are also slightly lower. When we look into the next quarter, our recycling facilities are operating at full capacity, but we expect the results from recyclers to be lower than last year on lower contribution margins, driven by the lower extrusion in gold premium level. As always, remember that trading results and currency effects in metal markets are, by nature, volatile.

Next slide, please. The results in Rolled Products decreased to NOK17 million in Q3 compared to NOK166 million in Q3 last year. The main impact for rolling operations in Q3 was the reduced sales volumes coming down 13%, which was partly offset by lower rolling costs. We also see higher depreciation on restructuring-related line closures accelerating depreciation in the end of the year. The results from Neuss smelter improved on lower raw material costs, partly offset by lower all-in metal prices.

If we look into the fourth quarter, then there is uncertainty with respect to estimated sales, and we expect the seasonal lower sales volumes to be somewhat offset by the improving market conditions following the COVID-19 situation. External analysts expect our products market to be down by — in the coming quarter compared to the same quarter last year. And based on current internal forecasts and — based on current internal forecast, as mentioned by Hilde, we expect to be somewhat lower than this as we expect lower volumes from the little segment.

In Q4 2019, we experienced some positive cost effects at our operations of around NOK60 million, which we do not expect to have in the fourth quarter of 2020. On the 9th of October, the U.S. Department of Commerce communicated it had been post preliminary antidumping duties on German aluminum sheet imports between 51.2% and 352.7%. The U.S. International Trade Commission is to decide whether it was harm to U.S. producers by April. And if no harm is found, then these duties should disappear.

Our exports to the U.S. in 2019 was around 80,000 tons, whereof 40,000 tons are affected by duties, but only two contracts being duty-paid, which is where we are directly exposed to the increase in duty. The rest are FOB price. For the rest of 2020, we have just some thousand tons impacted by these contracts. But with a duty right north of 350% and good prices, the total figure for 2020 becomes around NOK200 million, pending if you are able to find alternative sources for some of these volumes.

For 2021, we have only one contract of some thousand tons in total, which we are working with our customers to try and replace. We believe the duty is unfounded and unreasonable, and we will work with all related parties to minimize the effects of this, and we’ll keep you up-to-date on any development. Next slide, please. Underlying EBIT for Extruded Solutions increased from NOK559 million in the third quarter of ’19 to NOK894 million in the third quarter of ’20. COVID-19 has reduced sales volumes and impacted operations with lower capacity utilization and volumes dropping by 12% from the third quarter of ’19.

The results were positively impacted by reduced costs from the ongoing improvement and restructuring efforts as well as other temporary cost measures implemented amid weaker market demand. In addition, this quarter, we received NOK192 million in insurance compensation related to the cyber attack and NOK64 million in government grants. When we look into the next quarter, we expect to see continued market uncertainty due to COVID-19, although we are seeing a positive trend from the third quarter.

External analysts expect Extruded Solutions markets to be down by 8% and 7% in North America and Europe, respectively. We are slightly more positive in our internal forecast. At the same time, Extruded Solutions is working hard to support their earnings in challenging markets with the ongoing portfolio optimization, fixed cost reduction initiatives and procurement optimization. We expect that a fair amount of the temporary cost reductions seen in Q3 will also be carried forward into the fourth quarter.

Next slide, please. For Energy, underlying EBIT decreased from NOK254 million in the third quarter of ’19 to NOK132 million in the third quarter of ’20. The quarter saw a significant drop in prices compared to the third quarter of ’19, mainly attributed to strong hydrological balance, with prices averaging NOK52 per megawatt hours compared to NOK328 in Q3 last year. If we look forward, the reservoir levels are high also into the next quarter.

We are seeing some improvements in power prices in the Nordic region with average NO2 spot price of around NOK145 so far in October. However, the uncertainty is still large and will depend on hydrological conditions going forward. Please let me also remind you that NO2 spot prices are publicly available, and the realized price levels for the Company should not deviate significantly from the prices observed on the Nordic power exchange for NO2.

Next slide, please. Other eliminations netted out to a positive NOK213 million in the third quarter compared to negative NOK417 million in last year and negative NOK166 million in the second quarter. Other is mainly comprised of head office costs and costs related to holding companies as well as earnings from Hydro’s industrial insurance company. This quarter, we had NOK204 million in costs compared to NOK160 million last year and NOK109 million in Q2.

This quarter’s eliminations amounted to positive NOK417 million, mainly reflecting reduced internal alumina volumes and lower intercompany alumina margins. Next slide, please. Now let’s have a look at my favorite slide for the quarter, the development in net debt. Overall, our net debt position decreased by NOK3.3 billion, we started Q3 with NOK13.2 billion in net debt. We generated underlying EBITDA of NOK3.4 billion, and we then had a release of working capital of around NOK1 billion delivered by our downstream business areas. This is positively impacted by prices and lagging volume effect, but also our inventory management.

But given the unseasonal development driven by COVID-19, we have a release in the third quarter, and that means that we do not expect the normal release in the fourth quarter as volumes and prices look to be ramping up. Other operating cash flow adjustments of a positive NOK0.1 billion includes dividends from Qatalum, reversal of mark-to-market effects, which are offset by interest, taxes and provisions. And as a result, we generated net cash flow from our operations of a positive NOK4.5 billion in the third quarter. Investments came in at NOK1.5 billion.

And at the end of the quarter, we ended right below NOK10 billion in net debt. Next slide, please. If we look at the adjusted net debt at the end of the third quarter 2020, then it decreased by NOK3 billion compared to Q2. Net debt decreased by NOK3.3 billion, as I’ve just explained. Net pension liabilities increased by NOK400 million on lower discount rates and stronger euro versus NOK. Other adjustments were down by NOK0.2 billion.

And with that, the total adjusted net debt, including equity accounted investments at the end of the third quarter 2020, amounted to NOK31.6 billion, down from NOK34.6 billion at the second quarter of last year. Next slide, please. Let me then move on to some comments on our financial policy and hedging. In line with our hedging policy, we have the flexibility to hedge LME or currency in certain cases. And we have normally not done this to a great extent, but mostly with respect to transactions or plant start-ups.

Under our current profitability agenda, we are currently looking into ways of making our portfolio more robust and also delivering on a return and strategic ambitions over the cycle. And we will mainly deliver on this through our ongoing improvement effort and other portfolio initiatives. However, we also look at hedging parts of our exposure as a way to increase the robustness of our earnings and save our cash flow.

We have, therefore, entered into forward contracts for around 30% of Bauxite & Alumina’s BRL-dollar exposure, selling forward $400 million for 2021 and 2022 at an average currency rate of 5.53. This aims to reduce the volatility in Alunorte’s cash flow, but also supporting a robust cost curve position for Alunorte at the current BRL-dollar rate. Going forward, we may utilize our hedging policy to hedge LME and currency in certain cases where we can reduce the margin uncertainty at satisfactory level, where we can support our strong cost position or where we will support investment going forward.

Next slide, please. Let me then finish with an update on our capital return dashboard, summarizing our key financial targets and priorities. Looking at our balance sheet and the key ratio of funds from operations to adjusted net debt, and we have seen 35% in the last 12 months. This is an improvement from the 29% observed last quarter and a big step in the right direction towards our target of above 40%.

Also following the strong third quarter, full year free cash flow is now at NOK4.1 billion year-to-date, much supported by the release of operating capital of NOK6.4 billion since the fourth quarter 2018. We have mentioned our CapEx cuts, and we have revised down our guidance for 2020 to NOK7 billion to NOK7.5 billion from the earlier communicated NOK7.50 to NOK8 billion. Our dividend payment remains frozen. However, we will revert towards the end of the year with a final decision from the Board to pay or not when we have more certainty if current positive market development stick.

And on that note, I would like to give the word back to Hilde for her final remarks.

Hilde Merete Aasheim

Thank you, Pal, and then to the priorities for the next quarter. As the coronavirus surge in many places in the world, we need to stay disciplined and keep full focus on the measures to protect the health and safety of our people and the communities where we serve. Social distancing and preventing measures are as critical now as they were at the start of the pandemic.

As the markets are improving, we will capture opportunities in the marketplace. At the same time, continue to deliver on our improvement program and securing and improving our cash flow. Finally, we will continue our efforts to position Hydro for the future in line with our agenda to lift profitability and drive sustainability, strengthening our low carbon position, at the same time, explore new growth opportunities.

I’m looking forward to sharing more about our strategy and way forward at the Capital Markets Day on December 10. Thank you very much.

Line Haugetraa

Thank you, Hilde and Pal. We are now ready to start with the questions. [Operator Instructions] In addition to Hilde and Pal, we’re also are joined by EVP of Energy, Arvid Moss, for the Q&A, especially if there are any questions relating to the transaction that we announced on Wednesday with Lyse.

Operator, we are then ready to start the Q&A. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] We will take the first question from Liam Fitzpatrick from DB.

Liam Fitzpatrick

I’ll stick to just two questions. First of all, just on the pipeline at Alunorte. In terms of the outlook for next year, are you confident that you can maintain the 6.3 million ton production level? And have you kind of reassessed the maintenance plans and the CapEx requirements for that pipeline over the next one to two years? And then on Extruded, I mean clearly, an exceptionally strong set of numbers, which will be positive into next year. Are you ahead of the targeted restructuring plans? And could there be upside risk to those? And I will squeeze in just a quick third one. In terms of the CO2 compensation that you referred to, are you able to give any rough sensitivities at this stage in terms of what it could mean for EBITDA next year?

Hilde Merete Aasheim

First I can start on the pipeline, and then Pal can take the other questions. Obviously, the pipeline is crucial to us. It’s a 340-kilometer pipeline between Paragominas and Alunorte. And we are working in several, let’s say — with several measures to assure the integrity of the pipeline. We are doing systematic peak campaigns to assess the integrity inside the pipeline. We are doing modeling, and we are also doing physical test.

And we have done recently also more physical tests to ensure that what we experienced in August does not make us having more, let’s say, more of rescheduling of the maintenance program. We have a long-term maintenance program for the pipeline. And based on the quality assurance that we have done recently, we believe that we will follow that long-term pipeline replacement as we have it now.

Pal Kildemo

And Liam, if we move to the other questions there on Extruded Solutions. We are currently experiencing cost out above our improvement targets. As we mentioned, this quarter is supported also by around NOK60 million in governmental grounds that are coming from previous periods when we reduced staffing more than what we are seeing today. And of the costs which we have reduced so far, we are fairly comfortable that at least 1/3 of these are sustainable. But looking into fourth quarter, we still expect costs to be out at similar levels to the third quarter.

And then going into next year, we are also starting to deliver on the next phases of improvement. And we’re constantly challenging to see how much of the cost out in the COVID situation can be sustainable also going forward. So we will, in the coming quarter and towards our Capital Markets Day also, update our view if we can strengthen the improvement programs with the cost developments we’ve seen so far.

The last one, CO2 compensation, this is, of course, a topic which is high on many people’s agendas these days, and giving a concrete amount it could be misleading because it depends on what the price for CO2 is, what factor is used for calculating compensation. And that’s probably why you see analysts expecting ranges between NOK500 million, up towards the NOK1.5 billion, depending on prices and factors that they use. But it could be within those ranges if these assumptions materialize.

Liam Fitzpatrick

Okay. That’s very clear. Just one very quick follow-up. I’m not sure I heard you correctly. Did you give the percentage in terms of how much of the extruded costs you thought could be kept into Q4 next year?

Pal Kildemo

So what I said is that for the current — what we’re attributing to our current improvement program is around 1/3 of the cost that we are taking out now. But going into Q4, we see that we are still expecting a lot — most of the costs to be out. And then looking into next year, we are working to see that we — if we can make even more than 1/3 of these costs sustainable. But what we are currently attributing to our improvement program reporting is 1/3, and then we’re looking to increase this going forward.

Operator

We will now take the next question, Conor Rowley from Crédit Suisse.

Conor Rowley

Just two questions from me. I guess I wanted to a follow-up on Liam’s question on the C02 compensation.

Pal Kildemo

Sorry, Conor, you seem to be very far away from the microphone.

Conor Rowley

Can you hear me any better now?

Pal Kildemo

Yes.

Hilde Merete Aasheim

Yes.

Pal Kildemo

Perfect.

Conor Rowley

Yes. So just to follow-up on the CO2 compensation. I mean is it true to think that really what the upside we’re going to get into 2021 is all your Norwegian portfolio, excluding Husnes? And so on reasonable assumptions, we get to about a NOK750 million uplift next year. How would you account for that in the Primary division? Is that something we will just see in the financials from Q1? And secondly, again, on your contracts, you spoke at the Capital Markets Day last year of the NOK400 million uplift in the Energy division from the expired legacy supply contract. Is this something we should expect from January 1 in financials in the Energy division?

Pal Kildemo

If we start with the C02 compensation, then the figures that you are referring to are well within the range that I just commented on. So depending a bit on what you use for CO2 compensation, then I — it could be recognizable what to use for CO2 price. And it’s true that compared to what we have today, it’s the remaining Norwegian smelters on top of business. And then, of course, what we already get in Europe. So your assumptions are correct. And when it comes — what was the second question?

Conor Rowley

Legacy contract.

Pal Kildemo

Yes, when comes to legacy contracts, that’s correct. They roll out from the start of next year. So already from the start of the year, Energy should be benefiting from that as well as the roll-off of the legacy Lyse contract. So the total amount, I guess, we indicated last Investor Day was sort of NOK700 million for Energy.

So a significant improvement, yes, and I just remember your question on C02 accounting. If the Norwegian government have made a decision in time for the — our reporting of the first quarter, then this will be taken from the start of the year. If a decision is made later, then you would have a catch-up effect. Because as your two compensation, you basically get in the year following the year, so we account for it on a provisional basis, and then we need to have certainty on the Norwegian decision.

Operator

We will now take the next question from Jason Fairclough from Bank of America.

Jason Fairclough

Just two quick ones for me. One on hedging and then the other just on the Energy transaction. So just on the hedging, could you remind us your policy on hedging? And I guess not so much on the metal sales, but I’m looking at the currency hedges. Would it be fair to describe your hedging policy as just opportunistic, so ultimately, taking a call? And then secondly, just on the Energy transaction. Could you remind us, is it possible for the Lyse company to be listed on a stock exchange so that you could actually crystallize the potential value uplift? We do see hydroelectric utilities trading on but double the multiple of Norsk Hydro.

Pal Kildemo

On the first one, Jason, I would not say that we have an opportunistic hedging policy on a pure stand-alone basis. It’s not trading, but it is supporting either a robust cost position, safeguarding cash flows in joint ventures or maybe safeguarding and investment portfolio. So you should not expect us to move in and out of such type of positions, but where we see levels attractive in a historical context from cost position or margin level for a particular business area. And in this case, that doesn’t correlate a lot with other key revenue or cost drivers, then we have the flexibility to act on that. And I guess where we’ve historically done the most is on the dollar-BRL exposure.

Arvid Moss

Yes. On the second one on the lease transaction of the new Lyse Kraft DA company, as the Norwegian legislation says, 2/3 of that company needs to be owned by a public ownership. So that means that there’s very limited room to maneuver within. So IPO and public listing has not been on the agenda.

Jason Fairclough

Pal, can I just come back to you on the hedging?

Pal Kildemo

Yes.

Jason Fairclough

So again, the way you’re framing this is you’re saying you’ve looked at the chart and you think versus history, this is interesting. And so you’re — therefore, you decide to go ahead. Who is actually making that call? Is that your call? So you’ve looked at the historic Brazilian real chart and decided this is a good level to lock in? Who — how does that happen?

Pal Kildemo

No. We constantly look at the exposures across our company and the cost position and the margins in similar portfolios, our business areas as well as specific assets. And then together with the business areas, we have a discussion to evaluate if there are elements which are from a historical sense, from a robustness and cash flow context, indicates that maybe we should be seeking to safeguard some parts of our exposure. So it’s a discussion with the specific business area, but of course, also taking into account the full exposure of Hydro, and so we ensure that we are not increasing risk exposures by doing different things in the different business areas.

Jason Fairclough

Do you think, historically, when you’ve done hedging like this, do you think ex post, it’s turned out well?

Pal Kildemo

Well, we have some examples of it being neutral, some examples turning out well and some examples not turning out so well. So it’s a good mix.

Operator

We will now take the next question from Ioannis from Morgan Stanley.

Ioannis Masvoulas

I got a few left. First, in terms of the reset of the Energy contracts next year. So the benefit to the Power division, NOK700 million, but could you confirm what’s the benefit at the group level? Because I guess some of the contracts are with the Primary Metal. And the second question is around CapEx. The outlook looks improved in terms of both downstream and upstream operations. How should we think about 2021 CapEx? Is it fair to say that to hit your EBIT improvement plan, you probably have to spend that NOK2 billion that you deferred this year in 2021? And then lastly, just on Primary Metal. You mentioned some raw material cost inflation into Q4. Could you possibly quantify that?

Pal Kildemo

Yes. If we start with the net Hydro effects of the Energy contracts, then they are the same on the total Hydro level also, so NOK700 million stands for the Company as a whole. On the second — or on the second element, which was the CapEx. We will get back to our next year’s guidance on Capital Markets Day. As you remember, we have earlier indicated levels around NOK10 billion for total capital expenditures.

And then we said that we’ve put NOK2 billion out of this year, half return-seeking, half sustainable and some of that sustainable needs to come back at some point of time. However, you should not be expecting us to come out with guidance levels above what we’ve indicated earlier. We’re rather working here to see if we can reduce this from the earlier NOK10 billion. The last question was on…

Hilde Merete Aasheim

Raw material.

Pal Kildemo

The last question was on raw material prices. It’s not large raw material price movements we’re talking about. So given where we are standing now in the market, it doesn’t make sense to quantify them. But let’s rather talk about sensitivities.

Ioannis Masvoulas

Okay. No, that’s clear. And just a quick follow-up, if I may. You recently terminated the MoU for the LNG project at Alunorte. Could you provide some color on the reasons for that? And whether it changes the time line at all?

Hilde Merete Aasheim

Well, we — there was a mutual agreement to terminate the MoU that we have with Golar as it is now. But I have to say that we still are really eager to get — to replace coal and oil, particularly in the oil with gas. And so we are following the situation in Pará, bringing gas into Barcarena and we should not rule out that we can — we will resume dialogue when we see the ground for that.

Operator

We will now take the next question from Amos Fletcher from Barclays.

Amos Fletcher

A couple of questions from me. First one, can you clarify the timing of the dividend decision and the sort of dynamics behind it? So could we expect to get a 2019 dividend actually paid before the end of this year and then maybe a separate declaration in respect of 2020 early next year? And then secondly, can you just update on where we are on the Rolled Products sort of business review and the potential sale process? And then the final one is just on the NOK4.1 billion improvement target. Where are we as at the end of September? And can you give us an indication of how much you expect to achieve incrementally in 2021?

Pal Kildemo

Yes. If we start with the dividend, then the Board will make a decision on 2019 dividend before the end of the year, and then you should expect the decision on 2020 dividend to be made separately of this. So if there is a decision to pay dividend for 2019, then that could be done in this year. And then 2020, if decided, would likely follow the normal payout schedules that we’ve observed over the last few years in Hydro.

Hilde Merete Aasheim

So I can comment on the Rolled Products. As you would recall, we put Rolled Products under strategic review last year. There was a twofold sort of objective to really turn around the underperformance in Rolled Products, installing an ambitious improvement program, which I’m happy to see is going according to plan. Then we also said that we would like to explore opportunities to see if there was a better ownership structure for Rolled Products. And that work is ongoing. It was somewhat delayed due to the COVID, but that is ongoing as we speak. And we will announce a new resolution from that when that — time for that is right.

Pal Kildemo

And when it comes to the improvement program, we have, as you know, targeted around NOK4.1 billion in total for this year compared to start-up program. We are running somewhat behind, but it’s not a lot. So NOK200 million to NOK400 million full year estimate is what we’re behind now, driven mainly the Alunorte incident. When it comes to 2021, our NOK7.3 billion target still stands, but we’ll get back on Capital Markets Day with the exact target for 2021, if this is the same as we guided on last year or if this is stretched and this needs to take into account what we’ve been through with the COVID situation, and also what we’ve delivered and not delivered on in this year. So we’ll get back on that then.

Amos Fletcher

Okay. I just had one other follow-up. Regarding the NOK200 million antidumping charge in Q4. Is it reasonable to assume that for 2021, we can pro rata that up according to the volumes affected, going from 2,200 to 3,000 tons?

Pal Kildemo

I think into 2021, we haven’t given a number because we are working to see if we can replace that volume in other manners. But if we are not able to do that, then the volumes are quite similar in the two periods. So the same type of margin calculation could be applied there.

Amos Fletcher

Is there a sort of timing of when those volumes are sold as well? Is it sort of all in Q1 or H1 or a strong…

Pal Kildemo

Yes. It’s some 100 tons per month next year. So again, we’re smaller — talking small volumes, a couple of thousand tons in 2021, which we’re working to find other ways of delivery.

Operator

We will now take the next question from Jatinder Goel from BNP Paribas.

Jatinder Goel

Just a question or explanation on hedging, please. You’ve done Brazilian real. Any reason for choosing 30% and not higher versus your total exposure? Would you look at NOP hedging as well on the same principles if you find it attractive? And would you extend your hedging to primary aluminum beyond your next quarter’s typical hedging program as well in any market environment?

Pal Kildemo

The reason for choosing the exact size of the hedge place has many factors contributing to it. We run quite advanced statistical models to look at the risk effects and similar to determine an optimal hedge level. So — and this could stay going forward. On the second point, when it comes to why we would we be willing to hedge other elements. If we see that there are clear elements which stands out, which we believe that makes us robust in most forms of scenarios, which increases the possibility of delivering on our return ambitions, then that could also include other currencies than the BRL, and that could also include looking at the LME part. But as you are very aware of, a hedge or a securing of margins is only a good trip, the more you take off the cost side. So you might be increasing the risk by only choosing one element, so that we would, of course, also take into account.

Operator

We will now take the next question, which is the last question here, from Daniel Major from UBS.

Daniel Major

First question. You’ve talked about the positive benefits of the indirect CO2 compensation. Can you give us any insights on your net short positions in direct C02 costs, i.e., your difference between your emissions versus your three allowances? And whether the three allowances is expected to decline in 2021 and your kind of exposure to the carbon price?

Pal Kildemo

I don’t know if we go into all of these details here, and we can follow up on side also. But then, of course, these are a smaller element compared to the total picture where we look at indirect CO2 emissions. But of course, there is a reduction — an expected of reduction of this in the years to come. But then we can follow this on the outside of — the figures are quite small.

Daniel Major

Okay. So net, you will still receive a substantial benefit. Is that the takeaway?

Pal Kildemo

Yes. Yes. Yes. It is — the C02 conversation indirect is a significantly larger amount than on the direct emissions.

Daniel Major

Okay. Perfect. And then just second question on the expected sort of trajectory in unit costs for Primary and for B&A — well, for Alunorte into Q4?

Pal Kildemo

Yes. I think Ioannis touched upon the raw material cost comment in Primary Metal. And at current market prices, alumina is somewhat higher. Energy is somewhat affected by development in currency, et cetera, and then carbon costs are expected to be somewhat higher. And if you look at the totality, given current spot levels there, you could be talking somewhere between NOK100 million and NOK200 million in EBIT impact for Primary in the fourth quarter compared to the third quarter. What I would like to highlight on unit costs in Primary is that we do expect higher fixed costs on top of seasonality.

Typically, you see between NOK50 million and NOK100 million higher seasonal costs in Primary in the fourth quarter. Now we are ramping up the Husnes smelter, and that will see cost elements before you get the revenue elements. You probably remember that’s from the ramp-up of our technology pilot. So that will come on top. And then we also have some elements related to retirements and other expenses which brings this nonseasonal cost increase up to around NOK100 million also.

So that’s the total negative elements that we’re seeing for Primary into the fourth quarter, which will eat some of the positive developments that we’re seeing on LME volumes and premiums. If you look at Bauxite & Alumina, then the picture is maybe a bit more stable going forward. When we look at the expectation on the cost side, then the raw materials aren’t moving that into the fourth quarter. It’s mostly the impact of reduced fixed cost per ton as volumes comes out that you should take into account. So somewhat higher alumina prices, higher volumes, some relief on fixed cost on the unit side, are the main elements that we looked at into the fourth quarter compared to the third quarter in B&A.

Daniel Major

Okay. So just to clarify on the Primary. Was that NOK100 million to NOK200 million negative delta in total?

Pal Kildemo

No. NOK100 million to NOK300 million in total, if you take fixed and raw material costs. The fixed costs are more certain. Raw material, of course, depends on the price movement. But given where we see spot prices for carbon and alumina, then I can give a range of NOK100 million to NOK200 million there, and then at least NOK100 million on top of normal seasonality in Primary. But in a normal seasonality in Primary is around NOK50 million to NOK100 million. So if you add all of that together, you’re talking NOK200 million to NOK400 million.

Operator

It appears that there are no further questions at this time. I’ll pass back to you for any additional or closing remarks.

Line Haugetraa

Thank you very much, and thank you everyone for joining today. We really appreciate that, and please don’t hesitate to contact us in IR if you have any questions to this, to the quarter or in general.

Thank you.

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