Underlying operating results
Hydro incurred an underlying loss before financial items of NOK 2,555 million in 2009 compared to underlying EBIT of NOK 6,009 million in 2008. Underlying results were significantly impacted by the global economic downturn which led to a drop in overall sales volumes in the magnitude of 18 percent compared to 2008. Underlying EBIT was heavily influenced by an unprecedented decline in aluminium prices which occurred toward the end of 2008 and the beginning of 2009. Prices remained weak but improved continuously following the first quarter of 2009. Hydro's downstream business also incurred an underlying loss for the year due to the significant market decline and substantial losses from its automotive operations, in particular the automotive structures business which was divested in the fourth quarter. Underlying EBIT for Hydro's energy business declined compared to 2008 mainly due to lower power production.
Priorities for 2010
The Board will take further steps necessary to secure Hydro's ongoing operations in the challenging economic conditions expected in 2010. A key element in our strategy to improve the overall competitive position of Hydro is the ongoing repositioning of our upstream business. The successful ramp-up of Qatalum will be a key priority in 2010. Production from the plants 704 cells will be phased in during 2010 and the plant will have roughly 1,200 employees in place by the end of the year.
To address the cost challenge at Hydro's other smelters, a new cost-cutting program has been launched aimed at reducing the cash operating cost by USD 100 per mt excluding the effects of Qatalum and the impact of changes in raw material prices and currencies. We expect to make substantial progress toward this target in 2010 and to achieve most of the improvement by the end of 2011. Hydro will also focus on improving the margins at its primary casthouses through optimization of the markets it serves and further productivity improvements. Downstream, we will prioritize capturing opportunities as the market stabilizes and recovers. While keeping a sharp eye on cost and working capital levels, Hydro will concentrate on protecting its margins to ensure a sustainable level of profitability. We will actively pursue opportunities to further increase Hydro's share of the market by offering superior value in the market place.
To protect Hydro's liquidity the Board and management will maintain a strong priority on capital discipline including the prioritization of capital expenditures and optimization of working capital. The company will also work to maintain our financial flexibility and secure our investment grade credit rating. Careful attention to improving our environment and safety performance will continue. In 2009 we reduced our TRI rate (recordable injuries per million hours worked) by 26 percent, exceeding our target of 20 percent reduction compared to 2008. We have targeted an additional reduction of 20 percent for 2010. In 2009, the company revised its climate gas emission target down to a specific direct emission of 1.5 t CO2e/t aluminium in 2013, which is a further improvement of 19 percent of the current level.
Despite the challenging market situation and difficult funding environment early in 2009, Hydro established additional funding including a new EUR 750 million syndicated three-year revolving credit facility. This was on top of an existing USD 1.7 billion standby facility. Hydro also issued NOK 1 billion of six month commercial paper on two occasions during the year.
Hydro's share price closed at NOK 48.71 at the end of 2009. The return for 2009 was positive with NOK 20.91 or 75 percent.
Due to the strong commitment of returning cash to shareholders, improved market and earnings visibility compared to the beginning of 2009 and Hydro's cash position the Board of Directors has proposed a dividend of NOK 0.50 per share for approval by the Annual General Meeting on May 4th, 2010.