05 Feb 2003

2 billion NOK improvement plan on target

Norske Skog's efforts to achieve improvement results of 2 billion NOK by the end of 2004 are on target. The company has begun implementing multiple initiatives across the globe.

In October 2002, Norske Skog started a comprehensive program to strengthen the company's competitiveness and profitability. The 'Improvement 2003' program involves the entire global operation.
Work targeted
Norske Skog has identified close to 300 improvement initiatives and prepared plans for implementation. The cost reductions and increase in efficiencies should produce improvement results of 2 billion NOK.
"It is essential to carry out significant changes to strengthen Norske Skog's competitive strength and profitability. The current downturn is believed to continue in 2003 with weak markets, low paper prices and a strong Norwegian krone. We must proceed quickly and effectively to counter this situation. I am impressed with the contribution and work that is being done. There are some very difficult decisions ahead of us, but the work that has been done shows that we will succeed", says President and CEO Jan Reinås."
Co-ordinate and streamline
Norske Skog's strength is that it is a global player with operations on five continents, which allows for substantial results on improvement activities. The program will capture significant results and synergies with stronger co-ordination within administration, production, purchasing and logistics. Administration will be simplified and reduced, while the organisation and manning at the mills will be streamlined to a greater extent than today. This will make it easier to share knowledge and transfer best practice between production units in the company.
According to Norske Skog's calculations, the initiatives will capture improvement results in 2004 that will roughly be divided as follows:
  • Production & maintenance manning: NOK 450 million
  • Corporate and mill overhead: NOK 450 million
  • Supply: NOK 600 million
  • Distribution: NOK 150 million
  • Sales & operation: NOK 350 million
Manning reductions
In December 2002, considerable changes were made in the organisation structure and new senior managers for central positions were appointed. The restructuring process has continued throughout all parts of the company including a comprehensive review of tasks and responsibilities.
Based on this process, the total reduction is estimated to exceed 1,200 full-time positions during 2003 and 2004. In total, the administrative positions will be reduced by about 25%, while positions in production and maintenance will go down by approximately 15%.
The downsizing process will begin with staff functions at the head office and regional offices (Oslo, Sydney in Australia, and Curitiba in Brazil). The new organisational structure at these locations will be effective from February 15, 2003.
At the mills, it is necessary to use more time to develop the new organisation. The future organisation and goals for manning levels at each mill will be completed in March. It will be the responsibility of the line management in each unit to implement organisational changes. These will be handled in accordance with the rules about involvement and negotiations with employee representatives in each country.
Norske Skog has developed a global policy for downsizing to secure equal treatment of employees. Early retirement opportunities will be available and redundant employees will receive severance pay and assistance to advise and help them attain new employment.
Transaction service centres
In order to increase the efficiency within administration, two transaction service centres will be set up for Norske Skog in Europe, one in Skogn, Norway and the other in Antwerp, Belgium. The centre in Antwerp will have supporting functions for sales and logistics, and the centre in Skogn will perform accounting and salary administration for the Norwegian units. These centres will increase the efficiency of administrative tasks, which currently are spread out in many locations.
Targeted investments
Norske Skog will develop a long-term plan for development of the company's production facilities.
Capital spending will, to a large degree, be targeted to further develop competitive mills, while paper machines identified as "harvesting assets" (15 - 20 per cent of capacity) will only receive maintenance capital.
Norske Skog will continue to refine the investment strategy and at a later date, present a long-term plan for development of the company's mills and paper machines.

Oxenøen, February 5, 2003

Corporate Communications

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