|
05 Feb 2003 Result affected by weak demand and strong Norwegian krone - comprehensive cost-cutting measures required to strengthen competitiveness Norske Skog had operating revenue of NOK 23.4 billion in 2002 (NOK 30.3 billion) and operating earnings before restructuring costs of NOK 1.9 billion (NOK 5 billion). The operating result was negatively affected - in the amount of about NOK 1 billion - by the stronger Norwegian krone, if one compares the average krone exchange rate in 2001 and 2002. As well as the exchange rate, lower prices and volumes were the main reasons for the poor result. The Board proposes this year, as last year, a dividend of NOK 6 per share. "There is little doubt that it is the strong Norwegian krone which has had the most marked impact on Norske Skog's profitability, compared with our competitors," says CEO Jan Reinås. "Despite weak demand, Norske Skog has on the whole attained its long-term financial target figures. The Company is now undergoing a consolidation and operation phase, and Improvement 2003 will help better our competitiveness considerably. The result will be a stronger Norske Skog," he adds.
In the 4th quarter of 2002 Norske Skog had operating revenue of NOK 6 billion, and operating earnings - before restructuring costs - of NOK 432 million. The allocation of NOK 600 million to cover estimated restructuring costs in connection with the "Improvement 2003" programme gives an operating result of minus NOK 168 million. This amount includes set-asides to cover costs connected with de-manning.
Norske Skog's total assets declined from NOK 56.2 billion in 2001 to NOK 44.9 billion in 2002. At the end of 2002 Norske Skog had a net debt to equity ratio (gearing) of 1.02. During 2002 Norske Skog paid off debt totalling NOK 2.4 billion.
The Group's equity capital stood at NOK 17.9 billion as of December 31, 2002. This corresponds to NOK 136 per share, and gives an equity capital ratio of nearly 40%. Conversion of overseas subsidiaries to Norwegian kroner negatively affected equity capital by NOK 1.9 billion in 2002, owing to changes in currency exchange rates. The Group's debt is largely denominated in foreign currencies, and exchange rate changes reduced net interest-bearing debt by NOK 2.2 billion.
In Europe markets for publication paper were marked by imbalance and at times pressure on prices, during 2002. Newsprint prices in terms of local currencies were about 10% lower than in 2001. Lower advertising volumes led to lower demand during the year, and this in turn caused newsprint production adjustments. Norske Skog Europe had operating revenue of NOK 14 billion and operating earnings of NOK 1.1 billion in 2002.
South America is marked by economic uncertainty. This led to a fall in demand for newsprint. Norske Skog strengthened its market position in the region, despite increased competition from North American suppliers. Norske Skog's operating revenue in South America in 2002 was NOK 1.1 billion, and its operating result was minus NOK 9 million.
In Australasia there is relatively good demand for wood-containing publication paper. Norske Skog's long-term contracts in the region generate stable, satisfactory earnings. Total operating revenue for the region was NOK 3.8 billion. Operating earnings reached NOK 546 million.
Pan Asia achieved strong results in 2002. There was good demand in Korea and China, coupled with stable prices and efficient production. In other parts of Asia markets were weak and prices low. Norske Skog owns 50% of Pan Asia and its share of Pan Asia's operating revenue and operating earnings were, respectively, NOK 2.6 billion and NOK 562 million.
In North America, demand for wood-containing publication paper increased during the second half of 2002, but prices continue low. NorskeCanada, of which Norske Skog owns 30.6%, had operating revenue and operating earnings of, respectively, CAD 1,482 million and CAD minus 123 million in 2002.
Norske Skog expects that publication paper markets will be weak in the first half of 2003, too, and that the krone exchange rate will continue high.
Norske Skog foresees stable sales volumes in 2003, compared with 2002. In Europe, newsprint prices are expected to continue falling. Negotiations about prices and deliveries are still in progress. A newsprint price increase of USD 50 per tonne has been announced in North America, effective from March 1, 2003. Magazine paper is expected to be under some price pressure during the first half-year.
Consequently, Norske Skog foresees a weak result in 2003. Through the year, however, the effect of the improvement programme will make a positive contribution.
Oxenøen, February 5, 2003
|