20 Apr 2006

Norske Skog chair warns of demanding changes

Strong medicine rather than a mild cure was prescribed for restoring profitability to Norske Skog by chair Lars Wilhelm Gr°holt when he addressed the annual general meeting.

The requirement set for the company is a return of 11 per cent on capital, he said. However, the actual 2005 figure stood at 2.8 per cent.

Gr°holt was on the offensive during the AGM, which took place at the Norske Skog head office in Oksen°ya just outside Oslo.
"The management must demonstrate an even more aggressive approach to improving profitability," he said. "We must speed up the restructuring of the company."
Four areas. Full attention will be paid to four areas in particular, Gr°holt noted. One of these is the closure of old and unprofitable capacity. Second, attention must be focused on regions where the market for the company's products is expanding. Its production units must also be world-class in cost terms - either through closeness to the market or through a location in regions with special cost advantages for papermaking.
Finally, Gr°holt stressed that the company must be much tougher in seeking to realise synergies and to benefit from its size and concentration on publication paper.
"These factors give us opportunities to standardise work processes and to share experience and knowledge across regions and national frontiers.
"The board has questioned whether we have gone far enough in this area. We know that intensive work is needed on global standardisation, and the board will pay close attention to these efforts."
Energy prices. The Norske Skog board is worried about the development of energy prices in Norway and the rest of the world. Prices paid by the company rose by almost NOK 500 million in 2005.
"This trend seems set to continue," Gr°holt noted. "Securing sufficient energy supplies at competitive prices presents us with a big challenge.
"At the same time, politicians in both Norway and other countries should be concerned that the gap between supply and demand for energy is steadily widening.
"Politicians are good at calling for industry to show social responsibility. They should be equally concerned about the responsibility of government to the business community and jobs."
Restructuring. Large and difficult decisions had to be taken by Norske Skog over the past year - particularly for the Norwegian business, Gr°holt observed.
But restructuring had not come to an end in 2005. The company faces a number of major tasks in restructuring its worldwide business to meet global trends over the next five, 10 and 15 years.
"If we are to maintain our position as a world leader in the paper industry, we have got to earn money," Gr°holt emphasised. "We must have the financial muscle to implement the necessary restructuring, and we must give our owners an acceptable yield. This is the big job facing us."
He pointed to the closure of the Norske Skog Union mill in Norway, the sale of the shareholding in Canada's Catalyst Paper, and the disposal of Nordic Paper and Forestia as elements in the company's restructuring efforts.
The acquisition of PanAsia was the big event for the company in global terms last year. This move was wholly in line with its strategy of expanding its presence in the regions which offer the best prospects for publication paper.
Praise for employees. Given the level of negative attention recently faced by the group, Gr°holt felt it was all the more relevant to highlight the many positive results which the workforce helps to create every single day.
He highlighted the company's health and safety performance, which ranks among the best in the world. Sickness absence in 2005 was 2.7 per cent, while the lost-time injury frequency per million working hours came to 1.3.
"Although we have been through a tough period, it is reassuring to experience the commitment and loyalty in the organisation," he said.
"We will also face difficult times ahead, and taking care of each other during demanding restructuring processes presents an extra challenge."

Oxen°en, 20 April 2006
Norske Skog
Corporate Communication
For further information:
Senior Vice President Hanne Aaberg
Phone: +47 67 59 90 29
Mob: +47 913 51 681