Net operating earnings before special items came to NOK 167 million compared with NOK 97 million in the final three months of 2005.

 

Net earnings before tax for the first quarter were NOK 194 million, including NOK 146 million in recognition of IFRS related exchange rate differences in relation to the sale of Catalyst Paper shares.

 

"This result is weak," says acting chief executive Vidar Lerstad. "That particularly reflects the performance of the Australasia region, largely because of the planned conversion shut-down at the Norske Skog Albury mill.

 

"The market position in China is difficult, with a substantial fall in prices. Demand for newsprint and magazine paper is good in Europe and South America. However, increased energy costs are a cause for concern."

 

Markets and costs

European demand for publication paper rose by 4.5% from the first quarter of 2005. The increase is greatest for newsprint and super calendared (SC) magazine paper. Demand climbed by 17% in the former Eastern Bloc countries. Price increases for newsprint were implemented in Europe from the New Year.

 

Newsprint demand in South America rose by more than 10%, but declined in Australasia, China and North America. Although the negative trend appears to be continuing in the USA, European newsprint imports from North America halved from the first quarter of 2005.

 

Norske Skog's energy costs increased by appr. NOK 50 million compared with the fourth quarter of 2005, and by about NOK 280 million from the first quarter of last year.

 

Faster pace of change

 

The board of Norske Skog and chief executive Jan Oksum reached agreement in March that Oksum would resign from his post. Senior vice president Vidar Lerstad was appointed acting chief executive, and board chair Lars Wilhelm Grøholt has subsequently served as working chair.

 

A faster pace of restructuring to improve profitability has been announced by the board, which is in the process of searching for a new president and CEO.

 

Health and safety

The lost-time injury frequency per million working hours was 1.4 for the 12 months from 1 April 2005 to 31 March 2006.

 

Outlook for the rest of 2006

As reported earlier, no significant improvement in results is expected before the second half of 2006.

PM 2 at Norske Skog Tasman will be shut down for a planned rebuild for 10-12 days during the second quarter, and results for the Australasian region are set to remain weak in the quarter.

 

The Australasian restructuring project will be completed during the summer. A combination of reduced costs and anticipated price increases in Australia from 1 July will improve results.

 

Chinese demand is expected to improve over the year, but low prices will continue to hold margins down.

 

Demand in South America and Europe should remain good. The closure of Norske Skog Union will also have a positive effect on results in the second half.

 

Oxenøen, 3 May 2006

Norske Skog
Corporate communications

 

For further information:

Media:

Senior Vice President
Corporate Communications

Hanne Aaberg
Phone: +47 67 59 90 29
Mob: +47 913 51 681

 

Finance:

Vice President
Investor Relations

Jarle Langfjæran
Phone: +47 67 59 93 38
Mob: +47 909 78 434