12 Apr 2007

Norske Skog optimistic about turnaround

Turnaround and optimism were key themes in the speech given by departing chair Lars Wilhelm Grøholt to shareholders at Norske Skog's annual general meeting today.
The drastic cure he announced at the 2006 AGM had already yielded a positive effect of NOK 400 million by the end of the year, with the ultimate target being NOK 3 billion by 31 December 2008.
 "It's obviously far too early to draw any conclusions, but I'd permit myself to be an optimist on the company's behalf," Grøholt said.
The turnaround has been given the necessary entrenchment in all Norske Skog's business units, where value is actively created and the big changes are taking place.
While the board has set a target of 11% for return on capital employed, this percentage was 3.7% in 2006.
Grøholt noted that much of the global paper industry was being challenged by overproduction and rising costs. It has been unable to phase out sufficient production capacity to match trends in mature markets.
But he identified a number of bright spots, including a cautious expansion in European demand over the past five years. This can primarily be attributed to economic growth in eastern Europe. Developments are also positive in South America and stable in Australasia.
The big challenge facing Norske Skog is in China, where newsprint prices are very low because the number of paper mills built exceeds requirements.
 "It's hard to understand why Norske Skog, as the most global paper industry player, shouldn't be present in the world's most expansive market," said Mr Grøholt.
 "With two excellent mills, in Shanghai and Hebei respectively, we will be paying very special attention to the position in China."
He reviewed the main elements in the turnaround programme, which also involves demanning, and assured the AGM that the company is devoting much effort to helping those affected to find new work and financial security.

"One of the most difficult decisions I have ever been involved in during my career was the closure of Norske Skog Union," Grøholt admitted.
 "The massive coverage and criticism levelled at this move have made a deep impression, and I wouldn't defend all aspects of the way it was handled. Much could have been done differently."
 But he expressed surprise at the black-and-white character of the public debate, and pointed out that the industry in Europe faced overproduction and a desperate need to adapt.
 "We must restructure the company to be as well equipped as possible for the future. Restructuring is natural," Grøholt added, and highlighted the positive aspects for the community around the closed mill.

The rapid expansion of alternative media is affecting the paper industry, he said, but emphasised that the various media perform different functions.
 "The printed newspaper isn't something which exists despite developments, but has a solid position in the overall media picture.
 "We know that the number of published titles is increasing every year, and that 1.4 billion people read at least one newspaper a day."
 Grøholt praised the media houses and advertisers for continuous product development, and noted that this is a forward-looking industry where Norske Skog has and will retain a strong position.
Release to Oslo Stock Exchange:
AGM in Norske Skog
Norske Skog held its annual general meeting today, 12 April 2007.
 The AGM approved the board's proposal to pay a dividend of NOK 5.50 per share. This payment will be made on 24 April 2007 to shareholders registered in the company's share register today. The date of record for the payment is 17 April, and Norske Skog's shares will be traded ex-dividend with effect from tomorrow, 13 April 2007.

 The AGM mandated the board to buy back the company's own shares up to a ceiling of 10% of the shares outstanding at any given time. Replacing an earlier mandate, this will run until the AGM in 2008.

 Øyvind Birkeland was elected as a new member of the corporate assembly in place of Svein Aaser. The other members of the corporate assembly and nomination committee who were up for election were re-elected.

 The other items on the agenda were also approved in accordance with the notice of the meeting.

 In the following meeting of the corporate assembly, Kim Wahl was elected as the new chair of the board in succession to Lars W Grøholt, and Kari Broberg was elected as a new director to replace Annette Brodin Rampe. Directors serve for one year.

 Following the elections, Norske Skog's governing bodies have the following composition:

Board of directors - shareholder-elected directors
Kim Wahl, chair, Øivind Lund, deputy chair, Halvor Bjørken, Kari Broberg, Gisèle Marchand and Ingrid Wiik

Board of directors - worker directors
Kåre Leira, Stein Roar Eriksen and Trond Andersen

Corporate assembly - shareholder-elected members
Helge Evju, chair, Idar Kreutzer, deputy chair, Emil Aubert, Ole H Bakke, Øyvind Birkeland, Ann Kristin Brautaset, Kirsten C Idebøen, Birgitta Rødstøl Næss, Christian Ramberg, Tom Ruud, Turid Fluge Svenneby and Halvard Sæther

Corporate assembly - employee-elected members
Øystein Bruce, Roy Helgerud, Bjørn Inge Hoem, Paul Kristiansen, Randi Nessemo and Stig A Stene

Corporate assembly - employee-elected observes
Thor Granaune, Inge Myrlund and Martin M Petersen
The minutes of the AGM will be submitted to the Oslo Stock Exchange.
Oxenøen, 12 April 2007

Norske Skog
Corporate communications
For further information:
Vice President Investor Relations Jarle Langfjæran
Phone: +47 67 59 93 38
Mob: +47 901 78 434 
Vice President Corporate Communications Tom Bratlie
Phone: +47 67 59 93 34
Mob: +47 905 21 904