03 Aug 2007

Norske Skog Q2 2007 results: Still a demanding market

Norske Skog's result for the second quarter 2007 is in line with the results of the first three-month period. The turnaround programme is on track. However, cost increases and a stronger Norwegian currency have offset the positive effects of the programme. Gross operating earnings before special items for the period totalled NOK 1 129 million, compared with NOK 1 175 in the first quarter.
'We are achieving the expected results of our turnaround programme, but the cost increases have been higher than presupposed. I am not satisfied with the result. Norske Skog's profitability must be improved and further structural measures will be considered,' says chief executive Christian Rynning-Tønnesen.
Norske Skog's total production and sales volumes are virtually unchanged this quarter compared to the first quarter. Operating revenue in the second quarter was NOK 6.8 billion, marginally more than in the first quarter. Costs for recovered paper increased by about NOK 100 million compared to the first quarter. The result is also negatively affected by currency developments.
Even though demand for newsprint in Europe remains at the same level as previously, total deliveries from Europe have been reduced by 3.8% in the first half year compared to the same period in 2006. This is due to increased imports from North America. So far in 2007, demand in Asia is showing a positive trend compared to 2006. Demand in China increased by 6% in the period, and in Korea by 2%.
Norske Skog is achieving its best results in Australasia and South America with gross operating margins of 28.2% and 24.6% respectively. The moving of a paper machine from Norske Skog Union in Norway to Norske Skog Pisa in Brazil is going as planned. All necessary licences from the Brazilian authorities are now in place, and the paper machine will begin production in the second quarter of 2009.
In the second half of 2007, the profit improvement programme is anticipated to yield results as expected. Costs are expected to remain high. Newsprint prices in Australia will be reduced by 7% in the second half based on inbuilt price mechanisms in existing contracts.

Presentation and webcast
A presentation/webcast of the quarterly results will be held at Norske Skog headquarters today at 13:00 CET. The quarterly report and link to the webcast are available on www.norskeskog.com.
Oxenøen, 3 August 2007
Norske Skog
Corporate communications
More information:
Vice president Corporate communications Tom Bratlie
Ph: +47 67 59 93 34 / Mob: +47 905 21 904 
Vice president Investor relations Jarle Langfjæran
Ph.: +47 67 59 93 38 / Mob: +47 909 78 434