Norske Skog

Already announced capacity cuts in the industry should lead to an improved market balance for newsprint and magazine paper. In a very demanding market, our capacity utilisation in the fourth quarter remained high at around 86%. The weaker Norwegian krone is supportive to operating margins, particularly for the Norwegian units. The successful completion of the EUR 290 million in senior secured notes issue and the extended maturity profile enables full operational efforts in 2015.

- We have performed in line with what we expected for 2014. We have completed important investments at Saugbrugs and Boyer giving these units and the group, a cost-competitive edge in their respective markets. We believe that we are in a better cost position and are more competitive compared to prior years, due to continued cost reduction programmes, an advantageous currency situation, a lower oil price and better economies of scale at our remaining units, says Sven Ombudstvedt, President and CEO of Norske Skog.

Norske Skog's gross operating earnings (EBITDA) in the fourth quarter of 2014 were NOK 190 million, down from 208 million in the third quarter. Operationally, the EBITDA was flat with a weak magazine paper market in Europe offset by completion of the Boyer ramp-up. The depreciation of NOK occurred late in the quarter and had limited impact on the quarterly result. Gross operating earnings for the full year 2014 were NOK 801 million, a reduction of NOK 61 million compared to 2013, mainly reflecting a prolonged ramp-up of the new magazine paper machine at Boyer in Australia and lower sales volumes due to loss of capacity at Singburi, Pisa and Walsum.

The net loss of NOK 1.2 billion in the fourth quarter of 2014 was significantly impacted by a negative foreign exchange effect on foreign denominated long-term debt and negative changes (with no cash impact) in the value of energy contracts. Norske Skog redeemed the last NOK bond amounting to NOK 185 million in the quarter. Net interest-bearing debt increased by NOK 0.6 billion from 2013 to 2014, from NOK 6.8 billion to NOK 7.4 billion, purely resulting from a weaker NOK. Cash flow from operating activities before net financial items was NOK 641 million in the fourth quarter and NOK 947 million for 2014.

Refinancing successfully completed
Norske Skog has completed the refinancing of its bond maturities through the issuance of a EUR 290 million senior secured note (SSN) and an offer to exchange existing bonds into new bonds.

- After these transactions, we have strengthened and secured our long-term capital structure by enhancing our liquidity position, realizing immediate de-leveraging and extended debt maturities , said Mr. Sven Ombudstvedt, President and CEO of Norske Skog.

Market and segments
Prices for our products remained relatively stable in 2014 beyond certain foreign exchange effects.

Europe
Operating revenues, cost of materials and fixed costs increased slightly compared to the previous quarter, all caused by a weaker NOK. Gross operating earnings declined to NOK 129 million in the quarter, from NOK 159 million in the third quarter, with a weak magazine paper market in Europe.

Demand for newsprint and magazine paper in Europe decreased by 6% and 3% respectively last year compared to the previous year. Our capacity utilization was 84% in the fourth quarter compared to 86% in the third quarter.

Australasia
Increased operating revenues and cost of materials in the period was due to full production at the new magazine paper machine at Boyer. Gross operating earnings increased to NOK 92 million in fourth quarter, up from NOK 59 million in the third quarter, due to completion of the ramp-up at Boyer, lower fixed costs and seasonally higher sales volumes.

Demand for newsprint in Oceania decreased by 6% in 2014, compared to 17% in 2013. Demand for magazine paper in Oceania declined by 2% last year. Our capacity utilization was 93% in the fourth quarter compared to 94% in the third quarter.

Active capacity management

Total annual production capacity for the group is 3.0 million tonnes following the completion of the ramp-up at Boyer. In Europe the group capacity is 2.3 million tonnes, while in Australasia the capacity is 0.7 million tonnes.

Capacity utilization for the group in the fourth quarter was 86% compared with 88% in the third quarter, as a result of active capacity management. Capacity utilization for 2014 was 88% (88% for 2013).

- We have performed active portfolio management of our machine capacity throughout 2014, and we will continue this policy in 2015. The market remains challenging, and we will continue our efforts to improve the group's competitiveness and financial flexibility. Already announced permanent capacity cuts of more than 2.5 million tonnes in Europe and North-America in 2014 and 2015 in our product segments should be supportive to the market balance, and thus future price levels, says Sven Ombudstvedt, President and CEO of Norske Skog.

Publication paper prices in Europe were relatively stable into 2015, beyond certain foreign exchange effects, particular in the UK market. The market balance for newsprint and magazine paper is expected to improve into the second half of 2015, when already announced capacity closures in the industry have been completed.

Paper prices in Australasia are to a large degree stable reflecting long-term pricing contracts and a large logistical disadvantage for non-domestic producers. Export volumes for newsprint out of Australasia track international prices in Asia and is still expected to be challenging. The new magazine paper machine at Boyer in Australia should give a significantly positive contribution to gross operating earnings in 2015. Last year the machine was a significant negative contributor due to a prolonged ramp-up.

Variable costs for the group are expected to remain relatively stable. Fixed costs initiatives continue.

The refinancing plan announced in January has been successfully completed. Following these transactions, the capital structure has improved significantly through enhanced liquidity, immediate de-leveraging and an extended maturity profile. Despite this, leverage remains high and requires improved profitability, but the refinancing enables the group to focus on improving operations, cost initiatives and capital efficiency.

A recorded CEO presentation, the quarterly financial statements and the presentation package are available on www.norskeskog.com.

Norske Skog will not be hosting an international 4^th quarter telephone conference, but instead invites analysts and investors to a meeting at the corporate headquarter in Oslo on Monday 9 March at 13:00. Please confirm your participation in an e-mail to Investor Relations, tom.rogn@norskeskog.com.