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Strong operating performance, challenging markets

06 February 2020

Norske Skog’s EBITDA in the fourth quarter 2019 was NOK 560 million, an increase from NOK 505 million in the third quarter 2019. EBITDA was impacted by a gain on sale of water rights and termination of an energy contract related to the Albury transaction. In Europe, the sales volumes increased with a modest decrease in sales prices in the fourth quarter. Less domestic demand in Australasia resulted in more low-margin export sales from the region.

- Norske Skog confirmed a continued strong operating and financial performance in 2019 leaving the group with a solid balance sheet and strong platform for transforming the traditional publication paper operations into new green growth initiatives. The challenging market conditions will be handled with active asset management and necessary cost reduction initiatives, says Sven Ombudstvedt, CEO of Norske Skog.

Operating earnings in the fourth quarter were NOK -117 million compared to operating earnings of NOK 1,113 million in the third quarter of 2019. Net loss in the fourth quarter was NOK -158 million compared to a net profit of NOK 1,018 million in the third quarter 2019, impacted by restructuring expenses related to the closure of Albury in the Australasian region, impairment recognized for the Tasman mill, and non-cash changes in the valuation of energy contracts. Cash flow from operations was
NOK -78 million in the quarter down from NOK 150 million in the third quarter, mainly due to expenses related to the restructuring activities in Australasia, and paid taxes. Net interest-bearing debt is NOK 919 million at the end of the fourth quarter, with an equity ratio of 54%.

Key figures, fourth quarter of 2019

NOK MILLION (unless otherwise stated) Q4 2019 Q3 2019 Q4 2018 YTD 2019 YTD 2018
INCOME STATEMENT          
Total operating income 3 344 3 187 3 378 12 954 12 642
EBITDA 560 505 199 1 938 1 032
Operating earnings -117 1 113 412 2 398 926
Profit/loss for the period -158 1 018 309 2 044 1 525
           
CASH FLOW          
Net cash flow from operating activities -78 150 305 602 881
Net cash flow from investing activities 0 -1 -109 -180 -188
           
OPERATING MARGIN AND PROFITABILITY (%)          
EBITDA margin 16.8 15.8 5.9 15.0 8.2
Return on capital employed (annualised) 30.0 30.2 7.1 28.5 14.1
           
Capacity utilisation (Production / capacity %) 88 88 94 89 95


The Albury closure
The Albury mill ceased newsprint production on 5 December 2019. The sale of the Albury mill and realization of certain other related assets, including energy and water rights, will generate net cash proceeds of approximately NOK 700 million as previously announced.

Segment information
Total annual production capacity for the group is 2.3 million tonnes. In Europe, the group capacity is 1.9 million tonnes, while in Australasia, the capacity is 0.4 million tonnes.

Europe
Operating revenue increased from the previous quarter with higher sales volumes and modest decreases in sales prices. Variable cost per tonne remained unchanged in the fourth quarter with an underlying reduction in variable cost for pulpwood, recovered paper and energy in the quarter. Fixed costs were somewhat higher. According to Eurograph, demand for newsprint in Europe decreased by 7% through November compared to the same period in 2018. SC magazine paper demand decreased by 8%, while demand for LWC magazine paper declined by 11%. Our capacity utilization was 88% in the fourth quarter, down from 90% in the third quarter.

Australasia
Operating income and EBITDA increased from the previous quarter due to gains of
NOK 255 million recognised in the quarter, from sale of water rights and termination of the energy contract in relation to the sale of Albury. Sales volumes declined compared with previous quarter. Lower export prices were offset by currency effects. Variable cost per tonne were in line with the previous quarter. Fixed cost were slightly down in the quarter. According to official trade statistics, demand for newsprint in Australasia declined by 9% through December compared to the same period in 2018. Demand for magazine paper declined by 13%. Capacity utilisation was 86% in the period, which was impacted by the closure of Albury.

Outlook
The market balance for publication paper in Europe has weakened due to higher demand decline than the long-term trend. Prices have declined into the fourth quarter, and further price decreases are expected in first half of 2020. The impact of the lower sales prices will to some degree be offset by decreased input cost from energy, pulp wood and recovered paper.

Despite the closure of newsprint production at Albury in Australia, hence a significant reduction in export of newsprint, and a regional delivery optimization, we expect a challenging operating environment in the region in 2020. The Group will therefore continue to optimize operations in the region as well as seek to realize added value at the facilities beyond the current production of publication paper.

Norske Skog will continue its work to improve the core business, convert certain of the Group’s paper machines and diversify the business within bioenergy, fibre and biochemicals.

About Norske Skog
Norske Skog is a world leading producer of publication paper with a strong market position in Europe and Australasia. Publication paper includes newsprint and magazine paper. The Norske Skog group operates six mills in five countries, with an annual production capacity of 2.3 million tonnes. Newsprint and magazine paper is sold through sales offices and agents to over 80 countries. The group has approximately 2,300 employees. In addition to the traditional publication paper business, new growth initiatives related to renewable energy, bio cheminal products and fibre products have been launched.

Live presentation and quarterly material
Investors and press are invited to the CEO’s presentation of Q4 results today 08:30 CET at MESH (Tordenskiolds gate 3, Oslo).

The CEO presentation, the quarterly financial statements and the press releases are available on www.norskeskog.com and published on www.newsweb.no under the ticker NSKOG. If you want to receive future Norske Skog press releases, please subscribe through the website of the Oslo stock exchange www.newsweb.no.

Norske Skog
Communications and Public Affairs

For further information:

Norske Skog media:
Vice President Corporate Communication                                                                                                 
Carsten Dybevig
Mob: +47 917 63 117
Twitter: @Norske_Skog

Norske Skog financial markets:                                                                                                 
CFO
Rune Sollie
Mob: +47 906 34 788

CONTACT INFORMATION

Norske Skog ASA
PB 294 Skøyen
0213 Oslo
Norway
info@norskeskog.com

Phone: +47 22 51 20 20
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VISITORS

Norske Skog ASA
Sjølyst plass 2
0278 Oslo