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Norske Skog: Continued good performance

Strong demand for Norske Skog's products in all regions resulted in high capacity utilisation and net profit in the third quarter of NOK 190 million. This demonstrate the long-term trend of good performance. So far this year, the net profit is NOK 430 million.

Norske Skog: Continued good performance

Gross operating earnings in the third quarter 2016 was NOK 251 million, which was a decrease from NOK 335 million in the second quarter, mainly due to somewhat higher energy and recovered paper cost and weaken pound.

Net profit in the third quarter was NOK 190 million compared with a negative NOK 874 million in the third quarter 2015.

Despite a comprehensive refinancing of the group this year, the business units have completed major cost reductions and seen significant progress on new growth projects. The green shift transformation of Norske Skog into new segments will be more prominent in the years to come. The improved market balance should allow for a substantial increase in sales prices going forward, especially after significant capacity closures in Europe and North America combined with a flattening of the demand curve, says Sven Ombudstvedt, CEO of Norske Skog.

Cash flow from operating activities before net financial items was NOK 115 million compared with NOK 321 million in Q2 2016. The cash balance at the end of the quarter was NOK 570 million. Net interest bearing debt was reduced by NOK 0.2 billion from the end of the second quarter, from NOK 6.4 billion to NOK 6.2 billion, as a result of a stronger Norwegian krone against all major currencies and bond buybacks. The equity was NOK 269 million at end of the third quarter compared to NOK 190 million at the end of the second quarter.

About market outlook

The market balance for publication paper in Europe is favorable with modest demand declines and reduced supply due to capacity closures. The newsprint market will tighten further in 2017 with significant additional European capacity closures already announced, which should lead to price increases.

The Asian export market for newsprint, of increasing importance to Norske Skog is encouraging with price improvements.

Ongoing growth initiatives will begin to contribute meaningfully to gross operating earnings from next year and reach full run-rate within a timeframe of 3-4 years. Fixed costs initiatives continue at all mills towards a group level run-rate of NOK 600 million per quarter.

Recent foreign exchange developments, particularly from GBP depreciation, but also from NOK appreciation to EUR is a headwind for the group. Combined with somewhat higher energy and recovered paper costs, this will diminish the positive seasonal effect from higher sales volumes in the fourth quarter.

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