Strong performance

27 Jan 2023 06:55 CET

Norske Skog’s EBITDA in the fourth quarter of 2022 was NOK 1 083 million, an
increase from NOK 508 million in the third quarter of 2022. The fourth quarter
EBITDA was impacted positively by higher publication paper sales prices, and
significant energy revenues from excess energy sale in France. Lower sales
volumes were more than offset by inceases in publication paper prices. The
packaging paper conversion projects are progressing according to budget and
timeline. Norske Skog Bruck will commence packaging paper production in the
first quarter, while Norske Skog Golbey will start in the fourth quarter of
2023.

“Our commercial and mill teams have utilized fluctuations in the energy market
while matching a reasonable demand for publication paper to reach a strong
result. At the same time, our strategic project groups are on track to fulfil
our strategy to become an independent European packaging paper player. This
year, both the commercial and technical teams at Bruck and Golbey, will start
delivering packaging paper to the market. The group will eventually have an
annual capacity of 760,000 tonnes of recycled containerboard,” says Sven
Ombudstvedt, CEO of Norske Skog.

Cash flow from operations was NOK 745 million in the quarter compared to NOK 627
million in the previous quarter, positively impacted by the strong operating
results, but somewhat negatively impacted by change in working capital.
Operating earnings in the fourth quarter of 2022 were NOK 944 million compared
to operating earnings in the third quarter of 2022 of NOK 113 million. The
operating earnings in the quarter positively affected by non-cash changes in
fair value of energy contracts in Norway amounting to NOK 227 million, and
negatively impacted by NOK 164 million impairment entirely related to write-down
of the light weight coated paper machine (PM4) at Bruck. Profit in the quarter
was NOK 1 065 million compared to a loss of NOK 11 million in the previous
quarter. The net profit in the quarter was positively affected by NOK 200
million in gain of sale of high school facilities in Halden through Porsnes
Utvikling AS.

The board of directors proposes that the annual general meeting adopts an
authorisation to pay NOK 5.00 per share in dividend. A dividend payment would be
subject to lenders waiving certain shareholder distribution restrictions. Net
interest-bearing debt was NOK 1 092 million at the year end, with an equity
ratio of 43%.


Status projects
The conversion of newsprint machines at Norske Skog Bruck and Norske Skog Golbey
will add 760 000 tonnes of new cost-competitive and low-emission packaging paper
capacity. The packaging paper production will be fully based on recycled fibre,
and will utilise green energy generated from the waste-to-energy facility at the
Bruck industrial site and the biomass plant under construction at the Golbey
industrial site (Green Valley Energie).

“We are well prepared to soon serve both the publication paper and the packaging
paper markets in a sustainable and profitable manner. In 2023, we will complete
a large-scale transformation of Norske Skog when it comes to product portfolio
changes. Our entire organisation is tuned in to enter a new era of opportunities
within the packaging paper markets,” says Ombudstvedt.

Bruck ceased newsprint production (PM3) in the third quarter, and will commence
recycled packaging paper production in the first quarter of 2023. The Bruck team
has already entered into sales agreements with packaging paper customers. At
Golbey, the newsprint paper machine (PM1) was closed in the fourth quarter of
2022 for conversion into recycled packaging paper production resulting in the
sale of excess energy. The timeline and total budget is in line with the project
plan assumptions, with expected start-up in the fourth quarter of 2023.

The construction of the biomass boiler at the Golbey industrial site is
progressing according to original plans. The biomass boiler will produce about
200 GWh of electricity and about 700 GWh of renewable heat, thus generating CO2
savings of 210 000 tonnes per year. The Green Valley Energie (GVE) is a joint
venture, in which Norske Skog Golbey has a 10% equity stake.

"The biomass boiler will ensure a stable, long-term supply of cost-competitive
and renewable steam as an alternative to fossil energy sources, shielding us
from volatile energy markets," says Ombudstvedt.

Norske Skog Skogn will invest about NOK 180 million, net of NOK 40-50 million in
grant financing from the industrial partnership NOx Fund, in a new
thermo-mechanical pulp (TMP) line, substituting expensive recovered paper with
fresh fibre. The new TMP line will reduce varialble costs, significantly reduce
NOx and fossil CO2 emissions, and reduce waste sent to landfill. The start-up is
expected to be in the first half of 2024.

Norske Skog actively works to realise value from its industrial sites by
developing existing infrastructure and industry competence. Both the
biocomposite product CEBICO, and microfibrillar cellulose product CEBINA
produced at Norske Skog Saugbrugs have established regular commercial
operations. The products have successfully been applied in various processes and
materials. Norske Skog aims to pursue the opportunity to become CO2 net negative
or climate positive, and Norske Skog explores economically viable models for
utilisation of biogenic CO2.


Operations
Total annual publication paper production capacity for the group is 1.7 million
tonnes, with 1.4 million tonnes in Europe and 0.3 million tonnes in Australia.
Following the machine conversions at Bruck (PM3) and Golbey (PM1) during 2023,
Norske Skog will have an annual capacity of 760 000 tonnes of packaging paper
production. Norske Skog has several ongoing bio products and energy activities
at all industrial sites.

Despite lower sales volume in 2022, the operating revenues increased
substantially due to sales price increases, and sale of excess energy during the
year, especially following the newsprint machine closure at Golbey in connection
with the machine conversion into packaging paper grades. The sales price
increases were driven by higher energy and other raw material costs, and a tight
market situation for publication paper. Variable cost per tonne was unchanged in
the quarter, with lower distribution and recovered paper prices, and higher
pulpwood prices. Fixed costs per tonne increased somewhat due to lower
production volumes and increased inflation driven by employee benefit expenses.
Group capacity utilisation was 78% in the quarter, respectively 74% in Europe
and 98% in Australasia. The newsprint machine closure at Golbey and high peak
energy prices caused some operational down-time in the quarter, which impacted
the capacity utilization in Europe.

According to Eurograph, demand for standard newsprint in Europe decreased by 5%
through November compared to the same period last year. SC magazine demand
decreased by around 13%; whereas, LWC paper demand decreased by around 18%
through November compared to the same period last year. According to official
Australian trade statistics, demand for newsprint in the fourth quarter in
Australasia decreased by 8% compared to the same period last year.


Key figures, fourth quarter of 2022

NOK million (unless otherwise stated)
Q422 Q322 Q421 YTD22 YTD21
Income statement
Total operating income 4 056 3 630 3 092 15 214 10 315
EBITDA 1 083 508 422 3 105 662
Operating earnings 944 113 479 2 845 -160
Profit/loss in the period 1 065 -11 400 2 572 -363

Cash flow
Net cash flow from operating activities
745 627 317 2 040 191
Net cash flow from investing activities
-872 -520 -326 -1 956 -891

Operating margin and profitabilty (%)
EBITDA margin 26.7 14.0 13.6 20.4 6.4
Return on capital employed (annualised)
12.1 -0.7 8.1 14.8 -7.8

Capacity utilisation (Production / capacity %)
78 85 95 87 89


Outlook
The developments in the global economy, especially within the raw material and
energy markets, but also consumer spending, are of vital importance for the pulp
and paper industry, and thus for Norske Skog’s operations. Uncertainty in global
economic performance will remain during 2023. Raw material and energy prices
have fallen from peak levels, but are still at significant levels. Under these
circumstances, Norske Skog will actively manage its energy exposure through the
coming quarters.

The uncertainty in the cost and demand development will influence the
publication and packaging paper prices in Europe. Executed and planned capacity
closures in the industry are expected to maintain a balanced newsprint paper
market, whereas the markets for supercalendered magazine grades and in
particular lightweight coated magazine grades are softening. The turbulent
operating environment, especially within energy, may result in further downtime
and closures in the industry.

The waste-to-energy facility at Bruck has been operating since the second
quarter of 2022 on approximately 80% of its designed capacity. Together with the
supplier Valmet, optimization and modifications will be carried out in the first
quarter to bring the energy plant to its full design capacity. The energy
facility significantly reduces the gas consumption, and thus CO2 emissions for
Norske Skog Bruck.

Norske Skog expects to commence production of recycled packaging paper during
the first quarter of 2023 at Bruck PM3, and during the fourth quarter of 2023 at
Golbey PM1. From the first quarter of 2023, Norske Skog will establish Packaging
Paper as a new operating segment. Norske Skog will continue to develop other
industrial opportunities, which include further conversions and several new
initiatives within renewable energy and bioproducts.


About Norske Skog
Norske Skog is a world leading producer of publication paper with strong market
positions and customer relations in Europe and Australasia. The Norske Skog
Group operates four mills in Europe, two of which will produce recycled
packaging paper following ongoing conversion projects. In addition, the Group
operates one paper mill in Australia. Norske Skog aims to further diversify its
operations and continue its transformation into a growing and high-margin
business through a range of promising energy and bio product development
projects. The Group has approximately 2 100 employees, is headquartered in
Norway and listed on the Oslo Stock Exchange under the ticker NSKOG.

Presentation and quarterly material
The company will not hold a live presentation, but will arrange a webinar today
at 08:30 CEST for pre-registered participants. The quarterly recording, the
presentation, the 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 Communication and Public Affairs

Carsten Dybevig
Email: carsten.dybevig@norskeskog.com
Mob: +47 917 63 117

Norske Skog financial markets:

Investor Relation Manager
Even Lund
Email: even.lund@norskeskog.com
Mob: +47 906 12 919

More information:
Access the news on Oslo Bors NewsWeb site

580851_Norske Skog press release Q4 2022 ENG Final.pdf
580851_Norske Skog presentation - Q4 2022 FINAL.pdf
580851_Norske Skog quarterly reports Q4 2022.pdf