Coping with challenging markets

07 Feb 2025 06:55 CET

Norske Skog’s EBITDA in the fourth quarter of 2024 was NOK 33 million, a
decrease from NOK 88 million in the third quarter of 2024. EBITDA in the quarter
was influenced by continued pressure from price increases for energy and
pulpwood. Norske Skog Golbey will start production of packaging paper towards
the end of the first quarter of 2025, which will increase the Group’s total
capacity with 36%. Proceeds from the final insurance settlement from the
rockslide at Norske Skog Saugbrugs will improve the financial position and
liquidity by NOK 540 million in the beginning of 2025. The publication paper
markets are still challenging although several market closures have improved the
market balance for newsprint and magazine paper.

“In the first quarter of 2025, we will proudly launch containerboard production
at Norske Skog Golbey, the group’s most significant investment to date and a
bold step into the future. This marks a major milestone in our transformation
from a traditional publication paper producer to a dynamic supplier of
containerboard. With a cutting-edge production line powered entirely by recycled
fibre, we are increasing our capacity by more than one-third, strengthening our
ability to serve the growing demand in the containerboard market,” says Geir
Drangsland, CEO of Norske Skog.

The cash flow from operations in the quarter was NOK 28 million due to reduced
working capital following sale of CO2 allowances. Operating earnings in the
fourth quarter of 2024 were NOK -353 million compared to operating earnings in
the third quarter of 2024 of NOK -5 million. The operating earnings in the
quarter were negatively affected by non-cash changes in fair value of energy
contracts in Norway amounting to NOK 137 million, and negatively affected by NOK
121 million in impairments relating to assets at Norske Skog Saugbrugs.

Loss before taxes in the quarter was NOK -555 million compared to NOK -141
million in the previous quarter. The net profit was negatively affected by
non-cash currency changes in euro denominated debt and foreign exchange
contracts. Net interest-bearing debt increased from NOK 3 717 to 4 119 million
at the end of the quarter. The equity ratio was 37%.

Operations
Total annual publication paper production capacity for the group was 1.6 million
tonnes during 2024. Norske Skog has discontinued the reporting segment
Publication Paper Australasia after initiating a sales process in December 2024.
The Group capacity of publication paper will then become 1.3 million tonnes.
Norske Skog Golbey (PM1) plans to start packaging paper production towards the
end of the first quarter of 2025. Norske Skog will after the ramp-up of Norske
Skog Bruck and Norske Skog Golbey have an annual capacity of 760 000 tonnes of
packaging paper production.

According to Euro Graph, demand for standard newsprint in Europe decreased by 1%
through November 2024 compared to the same period last year. SC magazine paper
demand decreased by around 9%. LWC paper demand decreased by around 2% through
November compared to the same period last year. According to PPPC trade
statistics for Australia, demand for newsprint decreased by 16% and increased
for coated mechanical by 1% through November 2024 compared to the same period
last year.

 
Publication paper
Operating income increased from the previous quarter mainly due to higher
deliveries and sale of excess energy. Slightly higher publication paper sales
prices due to mix effects were more than offset by higher pulpwood and energy
prices compared to the previous period. The increase in sales prices did not
absorb the increased cost of materials in the period.

Variable costs per tonne increased in the quarter, both in absolute terms and
per tonne for cost of materials mainly due to pulpwood and energy prices.
Distribution costs were unchanged in the period but somewhat lower on a per
tonne basis. Fixed costs per tonne increased both on an absolute level and per
tonne level due somewhat higher employee expenses. Group capacity utilisation
was 87% in the quarter, 87% in Europe and 86% in Australasia.

Packaging paper
The packaging paper machine at Bruck continues to ramp-up its production,
although a commercially challenging market reduced deliveries in the quarter.
The containerboard production will reach full capacity utilisation during the
third year of production. The operating income for 2024 consists of revenue from
deliveries and gate fees from waste incineration, which were higher than the
variable and fixed costs.

Key figures, fourth quarter of 2024 *
NOK million (unless otherwise stated)
Q4 2024 Q3 2024 Q4 2023 YTD 24 YTD 23
Income statement
Total operating income 2 666 2 511 3 195 10 173 11 557
EBITDA 33 88 680 736 2 062
Operating earnings -353 -5 627 -60 934
Profit (loss) before tax -470 -144 588 -566 645

EBITDA margin % 1.2 3.5 21.3 7.2 17.8
Capacity utilisation publication paper %
87 91 83 87 80

Cash flow
Net cash flow from operating activities
28 -272 973 -15 1 928
Net cash flow from investing activities
-428 -289 -677 -1 198 -2 689

Balanse 311224 300924 311223
Total assets 14 467 14 824 14 755
Equity 5 384 6 132 6 161
Equity % 37 41 42

*)Restated figures to reflect the discontinuation of the publication paper
Australasia segment


Status projects

Norske Skog Golbey conversion projects
At Norske Skog Golbey, the conversion of the newsprint paper machine (PM1) into
recycled containerboard paper production is progressing towards start-up in the
end of the first quarter of 2025. Norske Skog Golbey will eventually add 550 000
tonnes of new low-emission packaging paper capacity after ramp-up is completed,
which will be fully based on recycled fibre. Along with the containerboard
production at Bruck, Norske Skog will at full capacity utilisation, deliver 760
000 tonnes of packaging paper to the market. Golbey PM1 will utilise renewable
energy generated from the newly commissioned biomass plant at the Golbey
industrial site (Green Valley Energie). This energy plant will be the largest of
its kind in France.
 
Norske Skog Saugbrugs BCTMP-production
Norske Skog Saugbrugs has started a main study aiming to enter the Bleached
Chemi-ThermoMechanical Pulp (BCTMP) market by starting production at Norske Skog
Saugbrugs in Halden. Currently, Norske Skog Saugbrugs has engaged technical and
environmental consultants, who are working with potential machinery and
equipment suppliers.

The new BCTMP line will produce approximately 300 000 tonnes of competitive pulp
to meet the growing demand, especially for products in the packaging market. The
BCTMP production will be based on fresh fibre, and the mill already has access
to adequate energy capacity. Norske Skog Saugbrugs investment will exploit
existing machinery, equipment, and infrastructure; thus, reducing the total
investment significantly compared to a greenfield alternative. The final
investment decision is expected to be made during the first half of 2025.


Outlook
The development in the global economy is important for consumer spending, and
this impacts the publication paper and packaging paper industry, and thus Norske
Skog’s operations and results. Norske Skog’s deliveries have increased during
the fourth quarter of 2024, with increase in newsprint deliveries outweighing
slight decreases in magazine paper and containerboard.

The raw material and energy markets, which are important for both publication
paper and packaging paper production, are expected to remain uncertain. During
the fourth quarter, energy costs reached somewhat higher levels. Cost of
pulpwood has increased, but the situation remains manageable. Recycled paper
prices show signs of stalling and even declining during the fourth quarter.

The level of input costs and demand for paper will continue to influence paper
sales prices in Europe. Both publication- and packaging paper markets see some
excess capacity, and capacity reductions are required to tighten the markets.
Industry utilisation is expected to remain below the historical average until
capacity is reduced. Norske Skog is able to maintain a higher utilisation rate
than the industry average.

The production of recycled containerboard at Norske Skog Bruck PM3 is expected
to increase in line with plan over the coming quarters. The EBITDA from the
packaging paper segment was positive in 2024 but is expected to be negative in
2025 due to allocation of fixed costs relating to Norske Skog Golbey PM1 from
the first quarter of 2025.

Norske Skog Saugbrugs continues to progress with the design phase of a new
bleached chemi-thermomechanical pulp (BCTMP) line, with expected final
investment decision in the first half of 2025. In addition, Norske Skog
Saugbrugs is also reviewing the future opportunity for SC magazine paper
production from the damaged PM6. During December 2024, Norske Skog initiated a
concrete sales process for its operations in Australasia. The transaction is
expected to close during the first quarter of 2025.

Norske Skog continues to monitor its financial position closely and has several
ongoing initiatives to secure its liquidity and financial performance going
forward. There is also a clear emphasis on reducing production cost and working
capital to improve the group’s competitive position and cash flow from
operations. Norske Skog will update separately on such initiatives from time to
time as they progress.

Norske Skog will continue to develop its industrial sites with new fibre
projects based on efficient use of certified fibre and renewable energy, both on
a stand-alone basis and in partnerships. The Norwegian mills, Norske Skog
Saugbrugs and Norske Skog Skogn, have received written notices from the
Norwegian Environment Agency stating that they will not be included in the EU
Emissions Trading System from 2026 to 2030. This is because emissions from
biomass combustion accounted for more than 95 percent of the mills’ total
average greenhouse gas emissions during the reference period 2019–2023.

“This is a significant setback for sustainable industry and deeply disappointing
for everyone who has invested in and prioritized the transition from fossil
fuels to renewable energy. This decision will incentivize facilities to continue
or even increase the use of fossil fuels," says Geir Drangsland, CEO of Norske
Skog.

 
About Norske Skog
Norske Skog is a leading producer of publication paper with strong market
positions and customer relations in Europe. The Norske Skog Group operates four
mills in Europe, which produce publication paper, recycled packaging paper,
energy and bioproducts. The annual publication paper production capacity is 1.6
million tonnes. The annual production capacity of packaging paper will be 0.8
million tonnes following the start-up of containerboard production at Golbey in
the first quarter of 2025. 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 arrange a Teams-webinar today at 08:30 CEST, which can be
attended by clicking the webinar link on the front page of the
www.norskeskog.com.

The quarterly board of directors report, 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 Corporate Communication and Public Affairs
Carsten Dybevig
carsten.dybevig@norskeskog.com
Mob: +47 917 63 117

Norske Skog Investor Relations:
Vice President Corporate Finance
Even Lund
even.lund@norskeskog.com
Mob: +47 906 12 919

More information:
Access the news on Oslo Bors NewsWeb site

637969_Norske Skog press release Q4 2024 ENG FINAL.pdf
637969_Norske Skog reports Q4 2024.pdf
637969_Norske Skog presentasjon - Q4 2024 FINAL.pdf