Corr: Higher earnings following operational improvements and beneficial currency developments

Thursday, 05. February 2009 08:21
Norske Skog's gross operating earnings (EBITDA) were NOK 922 million
in the fourth quarter of 2008, up from NOK 712 million in the third

"We have a seen a positive development throughout 2008. Our
production is now more cost-efficient and important input factors
have become more reasonably priced. In addition, currency
developments with a significantly weaker NOK through the latter half
of 2008 have had very beneficial effect for Norske Skog," says CEO
Christian Rynning-Tønnesen.

Net loss for the fourth quarter were NOK 1.3 billion, following major
negative changes in value for the company's energy contracts. Net
earnings for the full year 2008 were minus NOK 2.8 billion, with
large negative effects from write-downs and accounting losses without
cash effects.

The cash flow amounted to NOK 1.98 billion in 2008, and thus almost
on a par with 2007, when the cash flow was NOK 2.17 billion.

Key figures for 2008 (million NOK)

Q4 ' 08 Q3 ' 08 2008 2007
Operating revenue 7 354 6 317 26 468 27 118
Gross operating earnings (EBITDA) 922 712 2 723 3 932
Gross operating earnings after 256 111 100 1 053
depreciation (EBIT)
Value changes energy contracts -2 346 11 - 15 4 464
Accumulated translation differences -783 -783
Other special income and costs 368 195 74
Write-downs 502 -785 -4 840
Financial items and tax -63 -744 -1 359 -1 360
Net earnings -1 282 -1 212 -2 765 -683
Net cash flow from operations 732 119 1 977 2 166

Figures excluding the activities in Korea*:
Operating revenue 7 354 6 317 24 819 23 304
Gross operating earnings (EBITDA) 922 712 2 536 3 213
Operating earnings after depreciation 256 111 108 767

*) Norske Skog sold two mills in Korea in 2008. The earnings from the
two mills have been included up to and including the second quarter
of 2008 and therefore influence the comparison of the earnings for
2008 and 2007.

Over the last two years, Norske Skog has implemented a program which
aims to improve profitability by NOK 3 billion per year. The program
was completed at the end of 2008, and the achieved effects are close
to the original objective.

"The improvement program has been absolutely necessary to counter the
severe cost increases we have experienced in recent years," says

Total sales are a little higher in the fourth quarter compared with
the third. Sales in the fourth quarter are also somewhat higher than
the production, and stocks have been reduced as a result.

Production in the fourth quarter was 1.15 million tonnes, down from
1.24 million tonnes in the third quarter. It is mainly the production
in Asia and the production of magazine paper which have been

Continued good health and safety results

Norske Skog's constant focus on health and safety creates good
results. Absence due to illness for 2008 was 3 per cent and the H
value (lost time injuries per million working hours) was 1.4. The
average H value for the international paper industry is about 10.

"We are never satisfied with the health and safety results, but it is
good to see that we are successful in keeping absence due to sickness
and the number of injuries at a low level, even in times with major
reorganisations," says Rynning-Tønnesen.

Segment results

The gross operating earnings for Norske Skog's newsprint production
in Europe increased to NOK 369 million in the fourth quarter, up from
NOK 217 million in the third quarter. The main reason is the weaker
Norwegian NOK, lower energy and recovered paper prices, as well as
cost improvements.

The magazine paper segment shows a substantial result improvement in
the fourth quarter. The gross operating earnings were NOK 331
million, up from NOK 201 million in the third quarter. It is mostly
positive currency effects and lower input factor costs which
contribute to the result improvement.

Gross operating earnings for the activities in Australasia increased
to NOK 173 million in the fourth quarter, up from NOK 148 million in
the third quarter. The main reasons for the improvement are lower
energy costs in New Zealand and reduced wood prices in Australia.

The activities in Asia had a very weak fourth quarter result. Gross
operating earnings in the quarter were NOK 8 million, down from NOK
42 million in the third quarter. The situation with substantial
surplus capacity in China continues. In order to adapt production to
the market, Norske Skog has reduced newsprint production in Asia to
97 000 tonnes in the fourth quarter, compared to 133 000 tonnes in
third quarter. The reductions were implemented in the form of
temporary production shutdowns.

For the activities in South America, the gross operating earnings in
the fourth quarter were NOK 87 million. This is unchanged from the
third quarter. The price level in the region was acceptable during
the quarter, and the cost increase has levelled off.

Assets and liabilities

The value of Norske Skog's assets increased by NOK 2 billion to NOK
45.2 billion in 2008. The main cause is the weaker NOK, in particular
compared to the EUR and USD. The group's equity is not significantly
influenced by the currency fluctuations.

Net interest-bearing debt was reduced substantially in 2008 following
the sales of the activities in Korea and various properties. At the
end of 2008, the net debt was NOK 14 billion and the gearing (net
debt/equity) was 1.05. Cash and liquid assets amounted to NOK 6
billion. Own bonds were repurchased in the fourth quarter at a

Temporary capacity curtailments in 2009

Newsprint demand is expected to be lower in 2009 than in 2008. Norske
Skog has therefore decided to reduce the newsprint production
capacity in Europe by about 200 000 tonnes in 2009. The magazine
paper production capacity will be reduced by about 75 000 tonnes in
2009. The measures are temporary and will be divided between the
mills in Europe, focusing on optimising the results in the overall

The need for production curtailments will be assessed continuously in
2009 so that capacity can be quickly adjusted to reflect changes in

Profitability improvements and debt reduction

The main objective for Norske Skog is continued improvement of
profitability and debt reduction. Further cost reductions are planned
for 2009 and 2010, and the company will continue to focus on
reduction of net debt through cash flow from the operations, low
investment levels and transactions.

There is considerable uncertainty linked to currency developments and
the demand for newsprint and magazine paper in 2009. As of today,
Norske Skog expects a decline in volume of 5-10 per cent in mature
markets. There will be higher prices in Europe in 2009, and based on
long-term contracts in Australia, prices are expected to increase
from 1 July 2009. In Asia and South America prices could weaken
somewhat from the current level.

The costs of recovered paper and energy are expected to be lower in
2009 than in 2008. Overall, there is reason to believe that the
company's gross operating earnings will be somewhat better in 2009
than in 2008.

"We have implemented a major restructuring of the company in 2008.
Our financial situation has improved through the sale of the
activities in Korea and various properties. The group's cost position
has improved and the production capacity has been reduced in order to
meet lower demand. However, we can still not achieve results which
give a satisfactory return on capital. To achieve our goals to
improve profitability and continue to reduce debts, 2009 will also be
characterised by reorganisations and hard work," says Christian

A presentation/webcast will be held at Norske Skog's head office at
Lysaker today at 13.00 CET. More information about this event is
available on Norske Skog's website

Oxenøen, 5 February 2009

Norske Skog
Corporate affairs

For further information:
Media: The financial market:
Vice president corporate affairs Vice president investor relations
Tom Bratlie Jarle Langfjæran

Mob: +47 905 21 904 Mob: +47 909 78 434

This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.

View document

View document
Related Links: 
Copyright GlobeNewswire, Inc. 2016. All rights reserved.
You can register yourself on the website to receive press releases directly via e-mail to your own e-mail account.