Norske Skog: Better market balance An improvement in the market balance for newsprint and magazine paper, as a result of permanent shutdowns in the industry, contributes to higher capacity utilisation and an improved margin outlook in Europe. - During the quarter, we have both announced and implemented an active capacity management. We are now seeing the effects of this, through higher selling prices in Europe. Capacity utilisation is currently high for our machines. We will continue to actively cut costs and improve productivity, and assess our capacity on an ongoing basis, says Sven Ombudstvedt, President and CEO of Norske Skog. Alpha Norske Skog's gross operating earnings (EBITDA) in the third quarter of 2013 were NOK 176 million, down from NOK 371 million in the third quarter of 2012. The decrease was due to divestments and lower margins. Cash flow from operating activities was NOK -91 million in the third quarter, and was weaker than the third quarter of 2012. The decrease was due to lower operating earnings and increased working capital. - The total production capacity has been reduced in line with market demand. A better balance between supply and demand has given room for price increases in the second half of the year. This, combined with a favourable exchange rate development and stable raw material costs, contributes to a brighter margin outlook, says Ombudstvedt. Net interest-bearing debt increased by NOK 277 million in the quarter, primarily due to the weaker Norwegian krone and negative cash flow. Net interest-bearing debt has increased by NOK 897 million so far this year, of which NOK 565 million is due to the weaker Norwegian krone. The company repaid the revolving credit facility of EUR 70 million in the quarter, thus removing uncertainty regarding possible covenant breaches. Financial items consist primarily of NOK 160 million in interest costs and NOK 87 million in unrealised currency losses. Fixed costs were NOK 758 million in the third quarter, down from NOK 903 million in the third quarter of 2012. A new long-term sales contract was negotiated in the third quarter, and a fee was received in relation to cancellation of the previous contract. This amount will be recognised as income quarterly over two years. Key figures, third quarter of 2013 (NOK million) Q3 2013 Q2 2013 Q3 2012 2012 Operating revenue 3 353 3 267 4 115 16 592 Gross operating earnings (EBITDA) 176 214 371 1 485 Gross operating margin (%) 5.2 6.6 8.9 9.0 Gross operating earnings after depreciation 40 16 140 550 Restructuring expenses 3 0 -122 -118 Other gains and losses -47 -662 -65 -1 009 Impairments 0 0 -403 -2 086 Operating earnings -4 -647 -450 -2 663 Share of profit in associated companies 9 4 -83 -70 Financial items -245 -358 86 -117 Income taxes 94 142 20 69 Profit/loss for the period -147 -859 -433 -2 781 Profit/loss before special items -103 -197 550 432 Net cash flow from operating activities -91 -48 6 982 Active capacity management The company's investment projects are progressing according to plan. AUD 84 million (NOK 480 million) is being invested in connection with the conversion of a machine at Boyer in Australia from production of newsprint to catalogue paper, and NOK 220 million is being invested at Saugbrugs in Norway to reduce energy consumption and fixed costs. Both of these investments will have a positive impact on margins. As previously announced, Norske Skog will temporarily curtail production from the end of December at one of two LWC machines (PM4) at Walsum in Germany, due to low profitability. The annual production capacity of this machine is 225000 tonnes. As a result of improved margins for newsprint in England, PM2 at Skogn was started up again in late August after two months of curtailment. Norske Skog Singburi in Thailand was sold to a Thai industrial group for USD 33 million. The mill has an annual production capacity of 125 000 tonnes, and the transaction will be completed upon settlement of the sales consideration in the fourth quarter. Outlook Prices are expected to remain relatively stable from the third quarter to the fourth quarter. We anticipate little change in the level of variable costs, whilst fixed costs will decline somewhat as a result of ongoing cost reduction programmes. A weaker Norwegian krone is supportive to underlying earnings. Reported volumes, revenue and costs will be reduced following the divestment of Norske Skog Singburi. Presentation and telephone conference The interim financial statements will be presented in DnB's offices in Bjørvika in Oslo today at 08:30 CET. The presentation will be transmitted live on Norske Skog's website www.norskeskog.com. A recording of the presentation will be published shortly afterwards. An international telephone conference, open to questions from the financial markets, will be held at 13:00 CET. Conference call details: +44 1296 480180, confirmation code: 996531# Interim financial statements The interim financial statements are only prepared in English. Oslo, 24 October 2013 Norske Skog Communications and Public Affairs For further information: Norske Skog media: Norske Skog financial markets: Vice President Corporate Communication Vice President Investor Relations Carsten Dybevig Tom Rogn Mob: +47 917 63117 Mob: +47 948 55 659 This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act. Q3 2013 Norske Skog press release Q3 2013 Norske Skog quarterly report Q3 2013 Norske Skog presentation ------------------------------------------------------------------------------ This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Norske Skog via Thomson Reuters ONE HUG#1737782
Norske Skog: Better market balance
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