Norske Skog Posts Wider-Than-Expected Loss on Mill Writedown

Norske Skogindustrier ASA (NSG), the second-largest newsprint producer, reported a wider third- quarter loss than analysts predicted as it wrote down assets including the Parenco mill in the Netherlands.

The net loss was 1.83 billion kroner ($321 million), or 9.66 a share, compared with a loss of 244 million kroner, or 1.28 kroner a share, a year earlier, the Lysaker, Norway-based company said today. That missed estimates for a loss of 215 million kroner, according to the average of nine analysts surveyed by Bloomberg.

“The third quarter clearly shows a positive change after a rough period for Norske Skog,” Chief Executive Officer Sven Ombudstvedt said in a statement. “It is still necessary to align our European production capacity with future demand,” he said.

Earnings before interest, taxes, depreciation and amortization surged 22 percent to 469 million kroner on an increase in prices from the third quarter last year, while group sales were little changed in the quarter at 4.8 billion kroner as production fell. The Parenco mill was responsible for 927 million kroner of the net loss.

The quarterly results are “still far from satisfactory,” Ombudstvedt said. “We will make sure that Norske Skog has a capacity that is aligned with the market,” the CEO said.

The manufacturer expects stable newsprint and magazine prices and volumes in the fourth quarter, it said in a presentation. Costs will be at a “high level,” with some easing due to lower market pulp and recovered paper prices.

Norske Skog is grappling with an 8.1 billion-kroner debt burden amid too much supply in the newsprint market, competition from online media and rising raw-material prices.

Norske Skog said it satisfied covenants on its revolving credit facility. The terms of Norske Skog’s undrawn 140 million- euro revolving credit line arranged in May caps debt at 5.75 times Ebitda as of Sept. 30, tightening to 5.5 times by year- end, according to the bond offering memorandum. It reported a ratio of 5.49 at the end of the third-quarter.

To contact the reporter on this story: Stephen Treloar at streloar1@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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