Norske Skogindustrier ASA, the second-largest newsprint maker, climbed the most in a month in Oslo after selling assets in Chile and Norway as it seeks to cut debt amid excess industry capacity and growing competition.
Shares in the Lysaker, Norway-based group rose as much as 9.1 percent, the most since Feb. 27, and closed 2.9 percent higher at 6.12 kroner. That extends the stock’s advance to 17.7 percent since the start of the year, outperforming the OBX benchmark index’s 12 percent gain.
Norske Skog sold its Bio Bio newsprint mill in Chile for $56 million to “improve Norske Skog’s cash flow and financial position,” Chief Executive Officer Sven Ombudstvedt said today. The company, grappling with 7.9 billion kroner ($1.4 billion) of debt, is trying to improve its financial standing amid excess supply in the newsprint market, competition from online media and rising raw-material costs.
The sale follows a trend that has developed in recent years, where “financially weak players constantly have to sell good, cash flow-generating assets, just to satisfy their debt holders,” Mikael Jafs, an analyst with Credit Agricole Cheuvreux SA, said by phone from Stockholm. “When challenged companies reduce their financial risk, their share prices can move quite violently,” said Jafs, who has an outperform recommendation on Norske Skog.
Papermakers have closed mills and cut jobs to reduce costs and capacity as demand weakened.
Highest Unit Costs
Sappi Ltd., the world’s largest producer of fine-coated paper, shut mills in Switzerland and South Africa to reduce debt that stood at $2.58 billion in 2009, while its Helsinki-based competitors, Stora Enso Oyj and UPM Kymmene Oyj, have also both closed units. M-real, also based in Helsinki, has sold assets for 2.2 billion euros ($2.9 billion) since 2006 as it trims its paper and pulp division to focus on more profitable paperboard operations.
Norske Skog also agreed to sell its Follum unit in Norway for about 60 million kroner, it said today. Production at the unit, which has the highest unit costs of all its mills in Norway, will be halted at the end of the month and equipment removed, it said.