Norske Skogindustrier ASA, Europe’s third-largest newsprint maker, signed contracts valued at about 9 billion kroner ($1.5 billion) to supply paper to Australia’s News Corp. and Fairfax Media Ltd. until 2020.
The supply deals for newsprint and improved-grade paper, which will replace existing contracts expiring in 2015, will help the Lysaker, Norway-based company cut costs further, it said in a statement today.
“These agreements are securing our newsprint and improved-grade market share in Australia and New Zealand until 2020,” Chief Executive Officer Sven Ombudstvedt said in the statement. The deals “will also limit our future foreign exchange rate exposure in Australia and New Zealand.”
Norske Skog, grappling with about 6.9 billion kroner of debt, is trying to strengthen its balance sheet amid excess supply in the newsprint market, competition from online media and rising raw-material costs.
News Corp. and Fairfax Media represents about 70 percent of the newsprint and improved-grade market in Australasia, Norske Skog said. The Norwegian company has three mills in the region with a total annual production capacity of 700,000 metric tons.
Shares in Norske Skog gained as much as 14 percent to 4.75 kroner, the highest intraday level in more than a year, and where it was trading as of 9:15 a.m. in Oslo.