Norske Skog: Still lower costs
(Thomson Reuters ONE) -
Norske Skog continues the positive trend of reducing costs. High production at
the mills in a demanding market shows the relative competitive position of the
group.
- Our competitive position has improved over the past year as a result of
continuous improvement programs in all areas. Interest expense has been reduced
by repayments of expensive bond loans and by replacement of cheaper
securitisation facilities based on receivables totalling so far around NOK 800
million. At the same time, we will continuously monitor the market situation,
and if necessary implement active capacity management to counteract the effects
of market imbalances, says Sven Ombudstvedt, President and CEO of Norske Skog.
Norske Skog's gross operating earnings (EBITDA) in the third quarter of 2014
were NOK 208 million, down from NOK 251 million in the second quarter, but an
improvement from third quarter 2013 of NOK 32 million. The decrease was due to
prolonged initiation of the new LWC-production at Boyer in Australia and a
planned nine-week stop at one of three machines at Skogn in Norway.
Loss before tax for the period amounted to NOK -40 million in the third quarter,
compared to a loss of NOK -165 million in the second quarter of 2014. Loss after
tax for the period amounted to NOK -192 million in the third quarter, compared
to a loss of NOK -114 million in the second quarter of 2014. The tax expense of
NOK 152 million was mainly negatively impacted by a reassessment of deferred tax
assets. Net interest-bearing debt decreased by NOK 21 million to NOK 6 931
million. Cash flow from operating activities before net financial items was NOK
46 million in the third quarter, compared to NOK 206 in the second quarter.
- Despite the generally high cost level in Norway, especially on wages, we have
still in recent years implemented extensive cost cuts at our mills and
headquarter. Efforts of creative staff have resulted in more efficient use of
energy and raw materials, as well as lower fixed costs, says Sven Ombudstvedt,
President and CEO of Norske Skog.
Market and segments
Europe
Operating income was slightly lower compared to the previous quarter despite a
modest increase in sales volume. Capacity utilization was 86% in the third
quarter compared to 87% in the second quarter. The summer stop at one of three
machines at Skogn in Norway contributed to decline in gross operating earnings.
Demand for newsprint and magazine paper in Europe fell by 5% and 4% in the first
eight months of this year compared with the same period last year. Cost of
materials was flat from the second quarter on a per tonne basis. Fixed costs
continue to show a downward trend.
The Walsum paper machine (PM4), which ceased production of 225 000 ton in
December 2013, has been liquidated and sold to Eurasteel. The sales agreement
has a clause of not producing publication paper grades again.
Australasia
Operating revenue increased compared to the second quarter, due to higher
production after the start-up of the LWC-machine at Boyer. Demand for newsprint
and magazine paper in Oceania fell by 6% and 1% in the first eight months of
this year compared with the same period last year.
Variable costs per ton increased in the quarter compared to the previous quarter
due to higher costs associated with LWC-production at Boyer. Fixed costs were
slightly higher compared with the second quarter in part due to a stronger
Australian dollar. Capacity utilization was 94% in the quarter compared with
91% in the previous quarter.
Key figures, second quarter of 2014 (NOK million)
+----------------------------------------------------+-----+-----+-----+------+
| | Q3| Q2| Q3| |
| | 2014| 2014| 2013| 2013|
+----------------------------------------------------+-----+-----+-----+------+
|Operating revenue |3 057|3 018|3 353|13 339|
+----------------------------------------------------+-----+-----+-----+------+
|Gross operating earnings (EBITDA) | 208| 251| 176| 862|
+----------------------------------------------------+-----+-----+-----+------+
|Gross operating margin (%) | 6,8| 8,3| 5,2| 6,5|
+----------------------------------------------------+-----+-----+-----+------+
|Gross operating earnings after depreciation | 22| 71| 40| 134|
+----------------------------------------------------+-----+-----+-----+------+
|Restructuring expenses | 5| 0| 3| -145|
+----------------------------------------------------+-----+-----+-----+------+
|Other gains and losses | 70| 51| -47|-1 100|
+----------------------------------------------------+-----+-----+-----+------+
|Impairments | 0| 0| 0| 0|
+----------------------------------------------------+-----+-----+-----+------+
|Operating earnings | 97| 122| -4|-1 111|
+----------------------------------------------------+-----+-----+-----+------+
|Share of profit in associated companies | 0| -3| 9| 26|
+----------------------------------------------------+-----+-----+-----+------+
|Financial items | -138| -284| -245|-1 258|
+----------------------------------------------------+-----+-----+-----+------+
|Income taxes | -152| 51| 94| 500|
+----------------------------------------------------+-----+-----+-----+------+
|Profit/loss for the period | -192| -114| -147|-1 844|
+----------------------------------------------------+-----+-----+-----+------+
|Cash flow from operations before net financial items| 46| 206| 17| 690|
+----------------------------------------------------+-----+-----+-----+------+
Outlook
Publication paper prices in Europe are expected to remain relatively stable into
2015. The market balance for newsprint is acceptable, while the operating rate
for magazine paper currently is not satisfactory.
Newsprint prices in Australasia are to a large degree fixed through long-term
contracts, while export volumes track international prices. Magazine paper
prices are more short-term and among other exposed to the relative strength of
AUD.
Variable costs for the group are expected to remain relatively stable. Fixed
costs initiatives continue.
Presentation and telephone conference
The interim financial statements will be presented in Karenslyst allé 2 in Oslo
today at 08.30 CET, and transmitted live on Norske Skog's website
www.norskeskog.com.
An international telephone conference, open to questions from the financial
markets, will be held at 13:00 CET. Callers are asked to register before 12:50
CET. Conference call details: +44 1296 480 100, confirmation code: 483 289#.
A recording of the presentation and conference will later be available on
www.norskeskog.com.
Oslo, 23 October 2014
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 63 117 Mob: +47 948 55 659
Q3 2014 Norske Skog quarterly report:
http://hugin.info/105/R/1865037/654746.pdf
Q3 2014 Norske Skog presentation:
http://hugin.info/105/R/1865037/654747.pdf
Q3 2014 Norske Skog press release:
http://hugin.info/105/R/1865037/654745.pdf
This announcement is distributed by GlobeNewswire on behalf of
GlobeNewswire 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 GlobeNewswire
[HUG#1865037]
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Datum: 23.10.2014 - 07:02 Uhr
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News-ID 346318
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