Norske Skog: Good performance, material write-downs in Q2
(Thomson Reuters ONE) -
Net profit in the second quarter was NOK 229 million. A gain after the exchange
offer exceeding NOK one billion in April was offset by material impairments of
the asset portfolio of NOK 1.4 billion at the end of the quarter. Gross
operating profit for the second quarter was NOK 335 million, which is the best
gross operating earnings since the third quarter of 2012. Norske Skog's equity
at the end of the quarter was NOK 190 million.
New auditor
The former auditor EY suggested in its audit report for 2015 that the company's
asset portfolio should be written-down by at least NOK 2 billion, where
particularly the values in Europe were considered to be overvalued. The
consulting firm BCG has in the process of auditor change, prepared an
independent market analysis that largely coincides with the views of Norske
Skog's board and management. The final BCG-report concluded with a minor
impairment in Australasia and no impairment in Europe.
The company however has to write down its fixed assets materially due to a more
backward-looking perspective on margins than previously assumed. This has been
necessary in order to get a new auditor to accept the assignment after 2015. The
second quarter accounting effects of the asset write-downs was NOK 1.4 billion,
respectively NOK 0.3 billion in Europe and NOK 0.9 billion in Australasia. In
addition, the minority stake in Malaysian Newsprint Industries (MNI) was
written-down by NOK 0,2 billion.
The election of new auditor will take place at an extraordinary general meeting
on 10 August, which is the deadline set by the Register of Business Enterprises
(Foretaksregisteret) to register new auditor. The company's board proposes that
the EGM elect BDO as new auditor.
Operational development and gross operating earnings
Gross operating earnings (EBITDA) in the second quarter 2016 was NOK 335
million, which was a significant increase from NOK 242 million in the first
quarter and a significant improvement from NOK 138 million in the second quarter
last year. The improvement was mainly due to lower energy costs. Gross operating
earnings (EBITDA) for the first six months totalled NOK 577 million. Norske Skog
had guided for gross operating earnings in the first half above NOK 500 million.
Net income in the second quarter was NOK 229 million compared with a negative
NOK 578 million in the second quarter 2015.
- After a comprehensive refinancing of the group, major cost reductions and
significant progression on new growth projects, the Group is better equipped to
meet the future than earlier. The improvement in the market balance, after
significant capacity closures in Europe and North America in recent years,
should maintain margins in the second half at the same level as in the first
half, while seasonally the sales volumes are higher in the second half, says
Sven Ombudstvedt, CEO of Norske Skog.
Cash flow from operating activities before net financial items was NOK 321
million compared with NOK 285 million in Q1 2016. The cash balance at the end of
the quarter was NOK 725 million.
In the second quarter, Norske Skog completed a comprehensive refinancing of the
debt, which increased the average maturity of existing bonds to 6 years and
significantly reduced the debt. Net interest bearing debt was reduced by almost
NOK 1.7 billion from the end of the first quarter, from NOK 8.1 billion to NOK
6.4 billion, as a result of debt restructuring in connection with the exchange
offer, the repair equity offering and unrealized (without cash effects) currency
effects. After these transactions, the equity was NOK 190 million at end of the
second quarter compared to negative NOK 154 million at the end of the first
quarter.
Key figures, second quarter of 2016 (NOK million)
+-----------------------------------------------+-------+-------+-------+------+
| |Q2 2016|Q1 2016|Q2 2015| 2015|
+-----------------------------------------------+-------+-------+-------+------+
|Operating revenue | 2 891| 2 980| 2 786|11 538|
+-----------------------------------------------+-------+-------+-------+------+
|Gross operating earnings (EBITDA) | 335| 242| 138| 753|
+-----------------------------------------------+-------+-------+-------+------+
|Gross operating margin (%) | 11.6| 8.1| 5.0| 6.5|
+-----------------------------------------------+-------+-------+-------+------+
|Gross operating earnings after depreciation | 149| 52| -53| -14|
+-----------------------------------------------+-------+-------+-------+------+
|Restructuring expenses | -46| -| -15| -53|
+-----------------------------------------------+-------+-------+-------+------+
|Impairment | -1 238| -| -| -|
+-----------------------------------------------+-------+-------+-------+------+
|Other gains and losses | -10| -12| -285| -97|
+-----------------------------------------------+-------+-------+-------+------+
|Operating earnings | -1 146| 40| -352| -164|
+-----------------------------------------------+-------+-------+-------+------+
|Share of profit in associated companies | -204| 2| -9| -41|
+-----------------------------------------------+-------+-------+-------+------+
|Financial items | 1 359| -34| -244| -801|
+-----------------------------------------------+-------+-------+-------+------+
|Income taxes | 220 | 4| 27| -520|
+-----------------------------------------------+-------+-------+-------+------+
|Profit/loss for the period | 229| 11| -578|-1 526|
+-----------------------------------------------+-------+-------+-------+------+
|Cash flow from operations before net financial | 321| 285| 89| 66|
|items | | | | |
+-----------------------------------------------+-------+-------+-------+------+
|Net interest bearing debt | 6 353| 8 043| 7 531| 8 523|
+-----------------------------------------------+-------+-------+-------+------+
Market outlook
The market balance for publication paper in Europe is favourable due to a benign
demand development and capacity closures. Newsprint prices in the UK increased
into 2H16 reflecting British pound depreciation following Brexit. The European
SC market is benefiting from a strong dollar and capacity closures in the US.
The Asian export market for newsprint, of increasing importance to Norske Skog
due to a smaller domestic market in Australasia, is encouraging with price
improvements. There continues to be strong demand from regional Indian
newspapers.
Favourable energy costs for our European mills and efficiency measures at all
mills are expected to reduce variable costs by 2-3% per tonne in 2016. Fixed
costs initiatives continue at all mills towards a run-rate group level of NOK
600 million per quarter by year-end 2016. Sales volumes will be seasonally
higher in the second half, while margins should be on level with the first half.
Ongoing growth initiatives are expected to contribute marginally to gross
operating earnings this year, but reach full run-rate potential within a
timeframe of 3-4 years.
Markets and segments
Total annual production capacity for the group is 2.7 million tonnes after the
Boyer conversion. In Europe, the group capacity is 2.0 million tonnes, while in
Australasia the capacity is 0.7 million tonnes. Capacity utilization for the
group in the second quarter was 92% compared with 95% in the first quarter.
Europe
Operating revenue decreased from the previous quarter due to a stronger
Norwegian krone. Sales volume and prices remained stable from the first to the
second quarter. Variable costs declined per tonne with lower energy costs and
efficiency measures. Fixed costs remained unchanged from the first quarter.
Gross operating earnings increased to NOK 260 million in the quarter, from NOK
182 million in the first quarter of 2016 due to lower costs.
Demand for newsprint and magazine paper in Europe decreased by 3% in the five
first months of 2016 compared to the same period last year. Our capacity
utilization was 92% (94% in Q1 2016) in the quarter.
Australasia
Compared to the previous quarter, operating revenue decreased due to a stronger
Norwegian krone and somewhat lower sales volume. Sales prices remained stable.
Variable cost per tonne in Q2 2016 was lower compared to the previous quarter
due to lower energy prices and efficiency measures. Fixed costs were unchanged
from the first quarter. Gross operating earnings increased slightly quarter-
over-quarter from NOK 75 million in the first quarter to NOK 78 million in the
second quarter.
Demand for newsprint in Australia decreased by around 9% in the first five
months of the year compared to the same period last year, while demand for
magazine paper was relatively stable. The capacity utilization was 91% in the
quarter (97% in Q1 2016).
Update on new growth opportunities
Biogas
The NOK 150 million biogas project at Saugbrugs is on schedule for completion by
year-end 2016. The biogas facility will be at full run-rate contribution to
gross operating earnings in 2017.
Wood pellets in New Zealand
Nature's Flames pellets production has reached an annual capacity of 40 000
tonnes. Norske Skog considers to expand the production of pellets, given the
considerable competitive export advantage. Pellets brings significant
environmental benefits replacing fossil fuels in the large economies of South-
East Asia.
Tissue project at Bruck
The tissue project, a conversion of the newsprint site, has progressed well with
all permits in place and ground work completed. Norske Skog is currently in
discussions with partners for the project. The timeline is extended from spring
2017 to year-end 2017. Upon completion, the 125 000 tonnes newsprint machine
will be closed, while the 265 000 tonnes LWC machine will continue production.
Growth projects at Golbey
The sodding ceremony for the construction of the Golbey biogas plant was done on
July 13 with representatives from the press, investors and French politicians
present. The project at Golbey will be financed locally. The plant will be
connected to the biological-chemical treatment plant and be dimensioned to
absorb all organic waste from the paper production. The plant is expected to be
at full operation during 2017. At the same time, Golbey implements new projects,
which will combine synergies from the existing mill and the nearby industrial
cluster.
Presentation and quarterly material
A recorded webcast of the CEO presentation, the quarterly financial statements
and the presentation package will be available on www.norskeskog.com.
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
Twitter: (at)Norske_Skog
Q2 2016 Norske Skog quarterly report:
http://hugin.info/105/R/2029504/754660.pdf
Q2 2016 Norske Skog presentation:
http://hugin.info/105/R/2029504/754661.pdf
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(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Norske Skog via GlobeNewswire
[HUG#2029504]
Unternehmensinformation / Kurzprofil:
Datum: 20.07.2016 - 07:02 Uhr
Sprache: Deutsch
News-ID 484191
Anzahl Zeichen: 13571
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Town:
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Kategorie:
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