Norske Skog

Still lower costs

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.