Norske Skog: Higher costs, significant price increases ahead

Norske Skog’s EBITDA in the second quarter of 2021 was NOK 17 million, a decrease from NOK 112 million in the first quarter of 2021. The markets are still somewhat impacted by the Covid-19 imposed restrictions, but are expected to improve during the second half of the year as a result of substantial capacity closures and expected sales price increases. As announced earlier, Norske Skog’s board of directors made a EUR 250 million investment decision to convert one machine at the Golbey (France) industrial site from newsprint to recycled containerboard. This is the second major step of the two planned European conversion projects in the group’s strategy of establishing Norske Skog as a leading independent European producer of recycled containerboard.

  • The substantial capacity closures during the Covid-19 pandemic period have eliminated the huge imbalance in both the newsprint- and magazine paper markets. Therefore, we expect substantial price hikes during the second half of 2021, especially in the European markets. The decision to convert a Golbey newsprint machine into packaging will further diversify our asset base and create new long-term revenue and cash flows from 2023. Our other fibre and energy projects are progressing according to plan, and will contribute to a long-term sustainable industrial platform, says Sven Ombudstvedt, CEO of Norske Skog.

Cash flow from operations was NOK -190 million in the quarter compared to NOK 163 million in the previous quarter, mainly due to a combination of low sales prices and higher energy and recovered paper costs during the quarter. Operating earnings in the second quarter of 2021 were NOK -277 million compared to operating earnings in the first quarter of 2021 of NOK 204 million. The quarter was negatively affected by restructuring expenses, mainly related to the closure of the Tasman mill, amounting to NOK 160 million. Net loss in the quarter was NOK 355 million compared to a net profit of NOK 194 million in the previous quarter. Net interest-bearing debt was NOK 779 million at the end of the second quarter, with an equity ratio of 41 %.

Status projects
The final investment decision to convert a newsprint machine at Golbey will add a further 550 000 tonnes of cost-competitive and low-emission recycled containerboard capacity. The containerboard production will be 100% based on recycled fibre and will use green energy generated from a new biomass plant being constructed at the Golbey production site. In April, the board of directors decided to convert the Bruck newsprint machine into 210 000 tonnes of containerboard. These two conversions will bring Norske Skog’s total capacity to 760 000 tonnes of recycled containerboard by 2023.

“The packaging business will become an important and strong part of Norske Skog’s business going forward. These conversions will increase the value of the Bruck and Golbey industrial sites, and in few years, the majority of our mills will be able to both serve publication paper and packaging markets in a sustainable and profitable manner,” says Norske Skog’s CEO Sven Ombudstvedt.

The Skogn mill has started test production of interliner, a packaging product, on one of its three newsprint machines to serve the Asian packaging markets. The shift to production of interliner requires no capital expenditures. Interliner is a complimentary packaging paper product to the planned production of testliner and fluting products at Bruck and Golbey.

Norske Skog actively works to realise value from the industrial sites by developing existing infrastructure and industry competence. The work to develop CEBINA into a widely acknowledged commercial product has continued in the quarter. The continued development of CEBICO (bio composites) also progressed well in the quarter. The investment in a NOK 20-25 million extruder, enabling a significant increase in the ability and quality of testing with potential customers, progressed further in the quarter.

Norske Skog Skogn has expanded its partnership with Ocean GeoLoop to develop, test and commercialise their highly promising Carbon Capture, Storage and Utilisation (CCS/CCU) technologies, and for this project, Ocean GeoLoop has also submitted an EU Green Platform grant application. Through the partnership with Ocean GeoLoop at Norske Skog Skogn and Borg CO2 at Norske Skog Saugbrugs, Norske Skog aims to pursue the opportunity to become CO2 net negative, and to explore economically viable models for utilisation of biogenic CO2.
more at source: https://www.norskeskog.com/Investors/Press-releases/English-press-releases/Higher-costs–significant-price-increases-ahead?PID=4241&M=NewsV2&Action=1

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