Norway, Feb 8, 2012 - Norske Skog improved gross operating earnings in the fourth quarter, partly due to lower costs.
Gross operating earnings in the fourth quarter were NOK 503 million, compared to NOK 469 million in the third quarter.
The improved result was caused by somewhat lower costs. The market prices of pulp and recovered paper have fallen substantially from their highest level during the second quarter. A weaker NOK also contributed positively.
Even for the year as a whole, gross operating earnings improved, from NOK 1,413 million in 2010 to NOK 1,515 million in 2011. The underlying improvement in gross operating earnings for the year was approximately NOK 400 million as there were positive non-recurring items in 2010.
“These numbers confirm that underlying operations are gradually improving, in line with our guidance through the year. But the market is still challenging, and we keep up our vigorous efforts to improve the group’s competitive position and financial headroom,” says President and CEO Sven Ombudstvedt of Norske Skog.
“Full year 2011 showed a moderate drop in demand for our products, but there are substantial geographical differences, and we need to adapt to a changing market. We are very pleased with the significant improvement in the leverage (net interest bearing debt/EBITDA), and we believe this will continue in 2012,” says Ombudstvedt.
During the fourth quarter the group’s net interest-bearing debt was reduced from NOK 8.1 billion to NOK 7.9 billion. Key figures, fourth quarter 2011 (NOK million).
Operating earnings (IFRS) were minus NOK 841 million in the fourth quarter, compared to minus NOK 1,883 million in the third quarter of 2011 and minus NOK 46 million in the fourth quarter of 2010. Operating earnings are strongly affected by restructuring expenses in connection with the closure of Norske Skog Follum and in connection with a rationalisation project at Norske Skog Walsum in Germany and also by lower valuations of commodity contracts and derivates.
Underlying interest expenses in 2011 fell from 2010 in line with the reduction of net debt. Net loss was minus NOK 592 million, compared to minus NOK 1,841 million in the third quarter of 2011 and minus NOK 260 million in the fourth quarter of 2010.
Newsprint Europe – underlying improvement
Gross operating earnings in the fourth quarter were in line with the third quarter, but would have shown an improvement if Norske Skog Parenco had not been moved from Newsprint to Magazine. Underlying deliveries were higher, and lower costs also contributed somewhat positively.
Newsprint outside Europe – lower volumes in Australasia
Gross operating earnings fell somewhat compared to the third quarter. The reduction was due to lower volumes in Australasia and relatively higher export to Southeast Asia with lower margins.
Magazine paper – substantial improvement
Gross operating earnings improved substantially from the third quarter. Relatively high deliveries contributed in combination with somewhat lower costs and a stronger dollar.
Norske Skog Follum
On 8 December the corporate assembly of Norske Skog decided to cease production at Norske Skog Follum no later than 31 March 2012. This process goes according to plan.
“This has been a difficult time for Norske Skog in general and for the employees of Follum in particular, but in a market with declining demand, it is absolutely necessary to reduce capacity,” says Ombudstvedt.
Outlook for 2012
A flat sales price development is expected in 2012. Volumes are expected to be somewhat lower, with weak economic conditions and a structural decline in demand. The market balance for magazine paper is more stable due to reduced capacity in the industry. It is expected that a lower price level for input factors will contribute positively to the group's profitability.
Presentation and conference call
The interim accounts will be presented at the offices of SEB at Filipstad Brygge 1 in Oslo today at 08.30 CET. The presentation will be transmitted live at Norske Skog’s web site www.norskeskog.com. A recording of the presentation will also be published shortly thereafter. An international telephone conference, open to questions from the financial markets, will be held at 13:00 CET. President and CEO Sven Ombudstvedt and other members of corporate management will participate in both of these events.
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