Norske Skog announces the sale of the Albury mill to Australian packaging group Visy for NOK 520 million (AUD 85 million). The sale of the mill and realization of certain other related assets, including energy and water rights, will generate total cash proceeds of approximately NOK 920 million. Albury will cease newsprint production by the end of December 2019. Norske Skog will pay redundancy payments and transaction costs of approximately NOK 215 million following the closure, resulting in net cash proceeds to Norske Skog of approximately NOK 700 million.
“The closure of Albury will address the substantial imbalance between newsprint production capacity and customer demand in Australasia and unlock the Albury mill’s position as an ideal candidate for conversion into packaging grades,” Sven Ombudstvedt, President and CEO of Norske Skog, commented.
Albury has an annual newsprint production capacity of 265,000 tons and closure of the mill will substantially reduce the newsprint production capacity in Australasia and reduce the region’s export exposure to the Asian market. The Albury mill generated revenue of approximately NOK 1 billion in 2018. The Albury closure is expected to provide a positive EBITDA-effect of approximately NOK 80 million in 2020 due to optimisation of Norske Skog mill deliveries in the region and reduced export sales to low-margin Asian markets.
The sale of Albury is expected to generate a limited book value gain. The realization of water and energy assets will generate a book value gain equivalent to the proceeds less transaction costs. The majority of the cash proceeds from the transactions are expected to be received in the first quarter of 2020.
Completion of the Albury mill transaction is expected to take place in the first quarter of 2020. The transactions and redundancy will be recognised in the financial statement in the fourth quarter 2019. The transaction is subject to customary closing conditions, but no regulatory approvals are required. Following completion, Visy intends to undertake feasibility studies on future uses including the production of packaging grade papers at the site.
Pro forma net debt of Norske Skog as of 30 June 2019, taking into account the net proceeds from the transactions, is approximately NOK 250 million. The sale and net proceeds from the transactions will further strengthen the group’s underlying operations, balance sheet and financial capabilities, and thereby provide increased robustness for attractive dividends in the years to come.
Ombudstvedt expressed gratitude to the employees at Albury: “I would like to thank everyone at Albury for their valuable contribution to the company throughout the years. This decision is in no way reflecting their efforts, which have been outstanding. Unfortunately, as a business, we must always respond to prevailing market conditions and the decline in domestic sales in Australia and New Zealand and very volatile Asian export markets made this the best solution for Norske Skog and our owner”.
The sale of the Albury mill is in line with Norske Skog´s communicated strategy of optimising its portfolio and seek value enhancing transactions. Publication paper production will continue at Norske Skog’s two other Australasian mills, at Boyer in Tasmania and Tasman in New Zealand. Norske Skog’s long-term strategy remains to improve the core business, to convert certain of the group’s paper machines and to diversify the business to the bioenergy, fibre and biochemical markets.