Norske Skog: Good profitability despite turbulent markets

Norske Skog’s EBITDA in the second quarter of 2022 was NOK 905 million, an increase from NOK 610 million in the first quarter of 2022. Sales prices for all grades increased in the quarter as a consequence of high energy costs in Europe and a tight publication paper market. The containerboard conversions and energy projects are progressing as planned.

“Despite turbulent raw material and energy markets during the quarter, we have managed to achieve improved margins on our paper products. Our mills have been operating at full capacity during the quarter. We expect that the market for publication paper will remain tight also in the second half of 2022,” says Sven Ombudstvedt, CEO of Norske Skog.

Cash flow from operations was NOK 473 million in the quarter compared to NOK 196 million in the previous quarter, positively impacted by the improved operating margins, but negatively impacted by change in working capital, being mainly an increase in inventories, and trade and other receivables. Operating earnings in the second quarter of 2022 were NOK 1 195 million compared to operating earnings in the first quarter of 2022 of NOK 593 million. The quarter was positively affected by non-cash changes in fair value of energy contracts in Norway amounting to NOK 419 million. Net profit in the quarter was NOK 935 million compared to a net profit of NOK 583 million in the previous quarter. Net interest-bearing debt was NOK 1 012 million at the end of the second quarter, with an equity ratio of 42%.

Status projects
The conversion of one newsprint machine both at Norske Skog Bruck and Norske Skog Golbey will add 760 000 tonnes of cost-competitive and low-emission containerboard capacity. The containerboard production will be fully based on recycled fibre, and will utilise green energy generated from the newly opened waste-to-energy facility at the Bruck industrial site and the newly financed biomass plant at the Golbey industrial site. These containerboard investments are financed by debt facility agreements with an aggregate amount of EUR 265 million, having an average maturity towards the end of 2030.

“We are proud of being able to serve both the publication paper and the packaging paper markets in a sustainable and profitable manner in the near future,” says Ombudstvedt.

The waste-to-energy plant at Bruck was officially opened by the Austrian Federal Minister Leonore Gewessler and commenced production in April. PM3 at Bruck ceased newsprint production on 10 July to prepare for the conversion of the machine to recycled containerboard production. In June, Norske Skog announced that the Green Valley Energie (GVE) joint venture, in which Norske Skog Golbey has a 10% stake, will start the construction of the largest biomass boiler of its kind in France at the mill site of Golbey, following recent completion of debt financing. The biomass boiler will produce about 200 GWh of electricity and about 700 GWh of renewable heat, thus generating CO2 savings of 210 000 tonnes per year and providing electricity equivalent to the consumption of more than 13 000 homes.

“The Green Valley energy project is one more milestone in the ongoing transition of Norske Skog towards new growth markets and sustainable energy. The biomass boiler will ensure a stable, long-term supply of cost-competitive and 100 percent renewable steam as an alternative to fossil energy sources like natural gas, shielding us from increasingly volatile energy markets for the Golbey mill,” says Ombudstvedt.
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