Norske Skog: Higher capacity utilisation as market tightens

Norske Skog’s EBITDA in the first quarter of 2021 was NOK 112 million, a decrease from NOK 146 million in the fourth quarter of 2020. The markets are still impacted by the Covid-19 imposed restrictions, but are expected to improve during the year as a result of both already effectuated, but also newly announced capacity closures. As announced earlier today, Norske Skog’s board of directors has made a EUR 100 million investment decision to convert one machine at the Bruck (Austria) industrial site from newsprint to recycled containerboard production. This is the first 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.

  • Although the corona restrictions still have a negative impact on our operations, we are cautiously optimistic about the future. The decision to convert the Bruck newsprint machine into packaging will diversify our asset base and create new long-term revenue and cash flows from the end of 2022. Our other fibre and energy projects are progressing according to plan, and will contribute to a long-term sustainable industrial platform. Due to substantial capacity closures announced over the last twelve months, we expect the publication paper market to improve during 2021, says Sven Ombudstvedt, CEO of Norske Skog.

Cash flow from operations was NOK 163 million in the quarter compared to NOK 73 million in the previous quarter, mainly due to a reduction in working capital related to Norwegian CO2-compensation received for 2020 in the quarter. Operating earnings in the first quarter of 2021 were NOK 204 million compared to operating earnings in the fourth quarter of 2020 of NOK -1 276 million. The quarter was positively affected by non-cash change in fair value of energy contracts in Norway and New Zealand amounting to NOK 199 million. Net profit in the quarter was NOK 194 million compared to a net loss of NOK -1 363 million in the previous quarter. Net interest-bearing debt was NOK 401 million at the end of the first quarter, with an equity ratio of 43 %.

Status projects
The conversion at Bruck will introduce 210 000 tonnes of competitive containerboard capacity to meet the growing demand for renewable packaging. The project has received financing commitment from regional banks. Containerboard production will be based 100% on recycled fibre and will use steam from our new waste-to-energy plant starting up in the first half of 2022, making Bruck a cost-leading and green energy producer.

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 interliner production requires no capital expenditures. Interliner is a complimentary packaging product to the planned production of testliner and fluting products at Bruck and Golbey.

“All credit to our creative engineering teams that have managed in a short notice to produce interliner at Skogn. So far, feedback from the test production have been overwhelmingly positive. This will not only prolong the expected life of the Skogn industrial site, but it will also add an important supplement to our packaging product portfolio. 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.

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 following the first commercial sales within epoxy applications in the fourth quarter. The continued development of CEBICO (bio composites) also progressed well in the quarter. The investment into 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.

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