Norske Skog ASA

Investor Presentation • Jun 12, 2024

Investor presentation

12 June 2024

Key highlights

Over-the-cycle cash generation from publication paper production enabled by a competitive cost position

• Long-standing publication paper producer with leading cost positions and top-tier market positions
• Generated NOK 1.4bn in operating cash flow over last twelve months per Q1 2024 during challenging market conditions and operating environment

Fully financed strategic diversification into the growing recycled containerboard market to be completed during H2 2024

• Well invested asset base with NOK 6.3bn of expansion investments since 2019 and limited remaining investments to conclude announced strategic investment programmes
• Ramp-up of containerboard production progressing according to plan and will increase the Company's total production capacity with close to 50% at full utilisation in 2025-26

Robust and resilient financial position supported by a conservative financial strategy

• Equity ratio of 41% and interest coverage ratio of 11.9x highlights the Company's financial position per Q1 2024
• Fundamental uplift in earnings potential from recycled containerboard production to further strengthen the balance sheet and credit metrics

Focused on sustainable value creation and enabling a circular economy

• Reduction of scope 1 & 2 CO2 emissions of 42% in 2023 and target reduction of 55% in 2030, compared to 2015 levels
• Enhancing environmental reporting and achieving a CDP Climate Change score of A- in 2022 and 2023

I	Highlights
II	Introduction to Norske Skog
III	Update on projects and operations
IV	Markets
V	Financials

Norske Skog Sustainable fibre processing industry

Strategic transition

• Publication paper
• Packaging paper

Fibre projects Leading publication paper producer

• News capacity: 990kt
• Magazine capacity: 600kt

Growing packaging paper producer

• RCCM: 760kt (2025-26)
• Remaining net capex of NOK 0.4bn

Exploring further growth from fibre projects

• BCTMP: 300kt (2027-28)
• Project net investment of NOK 1.5-2.0bn will unlock NOK 615m from insurance settlement
• Approximately 2 100 employees
• Listed on the Oslo Stock Exchange with a current market cap of NOK 3.9bn¹

Five high quality industrial sites

• Eleven paper machines with supporting infrastructure for energy, fibre, and water
• 2023 CDP Climate Change Score A-

Q1 2024 key financials

• NOK 1 543m LTM EBITDA (12% margin)
• NOK 1 429m LTM cash flow operations
• NOK 3 246m net debt
• NOK 1 915m cash

Saugbrugs Skogn Bruck Golbey Oslo, HQ France Austria Norway Norway

Boyer Australia

5 RCCM = Recycled Corrugating Casing Materials, BCTMP = Bleached Chemi-Thermomechanical Pulp 1) Per 11 June 2024

Five high quality sites Supporting infrastructure for energy, fibre, and water

Capacity, tonnes PM1: 550 000 RCCM (H2'24 start-up) PM2: 330 000 news

PM3: 210 000 RCCM PM4: 265 000 LWC

Boyer, Australia

Capacity, tonnes PM2: 150 000 news PM3: 135 000 LWC

Norway: Five competitive publication paper machines with excellent infrastructure

• Skogn delivers stable and efficient newsprint production, fully based on pulpwood per Q2'24
• Saugbrugs operating two paper machines and starting pre-engineering for BCTMP production, which will unlock NOK 615m to support future investments in equipment and machinery
• Europe: Packaging strategy underway with conversion of two paper machines from publication paper to containerboard
• Bruck ramping up containerboard production, supported by cost and CO2 efficient thermal energy from waste-to-energy boiler
• Golbey producing cost-efficient and low emission newsprint paper, and will supply competitive containerboard from H2 2024
• Australia: Current footprint of two paper machines following gradual regional exit with sale of Albury, Tasman, Nature's Flame, and forest assets
  • Boyer is the last domestic supplier of publication paper in Australasia

6 SC = Supercalendered; LWC = Light Weight Coated 1) Conditional upon positive final investment decision following conclusion of pre-engineering (main study)

Resilient financials through the cycle Maintaining profitability and positive operating cash flows

Operating revenue Other operating income

• Cyclical market impacting operating income development, with publication paper prices influenced both by the market balance and input costs (energy, fibre, chemicals, transportation, etc.)
• The structural annual decline in publication paper demand of 5-7% results in periods of capacity closures, allowing cost-efficient suppliers to gain market share
• Strategic diversification into containerboard production is expected to both reduce cyclicality and increase operating income

• Norske Skog targets a 10% EBITDA margin for its publication paper business over-the-cycle, and has achieved this ambition over the previous cycles
• The EBITDA margin target for the containerboard business is 20% when reaching full utilisation (2025-26), which is expected to enhance the Group's earnings meaningfully

Cash flow operations

• Norske Skog has achieved a positive operating cash flow during both cyclical downturns and challenging operating environments, showcased by the recent 2020-2021 COVID-19 downturn
• This is the result of high operational efficiency which is a constant focus across the entire group

Significant project investments since 2019 Fundamental uplift in earnings potential following strategic investment programmes

Substantial investments into strategic diversification…

8 1) Green Valley Energie (GVE) is a joint venture between Norske Skog (10%), Veolia (10%) and Pearl Infrastructure (80%), where Norske Skog will be sole offtaker of steam under a competitive long-term contract

Enabling the circular economy

Continuously improving environmental footprint

Biofuel Agriculture Collectors Landfill

0% 5% 7% 13% 11% 41% 44% 51% 42% 0% 10% 20% 30% 40% 50% 60% 2015 2016 2017 2018 2019 2020 2021 2022 2023 Reduction in scope 1 & 2 CO2 emissions per tonne Reduction in CO² per tonne produced Ambition to achieve 55% reduction from 2015 levels by 2030, and net zero 2050

I	Highlights
II	Introduction to Norske Skog
III	Update on projects and operations
IV	Markets
V	Financials

Strategic projects nearing completion Containerboard cost efficiency supported by energy investments

Strategic investment projects Commentary

Golbey PM1 containerboard project Golbey biomass boiler project

Bruck PM3 containerboard project Bruck waste-to-energy boiler project

Bruck PM3 containerboard

• Continue to improve production efficiency as utilisation and process optimisation increases
• Continued growth in production and deliveries, expect ~85% utilisation end of 2024 in line with plan
• Excellent product quality and customer feedback

Bruck waste-to-energy boiler

• Provides access to highly cost competitive thermal energy for Bruck's containerboard production
• Produces 400 GWh (50 MW) of thermal energy with Bruck as sole offtaker
• Replaces fossil natural gas consumption with energy produced from regional RDF
• Generates revenue from gate fees by providing offtake for around 150kt of RDF
• Reduces the annual fossil CO2 footprint of Bruck with around 100kt

Golbey PM1 containerboard

• Containerboard start-up in H2 2024, final piping and electrical work being completed
• Increases Norske Skog containerboard production capacity from 210kt to 760kt
• Expect 90% utilisation early 2026, and full utilisation H2 2026

Golbey biomass boiler project (Green Valley Energie)

• Green Valley Energie (GVE) biomass plant start-up in Q3 2024
• Sell green steam to Golbey under long-term contracts, replacing fossil natural gas
• Provides highly cost competitive thermal energy for Golbey's containerboard production

Saugbrugs to expand fibre processing footprint Strong political and community support to secure Saugbrugs as a cornerstone employer

BCTMP pre-engineering (main study)

• Starting pre-engineering for 300kt BCTMP production at Saugbrugs with final investment decision H1 2025
• Potential to become a cost-leading BCTMP supplier, building upon expertise of the mill organisation, and well invested TMP, energy, water treatment, and other assets
• Expected net investment of NOK 1.5-2.0bn based on early supplier discussions for proven and industry-standard equipment and technical solutions
• Production expected to start H1 2027 and full utilisation in H1 2028, achieving return on net investment above 20%
• In addition, investments in BCTMP production will unlock remaining insurance payments of NOK 615m
• The project requires updating existing environmental permits and approval from certain lenders

SC magazine paper production continues

Saugbrugs will continue to be a reliable supplier of 200kt SC magazine paper from PM4 and PM5

Expect positive insurance EBITDA impact of NOK 30-50m per quarter in 2024 to cover mill restoration, and additional NOK 295m in Q2 2024 (cash payment received Q4 2023). Insurance payments of NOK 615m to be received and recognised as BCTMP investments accrue

Top brownfield opportunity Introducing 300kt of BCTMP capacity

Sources of cost competitiveness

• Industrial site and buildings with scale advantages and personnel experienced with TMP production P
• Invested NOK 165m in 2020-21 to further enhance energy efficiency of high quality TMP lines P
• Access to green hydro power with sufficient grid capacity (280 MW) in place P
• Biomass boiler (70 MW) secures sustainable and competitive steam supply, covering BCTMP and SC magazine paper production P
• Established relations to pulpwood suppliers, with expectation to return to historic consumption levels P
• Existing infrastructure and processes for low-cost logistics of inbound raw materials P
• Efficient transportation by road, rail, and sea of BCTMP to potential packaging, hygiene, and other customers both in Nordic and global markets P

Production based on fibre and energy Balancing fibre and energy supply to maintain high operating rates and profitability

Commentary

• Production based on mix of pulpwood and recovered paper (RCP) provides diversification and stability as fibre prices fluctuate
  • Production in Norway to be fully based on pulpwood (fresh fibre) from Q2 2024, with annual European pulpwood consumption expected around 1.8m solid cubic metres
  • Austrian and French publication paper capacity mainly relying on RCP, with annual consumption of around 0.5mt RCP
• Large share of energy consumption sourced on long-term contracts or supplied from own assets
  • Electricity sourced 85-90% on long-term contracts expiring in period 2026-30, and annual consumption of 2.7 TWh
  • Limited purchase of natural gas following start-up of waste-to-energy boiler at Bruck in 2022, majority of heat supplied by own boilers from biomass and RDF as well as process heat recovery

Fixed cost per tonne to decrease

Golbey containerboard start-up and fixed cost initiatives will reduce fixed cost per tonne

15 1) Note that fixed costs in Q3 2023 and Q4 2023 were impacted by NOK 71m and NOK 73m, respectively, relating to insurance covered clean-up costs at Norske Skog Saugbrugs following the rockslide on 27 April 2023

Continued growth in containerboard deliveries Operating targets of +95% utilisation and mid-cycle EBITDA margin of 20% (2025-26)

Monthly RCCM deliveries Bruck PM3

Thousand tonnes

Mill gate cash cost index per tonne Commentary

Index set to 100 per June 2023

• The packaging paper segment currently consists of Norske Skog Bruck PM3 in Austria, and will also comprise Norske Skog Golbey PM1 in France following start-up in H2 2024
• Delivery volumes expected to increase gradually during the coming quarters as ramp-up continues
• Bruck PM3 expected to produce 16-17kt per month when at 95% utilisation in H2 2025, equivalent to 200kt per year. Expect positive EBITDA from Bruck PM3 in Q2 2024
• Golbey PM1 expected to produce 43-44kt per month when at 95% utilisation in H2 2026, equivalent to 520kt per year
• Packaging Paper segment expected to be negative for full year 2024 as fixed costs of around NOK 70m per quarter currently recognised in Publication Paper Europe segment will be allocated to Packaging Paper upon start-up of Golbey PM1
• Once at full utilisation on both machines, the machines are expected to generate annual EBITDA of EUR 70-80 million based on historical prices and margins seen in the market

Deliveries

Fixed per tonne Variable per tonne

Focus on protecting margins and cash flow Norske Skog Boyer is the last domestic supplier of publication paper

Sales volume, kt

EBITDA margin, %

Commentary

• Norske Skog has gradually exited the Australasian region, with Boyer being the last domestic supplier of publication paper
• Domestic volumes allow for marginal profitability, but exports to Asia are challenging
• Significant effort in all customer negotiations, as well as all sourcing of energy, fibre, other raw materials, and distribution to enable continued profitability
• Ambition to maintain positive margins and cash flow at Boyer

I	Highlights
II	Introduction to Norske Skog
III	Update on projects and operations
IV	Markets
V	Financials

Monthly publication paper demand and capacity Western Europe

Publication paper market Stable demand into 2024 as stock-levels normalise

Publication paper closing stock volume Western Europe

Closing stock days Linear (Closing stock days)

Publication paper cash cost curves

Norske Skog well situated on the Western European cash cost curves

Publication paper prices Prices stabilising at marginal cost producer levels

Price

Recycled containerboard capacity Increase in Western European recycled containerboard capacity is delayed

Packaging paper price

Increasingly important to be a cost-efficient producer to manage low-price environment

Testliner 3

Raw materials

Normalising energy prices, but fibre prices continue upwards

I	Highlights
II	Introduction to Norske Skog
III	Update on projects and operations
IV	Markets
V	Financials

Maintenance covenants and financial policies

Maintaining a strong financial position through strategic transition

Group maintenance covenants

• Equity ratio above 25% (41% as of Q1 2024)
• Interest coverage ratio above 2.0x (11.9x as of Q1 2024)
• Minimum cash above NOK 100m (NOK 1 318m as of Q1 2024)

Financial policies

• Aim to have a leverage ratio less than 2.0x in the long-term
• Financial flexibility to fund short and long-term capital requirements
• Maintain a capital structure that suits the Group's strategy
• Access to a diversified range of capital sources
• Keep maturity profile on financing arrangements spread out

Maintenance covenants

Well within all group maintenance covenants

group covenant of min. NOK 100m unrestricted

Unrestricted cash Restricted cash

Equity ratio

Interest coverage ratio

Operating cash flow Healthy operating cash flows for debt servicing

Cash flow from operating activities excl. net interest Net interest

28 1) Norske Skog includes interest payments made and received in operating cash flows

• Competitive mills with very few quarters of negative operating cash flows despite challenging markets and operating environments
• Timing of cash release related to sale of CO2 allowances and receipt of compensation, leads to large quarterly swings through the year
• In Q4 2023, receipt of insurance settlement at Saugbrugs as part of the rockslide resulted in large positive impact on cash flows
• Ongoing effort to reduce operating working capital levels across Norske Skog
• Target annual maintenance capex of NOK 200m, but historically achieved around NOK 250m

Sustainable debt level

Net debt to remain at sustainable levels as investment projects are completed

• Refinancing of bond and issue of loan at Skogn to increase available liquidity
• Maintaining a strong liquidity position ahead of remaining gross expansion capex at Golbey, with energy certificates and investment grants to be received over coming years
• Sold CO2 allowances and received compensation during Q2 2024

Overview of main financing facilities Majority of debt issued in operating companies

30

Outlook

Creating value from fibre

• Optimise cash flows from publication paper production across all mills
• Continue to increase production of packaging paper over coming years
• Continue to explore profitable growth through new fibre projects
• Significant focus on project execution and cost efficiency going forward

Earnings from investment projects starting to take effect, and expected to grow over coming years

We create

green value

Norske Skog ASA Postal address: P.O. Box 294 Skøyen, 0213 Oslo, Norway Visitors: Sjølyst Plass 2, 0278 Oslo, Norway

Phone: +47 22 51 20 20 Email: info@norskeskog.com Email: ir@norskeskog.com

This presentation contains statements regarding the future in connection with Norske Skog's growth initiatives, profit figures, outlook, strategies and objectives . All statements regarding the future are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from what has been expressed or implied in such statements .