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Norske Skog ASA
Earnings Release • Jan 27, 2023
3687_rns_2023-01-27_a881da33-62c5-4b83-ad9c-0bc551375b91.pdf
Earnings Release
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Sustainable and innovative industry
Strategic transition
- Publication paper
- Packaging paper
- Energy and bio products
| 2023-24 | 2025-26 |
|---|---|
| Ramp-up |
- Become a leading independent producer of Packaging Paper, starting Q1 2023
- Improve and optimise cash flows from Publication Paper
- Diversify and innovate within bio products and energy
- Focussing on European operations and divesting non-core assets
Norske Skog ranked as Leader in the CDP Climate Change programme
- Norske Skog received "A-" score on the company's first Carbon Disclosure Project (CDP) submission since 2011
- This is higher than the Europe regional average of "B", and higher than the Paper products & packaging average of "B"
Selected initiatives over coming years to achieve "A"
- Improve / complete Scope 3 reporting
- Increase use of renewable energy
Current reporting within CDP Climate Change, but ambition to expand reporting to also encompass CDP Forest and CDP Water over coming years
A-
Fourth quarter in brief
Strong results in uncertain times
EBITDA of NOK 1 083m and operating cash flow of NOK 745m in the quarter FY2022 EBITDA of NOK 3 105m
Turbulent energy and raw material markets
Energy exposure actively managed, allowing sale of excess energy after closure of Golbey PM1 Input costs remain at significant levels despite coming down from record highs impacting production
Publication paper capacity reductions from 2023 to 2024
Newsprint market remains balanced, while markets for magazine grades are softening particularly lightweight coated Recognised impairment of NOK 164m related to Bruck PM4
Sale of high school facilities in Halden
Gain of NOK 200m in Q4 2022 and cash proceeds of NOK 200m received in 2023
The board proposes to the AGM the authority to pay NOK 5.00 dividend per share Subject to lenders waiving certain shareholder distribution restrictions
Navigating turbulent and uncertain markets
5 1) LTM = Last Twelve Months, i.e., the last four quarters; 2) Operating EBIT defined as EBITDA less maintenance capex
Continued good performance
| 46 | 40 | 49 | 33 | 33 |
|---|---|---|---|---|
| Q4'21 | Q1'22 | Q2'22 | Q3'22 | Q4'22 |
| Europe | Q4'21 | Q1'22 | Q2'22 | Q3'22 | Q4'22 |
|---|---|---|---|---|---|
| Operating rate, % | 96% | 94% | 90% | 83% | 74% |
| Deliveries, thousand tonnes | 427 | 407 | 407 | 347 | 300 |
| Total operating income | 2 648 | 2 968 | 3 469 | 3 131 | 3 555 |
| EBITDA | 395 | 441 | 910 | 484 | 1 129 |
| EBITDA margin, % | 14.9% | 14.9% | 26.2% | 15.5% | 31.8% |
| Australasia | Q4'21 | Q1'22 | Q2'22 | Q3'22 | Q4'22 |
| Operating rate, % | 87% | 91% | 98% | 94% | 98% |
| Deliveries, thousand tonnes | 62 | 61 | 63 | 66 | 63 |
| Total operating income | 395 | 429 | 470 | 514 | 508 |
| EBITDA | 46 | 40 | 49 | 33 | 33 |
| EBITDA margin, % | 11.6% | 9.2% | 10.4% | 6.3% | 6.5% |
| Other activities | Q4'21 | Q1'22 | Q2'22 | Q3'22 | Q4'22 |
| Total operating income | 71 | 222 | 23 | 22 | 27 |
| EBITDA | -19 | 130 | -55 | -9 | -80 |
Introducing Packaging Paper as new operating segment from Q1 2023
European1 fixed costs per quarter (employee benefit expenses and other operating expenses)
- From Q1 2023, part of the fixed costs currently in Publication Paper Europe will be allocated to Packaging Paper
- For Q1-Q3 2023, Packaging Paper includes Bruck PM3. From Q4 2023, the segment will also include Golbey PM1
- Norske Skog has nine PMs in Europe, and each represents approximately one ninth of European fixed costs
- Expect positive Packaging Paper gross margin in 2023, but insufficient volumes to cover fixed costs in first operating year
Prudent cash balance management
8 1) Cash earnings defined as cash flow from operations less maintenance capex; 2) Includes investments in packaging paper projects at the Bruck and Golbey industrial sites, and expansion of thermomechanical pulp capacity at Skogn; 3) ETS = Emission Trading Scheme; 4) EUA = European Union Allowance
- Net debt of NOK 1 092m
- Net debt / LTM reported EBITDA of 0.4x
- Repurchased EUR 11.1m of EUR 150m bond
- Average deposit rate of 3.0-3.5%
- Remaining capex of EUR ~170m2 covered multiple times by available liquidity
- Cash proceeds of NOK 200m from sale of high school received in January
- NOK ~250m of 2022 EU ETS3 related cash proceeds, mainly relating to EUAs4 sold forward, to be received during H1 2023
High school facilities sold to Viken
Viken county municipality purchased high school facilities for NOK 730m
- Former Saugbrugs paper storage facilities transformed to a modern high school
- Wide spectre of amenities for vocational education, including music studios, concert halls, and wood and mechanic workshops
TMP capacity expansion and process optimisation at Skogn
Increasing TMP1 production capacity with 100 000 ADT2
- Skogn to become fully based on fresh fibre, total annual volume of 1.2m cubic metres
- Reduces annual imports of recycled paper with 70-80kt
- De-inking facility for recycled paper to remain as back-up alternative if required
- TMP applicable for use in graphic papers, packaging papers, and pulp for exports
- Investment of NOK 180m, net of NOK 40- 50m grant from NOx Fund
- Start-up expected in H1 2024
Volatile raw material markets
Product prices track input cost development
LWC offset 60g SC rotogr. 56g News 45g Fluting 105g Testliner 140g
Nordic newsprint production is favourably positioned
13 Sources: PPPC, RISI, press releases 1) Excludes Bruck PM3 (125kt) and Golbey PM1 (235kt)
2023 will be a milestone year in the transformation of Norske Skog
Packaging paper capacity
- Projects remain on time and budget
- 760k tonnes recycled containerboard
- Bruck PM3 in the market from Q1 2023
Targets
- Operating rate of ~95% (2025-26)
- EBITDA margin of +20% (2025-26)
- Competitive steam supply P
- Centrally located with low transport costs P
- Established raw materials access P
- Ideal machine scale, trim and speed P
Works at Golbey progressing to plan for start-up Q4 2023
Norske Skog Golbey: May 2022 Norske Skog Golbey: January 2023
Enabling the circular economy
Developing climate solutions
- Participating in Borg CO2 industry cluster to develop CCUS2 technologies with ambition to capture ~630k tonnes
- Supporting Ocean GeoLoop to develop and pilot its CCUS2 technologies to capture close to 100% of CO2 from flue gas
- Exploring a range of opportunities within advanced e-fuels, bio-carbon, -chemicals, -additives and -materials
Outlook
- Newsprint market expected to remain balanced due to industry capacity closures
- Volatile energy and raw material markets continues to cause operational challenges
- Continue to actively manage energy exposure through 2023
- Newsprint prices stable into 2023, but softer development for magazine paper grades
- Starting containerboard production at Bruck PM3 during Q1 2023 and Golbey PM1 in Q4 2023
- Continued development of renewable energy and bio product projects
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: [email protected] Email: [email protected]
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.
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