Sustainable and innovative industry
Second quarter in brief
Good profitability despite turbulent markets
EBITDA of NOK 905m, impact from waste-to-energy facility and price increases offsetting energy and raw material costs Profit of 935m in the quarter, including positive non-cash impact of NOK 419m from valuation of energy contracts
Challenging energy and raw material markets
Uncertainty and high costs for energy and raw materials continue into H2 2022, impacting production and prices Investments in waste-to-energy plant at Bruck and CHP biomass plant at Golbey support the reduction of natural gas imports
Publication paper capacity reductions from 2022 to 2024
Bruck PM3 stopped production on 10 July to facilitate conversion, expect marginal negative EBITDA impact Further industry closures announced in Western Europe support high operating rates in 2022 and into 2023
Good progress on energy and growth projects
New waste-to-energy plant in Bruck close to 100% utilisation and GVE started construction of new biomass plant in Golbey
- Containerboard projects in Bruck and Golbey on schedule for production start-up in 2023
- CEBICO with partnership agreement for further commercialisation and CEBINA successfully applied in filler materials
New waste-to-energy facility improving EBITDA
Positive development in both operating segments
Solid balance sheet and liquidity
Net debt of NOK 1 012m
- Net debt / LTM reported EBITDA of 0.5x
- Repurchased EUR 4.4m of EUR 150m bond
Total available liquidity of EUR ~460m Cash of NOK 1 728m (EUR ~170m) 2021 CO2 comp. of NOK ~290m (EUR ~30m) Undrawn project debt of EUR ~230m Undrawn RCF of EUR 31m
Remaining capex of EUR ~260-280m
EUR ~160m of growth investments to date, EBITDA impact over next 1-2 years2
6 1) Cash earnings defined as cash flow from operations less maintenance capex; 2) Includes investments in waste-to-energy facility and packaging paper projects at the Bruck and Golbey industrial sites
Optimising publication paper cash flows and operations
Publication paper capacity
- Four sites in Europe, one in Australia
- In total, 10 publication paper machines
- 1 225k tonnes newsprint
- Bruck PM3 (125kt) now closed for conversion
- Golbey PM1 (235kt) closing for conversion Q2 2023
- 400k tonnes LWC magazine
- 360k tonnes SC magazine
Targets Operating rate of +90% EBITDA margin of +10% P P
Energy and raw material markets expected to become more challenging in H2 2022
Source: Nord Pool, European Energy Exchange (EEX), Dutch Title Transfer Facility (TTF), RISI, Miljødirektoratet
Nordic operations favourably positioned versus a volatile and uncertain European operating environment
- Challenging energy and RCP situation in Europe
- Nordic mills favourably positioned
- Norske Skog publication paper capacity increasingly skewed towards Norway
Tough operating conditions and announced closures expected to keep the publication paper market tight
Publication paper price increases necessary to address unprecedented raw material and energy prices
Western European publication paper operating rate and demand
Entering the growing market for recycled containerboard
Packaging paper capacity
- 760k tonnes recycled containerboard
- In the market from Q1 2023
Targets
- Operating rate of ~95% from 2025-26
- EBITDA margin of +20% Competitive steam supply Centrally located with low transport costs Established raw materials access Ideal machine scale, trim and speed P P P P
Green Valley Energie CHP plant will support Golbey cost competitiveness
Biomass energy
- Biomass energy JV2 between Pearl (80%), Veolia (10%) and Norske Skog (10%)
- The JV will sell electricity to the French grid and steam to Norske Skog until 2043
- 700 GWh of cost competitive steam for Golbey's packaging paper operations
- Project is fully financed and construction is ongoing, completion expected in 2024
Waste-to-energy facility reducing Bruck gas consumption
Bruck waste-to-energy facility
Bruck external energy exposure
Gas and electricity, MWh / tonne
Waste-to-energy
- Under commissioning with Valmet and nearing 100% utilisation
- Reduces gas consumption by ~0.7 TWh and increases electricity by ~0.2 TWh
- Enables very competitive steam supply for drying of paper and containerboard
Conversions look attractive across the board
Value accretive projects
- Production capacity doubles by switching from newsprint to containerboard
- Price per tonne for newsprint and containerboard are in the same area
- Expected containerboard EBITDA margin of +20% versus +10% for newsprint
- Growing demand for containerboard compared to declining newsprint demand
Containerboard market remains tight driven by e-commerce and sustainability focus
Recycled containerboard prices Germany Western European recycled containerboard operating rate and demand
Million tonnes (and industry operating rate)
Milestone progress across all bio products
Large scale CEBINA application
- Applied in spray filler for Salmon Evolution farming tanks
- Reduces work load from two weeks to four days
- Commercial milestone, further expanding market potential
- Awarded Green Platform grant of NOK ~60m
- Reviewing production capacity expansion
Partnership to commercialise CEBICO
- Partnership between Norske Skog, BEWI and BE Form
- Ambition to identify commercial applications for CEBICO
- Develop commercial foundation for capacity increase
- Current capacity of 300-800 tonnes from pilot plant
- Supported by Innovation Norway grant of NOK ~15m
Circa and Valmet industrial partnership
- Provides technology expertise and scale-up experience
- Long-term focus on Circa's strategy of 80kt capacity in 2030
- Near-term focus on ReSolute and initiate FC6 studies
- Fully financed for ReSolute, Norske Skog holds ~26%
- Continued development of new Levoglucosenone derivatives
Green energy production and energy efficient operations enable annual surplus of CO2 allowances
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
- Publication paper market expected to remain tight due to industry capacity closures
- Volatile energy and raw material markets expected to continue causing operational challenges
- Converting two machines from newsprint production to recycled containerboard production
- Waste-to-energy facility to reduce energy purchases and improve green energy mix
- Continued development of existing and potential 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.