Norske Skog posts €32m loss in the first quarter

The near-term outlook is gloomy for Norske Skog
amid the coronavirus pandemic
23 Apr 2020 − 

Norske Skog's first quarter earnings were impacted by high currency losses. The fact that demand for publication paper is on the decline did not help either, although the impacts from coronavirus will be seen later.

Publication paper manufacturer Norske Skog started off the year 2020 with negative results. The company posted a net loss of €32m (NOK374m) in the first quarter, mainly blaming unrealised currency losses on debt as the NOK weakened significantly. Financial items fort he quarter amounted to -€37m (-NOK433m), the loss being more than seven times higher than in the last quarter.

The market environment was also challenging and the company's sales dropped 11 per cent year-on-year to €241m(NOK2.8bn) in the first quarter. According to Norske Skog, demand for newsprint in Europe, where most of its mills are located, declined 12 per cent through February compared to the same period last year. SC and LWC paper demand are said to have decreased by 4 per cent and 9 per cent respectively.

As a result, the company's deliveries dropped in the first quarter, even if a considerable part of this decline was attributed to the closure of the Albury mill in Australia. The Albury mill had a capacity of 265,000 tpy and was closed at the end of 2019. In Europe, Norske Skog's deliveries fell by 20,000 t year-on-year to 396,000 t and capacity utilisation was 86 per cent compared to 93 per cent in the same period of 2019.

The cost situation, on the other hand, was more positive during the first quarter. Norkse Skog benefited from unusually low recovered paper prices in the first quarter. Pulpwood and energy also cost less year-on-year. Overall, the company spent €122m (NOK1.4bn) and therfore 17 per cent less on raw materials than the year before.

Covid-19 pandemic might cause more production stoppages

The publication paper market is particularly struggling with the effects of the coronavirus pandemic. Norkse Skog predicts that the Covid-19 pandemic will have significant near-term impact on operations due to current worldwide restrictions on movement of goods and people which reduces demand for publication paper. 

The company therefore does not rule out downtime measures in the future. "Insufficient supply of raw material may lead to temporary closures of production," the company said. Norkse Skog already had to stop machines due to coronavirus. At the Saugbrugs mill in Norway, two PMs are currently down and the Tasman mill in New Zealand has also been temporarily closed. The Golbey mill in France experienced downtime measures as well in March.

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