Nordic Basic Industry Seminar Stockholm, Handelsbanken Capital Markets

Transcription

1 Nordic Basic Industry Seminar Stockholm, Handelsbanken Capital Markets 5 March 2009 Christian Rynning-Tønnesen President & CEO

2 Agenda Company headlines 2008 in brief Cost focus Market & outlook

3 The world of Norske Skog Corporate centre Oslo Follum Skogn Saugbrugs Parenco Golbey Walsum Bruck Hebei Shanghai Sing Buri MNI (34%) Pisa Albury Boyer Tasman Bio Bio 3

4 Production capacity by segments Europe magazine 27 % Australasia newsprint 16 % Total capacity 5.2 mill. tonnes Newsprint etc. 3.8 mt Magazine 1.4 mt Asia newsprint 13 % South America newsprint 6 % Europe newsprint 38 % 4

5 2008: A year of firm actions Q1/Q2: Closure of Steti and Follum PM2 Capacity reduction of t/y Downsizing/Staff reductions at head office Q2/Q3: Sale of Korean mills (NOK 3.8 bn in cash proceeds) Q1-Q4: Sale of other assets: NOK 600 mill Improvement program of NOK 3 bn completed close to target (NOK 2.95 bn achieved) 5

6 Favourable NOK Index 100=31 Dec Norske Skog Index* jan.07 mar.07 mai.07 jul.07 sep.07 nov.07 jan.08 mar.08 mai.08 jul.08 Q4 08 sep.08 nov.08 jan.09 *Value of Norske Skog's trade-weighted basket of currencies Main currency impacts from weaker NOK: Profit and loss account: Improved EBITDA and EBIT Financial items: Loss on currency hedging, realised gain from higher value on cash Cash flow: Positive impact from higher EBITDA and realised gain from cash Balance sheet: Increased assets and debt, minor impact on equity Higher gearing 6

7 Strongly improved EBITDA through 2008 Q4: EBITDA NOK 922 mill Mill NOK EBITDA ex. Korea Korea Full year: EBITDA NOK mill Cash flow NOK 2 bn Q3 Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

8 Debt and gearing 25,0 20,0 15,0 10,0 5,0 0,0 0,84 0,96 1,12 1,05 1,07 0,89 1,05 0,99 19,1 17,3 16,4 15,7 15,7 14,0 12,7 13, Net debt NOK bn (left axis) Gearing (right axis) Q Q2 Q3 Q4 Pro forma ,2 1 0,8 0,6 0,4 0,2 0 Net debt and gearing increased because of weak NOK at Gearing also negatively affected by reduced value of energy portfolio By (pro forma): Net debt: NOK 13.2 bn Gearing: 0.99 Covenant on bank debt: Gearing < 1.4; good headroom 8

9 Improved liquidity 6 5 NOK 6.2 bn total liquidity as of year end 2008, up from NOK 1.8 bn from beginning of year Cash ,2 NOK bn ,1-0,2-1,3 Debt maturity schedule by ,1-1,4-2 -2,3 Debt ,6-5,3-4,9 Cash

10 Cost focus

11 Total cost breakdown 2H 2008 Total cost Raw materials Depreciation 11 % Other fixed 9 % Raw materials 35 % Chemicals etc. 24 % (9%) Wood 32 % (11%) Labour 14 % Distribution 10 % Other direct 3 % Energy 19 % Kraft pulp 10 % (4%) Recovered paper 33 % (12%) Cost breakdown, after divestment of Korean assets. 11

12 Cost of energy and raw materials NOK billion Energy Rec Paper Wood Chemicals Kraft pulp

13 Energy consumption Energy volume Coal, Bio & Steam 16 % Gas & Oil 22 % Gas & Oil 17 % Energy costs Coal, Bio & Steam 6 % Electricity 62 % Energy consumption (excluding self generated thermal of ~3 Twh) ~ 17 Twh (= 17 billion kwh) Electricity ~75% is bought under long term contracts 13 Electricity 77 %

14 GWh Hedging & Consumption of Long-term Electricity 0 Hedged electricity Non-hedged electricity Long term contracts in Norway, Australasia and South America Electricity exposure in spot market in continental Europe and Asia

15 January Electricity -monthly average prices Germany /MWh January 2002 July 2002 January 2003 July 2003 January 2004 July 2004 January 2005 July 2005 January 2006 July 2006 January 2007 July 2007 January 2008 July

16 Geothermal power plant on New Zealand (NS Tasman plant) Until Q % hydro power with volatile prices From October 08 Long term financial contract until 2023 New plant supplying 60% of Tasman s electricity consumption 16

17 January 2009 January 2008 July 2008 July 2007 January 2007 July Brent -monthly average prices $/bbl January 2002 July 2002 January 2003 July 2003 January 2004 July 2004 January 2005 July 2005 January

18 A balanced raw material base Total paper capacity: 1.9 News News 0.4 LWC SC News Mag News Production based on: Recovered paper News 0.75 Wood Fillers, coating, mkt pulp 18

19 Recovered paper Norske Skog s yearly consumption ~2.3 million tonnes Australasia 7 % Norway 7 % Consumption by region after sale of Korea Asia 39 % Continental Europe 47 % 19

20 20 Recovered paper prices Europe and Asia Newspapers (2.01) - Germany Old News - China EUR/tonne USD/tonne Source: RISI

21 South America 11 % Australasia 26 % Wood consumption 2008 ~6.3 mill m 3 Norway 36 % South America & Australasia Long term contracts at favourable prices Chips 32 % Continental Europe 26 % Roundwood 68 % Norway & Continental Europe Market exposure. Price reductions during 2009 expected. Postponement of increased Russian export tax is positive 21

22 Projects to reduce costs Filler project Skogn Reduce direct cost by replacing wood with filler Improved quality to sell in core markets Softwood conversion Boyer Replace eucalyptus with pine 22

23 Variable cost development -in local currency Wood Price reductions during 2009 expected Recovered paper Low spot prices at present. Avg 2009 lower than avg 2008 Chemicals & Pulp Lower prices on pulp and oil-based chemicals Energy Lower prices on market exposed energy. Favourable long term electricity contracts in Norway, South America and Australasia 23

24 Fixed cost development -cash costs, NOK/tonnes produced %

25 Downsized with employees in three years Employees world wide by year end : Korea, sale Steti, closure Follum PM2, closure Large headquarter cuts Divestments Closures Downsizing Total cuts

26 Market & outlook

27 Paper is still the largest medium for advertising in the world Print 40% 27 Source: World Association of Newspapers

28 Std news demand 2008 vs 2007 World -2.5% +2.6 % % Std news -3.8 % Mag -1.1 % +8.2 % -6.2 % 28

29 Capacity development Substantial closures in Europe and North America 2008 capacity changes: N.A. Europe Newsprint ~11% ~7% Magazine ~8% ~6% Slowing capacity growth in Asia 1000 t 1000 t Newsprint capacity Magazine capacity RoW Eur NA OUM SC CMR 29 Source: PPPC, NSI estimates

30 Standard newsprint 45 gsm prices in EUR/t 700 Germany US East UK jan 05 jan 06 jan 07 jan 08 jan Source: RISI

31 31 Outlook Positive elements: Price increase in European newsprint for 09 Price increase in Australia likely in 2nd half of 09 Reduced costs on recovered paper, energy and pulp Risks/negative elements: Recession is deepening and leads to reduced paper demand, expect 5-10% drop in mature markets Currency changes Focus: Swift capacity response to demand development, announced tonnes curtailments in Europe Continue cost reductions Reduce net debt further Expectations 2009 Improved operating result vs 2008 Reduced net debt vs 2008

32 Nordic Basic Industry Seminar Stockholm, Handelsbanken Capital Markets 5 March 2009 Christian Rynning-Tønnesen President & CEO