Bank of America Merrill Lynch Credit Conference

Transcription

1 Bank of America Merrill Lynch Credit Conference Odd-Geir Lyngstad, Treasurer and deputy CFO New York, 2 December, 2009

2 The world of Norske Skog Corporate centre Oslo Follum Skogn Saugbrugs Parenco Golbey Walsum Bruck Sing Buri MNI (34%) Pisa Albury Boyer Tasman Bio Bio 2

3 Norske Skog s products Newsprint Standard and improved grades for daily newspapers, free newspapers, advertising supplements Second largest global producer of newsprint World-wide operations, ex. North America Magazine Paper Magazine paper for magazines, periodicals and advertising purposes European operations only Two different grades: SC - uncoated paper (supercalendered) CMR - coated paper Fifth largest global producer 3

4 Production capacity by segments * Australasia newsprint 20 % South America newsprint 7 % Asia newsprint 3 % Total capacity Europe magazine 31 % 4.5 mill. tonnes Newsprint etc. 3.1 m.t. Magazine 1.4 m.t. Europe newsprint 39 % 4 *) After sale of SNP and Hebei, and idling of PM2 in Parenco

5 Top global publication paper companies Mt UPM (FIN) AbitibiBowater (USA) Stora Enso (FIN) Norske Skog (NOR) Nippon Paper (JAP) Myllykoski (FIN) Coated Mag Uncoated Mag Newsprint NewPage (USA) White Birch (USA) Holmen (SWE) Grade Top 5 share of capacity North America Europe Oji Paper (JAP) SCA (SWE) Kruger (CAN) Catalyst (CAN) Newsprint 80% 60% Uncoated Mag 80% 80% Coated Mag 85% 70% M-real (FIN) 5 Burgo (ITA) Source: RISI Dec 08, PPPC Oct 09

6 A balanced raw material base Total paper capacity: 1.75 News News 0.4 LWC SC News Mag News Production based on: Recovered paper News 0.75 Wood Fillers, coating, mkt pulp 6

7 Third quarter results

8 Q308 Q408 Q109 Q209 Q309 8 Results - segments 400 Gross operating earnings mnok Margin % Q308 Q408 Q109 Q209 Q309 Q308 Q408 Q109 Q209 Q309 Q308 Q408 Q109 Q209 Q309 Q308 Q408 Q109 Q209 Q309 Q308 Q408 Q109 Q209 Q Europe South Asia Australasia Magazine America Newsprint Energy/ Other 40 % 30 % 20 % 10 % 0 % -10 %

9 Q in brief EBITDA NOK 642 mill. NOK 568 mill. Q2/09 NOK 712 mill. ex Korea Q3/08 Increased magazine paper volumes in Q3 Higher operating rates Lower costs compared with Q2/09 Sale of Norske Skog Hebei, China EBITDA ex. Korea Korea Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 9

10 Capacity utilisation improved Average operating rate Q3: 81% (75%) Increased production in South America and Magazine segment Increased export from New Zealand to Asia One machine at Parenco indefinitely idled Production of book paper at Follum has started tonnes % 70% Capacity 87% 97% Europe Asia Australasia South America Production 85% Magazine 10

11 Cash flow * NOK Mill Cash flow NOK 730 mill. (NOK -294 mill. in Q2) Reduced working capital of NOK 190 mill. Financial items NOK -36 mill. (NOK -737 mill.) Lower paid interest Realised gain from currency hedging Free cash flow NOK 674 mill Q3 Q4 Q Q2 Q3 11 * Cash flow from operations, after financial items and taxes

12 Stronger NOK in Q Jan- 08 Apr- 08 Main currencies vs NOK Jul- 08 Oct- 08 USD GBP EUR Jan- 09 Apr- 09 Jul- 09 Oct- 09 Operations Negative impact on revenue from Norwegian mills Negative translation differences on accounts receivables Balance sheet Reduced value on both assets and interestbearing debt Hedge accounting for part of translation difference in balance sheet 12

13 Financial items positively affected by currency NOK mill. Net financial items NOK mill Q3 Q Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Clean interest (228) (209) Interest rate derivatives Currency hedging CF 270 (58) Currency other Buy-back of bonds Other fin items (55) (60) Total Currency items in total NOK 764 mill. (NOK -37 mill. in Q2) Gains from CF-hedging NOK 270 mill. Other currency gains/losses NOK 494 mill. Positive translation difference on debt, not hedge accounted Negative translation difference on cash Gains on other currency hedging 13

14 Demand 2009 per segment/region Segment To: YTD 09 /YTD 08 Comments World Std news Sep -15.4% All regions down, but q/q improvement versus Q2 N. Am Std news Sep -28.1% Consistent weakness Europe Std news Sep -13.2% Steep fall in W.Europe but also declines in E.Europe Europe Magazine (incl. of improved news etc) Sep -18.0% CMR (-24%) weak, SC somewhat better (-9%). Non-Japan Far East Sep -10.2% India (-31%) and trad l export Std news markets down, China flat (2%) Australasia Std news Latin America Std news Sep Sep -12.8% Europe-like declines, circulation and newpaper adspend down -23.1% All major markets weaker except Mexico (-17%). 14 Source: PPPC, CEPIPRINT

15 Markets

16 Std Newsprint main trade flows YTD September Source: PPPC

17 Regional demand for publication paper 2008 demand & change 08/ % 3.0% million tonnes % -11.2% -9.5% 6.8% % 6.5% -6.2% 12.9% 0 Europe North America Asia Latin America Australasia 17 Sources: PPPC Newsprint Newsprint = Standard newsprint Magazine = Coated, supercalendered and other (improved newsprint etc.) Magazine

18 North American newsprint shipments to Europe 18 Source: PPPC, CEPIPRINT

19 Capacity closures Publication paper in Europe and North America YTD Grade Region Tonnes Std newsprint % of 2007 capacity W. Europe % N. America % SC and other uncoated paper* W. Europe % N. America % Coated magazine paper W. Europe % N. America % *) Includes improved newsprint and directory book paper 19 Source: RISI and PPPC

20 Focus on debt- and cost reduction Asset sales to reduce debt Korea Properties SNP Hebei Closures to adjust capacity and reduce cost Norway, Union and Follum Europe, Steti and Parenco Australasia, Tasman Other cost cutting initiatives 20

21 21 Price development EUR/tonne Newsprint 45 g Supercalendered 56 g LWC 60 g Jan 04 Apr 04 Jul 04 Oct 04 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 Oct 06 Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Source: RISI

22 Considerable reduction in net debt NOK bn NOK bn Net debt 2007 Q Net debt Q Q Net debt reduced by NOK 6.4 bn since end 2007 Retained free cash flow Bond buy-back strategy NOK 5.4 bn through asset sales Net debt reduced by NOK 2.2 bn in Q3 Retained free cash flow: NOK 700 mill. Reclassification of Hebei debt: NOK 800 mill. Currency: NOK 700 mill. Gearing

23 Actions to meet challenging markets

24 Focus on cash flow and liability management Bond buy back In total NOK 2.3 bn in bond debt bought back during the last three quarters Gain of ~NOK 600 mill in the same period Extend maturity Innovation Norway loan: NOK 250 mill/12 years Issued NOK 750 mill five year bonds Reduced CAPEX-level New level NOK 600 mill 24 Asset sales Sale of shares in SNP (Shanghai) and NSH (Hebei) Some further asset disposals considered

25 Cash and debt maturity profile NOK bn Cash Bank debt Bond debt > 2033 Note: As of 30 September

26 Cost reductions NOK mill Q Q4 Q Q2 Q3 Fixed costs Fixed costs NOK mill. in Q3/09 Down from NOK mill. in Q2/09 Main items: Reduced maintenance and deconsolidation of SNP Improvement initiatives Parenco production line idled Downsizing at Follum and other business units Lower headquarters costs Full impact of NOK mill. in

27 Total cost breakdown 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%) 27

28 Outlook Challenging business climate few signs of market upturn Weak advertising market, low pagination and circulation Continued overcapacity Risk exposure from currency and cost of raw materials Strong NOK - challenge to Norwegian operations Cost pressure on recovered paper 28

29 Cost cutting initiatives Profit improvement program ended 2008 Close to target of NOK 3 billion Main elements; energy, efficiency improvement and demanning Reduced fixed costs from closure of capacity in Europe and New Zealand Work force substantially reduced Reduced maintenance and other fixed costs Reduced HQ cost Cost savings from filler project at Skogn and softwood conversion at Boyer New energy initiatives 29

30 Management focus Continuous cost reductions and operational improvements Optimization through capacity management Measures to further strengthen financial position Continue to explore business opportunities within bio energy 30

31 Q & A