Citi European Credit Conference. November 2011

Transcription

1 Citi European Credit Conference November 2011

2 A leading manufacturer of publication paper 14 mills in 11 countries Revenues (2010): NOK 19.0 bn (USD 3.15 bn) employees Listed on the Oslo Stock Exchange No controlling shareholder Credit rating B /Caa1 2

3 Major global player Top global publication paper companies Mill tonnes UPM (FIN) AbiBow (US/CAN) Stora Enso (FIN) Norske Skog (NOR) Nippon Paper (JAP) NewPage (US) WhiteBirch (US) Oji Paper (JAP) Holmen (SWE) Kruger (CAN) SCA (SWE) Catalyst (CAN) Burgo (ITA) Sappi (S.Afr) Palm (Ger) Grade Top 3 share of capacity North America Western Europe Newsprint ~70% ~60% Uncoated Mag ~60 % ~75% Coated Mag ~70 % ~60% Newsprint Uncoated magazine paper Coated magazine paper * UPM inclusive closures of Allbruck, UPM Myllykoski Paper Ettringen PM3 Source: RISI, Company research 3

4 Global presence strong European footprint Share of capacity Europe Newsprint 35% Europe Magazine 35% Skogn (Norway) Follum (Norway) Saugbrugs (Norway) Outside Europe 30% Parenco (The Netherlands) Golbey (France) Walsum (Germany) Bruck (Austria) Singburi (Thailand) MNI (Malaysia 34 %) Pisa (Brazil) Bio Bio (Chile) Albury (Australia) Tasman (New Zealand) Boyer (Australia) 4

5 Regional demand for publication paper 2010 demand and change from previous year % 2.5% million tonnes % -6.0% 1.4% 12.6% % 28.6% 3.7% 12.0% 0 Europe North America Asia Latin America Australasia Newsprint Magazine Sources: PPPC

6 Demand 2011 YTD per region/segment Region/segment Annual change (YTD)* Comments World standard newsprint North America standard newsprint Europe standard newsprint Europe magazine paper (incl. improved newsprint etc) Asia excl. Japan Standard newsprint Australasia standard newsprint Latin America standard newsprint 5.0% 6.8% 0.6% 1.6% 9.4% 5.9% +0.4% Western Europe ( 2%) Eastern Europe (+6%) SC ( 2%), LWC ( 2%) Improved NP etc. (+1%) India (+3%) China ( 21%) Brazil ( 5%) Chile (7%) *) Jan Sep 2011 vs. same period in 2010 Source: PPPC, CEPIPRINT 6

7 Demand Newsprint e Europe and USA is different M tonnes Europe North America Source: PPPC 7

8 Main trade flows Std newsprint YTD Sep 2011 YTD change -63 % change -25% YTD change -141 % change -13% YTD change -49 % change -7% YTD change 71 % change 9% Source: PPPC 8

9 Main trade flows Magazine paper YTD Sep 2011 N.Am to: S.Am Asia YTD change % change -16 % -8 % EU to: N.Am S.Am Asia AA YTD change % change 9 % 16 % 12 % 36 % Source: PPPC 9

10 European newsprint capacity changes Turkheim (incl UMI) 80 Palm King s Lynn 400 Perlen (oct 2010) 360 UPM Kajaani 185 NS Follum (incl UMI) 130 NS Steti 130 M&F Ledar 30 Holmen Hallsta 150 NS Parenco 225 Perlen 125 AbiBow Bridgewater 230 SE Varkaus 290 SE Maxau kt kt Total 850 kt

11 European publication paper prices recovering * Source: RISI *) German reference prices 11

12 High operating rates and improved deliveries Newsprint Norske Skog Q3 Operating rate in Europe 89% and Outside Europe 97% Deliveries somewhat lower in Europe, higher outside Europe * * Magazine Norske Skog Q3 Operating rate 89% and again at normalized level Deliveries significantly higher *) Adjusted for capacity at Norske Skog Saugbrugs 12

13 Cost distribution Cash cost = ¼fixed and ¾variable Energy and fibre largest cost elements Limited exposure to market pulp General trend Fixed costs decreasing relative to variable cost Labour Distribution 10% Other direct 16% 5% Other fixed Chemicals fillers etc 8% 10% 4% Pulp 23% 11% RP Energy 12% Wood 13

14 Some easing of cost inflation Most raw material prices still remain at high level Recovered paper and pulp prices retreated in Q3 Spot energy prices in Norway and continental Europe lower in Q3 Norwegian wood prices stable at a high level Recovered paper (Europe) Market pulp (World) Wood (Norway) Index: Dec 2008 = 100 Source: RISI, Company data 80 Dec 2008 Jun 2009 Dec 2009 Jun 2010 Dec 2010 Jun

15 Q3 in brief EBITDA NOK 469 mill. (NOK 248 mill. in Q2): lower costs, higher volumes and prices Improved cash flow from operations at NOK 413 mill. Net debt reduced by NOK 305 mill. to NOK mill. Impairments of NOK mill. in Q3 Norske Skog Saugbrugs: full production in Q3 following stoppage in H1 NOK mill. *) Including reversal of an environmental provision of NOK 108 mill. **) Including reversal of provision and income related to pension schemes 15

16 EBITDA contributions from Q2 to Q3 NOK mill. Q3 11 vs Q

17 Key financials Q Key figures (NOK mill.) Q Q Q Operating revenue EBITDA EBIT before special items Result after tax EBITDA NOK 221 mill. higher Q/Q Significant improvement in all segments Some positive currency effects on AR/AP Net result impairment driven Excluding impairments net result would have been NOK 212 mill. Impairments of NOK mill. recognised in Q3 Norske Skog Parenco Cost of capital / cash flow horizon 17

18 Improved EBITDA contribution from all segments *) Reversal of an environmental provision of NOK 108 mill. 18

19 EBITDA including realized currency gains Group EBITDA was NOK 151 million higher YTD when including currency effects The effect was NOK 173 million in the same period last year 19

20 Financial items NOK mill Currency (unrealised and realised) Other Currency: loss reflecting end period depreciation of NOK against Norske Skog s currency basket Other: mainly gain from bond buy backs Net interest Q3 10 Q4 Q1 Q2 Q3 11 Net interest: stable at quarter level just below NOK 200 mill. 20

21 Cash flow EBITDA NOK 469 mill. in Q3 Working capital outflow of NOK 75 mill. Cash flow from net financial items NOK 25 mill. Taxes paid NOK 6 mill. Net investments Negative NOK 21 mill. in Q3 Positive NOK 574 mill. YTD Non core disposals NOK 100 mill. in Q3 Cash flow from operations, after financial items and taxes 21

22 Debt reduction continued through Q3 Net debt lowered by NOK 305 mill. Stronger cash flow from operations Bond buy backs Currency had adverse effect on debt level Leverage reduced Net debt / EBITDA at 5.49 EBITDA / net interest at 2.16 Both ratios well within respective covenants (<5.75 and >1.75) 22

23 Maturity profile USD 2011 bond with USD 259 mill. outstanding paid 15 October Per 30 September

24 Outlook for fourth quarter 2011 Stable prices and volumes for newsprint and magazine paper Input factor costs remaining at high level, but some easing due to lower market pulp and recovered paper prices Gross operating earnings for the year expected to be somewhat stronger than in

25 Market outlook 2012 Newsprint Unsustainable margins and prices below historic average despite continued high input costs Continuation of quarterly contracts Improved pricing environment for magazine likely to also support newsprint prices through substitution Magazine paper UPM retiring capacity following Myllykoski acquisition Magazine capacity to be reduced by 1.2 mill. tonnes Expected to have positive impact on 2012 price negotiations 25

26 Management focus going forward Re establish earlier price levels and margins in Europe Further reduction of debt and fixed costs Continued sale of non core asset Machine capacity in Norway and Europe under scrutiny Active capacity management 26