Norske Skog’s EBITDA in the third quarter of 2020 was NOK 73 million, a slight
increase from NOK 52 million in the second quarter of 2020 when excluding the
gain of NOK 86 million from the sale of the Tasmanian forest. Although, there
are modest signs of demand improvement, the markets have not returned to
pre-COVID-19 levels. Norske Skog Saugbrugs (Norway) will permanently cease
production at one of their SC-machines (PM5/100 000 tonnes) during  the fourth
quarter.

- The corona restrictions have had a severe negative impact on operations due to
a sudden and considerable drop in demand for publication paper. To ensure future
profitability and competitiveness, we will adjust our production capacity to the
prevailing market conditions; thus, we will close one SC-machine at Saugbrugs.
In close dialogue with the employees, we will start a process to adapt the
Saugbrugs organisation to a two-machine site. We will also identify new
industrial opportunities at our mills in a response to the falling publication
paper demand, says Sven Ombudstvedt, CEO of Norske Skog.

Operating earnings in the third quarter of 2020 were NOK -31 million compared to
operating earnings of NOK -122 million in the second quarter of 2020, mainly
driven by a modest sales volume increase. Net loss in the quarter was NOK 89
million compared to a net loss of NOK 59 million in the previous quarter. So far
this year, Norske Skog in Norway recorded a net loss of about NOK 45 million due
to sale of excess energy. The market downtime due to corona pandemic had a
considerable effect on the costs as the mills had to sell unused energy at a
substantially lower market energy price than the contractual price.

 - The Norwegian government implemented several Covid-19 related compensation
schemes, but failed to compensate the power-intensive industry for the
considerable extra costs related to the sale of excess energy as a result of
market downtime. The low economic activity due to Covid-19 triggered a sharp
decline in energy market prices; thus, leaving the industry to sell excess
energy at prices far below contractual prices at huge losses. At the same time,
the government controlled Statnett decided to  increase the future grid tariffs.
We are a green company with renewable input factors and recyclable end products;
nevertheless, these manoeuvers by the Norwegian government are incomprehensable
in the context of the green shift, says Sven Ombudstvedt, CEO of Norske Skog.

Cash flow from operations was NOK 115 million in the quarter compared to NOK
-109 million in the previous quarter, mainly due to a reduction of inventory and
lower paid taxes. Net interest-bearing debt was NOK 628 million at the end of
the third quarter, with an equity ratio of 51%.


Status projects
Norske Skog plans to invest and convert two newsprint machines at respectively
Bruck and Golbey to recycled containerboard. The conversions at Golbey and Bruck
will introduce 765,000 tonnes of competitive containerboard capacity to meet the
growing demand for renewable packaging. The final investment decision is
expected in H1 2021. Following the conversions, both mills will have access to
renewable energy and will have reduced their carbon footprints to become among
the best performers in the industry. The approximately EUR 350 million
investment is expected to be financed with partial export credit agency (ECA)
guarantees and cash on balance. 

Norske Skog actively work to realise and develop value from the infrastructure
assets and industry competence. Norske Skog sold the Albury mill at the end of
2019, and the Tasmanian forest in June. The scale-up of pellets production
capacity in New Zealand at the start of 2020 was successfully delivered. The
installment of a 50 MW renewable waste to energy boiler in Austria is
progressing according to plan. Detailed engineering for the containerboard
projects in Austria and France are on track for final investment decision in the
first half of 2021. Norske Skog is the largest shareholder in Circa, which
recently received a EUR 12 million EU Flagship Grant for the production of a
first-of-its-kind 1,000 tonnes bio chemicals plant in France. 

- We now have several promising on-going projects within biocomposites and
biochemicals, and we are also reviewing the opportunity to produce bleached
chemi-thermomechanical pulp (BCTMP) both in New Zealand and Norway. Our fibre
projects like CEBINA, FibreMatrix and Cyrene, indirectly through our ownership
in Circa, also demonstrate promising progress, says Sven Ombudstvedt, CEO of
Norske Skog.


Key figures, third quarter of 2020 in NOK MILLION (unless otherwise stated)
	                                 Q320    Q220    Q319   YTD20   YTD19
INCOME STATEMENT	 	 	 	 	 
Total operating income	                2 199	2 167	3 187	7 136	9 610
EBITDA	                                   73	  138	  505	  590	1 378
Operating earnings	                  -31	 -122	1 113	  -63	2 516
Profit/loss for the period	          -89	  -59	1 018	 -522	2 202
 	 	 	 	 	 
CASH FLOW	 	 	 	 	 
Net cash flow from operating activities	  115	 -109	  150	  476	  681
Net cash flow from investing activities	 -131	  241	   -1	  518	 -181
 	 	 	 	 	 
OPERATING MARGIN AND PROFITABILITY (%)	 	 	 	 	 
EBITDA margin	                         3.3	  6.4	 15.8	  8.3	 14.3
Return on capital employed (annualised)	-7.3	  0.8	 30.2	  5.2	 27.4
 	 	 	 	 	 
Capacity utilisation (Prod/capacity %)	  71	   69	   88	   75	   89


Segment information
Total annual production capacity for the group is 2.3 million tonnes. In Europe,
the capacity is 1.9 million tonnes, while in Australasia the capacity is 0.4
million tonnes.

Europe
Operating income increased from the previous quarter due to higher sales
volumes. Sales prices decreased moderately. Variable cost per tonne decreased in
the quarter due to lower fibre and energy prices. In Norway, Norske Skog was
forced to sell excess energy contract volumes at prices substantially below
contract prices. Fixed costs were lower due to lower employee benefit expenses
and maintenance. According to Eurograph, demand for newsprint in Western Europe
decreased by 23% through July compared to the same period in 2019. SC magazine
paper demand decreased by 15%, while demand for LWC magazine paper declined by
23%. Our capacity utilisation was 72% in the quarter, up from 70 % in the
previous quarter.

Australasia
Operating income decreased from the previous quarter due to a gain of NOK 86
million recognised in the previous quarter from the sale of the Tasmanian
forest. Sales volumes increased compared to the previous quarter. Despite
favourable AUD exchange rates to USD for export sales, weak export prices
impacted the EBITDA margin negatively. Variable costs per tonne were in line
with the previous quarter. Fixed costs were slightly down in the quarter.
According to official trade statistics, demand for newsprint in Australasia
declined by 24% through September compared to the same period in 2019. Demand
for magazine paper declined by 24%. Capacity utilisation was 69% in the period,
up from 65% in the previous quarter.
 

Outlook
Although some improvement has been seen, the near-term market balance for
publication paper in Europe is expected to remain weak due to a structural
demand shift in light of COVID-19. The continued level of the national
restrictions caused by the global coronavirus pandemic, is expected to impact
demand development in the coming periods. The significant announced capacity
closures are expected to improve the long-term market balance, especially in
2021. As a consequence of the expected continued challenging market, Norske Skog
has decided to permanently close one paper machine at Saugbrugs. The closure is
expected to give an annual fixed costs saving of NOK 80 million.
Following the significant demand drop for publication paper in the Australasian
region due to COVID-19, the region is subject to overcapacity, and exports to
lower margin Asian markets have increased. This has lead the Australasian region
to announce a strategic review of the Tasman mill. The Tasman mill has a
newsprint capacity of 150,000 tonnes. The mill is likely to stop production of
newsprint in the first quarter of 2021. 
The Group will continue to optimise operations in the region as well as seek to
realise added value at the facilities beyond the current production of
publication paper. Norske Skog will continue its work to improve the core
business, convert certain of the Group’s paper machines and diversify the
business within bioenergy, fibre and biochemicals.

About Norske Skog
Norske Skog is a world leading producer of publication paper with strong market
positions and customer relations in Europe and Australasia. The Norske Skog
Group operates four mills in Europe, two of which will produce recycled
containerboard following planned conversion projects. In addition, the Group
operates two publication paper mills and a pellets facility in Australasia.
Norske Skog aims to further diversify its operations and continue its
transformation into a growing and high-margin business through a range of
promising fibre projects. The Group has approximately 2,300 employees in five
countries, is headquartered in Norway and listed on the Oslo Stock Exchange
under the ticker NSKOG.


Presentation and quarterly material
The company will hold a live presentation today at Continental Hotel (Oslo) at
08:30 for pre-registered participants. There is a link to the webcast on
www.norskeskog.com. The presentation, the quarterly financial statements and the
press releases are available on www.norskeskog.com and published on
www.newsweb.no under the ticker NSKOG. If you want to receive future Norske Skog
press releases, please subscribe through the website of the Oslo Stock Exchange
www.newsweb.no.


Norske Skog
Communications and Public Affairs

For further information:

Norske Skog media:
Vice President Communication and Public Affairs                                 
                                                               
Carsten Dybevig
Email: Carsten.Dybevig@norskeskog.com
Mob: +47 917 63 117
Twitter: @Norske_Skog

Norske Skog financial markets:                                                  
                                              
Investor Relation Manager
Even Lund
Email: Even.Lund@norskeskog.com
Mob: +47 906 12 919