Norske Skog to idle SC paper machine at its Saugbrugs mill

Photo: Bjoertvedt/Wikimedia Commons

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%.

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.