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DNB Markets SME ConferenceMarch 2013, Oslo
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Norske Skog in brief
• Publication paper producer• Newsprint – capacity 2.3 mill. tonnes• Magazine – capacity 1.3 mill. tonnes
• Significant footprint • Europe – capacity 2.6 mill. tonnes• Australasia – 0.7 mill. tonnes
• 2012 revenues NOK 17 bn., EBITDA NOK 1.5 bn.
• 4 000 employees
• Listed in Norway• Market capitalization NOK 0.6 bn.
• Net debt NOK 6.0 bn.
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Norske Skog in the big picture
0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000
UPM
Stora Enso
Resolute
Norske Skog
Nippon Paper
Oji Paper
Holmen
Burgo
SCA
Catalyst
NewPage
Sappi
WhiteBirchNewsprint SC LWC
Tonnes 000’s
3
RISI
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Two business systems – Europe and Australasia
Saugbrugs (Norway)
Skogn (Norway)
Bruck (Austria)Walsum (Germany)
Golbey (France)
Singburi (Thailand)
MNI (Malaysia – 34 %)
Boyer (Australia)Tasman (New Zealand)
Albury (Australia)
Pisa (Brazil)
4
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’11/10 = ‐1% YTD = ‐7% ???
Producers Consumers
Newsprint Western Europe
RISI, PPPC
0
500
1 000
1 500
2 000
2 500
UPM Stora Enso NorskeSkog
Palm Holmen SCA
Tonnes 000's
0
500
1 000
1 500
2 000
2 500
Germany UK Italy France Spain
Tonnes 000's
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’11/10 = ‐1% YTD = ‐7% ???
Producers Consumers
Newsprint outside Europe
RISI, PPPC
0
1 000
2 000
3 000
4 000
5 000
US China Japan India South Korea
Tonnes 000's
0
1 000
2 000
3 000
4 000
Resolute Shandong NipponPaper
Oji Paper NorskeSkog
WhiteBirch
Tonnes 000's
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Newsprint trade flows 2012 (Tonnes 000’s)
822
750
1981 450
PPPC
288
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’11/10 = ‐1% YTD = ‐7% ???
Producers Consumers
Magazine paper Western Europe
RISI, PPPC
0
2 000
4 000
6 000
UPM Stora Enso NorskeSkog
Burgo Sappi SCA
Tonnes 000's
0
1 000
2 000
3 000
4 000
Germany UK France Italy
Tonnes 000's
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Magazine paper trade flows 2012 (Tonnes 000’s)
PPPC
776
451
1 180
487140
201
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Industry developments
• Publication paper demand
• Cyclical and structural decline
• Significant capacity closures already announced for 2013• Scope for price increases into the second half
• Print an important medium• Publishers typically obtain 90% of revenue from the print edition
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Challenging market
PPPC
‐3 %
‐11 %
‐3 %
‐1 %
1 %
‐11 %
‐5 %
World WesternEurope
EasternEurope
NorthAmerica
Asia Oceania LatinAmerica
Newsprint demand 2012
1 %
‐7 %
1 %
‐10 %
‐3 %
‐8 %
‐6 %
World WesternEurope
EasternEurope
NorthAmerica
Asia Oceania LatinAmerica
Magazine demand 2012
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Trough cycle operating environment
60
70
80
90
100
110
2006 2007 2008 2009 2010 2011 2012
Demand Supply
2006 = 100
Financial crisisEuro crisis
• Cyclical decline with weak macro• Amplifying structural decline
Development in European S/D for publication paper
• Industry closing capacity• Adapting to challenge
PPPC
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Trough cycle margins
0
5
10
15
20
25
30
1970 1975 1980 1985 1990 1995 2000 2005 2010
Percentage
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
NOK mill.
EBITDA EBITDA margin
Average
Norske Skog development in EBITDA and margin
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Newsprint demand strongly cyclical
IMF, PPPC
‐15
‐10
‐5
0
5
10
199219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
1120
12Percentage
Real GDP growth Change in newsprint demand
GDP change to newsprint demand change
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Western European capacity
PPPC
Installed capacity year end 2012
Tonnes 000's
0
2 000
4 000
6 000
8 000
10 000
Newsprint SC LWC
Tonnes 000's
0
200
400
600
800
Newsprint SC LWC
Capacity closures already announced for 2013
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Publication paper prices somewhat lower
350
400
450
500
550
600
650
700
750
2006 2007 2008 2009 2010 2011 2012 2013
EUR/tonne
Newsprint LWC SC
RISI; Germany 45gsm, 56gsm and 60gsm respectively
• European magazine reference prices lower into 2013
• European newsprint reference price flat
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World advertising spending
• Print second largest medium after TV• Total market some USD 500 bn.
Zenith Optimedia
TV40 %
Newspapers20 %
Magazines9 %
Internet16 %
Radio7 %
Outdoor7 %
Cinema1 %
Zenith Optimedia
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Publishers dependent upon print
• Print generating the bulk of advertising revenue• Search engines capturing significant share of online generated advertising
0
10
20
30
40
50
60
70
80
90
100
2009 2010 2011
Percentage
Print Online
Advertising revenue US newspapers
Newspaper Association of America
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Some print segments are growing
• More to print than traditional newspapers• Usage for promotional material has been growing
Tonnes 000's
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
2007 2008 2009 2010 2011
Newspapers Promotional Material OtherEuro‐Graph, PPPC
End‐user demand newsprint western Europe
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Newsprint demand converging• US consumption leveling out from high
usage per capita
• Western Europe consumption approaching US level from different starting point
• Australia / NZ consumption converging from high level
0
5
10
15
20
25
30
35
40
45
50
1995 2000 2005 2010 2012
Newsprint demand capita (kilos)
WE US Australia / NZPPPC, The World Bank
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Norske Skog adapting
• Active capacity management
• Cash conversion and deleveraging• Good cash flow despite weak margins
• Cost reductions and capital efficiency• Fixed costs• Working capital
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EBITDA retained despite capacity reductions
NOK mill.
0
500
1000
1500
2000
2010 2011 2012
Reported EBITDA Year‐end capacity
*
*January 9th 2013 post closure of one machine at Tasman in New Zealand
Tonnes 000's
20002500
30003500
40004500
5000
2010 2011 2012*
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High cash conversion
CF from operations before net interest
0
500
1000
1500
2000
2010 2011 2012
NOK mill.
0
20
40
60
80
100
120
Percentage
CF from operations Cash conversion (%)
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Net debt significantly reduced
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
2009 2010 2011 2012
NOK mill.
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Interest payments declining with deleveraging
• Net interest in 2013 just below NOK 600 mill.
NOK mill.
500
550
600
650
700
750
800
2010 2011 2012
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Capex stable at low level • Capex 2013 at NOK 600 mill. due to two large development projects
• Boyer conversion / Saugbrugs energy efficiency• Both projects to be completed in 1Q14
0
100
200
300
400
500
600
2010 2011 2012
NOK mill.
Maintenance capex Development capex
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WC released and fixed costs reduced• Still scope for further capital efficiency improvements and fixed cost reductions
• But smaller steps given larger leaps completed• Closure of Follum significant contributor to WC release last year
• Fixed costs to reach year‐end 2013 run rate of NOK 3.2 bn. from initiatives already in place
‐200
0
200
400
600
800
2010 2011 2012
NOK mill.
3 000
3 500
4 000
4 500
5 000
2010 2011 2012
NOK mill.WC released Fixed costs reduced
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Maturity profile
‐0.9 ‐0.9 ‐1.0 ‐1.1
1.2
‐2.9
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
NOK bn. Cash RCF Bank Bonds
1.1
31 December 2012
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• Challenging operating environment• Weak demand in both Europe and Australasia
• Active capacity management will lead to low utilisation rates short term
• Further NOK appreciation remains an additional risk
• Relatively stable costs
• Industry‐wide capacity closures supportive
Outlook
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• Improve margins• Active capacity management
• Temporary adaptations and permanent closures/conversions
• Continued cost reductions
• Further identification and sale of unrelated assets
• Reduction of net debt
• Improvements in the regulatory framework
Management focus
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