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Deutsche Bank 6th European Paper Seminar
Christian Rynning-TønnesenPresident and CEO
London,12 November 2008
Norske Skog Basics
3
The world of Norske Skog
Skogn
SaugbrugsFollum
Golbey
Parenco Walsum
Bruck
MNI (34%)
Sing Buri
ShanghaiHebei
Albury
BoyerTasman Bio Bio
Pisa
4
Our Products
▪ Standard and improved grades for daily newspapers, free newspapers, advertising supplements
▪ Second largest global producer of newsprint
▪ World-wide operations, ex. North America
Newsprint 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
5
Company Overview▪ One of the world’s leading producers of newsprint and magazine paper
– 16 mills in 12 countries– Capacity (fully owned): 5.2 mill tonnes, after closures and divestment of Korean mills– Revenue (2007) ~ NOK 27.1 billion
▪ Global market share of approx. 10% for newsprint and 5% for magazine paper
Industry position 1
Standard NewsprintUncoated Magazine Paper and Other Publication Paper
Coated Magazine Paper
Note:1 Source: RISI
0
1,000
2,000
3,000Abitib
iBow
ater
UPM
Sto
ra E
nso Oji
Nors
ke S
kog
Nip
pon U
nip
ac
(kt)
0
1,000
2,000
3,000
4,000
UPM
Sto
ra E
nso
M-r
eal
IP
Burg
o
Nors
ke S
kog
(kt)
No
rske S
ko
g
No
rske S
ko
g
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
No
rske S
ko
g
6
Production capacity by segments
▪ Total capacity 5.2 mill. tonnes– Newsprint etc. 3.8 m.t.– Magazine 1.4 m.t.
Europe newsprint38 %
Asia newsprint13 %
Europe Magazine27 %
Australasia newsprint
16 %
South America newsprint
6 %
Financial and market update
8
Q3 2008:Improved result, reduced debt
▪ EBITDA NOK 712 mill – +18% Q3 vs Q2– +43% adjusted for Korea sale
▪ Net result – NOK 1.2 bn– Mainly accumulated translation
differences from Korea sale with no cash or equity impact, and unrealised losses from currency hedging
▪ Net debt reduced by NOK 3 bn by the end of Q3
– Korea cash proceeds: NOK 3.8 bn– Currency/other: NOK -0.8 bn
▪ Cash deposits NOK 5.7 bn
Mill NOK
0
200
400
600
800
1 000
1 200
1 400
1 600
Q32006
Q4 Q12007
Q2 Q3 Q4 Q12008
Q2 Q3
EBITDA ex. Korea Korea
9
NOK 2.75 bn annual effect gained from the improvement program
▪ Target is NOK 3 bn in annualized improvement compared to 2005
675
45
230 1 240
1 002
712
-100
0
100
200
300
400
500
600
700
800
900
1 000
1 100
1 200
1 300
1 400
"Clean" EBITDA,quarterly average
2005
Sales pricedevelopment
Cost increases Other (incl FX,vol.adjustm+
Corp.Improvemt)
Profitability Improvement
Q3 2008
"Clean" EBITDA Q3 2008
NO
K m
illio
n
10
0
50
100
150
200
250
Europe Asia Australasia SouthAmerica
Magazine
Q1 2008 Q2 2008 Q3 2008
NOK mill
*
Result segments (EBITDA)
*) Q3 ex Norske Skog Korea
Korea
11
Newsprint EuropeEBITDA
Key figuresNOK million
2008Q3
2008Q2
2007Q3
Operating revenue 1 915 1 942 2 087
EBITDA 217 175 381
EBITDA margin % 11.3 9.0 18.3
Deliveries 1 000 ton 472 505 510
Slight improvement▪ Q3 vs Q2: Improving results due
to cost cuts and currency effects – Closing of two paper machines in
Q2 2008 important factors
▪ YTD 2008 vs 2007: Weaker result due to lower prices
▪ Demand down 3% YTD
▪ Good market balance
Germany
Price development newsprint
Source: RISI
300
350
400
450
500
550
600
650
Jan
'98
Jan
'99
Jan
'00
Jan
'01
Jan
'02
Jan
'03
Jan
'04
Jan '0
5Ja
n '0
6Ja
n '0
7Ja
n '0
8
Average Newsprint 45 gsm Euro/t(Nom.)
0
100
200
300
400
500
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3
EBITDA NOK mill
12
US prices have increasedsharply…
Newsprint prices 45gsm
300
350
400
450
500
550
600
650
jan 2005 jul 2005 jan 2006 jul 2006 jan 2007 jul 2007 jan 2008 jul 2008
Euro/tonnes
Germany UK US East
13
..and newsprint prices in Europe will move up tooDevelopment in 2008:▪ Supply down by ~8 %, because of closures
and reduced imports from Canada▪ Demand down by ~3 % YTD September▪ Result: Market balance is significantly
improved▪ Norske Skog has announced 15-20 % price
increase on newsprint in Europe for 2009
14
0
50
100
150
200
250
300
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3
EBITDA NOK millEBITDA
Newsprint AsiaKey figuresNOK million
2008Q3
2008Q2
2007Q3
Operating revenue 467 1 275 1 312
EBITDA 42 134 134
EBITDA ex Korea 42 29 19
EBITDA margin % 8.9 10.5 10.2
Deliveries 1 000 ton 120 379 381
Weak result▪ Q3 vs Q2: Comparable result is better due to higher prices▪ YTD 2008 vs 2007: Price hikes has partly offset cost
increases ▪ Demand China (YTD August) +7.2%
Norske Skog Korea
15
Newsprint AustralasiaEBITDA
Key figuresNOK million
2008Q3
2008Q2
2007Q3
Operating revenue 911 977 895
EBITDA 148 167 201
EBITDA margin % 16.3 17 22.5
Deliveries 1 000 ton 218 222 200
Moderately decreased result▪ Q3 vs Q2
– Reduced EBITDA due to 7% price reduction on standard newsprint in Australia from 01.07.08.
– Cost reductions mainly on energy partly offsets lower paper prices▪ YTD 2008 vs 2007: Weaker results because of lower prices▪ Demand down 7.3% YTD, mainly caused by customer inventory
changes
0
50
100
150
200
250
300
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3
EBITDA NOK mill
16
Newsprint South AmericaEBITDA
Key figuresNOK million
2008Q3
2008Q2
2007Q3
Operating revenue 364 295 318
EBITDA 87 35 46
EBITDA ex. Tax refund 50 35 46
EBITDA margin % 13.7 11.9 14.5
Deliveries 1 000 ton 77 71 80
Improved result ▪ Tax refund NOK 37 mill in Q3▪ Q3 vs Q2: Improved result due
to higher prices▪ YTD 2008 vs 2007: Weaker results
due to fibre and energy costs▪ Demand +11% YTD, increased
customer inventories▪ Tight market balance
Price development newsprint
Source: NSG
0
40
80
120
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3
EBITDA NOK mill
300
400
500
600
700
800
900
Jan
'98
Jan
'99
Jan
'00
Jan
'01
Jan
'02
Jan
'03
Jan
'04
Jan
'05
Jan
'06
Jan
'07
Jan
'08
Newsprint Brazil 48.8g (USD/mt)
17
EBITDA
MagazineKey figuresNOK million
2008Q3
2008Q2
2007Q3
Operating revenue 1 856 1 642 1 719
EBITDA 201 130 138
EBITDA margin % 10.8 7.9 8.0
Deliveries 1000 ton 339 325 364
▪ Higher prices lifted result▪ Q3 vs Q2: EBITDA improved due
to price increases and currency changes
▪ YTD 2008 vs. 2007: Improved results due to higher prices
▪ SC demand: World +3.8% YTD, Europe +6.3%
▪ LWC demand: World down 1.6% YTD, Europe down 0.3%
Price development magazine
GermanyGermany
Source: RISI
0
100
200
300
Q12007
Q2 Q3 Q4 Q12008
Q2 Q3
EBITDA NOK mill
300
400
500
600
700
800
900
1 000
Jan
'98
Jan
'99
Jan
'00
Jan
'01
Jan
'02
Jan
'03
Jan
'04
Jan
'05
Jan
'06
Jan
'07
Jan
'08
Average SC Roto 56 gsm Euro/t(Nom.)Average LWC Offset 60 gsm Euro/t(N )
18
Reduced net debt and improved gearing
▪ Net debt reduced by NOK 3 bn by the end of Q3
– Korea cash proceeds: NOK 3.8 bn– Currency/other: NOK -0.8 bn
▪ Gearing improved to 0.89
– Covenant on bank debt: Gearing < 1.4
▪ Total property sales of approx NOK 700 mill in 2008
12,716,9 16,419,1 17,3 15,7 15,7
0,890,84
0,96
1,05
1,121,07
0,89
0
5
10
15
20
25
2004 2005 2006 2007 Q12008
Q2 Q30
0,2
0,4
0,6
0,8
1
1,2
Net debt NOK bn (left axis)Gearing (right axis)
19
Improved liquidity
-1,6
-3,7
-1,1 -1,1
-4,2
-0,1
-4,5
-0,2-0,6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
NO
K b
n Debt maturity schedule by 30.09.2008
Cash
Debt
NOK 5.7 bn total liquidity as of September 2008
-1,1
2033
20
Value of energy portfolio
▪ Portfolio:– Physical contracts in Norway
and Brazil– Financial contracts on New
Zealand
▪ Reduced values in Norwegian contract balanced by higher values of energy contracts in Brazil
NOK millions
0
1000
2000
3000
4000
5000
6000
7000
Q4 2007 Q1 2008 Q2 Q3
21
▪ 1 per cent change in NOK against NSIs trade weighted currency index ~ +NOK 60 mill EBITDA per year
Impact of NOK depreciation
Q1’05
Q2’05
Q3’05
Q4’05
Q1’06
Q2’06
Q3’06
Q4’06
Q1’07
Q2’07
Q3’07
Q4’07
Q1’08
Q2’08
Q3’08
100
95
90
85
80
75
Norske Skog currency index 01.01.05-31.10.08
Summary
23
Meeting the recession
Consequences:▪ Declining paper
demand▪ Higher capital costs▪ Reduced costs on fibre,
energy and chemicals
0
0,5
1
1,5
2
2,5
3
3,5
2006 2007 2008 2009
IMF-prognoses from 2 Oct 2008 onGDP-growth advanced economies
Actions:Maintain a healthy supply/demand balance
Adjust capacity as necessary
Keep strong focus on cost reductions and capital discipline
▪ Reduced GDP growth in all markets is expected
24
Outlook
▪ Positive elements:– Prices increase in European newsprint for 2009 announced– Based on current price and currency conditions, prices increases
are expected in Australasia in 2009– Reduced costs expected on recovered paper and energy
▪ Risks/negative elements:– Recession will effect paper demand negatively– Currency changes (present levels are favourable)
▪ Focus:– Further increase in operating margins– Achieving NOK 3 billion improvement target by the end of 2008– Reduce net debt – Swift capacity response to demand development
Deutsche Bank 6th European Paper Seminar
Christian Rynning-TønnesenPresident and CEO
London12 November 2008
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