Norske Skog

Odd-Geir Lyngstad, Treasurer and Deputy CFO

Deutsche Bank – 13th Annual European Leveraged Finance Conference11 June 2009

Overview

3

Norske Skog Headlines

▪ World’s second largest producer

of newsprint, fifth largest of

magazine paper:

– 16 mills in 12 countries– Production capacity 5.2 mill tonnes, – Revenue (2008) ~ NOK 26.5 billion

▪ Listed on Oslo Stock Exchange

– Good liquidity in the shares– 30 % foreign ownership

▪ Norwegian and international bond

loans

▪ Credit rating

– S&P: B+ neg outlook– Moody’s B2 stable outlook

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

Skogn

SaugbrugsFollum

Golbey

Parenco Walsum

Bruck

MNI (34%)

Sing Buri

Shanghai

Hebei

Albury

Boyer

Tasman Bio Bio

Pisa

Strong global position and industrial focus

Capacity management, cost focus, Capacity management, cost focus, new business/energynew business/energy

Cap management & Cap management & cost focus based on cost focus based on longlong--term growth trendterm growth trend

Capitalize on our Capitalize on our strong positionstrong position

Capitalize on strong position, Capitalize on strong position, new business/energynew business/energy

Market update

7

Regional demand for publication paper2008 demand & change ’08/’07

0

2

4

6

8

10

12

14

16

Europe North America Asia Latin America Australasia

mill

ion

tonn

es

Newsprint MagazineSources: PPPC

Newsprint = Standard newsprintMagazine = Coated, supercalendered and other (improved newsprint etc.)

-9.5%

6.8%

-1.2%

6.5% 12.9%

-3.8%

-11.2%

8.3%

-6.2%

3.0%

8

The global publication paper market

Australasia

• Mature market• Cost-competitive

exports and limitedimports

• Prices increasing from low levels• Good cash flow

2000 2008

South America

• Increasingdemand

• Import region• Good access to

raw materials• Low cost, but exposed to

local currency volatility

2000 2008

North America

• Dramatic dip in newsprint consumption

• Large-scale shut-downs not sufficient for market balance

• Prices increased in ’08, now falling

• Continued capacity curtailments needed

The graphs show the development in demand for newsprint in the individual regions in 2000 and 2008

2000 2008

• The world’ s largest newsprint market

• Long-term demand growth potential

• Prices spiked in ’08, now down significantly

Asia

2000 2008

2000 2008

Europe Newsprint• Mature market• Price increases

for 2009• Capacity curtailments to

compensate for lower demand

Magazine paper• Improved market balance in ‘08,

sharp demand drop in ‘09• Price increases in ‘08 and early

‘09

9

Main trade flows newsprintFull year 2008 vs 2007 (’000 t)

YTD 538Change (t) -105% -16 %

YTD 1053Change (t) 164% 18 %

YTD 849Change (t) 102% 14 %

YTD 148Change (t) 8% 6 %

YTD 197Change (t) 8% 4 %

YTD 1321Change (t) 107% 9 %

Source: PPPC

10

Capacity development

▪ Substantial closuresin Europe and North America in 2008

2008 capacity reductions:N.A. Europe

Newsprint ~11% ~7%Magazine ~8% ~6%

▪ Slowing capacity growth in Asia

Newsprint capacity

0

10 000

20 000

30 000

40 000

00 01 02 03 04 05 06 07 08 09

10

00

t RoWEurNA

Magazine capacity

0

10 000

20 000

30 000

40 000

00 01 02 03 04 05 06 07 08 09

10

00

t OUMSCCMR

Source: PPPC, NSI estimates

1111

Demand Q1 2009 per segment/region

Source: PPPC, CEPIPRINT, NS Panasia

Syncronous fall in all regions-18.3%MarWorld – Std news

Mar

Mar

Mar

Mar

Mar

Mar

To:

Brazil accounts for half of the decline in the region

-20.7%Latin America – Std news

Both circulation and newpaper adspend down

-14.6%Australasia – Std news

Some sign of improvement in demand from February, China positive vs 2008

-17.8%Non-Japan Far East – Stdnews

SC better (-6%), CMR (-27%) and UMI (-25%) weaker.

-20.0%Europe – Magazine(incl. of improved news etc)

Similar declines in W.E. & E.E.-14.8%Europe – Std news

Very weak numbers through Q1-32.2%N. Am – Std news

CommentsYTD ’09/YTD’08

Segment

Syncronous fall in all regions-18.3%MarWorld – Std news

Mar

Mar

Mar

Mar

Mar

Mar

To:

Brazil accounts for half of the decline in the region

-20.7%Latin America – Std news

Both circulation and newpaper adspend down

-14.6%Australasia – Std news

Some sign of improvement in demand from February, China positive vs 2008

-17.8%Non-Japan Far East – Stdnews

SC better (-6%), CMR (-27%) and UMI (-25%) weaker.

-20.0%Europe – Magazine(incl. of improved news etc)

Similar declines in W.E. & E.E.-14.8%Europe – Std news

Very weak numbers through Q1-32.2%N. Am – Std news

CommentsYTD ’09/YTD’08

Segment

12

350

400

450

500

550

600

650

700

jan 05 jan 06 jan 07 jan 08 jan 09

Germany US East

Standard newsprint 45 gsmprices in EUR/t

Source: RISI

Cost development

14

Cost breakdown

Total cost

(11%)(9%)

(4%)

(12%)

Raw materials

Raw materials

35 %

Energy19 %

Other direct3 %

Distribution10 %

Labour14 %

Other fixed9 %

Depreciation11 %

Wood32 %

Recovered paper33 %

Kraft pulp10 %

Chemicals etc.

24 %

15

01 0002 0003 0004 0005 0006 0007 0008 0009 000

10 000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

GW

h

Hedged electricity

Non-hedged electricity

Hedging & Consumptionof Long-term Electricity

▪ Long term contracts in Norway, Australasia and South America

▪ Electricity exposure in spot market in continental Europe and Asia

16

Recovered paper prices in Europe and Asia

Newspapers (2.01) - Germany

0

20

40

60

80

100

120

140

160

180

01

/0

1

01

/0

2

01

/0

3

01

/0

4

01

/0

5

01

/0

6

01

/0

7

01

/0

8

01

/0

9

EU

R/

ton

ne

Old News - China

0

50

100

150

200

250

300

01

/0

1

01

/0

2

01

/0

3

01

/0

4

01

/0

5

01

/0

6

01

/0

7

01

/0

8

01

/0

9

US

D/

ton

ne

17

Variable cost development

▪ Wood – Price reductions in Europe during 2009 expected

▪ Recovered paper – Low spot prices in early 2009 – Average 2009 lower than average 2008

▪ Chemicals & Pulp– At present, low prices on pulp and oil-based

chemicals▪ Energy

– Favourable long term electricity contracts in Norway, South America and Australasia

-in local currency

18

Fixed cost development-cash costs, NOK/tonnes produced

600

700

800

900

1 000

1 100

1 200

1 300

2002 2003 2004 2005 2006 2007 2008

21%

Financials

20

Historical P&L figures

20 000

25 000

30 000

'04 '05 '06 '07 '080

2 500

5 000

'04 '05 '06 '07 '08

EBITDARevenue Cashflow

0

1 750

3 500

'04 '05 '06 '07 '08

mNOK '04 '05 '06 '07 '08Revenue 25 302 25 726 28 812 27 118 26 468EBITDA 4 240 3 950 4 704 3 932 2 723Cashflow 3 132 3 061 2 763 2 166 1 977

21

Q1 2009 in brief

▪ EBITDA NOK 504 mill– NOK 922 mill in Q4 ’09 and– NOK 406 mill ex. Korea in Q1 ‘08

▪ Operating rate only 76%▪ Lower volumes reduce

result 0

200

400

600

800

1000

1200

Q12007

Q2 Q3 Q4 Q12008

Q2 Q3 Q4 Q12009

EBITDA ex. Korea Korea

Mill NOK

▪ Recession impacts advertising– Estimated drop in ad spend YTD ’09 vs YTD ‘08 ~ 20%

▪ Structural decline in newsprint demand in mature markets

22

15.4 %

18.9 %

2.0 %

22.5 %

14.8 %13.0 %

14.5 %

-12.7 %

27.6 %

12.6 %

-15.0 %

0.0 %

15.0 %

30.0 %

40.0 %

60.0 %

80.0 %

100.0 %

Op margin Q4 08 Op margin Q1 09 Op rate

Operating margin & rate by geographical regions

Newsprint Europe

Newsprint Australasia

Newsprint Asia

Newsprint S. America

Magazine Europe

2323

Cash flow*)

▪ Cash flow NOK 723 mill – Cash effect of monetizing currency/

interest rate swaps: NOK 460 mill

– Paid taxes NOK 26 mill in Q 1 vsNOK 290 mill in Q 4

▪ Low capex level in Q1 – NOK 138 mill

▪ Full-year capex: Approx. NOK 900 mill

Mill NOK

0

100

200

300

400

500

600

700

800

900

Q12008

Q2 Q3 Q4 Q12009

*) Cash flow from operations, after financial items and taxes

24

Financial strategy

▪ Improve cash flow from operations

▪ Strong capex discipline ▪ Possible asset divestments

Reduce debtImprove maturity

profile

▪ Average maturity 5.8 years at March 31

▪ No significant refinancing need in ’09 and ’10, focus on instalment peaks in ’11 and ’12

▪ Q 2, 2009: New NOK 250 mill/12 years loan at a favourable rate

▪ Exploring other financing options (e.g. Norwegian Government Bond Fund/ SOF)

2525

Pro forma 30.04.09:

Debt reduction Gearing 31 March: 1.08

19,1

17,316,4

15,7 15,7

12,714

12,8

0

2

4

6

8

10

12

14

16

18

20

2005 2006 2007 Q1 2008 Q2 Q3 Q4 30.042009

Net debt NOK bn

26

Debt maturity profile as of 31 March

5 307

1 519

342 329

3 760

3 121

425 2 550

902

195

1 269

4 445

1 336

0

1 000

2 000

3 000

4 000

5 000

6 000

Cash 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2033

NO

K m

illio

n

Cash Bank Bonds

27

Firm actions required

▪ Temporary/permanent reduction of capacity– Further curtailments in all regions– Permanent capacity closures under evaluation

▪ Reduce cost – Temporary lay-offs– Further cost reductions in all units– New improvement program implemented

▪ New business opportunities– Energy

Norske Skog

Odd-Geir Lyngstad, Treasurer and Deputy CFO

Deutsche Bank – 13th Annual European Leveraged Finance Conference11 June 2009