Norwegian paper giant Norske Skog said challenging export markets in Australasia and a drop in local demand for newsprint contributed to a third-quarter loss of almost $A123 million (NOK 742 million).
Q3 gross operating earnings of $A27 million (NOK 163 million) were up on the second quarter due to 'foreign exchange effects' but this was ‘somewhat offset’ by lower sales prices with export markets in Australasia.
‘We are satisfied with the cost development in Europe, but we are challenged by low export prices from Australasia,” said Sven Ombudstvedt, President and CEO of Norske Skog. Australasian operating revenue declined with more export sales at lower prices and depreciation of the Australian dollar, while Asian newsprint prices remained at historical low levels.
Domestic demand for newsprint and the Asian price level are challenging. Demand for newsprint in Australasia decreased by around 10% in the first eight months of the year compared to the same period last year, while demand for magazine paper was relatively stable. The newsprint export business out of Australasia is an increasing challenge as the domestic market declines and the Asian prices remain historically low.
Norske Skog has two mills in Australia - at Boyer in Tasmania and at Albury in NSW – and operates the Tasman mill at Kawerau in New Zealand.
In an update on new growth opportunities, the company said its NOK 150 million biogas project at Saugbrugs was on schedule for completion at year-end 2016. Norske Skog has also formalized a joint venture with Italian producer and tissue distributor Roto-cart for converting the newsprint site at Bruck in Austria to tissue production.
The company said it had been ‘significantly impacted’ by foreign exchange losses due to the depreciation of the Norwegian kroner but remained confident about the future.
The challenging market environment for both price and volumes have reduced gross operating earnings and cash flows. The industry consensus is, however, for improved pricing for all grades into 2016. LWC prices have increased this autumn, and high operating rates across all graphic paper grades support higher prices into 2016 for all the company's product.