Good morning, everybody. Thank you for sharing time with us. We are here, the management of Norske Skog, to present the fourth quarter figures for the group. I think we just start immediately, and I leave it to you, Tord, the CFO of Norske Skog.
Thank you, Geir. In Norske Skog, we continue to focus on being a committed and cost-efficient supplier of publication paper to all our customers, and also growing our deliveries of packaging paper and exploring new profitable fiber projects across all our mills. For those of you who have followed our reporting from earlier, you might have noticed that the map on the right side of this slide is a bit changed. It does not include Australia anymore. The reason for that is that it was initiated a concrete sales process in December 2024 for the sale of all our assets in Australia, and the transaction was published and completed or signed SPA this morning. As a consequence of that, the Australasia segment is in this report classified as discontinued operations. Next. Even, maybe you want to give some more details about the transaction we announced this morning.
Yes, absolutely. Thank you, Tord. As Tord said, we signed a share sale agreement for the sale of all of our assets in Australasia. That is the sale of the holding company Norske Skog Industries Australasia Ltd. We expect the closing of the transaction during the first quarter. The sale was at an enterprise value of around NOK 190 million. Following working capital adjustments and transaction costs, we expect cash proceeds of around NOK 150 million to result from the transaction. We do not expect any gain or loss resulting from this. As Tord said, we have discontinued the segment from the fourth quarter. Briefly on the buyer, this is the last asset in the group, which was held as part of the Fletcher Challenge acquisition back in 2000.
It is a milestone event for Norske Skog to leave Australasia after 25 years in the region. The mill has been sold to a newly established company, Boyer Capital, which is controlled by David Marriner, a local property and industry developer. He is looking to further develop the site and continue the production of publication paper in the region.
Thank you, Even. These are the highlights from the quarter. We maintain the positive EBITDA despite very challenging markets, especially for magazine papers and container board. Our newsprint machines are delivering relatively good results, in part due to less overcapacity in the newsprint market, and also as a result of our newsprint machines in Skogn and Golbey being very cost-efficient. After the quarter end, we have signed a final settlement agreement with the insurance company at Saugbrugs. We made an announcement about that last Friday for all remaining claims after the Saugbrugs incident in 2023. The settlement amount is NOK 540 million, and the full amount is to be received in first quarter 2025. Yeah, not yet. Yeah, and as Even discussed on the previous slide, this morning we announced that we have signed SPA for the sale of all our remaining assets in Australia.
Both these initiatives together will contribute significantly to secure our financial position going forward. Excess capacity is still present in all our markets, but the situation is slightly improved for newsprint and SE magazine paper following capacity closures. For LWC, the market is still very challenging with the delivery to capacity ratio in the low 60%. Our container board deliveries decreased slightly in the quarter, but you can expect an increase again in Q1 2025. We are still on track for starting up PM1 in Golbey for container board production in Q1 2025. We look very much forward to making the announcement that we have paper on wheel for that machine in the near future. We are reviewing future opportunities for Saugbrugs, and the BCTMP main study is nearing completion. As mentioned, we have reached the final settlement for all remaining insurance claims.
This agreement will give us time and flexibility to assess all options for the site. We can move to the key figures for the quarter. I would like to note here that prior periods figures are restated as publication paper Australasia is now classified as discontinued operations. Production and deliveries develop well for newsprint, while the other grades show a slight decrease compared to prior quarter. Operating revenue increased as a result of higher deliveries of publication paper and also higher income from sale of excess energy. Other operating income is up due to higher recognition of insurance compensation at Saugbrugs and also slightly higher CO2 prices. EBITDA decreased to NOK 33 million, mainly driven by higher energy costs, lower sales prices on SC magazine paper and container board, and higher maintenance costs due to a lot of annual maintenance activities in the quarter.
Pre-tax profit of negative NOK 470 million is impacted by lower valuation of our electricity contracts in Norway and also impairments related to the PM4 and PM5 machines in Saugbrugs. Briefly on the financial position, the equity ratio dropped to 37%, and interest coverage ratio is now at 4.9 x. The cash balance came in at about NOK 1.1 billion, and the drop from prior quarter is quite close to the CapEx in the quarter. The net debt at quarter end stood at around NOK 4.1 billion, an increase from previous quarter, again mainly due to CapEx of about NOK 460 million. We sold our received balance of CO2 quotas in the quarter, but we do expect to receive about 90,000 quotas in France in the very near future as the allocations in France were delayed, and we have not yet received the 2024 allocation.
In Q2, we normally receive the allocation for the current year, so we will receive the 2025 allocation. Moving to the segments, publication paper Europe with an EBITDA of NOK 40 million and margin of 2%, a decrease from prior quarter, mainly due to increased cost of pulpwood, increased cost of natural gas, and also electricity, with the average sales prices remaining more or less flat. For packaging paper, deliveries from Bruck decreased slightly due to lower orders, but you can expect an increase again in Q1 and full utilization of the machine in the second half of 2025. Publication paper Australasia, as mentioned, is now discontinued, and the EBITDA from that mill came in at NOK -15 million in the quarter. I will hand over the word back to Senior Vice President Corporate Finance, Even Lund, for an update on projects and the markets.
Thank you, Tord. Briefly on the strategic transformation at Norske Skog. As most of you know, we have completed our projects in Austria at our Bruck mill. Both the container board machine and the waste energy boiler are up and running and performing very well. The container board machine is expected to reach full utilization during the second half of 2025 and contribute significantly to the group's financial performance. We continued to repay on our debts during the quarter, and the total debt now directly at the Bruck mill is around EUR 92 million relating to these projects. So approximately 50% of the invested amount at the mill. Moving to France and to Norske Skog Golbey, as Tord mentioned, we are nearing completion of the container board conversion project and hoping to start production at the end of the first quarter.
There's some remaining commissioning work and cabling work at the mill, but the project is under good control, and we are very committed to reaching the timeline of first quarter production. This machine will reach full utilization during 2027 and add approximately 30%-40% to the total delivery capacity of the Norske Skog Group, so a major contributor to the company. The biomass boiler, JV Green Valley Energy in Golbey, has been completed, and the boiler is now starting up and delivering test volumes of steam to our facilities. Moving to the markets, publication paper demand has been fairly stable in 2023 and 2024, but we are seeing pressure on the demand side returning. Obviously, there was a strong decline in demand during 2021 and 2022 before a more stable period, but now pressures are returning.
There is, as mentioned initially, still overcapacity in this market, and we need to see machines leave the market before balance is returned. On the stock levels, they remain around normal levels. In a market with excess capacity, it's important to be the most cost-efficient producer. At Norske Skog, we have a very strong focus and emphasis on cost throughout the entire production process. As you can see from the left-hand side, the Norske Skog Skogn mill is ranked the most competitive producer of newsprint, with Golbey slightly higher on the cash cost curve. That is partly driven by the ongoing project at the mill, and we expect Golbey to become equally competitive as Skogn once the container board is up and running and there's better utilization of the fixed cost base.
Looking at unquoted mechanical cash cost, the Skogn mill is delivering some volumes into this market and is very competitive. Unfortunately, the Saugbrugs mill is slightly higher up on the cash cost curve, as you can see here. The main reason for that is that we are operating two smaller machines and do not achieve the desired economies of scale for that mill. We will get back to later in the presentation some of the work undertaken at Saugbrugs currently. Last, the quoted mechanical cash cost curve, where we have 265,000 tons of capacity with our Bruck PM4 machine. It is located approximately in the middle of the cash cost curve. This is a very challenging market at the moment with significant overcapacity, and currently we are just above break-even for that machine.
Moving to the container board market, on the left-hand side, you see the delivery capacity and also the demand. As you can see, there is expected a significant increase in delivery capacity over the coming two to three years, with a somewhat slower growth in demand. There is a current excess capacity situation in the recycled container board market, and we expect that to persist. However, we are also seeing positive signs of price increases being announced in the market of up to EUR 100 per ton to be implemented during the first quarter. Although there are some challenges in the short term for this market, we have entered it to be present in the long term and to benefit from the long-term growth trends and profitability that can be achieved in this market. On our ramp-up, we are just starting to enter this market.
We've been in it for approximately one and a half years or two years now. On the left-hand side, you see the production ramp-up at our Bruck mill in Austria. Unfortunately, the fourth quarter was a bit slower than what we had hoped. This was mainly due to the commercial situation in the market. As Tord mentioned, we expect volumes to return to the on-trend development towards full utilization already now in the first quarter. On the cash cost curve, Bruck is situated approximately in the middle of the cash cost curve, but we expect it to improve as we reach full utilization. On Golbey PM1, the project is, as mentioned, expected to start during the end of the first quarter, and the remaining gross CapEx is around EUR 60 million, of which close to everything will be expensed during the first half of 2025.
Briefly on the raw materials, as you can see on the first chart, energy prices have increased significantly during the last couple of months. For Norske Skog, we are hedged to a large extent on energy, both power and thermal energy, thermal energy through our own biomass and waste energy boilers, and power through long-term contracts. For us, we do not experience the daily fluctuations to the extent that the market sees it, but still some pressure from this increase in energy prices. On the recycled paper, this has declined a fair bit from the peaks seen earlier in 2024, and the availability has improved somewhat. However, this is still a market under stress, especially for the RCP grade used for newsprint production. It is still a challenging market. Spruce pulpwood, so virgin fiber in Norway, continues to increase.
It has perhaps stabilized somewhat in the very recent picture, but still at a very high level for us, and currently no signs of declining prices for pulpwood. CO2 prices, as mentioned initially, we have a surplus currently per year of around 200,000 allowances. Due to changes in the regime and the introduction of a biomass exclusion criterion, this is expected to drop to around 50,000 allowance surplus from 2026. The impact for us is around NOK 120 million from that reduction. The prices are now back to higher levels of around EUR 80 per ton. The value of our current allowances has increased.
Just to add to that allocation of free allowances in 2026 and onwards, we still believe that there is some ambiguity in the guidance documents from the EU and the way that rule should be interpreted. We are still working with the environmental agency and discussing with the politicians to try to get a different outcome in that case and continue to be a part of the EU ETS for the Norwegian mills also in the future.
On the product prices, on the left-hand side, you see the three publication paper grades. The price picture has been fairly stable for quite some time, and we expect it to remain fairly stable going forward, of course, depending on the price of raw materials and energy. On recycled container board, there has been a price decline over the past few months. However, as mentioned, there has been announced now that price increases of up towards EUR 100 per ton will be implemented through the first quarter.
Going back to Saugbrugs here in Norway, Tord mentioned that we agreed on a final settlement of NOK 540 million during the first quarter and announced one week ago. The settlement amount is freely available and provides Saugbrugs both time and flexibility to invest and develop the industrial site for the future. Payment of the proceeds is expected during the first quarter and will result in recognition of around NOK 560 million in the EBITDA for the first quarter of 2025. We believe that Saugbrugs has significant and valuable infrastructure, both for energy, water treatment, logistics, fiber, etc., and that it has significant potential for future activity. As we have said previously, we are currently undertaking a pulp study project for Bleached Chemi-Thermomechanical Pulp and expect to conclude this study during the first half.
In addition, we have engaged with vendors to review the opportunity for startup of magazine paper production at the PM6 machine. However, this is still in the early part, but could provide significant improvement of the economies of scale at Saugbrugs. This study is also expected to be completed during the first half. The main advantage of having made the insurance settlement now is that we have better time to digest and prepare to make the best possible decision for how to develop Saugbrugs for the future. Briefly on outlook, as said, prices remain stable for publication paper, and we see signs of increases for container board. We have a significant focus on reducing production cost and working capital to maintain our competitive position.
Bruck PM3 is expected to reach full capacity utilization during the second half of 2025, and Golbey will start producing in the first quarter of this year and reach full utilization in 2027. In addition, at Golbey, we expect to receive proceeds from energy certificates and grants during 2026 and 2027, with an aggregate value of. [audio distortion] To all of our lenders and experience a shared understanding of the fundamental growth journey that we are currently on. As Tord mentioned initially, we have announced and have several ongoing initiatives to secure our financial position and performance for the future, most recently illustrated by the sale of the Australasian operations and the settlement of the insurance compensation. I guess that concludes the presentation, and we can open up for some questions.
Yes, Preben Rasch -Olsen, you're welcome to raise your questions. Thank you. Good morning.
Just a quick one. I'm a bit impressed by the increasing revenue in what seems to be a very challenging market. It seems like you're pointing towards both higher volumes and better prices going forward. I'm a bit uncertain on what you're trying to say on the cost side because now that you have started up the steam machine in Golbey and with the recycled paper prices coming off, should we expect the cost base to improve in the coming quarters, or do you expect it to be fairly stable?
It's a good question. I guess, of course, the cost base will increase simply by the fact that we will produce more and more volume from the Golbey PM1 machine, meaning that we purchase more fiber and more energy and more steam as well, as you mentioned, from the Green Valley Energy boiler.
That will, of course, then also result in greater revenues. I think the effect to keep in mind is that the fixed cost base at Golbey is already in place, meaning that we have a fixed cost base scaled for two machine production, but currently only one machine is producing. That represents an additional cost of around NOK 300 million per year, which, of course, will see a significant improvement in the economies of scale once we start producing, meaning that the contribution margin from production of container board at Golbey will have a significant impact on our financial performance.
Okay, if you do not have any more questions, Preben. No? Marcus Gravelli, you are welcome to raise your questions. Yes, thank you.
It would be very nice to get some color on how you think about containerboard profitability in the current markets and assuming that more prices want to go one way or the other. How do you think about the trajectory towards profitability as Golbey ramps up through 2026? Because you hold your EUR 70 million-80 million EBITDA target firm for the segment. When do you see that actually materializing, and what are the assumptions?
Yeah, thank you for that, Marcus. I can start, and feel free to fill in. Obviously, the market that we saw in the fourth quarter was very challenging, as you can also see from the profitability of the packaging paper segment. It was just slightly above zero on the EBITDA. It is a very challenging market at the moment and clearly what we consider to be a tough market.
However, as I've said, there are price increases that have been announced now for the first quarter, which could significantly improve the situation. Perhaps not normalize it and bring it back to a historical average level, but at least improving it. Hopefully that sort of momentum continues through 2025, and we can ramp up Golbey in a more positive market than what we have seen over the past two to three years. That said, I don't think we expect to achieve with the current market conditions the target of EUR 70 million-EUR 80 million. That would need to see a further normalization of the market before we can reach that target. As stated, we expect surplus capacity to persist for some time. To normalize the market balance, we would need to see capacity come out.
However, as was the basis for the investment decision at both Bruck and Golbey, we think these assets will be very competitive in terms of cash cost and be long-term producers in this market when it is bad and when it is good. I do not know if anyone wants to add any further to that. Does that address the question, Marcus?
Yeah, perfect. Thank you.
Okay, thank you to you. Martin Melby, you are welcome to raise your questions.
Good morning. When do you expect positive EBITDA from Golbey? Second question, is there a risk for a write-down given the CapEx overrun on this project?
Yeah, of course, it is very dependent on the way the market develops when we will see a positive EBITDA from the mill, but we do expect the first few quarters to be in the negative.
With regards to the possible write-down or impairment, we do, of course, believe that this is a market we will stay in for a long time. It is underlying growth in the market. We see now price increases announced of close to EUR 100 per ton, which, of course, will shift the margin in the industry by many %. We do not, when we look at the long-term picture and assuming normalized margins, see a risk of having to write down the asset as of now. We have, of course, done the assessment ahead of the annual reporting in 2024, and we currently see no need to do an impairment. Of course, markets change and so on, so we realize that the asset is a large part of our balance sheet.
Thank you. Any other questions? Johannes Grunselius, you're welcome to raise your question.
Yes, morning everyone. I think I have two questions, but first on the price hike on Testliner. If you could give some color what the perception is among your clients. I mean, the industry seems to be very committed to implement this price hike. When do you expect that to come through? Again, what's the feedback from clients?
The feedback from clients is, of course, that they understand the need for this, even if they're not always happy with the price increase. I think we will get that through to a high degree. Already, we've secured business in Germany and Poland. Maybe not at 100, but very close to that. I think that will start to flow through already in the February deliveries.
How long that lasts, of course, is another question, but I think there was a need for it from the whole industry because the end box prices have had to come up as well. I think that's what's driving this to get an increase for the actual box producers as well.
Okay, yeah, that's helpful comments.
Then CPE for commercial, Robert Wood, who answered the questions? Yes, come on.
Very good explanations. Thanks for that. I also think about some bullets in your recent outlook comments, your fresh o utlook comments, that you are taking action for reducing cost and also the last bullet of ongoing initiative to sort of improve the balance sheet. Can you give some examples on what you're doing on the cost side? Is it more ongoing work, or is it any sort of big moves? If you can perhaps give some examples of what you're considering in terms of improving the balance sheet here.
No, I do not think we will announce that now. I think we will finish some work. I spend a lot of time actually being at the mill, which is the heart of Norske Skog. There are several concrete initiatives to analyze what do we need to produce the tons and what do not we need and what we do not need I want to get rid of. There are quite aggressive actions from my side on the mills, and there will probably be some announcement of the consequences for Norske Skog of these actions at that time during first quarter. I would like to get the job done first and then tell you what I have done. Yeah. There is identified quite a number of areas where we can save money.
Okay, understood. Yeah, fair enough. Thank you.
Okay, Cole Hawthorne, you're welcome to raise your questions.
Thank you for the question. I'd just like to follow up on the commercial negotiations that are in place with the Golbey production. How are your negotiations with customers to place the initial volumes into the second quarter? Just any update or commentary you can give on looking for new customers and how that ramp-up process or trials with customers are going. Thank you.
First of all, we need the actual paper to be produced, and that's what we're working towards. Of course, we have very clear plans and agreements in place, first of all, for the startup tonnage and then to move into commercial deliveries.
Once the paper has been qualified, you have to go through a process where you produce the first reels, send out the sheets for testing, the customers approve that, and then they send in the trial order. We have done this with the startup of the Bruck mill container board, so we do know what we are doing, and we have firm plans in place. As soon as we get the first production, we are off and running.
Maybe just out of interest, does this put you in a better position with your customers in the sense that now that you have got kind of backup supply or not really? I am just wondering if having two mills, better security of supply to your customer base is helpful at all in negotiations.
Yeah, I mean, it is certainly useful to have the second and larger machine coming on. There are slight differences in terms of how the product portfolio will be at the end of the day between Bruck and Golbey. Yes, there is an overlap possibility for sure. Certainly, the customers welcome the fact that we're coming with Golbey in addition to Bruck. I mean, geographically, we'll split it depending on logistics costs and things, but it does help, and it does help to be, from our side, an independent supplier to the market.
I'd like to follow up on Johannes' question on the container board price hike. You mentioned it a little bit in your response, but is there a kind of incentive for the corrugated sheet producers and the box makers to accept the container board price hike so that they don't need to give back as much of the box price now? I'm just wondering, is there much more willingness to accept the kind of cost push hike, but also an incentive from the box makers to kind of take this container board price through not to give back box price or sheet prices?
Yeah, I think that's part of it. I think the fact that they accept a significant part of this EUR 100 tells you that they need a significant increase on the supply from us to the corrugators so that they can then put that through to their customers. If it's too small, the customers won't accept it. It has to be of a significant size. I think that's what the dynamic is driving this. That's the dynamic that's driving this in terms of acceptance from the corrugators of this price increase because they need a price increase on the boxes.
Thank you.
Does that make sense?
Can I just have? That was very helpful. Just maybe one follow-up on newsprint. I don't know if you can answer this, but with tariffs and trade questions around there, I'm just wondering if there were tariffs on Canada, what would that do to some of the Canadian producers? Would we potentially see some more Canadian newsprint end up in Europe? I'm just wondering what might happen on a trade scenario or tariff scenario.
Yeah, I think everyone's asking the same questions that you are. Of course, if they have to put a tariff on to deliver into the U.S., then they will also look to push perhaps more out to Asia and to Europe. At the same time, it was delayed by 30 days, so nothing has changed for the moment. We'll have to wait and see. I mean, they've always exported to Europe.
They've always exported to Asia. Whether they increase that, we have to wait and see. Of course, we have to wait and see what Mr. Trump does in terms of European supply into the U.S. I mean, there's significant exports into the U.S. from Europe, pulp and paper-wise. It is a bit uncertain just now.
Thank you.
Okay, thank you to all. I can't see anybody else wanting to raise any questions. This will conclude today's webinar from Norske Skog, and I wish you all a nice day.
Thank you, everyone.
Thank you.