Good morning, everybody. My name is Carsten Dybevig. I'm the Vice President Communication and Public Affairs at Norske Skog. Welcome to a short webinar where Norske Skog's CEO, Sven Weum, will present highlights from a very good quarter. The CEO and the corporate management are present. After the presentation, you will be able to raise questions to the CEO by raising the yellow hand in the Teams. Please keep the microphones on mute. The word is yours, Sven.
Thank you, Carsten, and good morning, everyone, and welcome to this very short presentation of our Q4 2022 results. Just to remind you that we are now on the cusp of becoming a publication paper and packaging producer. From the first quarter onwards, towards the end of this quarter, we will actually produce paper on reel, containerboard in Bruck in Austria and in the fourth quarter in Golbey, France, meaning that we will become an independent and leading producer of packaging paper in Europe. Cash flows from publication paper is still important for us, will be important, and we have said this before, and we can reiterate that. As long as there is meaningful demand for publication and graphic paper, we will still be a producer of said grades.
In addition, we continue our bioproducts and energy strategy, and we will also occasionally divest non-core assets. As you have seen, we've done with the high school in Halden in the fourth quarter. Before I go into briefly the results, just to mention that we have ramped up our ESG reporting and we received an A-minus score from the Carbon Disclosure Project, CDP, which we think, given our size and the industry we operate in, is probably the top score we could get now. We will not stop there, obviously, and we will still continue to improve the reporting, particularly on the Scope 3 CO2 emissions. Obviously we will also still act in order to reduce our footprint, even though the footprint is relatively minor at first. Turning to the quarter, a good result.
EBITDA peaked above NOK 1.083 billion. There is satisfactory operating cash flow. Both the third and the fourth quarter last year has strong operating cash flows, as we indicated through the year, which is customary, and which also happened in 2022. For the full year, above NOK 3 billion, which is a satisfactory level given all the uncertainty and the turbulence that we've seen, particularly in our raw materials markets. Talking about that, we closed the deal on Boyer a bit earlier than what we may have indicated earlier, given the opportunity to sell excess energy and also to allow the project more time to dismantle and to prepare for the actual conversion. Yeah.
Excuse me, please keep the microphones on mute.
We expect the paper markets to remain relatively balanced despite the fact that we're back to sort of a normal decline. Newsprint declined about 5% in 2022. Magazine grades more, but also impacted by the strike in Finland in the first half and high costs, particularly in Continental Europe, which led to the same temporary and permanent closures. We still think that the market will be reasonably balanced, particularly because of the announced closures that will still happen. I briefly mentioned the high school facility in Halden. We booked a gain of about NOK 200 million in the fourth quarter figures, and the cash proceeds were received now in January through a dividend from the joint venture. We actually sold the school.
We will remain focused on developing this type of opportunities also going forward. Finally, we have proposed, or the board has proposed to the AGM, will propose to the AGM, that the AGM gives an authority to the board to pay a dividend. However, as you all know, there's, this is still subject to certain lenders, who needs to waive shareholder distribution restrictions in our loan documentation. However, with the strong quarter, we believe that it's appropriate to have the authority from the AGM if the shareholders agree. The figures, not, nothing too much to say apart from what I already said. The turnover-wise, it was just above NOK 4 billion. The EBITDA, as mentioned, a healthy margin.
We have said throughout 2022 that the quarters appear a little bit more lumped than they probably are. It's probably a fair reflection of the year to even it out a bit more and talk about margins in excess of 15%. Then EBITDA, EBIT obviously follows this. The segments, briefly, Australia, Asia continues. They've hovered around sort of NOK 40 million-NOK 50 million per quarter. A little bit less in the last 3 quarters because of the net gain share with the energy suppliers Hydro Tasmania. In principle, we've been around the NOK 40+ million per quarter. We obviously aim to improve that as the EBITDA margin of 6+% is too low, and we will have to improve that going forward.
Europe is, as you all see, is reasonably healthy in the fourth quarter. Just to mention briefly that packaging is now coming also reporting wise. We will introduce the segment from reporting Q1 2023 in April. Here we just give an illustration of the fixed costs, which are then allocated to the segment Bruck for 4 quarters and will be then from the fourth quarter onwards. Balance sheet remains reasonably healthy with a net debt of NOK 1.1 billion and cash of about NOK 2.7, and a relatively low gearing ratio at year-end. I'm also pleased to say that we have announced an investment. The board approved yesterday an investment in a new TMP line at Skogn, which will increase our TMP production with about 100,000 tons, so air dried tons.
Will then be a new refining line at Skogn, which will then enable the facility to run without recycled paper, which we today have to import at a significant cost. Based on Norwegian energy and Norwegian fiber, we will do even more processing based on local raw materials. Total investment cost is estimated at around NOK 180 million, which is net of a grant from the Enova fund, which will be somewhere probably between NOK 40 million and NOK 50 million. It's obviously good from a profitability point of view, from a local point of view, but also from an environmental point of view, as it obviously reduces the NOx emission, but also CO2, and it will still avoid land filling quite a significant amount of waste.
The energy markets continue to be unpredictable and volatile despite the relatively mild winter in Europe. It's still on a reasonably high level. We have to remind ourselves and everyone else that energy markets are not back to 2021 levels and beyond, and, before that, so we still have reasonably high energy costs despite the fact that they have come down from the absolute peak in the summer of 2022. Recycled paper, likewise, is a volatile market. The de-inking grades have not decreased as much as OCC, but still, coming down from a high level, but are sort of not at historical low levels.
At the same time, we're seeing increases in pulpwood costs, particularly in the north, as partly because of obviously demand for the product, but also because there is less Russian wood in Europe because of the Ukrainian situation. Product pricing is still driven to a certain extent by the variable costs. Here we really have now started to chart the containerboard grades and then publication paper grades in the same graph. This is at least one innovation in this presentation. Two words on the projects. I think the two words are on time, on budget. We are happy to report both the Bruck project and the Golbey project progressing as we thought and indicated in the past.
Despite 2023 will be a year of transition, we are looking forward to finally placing the products in the market and be becoming an independent producer of containerboard. Finally, just on the outlook, we expect the newsprint market to be balanced. We have seen maybe slightly more weakness on the magazine grades. Still remains to be seen what will happen obviously in 2023. We are, reasonably, let's say, optimistic in terms of the market balance as there are closures which has been announced, which will be effectuated also through 2023. Combined with still volatile raw material markets, which is operationally a challenge, but which also obviously have an impact on the price and the margins that we can achieve.
We will continue to manage this exposure obviously, which we did with some success in 2022, and we will still manage this in 2023. Despite, let's say, all the challenges, we think this is probably something which is net positive for the company. containerboard production, as mentioned, is coming, and we certainly look forward to that. We also look forward to the continued development of other projects in the energy and bio space, which is continuing without there necessarily being any big news from quarter to quarter. With that note, Carsten, I will turn it back to you and open up for Q&A.
Yes. You may raise questions, and you do it by raising the hand on the, on the Teams. Kenneth Sivertsen, please, the word is yours.
Good morning, congratulations. A tremendous quarter. Can you elaborate a bit on the outlook? Newsprint is expected to be stable and magazine a bit softer. Also cost is coming down and you have the gas wallet is coming down. Could you just provide some color on effects going into 2023 for you? That's number one. I have three questions basically, but I could stop there and follow up. Okay. I think on the outlook there is not a tremendous amount of transparency. Your estimate is probably as good as ours. We believe that the markets are reasonably balanced.
Of course, there is recessionary fears in Europe, which means that for all products, not only our products, but there is less of a demand from probably summer 2022 onwards in most, I think most segments in Europe, including our containerboard and publication paper. At the same time, we have taken out capacity, other people are taking out capacity, other capacity closures have been announced. I think the market remains cautiously balanced now with slightly weaker magazine than newsprint. And of course, cost is coming down. All in all, probably the first quarter is not going to be very different than what we're seeing. It is a short-term window. I think everyone now operates on a short-term window.
Both in terms of pricing and cost, it's very, very difficult to be too, let's say, too even medium term, when you, when you look at things both from a practical point of view and from an analytical point of view. We cannot unfortunately give it too much color, I think.
No, understandable. It's still, it's looking at your fixed cost on slide seven, I think you had it. It's up approximately EUR 100 million in Europe. That's part, as you're right, it is cost inflation and other non-recurring items. Is it also reflecting that you are in the process of ramping up packaging capacity?
Yes. It is certainly a reflection of that. It's also a reflection of let's say, we will for some time have less volumes, as you will see from the conversion process. The fixed cost definitely hurt on and also in absolute numbers will be somewhat higher. There is, in the fourth quarter, there is a bit of things which will not be repeated. If you look at the 4 quarters in 2023, probably an average is more representative than the fourth quarter in of itself. There is definitely pressure on fixed cost, but I wouldn't over do that either.
The guidance now is more to indicate to you that we will allocate some of the fixed cost obviously to the packaging segment. That's an indication on the slide we show.
Okay. Thank you.
Thank you, Kenneth. The next one on our list is Preben Rasch-Olsen . You're welcome to raise your questions.
Good morning. This is Preben Rasch-Olsen. Two questions for you. First, back on the question Kenneth asked about the paper price contracts. Can you say something about how those contracts are now? Are they signed for three months, six months? Trying to get.
Short.
Short, okay. You're still on the one-month contracts?
Almost. Not. I mean, every time I say something about this, people will point out that there is a, or there are exceptions, but in principle, they're quite short.
All right. The second on the containerboard, because early on when you started working on containerboard, you talked about, I believe, EUR 70 million in EBITDA through a cycle. What do you think that will be now, given that you know more about the market and see the new prices?
I have indicated in the process, last year that it would be significantly above. We still operate with a normalized margin because these are projects which will last for many decades. I think it's still meaningful to talk about the normalized margins. Margins are still above average, so it will be higher than the indication if you did it just now.
Thank you.
Okay. Any other questions from Preben Rasch-Olsen? No. Okay. The next one on the list is Martin Norman. The word is yours.
Yeah. Hi, guys. Uh, we're being spoiled now with, with good numbers, but, um, uh, I have one question regarding, uh, power sales. Uh, closing of, of PM1 in Golbe y was, uh, as I understand, a net 100 million, uh, EBITDA gain in, in Q4. How about, uh, the energy situation and how you can play out this in Q1 and Q2? What can we expect there from power sales in, in, from Golbe y?
If you tell me the power price, I can give you the answer.
Okay. Let's say EUR 200 per megawatt hour.
If it's 200 or 1,600, it will be good.
Yeah, how good?
No, it's impossible to say. I mean, we have less volumes obviously as we haven't contracted. We have known for some time that we will have less capacity, so we obviously have smaller contracts going forward. I mean, again, I've said this before, that high power and energy prices in Europe is good for the company, and we will try to benefit from that. More normalized level will mean less power sales. If volatility and high prices returns, it will be better. Today it's not going to be very significant, given today's market, if we just take today's trading level.
Okay. Can you then please elaborate a little bit more on your exposure? What's in terms of net exposure that you can play with?
We buy to produce paper. We don't buy to play the energy market. We buy roughly what we need.
Okay. Thank you.
Okay. Thank you to Martin Norman. Kristian Spetalen, the word is yours.
Thank you. Just some A minor details there. I think on working capital, could you just please elaborate a bit on the negative cash flow effect? Perhaps inventories is, you know, the first thing I see, and then there's some other balance sheet stuff here that... Yeah. Please.
Oh, absolutely. Working capital is always a little bit tricky because there will be large figures even from relatively small movements. We did have low inventories and stock levels throughout 2022. We have normalized it a little bit at the year end, which is in a normal year prior to 2022, we would have a larger effect from working capital release in the fourth quarter, which this year was the opposite as you indicate. It's more a normalization of working capital rather than any other, let's say, specific events.
Okay, thanks. Second and last question, on the LTIP impact on HQ cost, could you just quantify that please? Kind of non-cash impact there.
There's no cash impact thus far, but the cash is obviously coming at some point. Rune, do you want.
It's about NOK 60 million, I think, and it's more or less the change in the share price from end of Q3 to end of Q4.
Yeah. you
About 60-ish.
you probably have that more or less correct then if you, if you multiply the difference.
Okay, thanks.
Okay, thank you to Christian Spetalen. Sven Ombudstvedt, the word is yours.
Good morning. Thanks for the time, guys. Just in terms of as you're ramping up for Bruck now in Q1, I'm not sure if you could provide any further commentary or insights around, you know, how you sort of see test liner and supply-demand dynamics. That'd be quite useful if you could share, you know, any anecdotal comments. Thank you.
Yeah. We, we don't have a lot that you don't know from other sources. Obviously, the market was weaker in the second half of 2022 and in the first half and certainly weaker than 2021. Deliveries were slightly down in 2022 after a very strong 2021. I think it's just a bit too early to say exactly where the market is in terms of demand. Of course, the supply is more predictable in a sense, we know roughly what is coming on. We still think it's a market in okay balance. We still think it will come back to growth rates, but clearly it's dependent on economic conditions in general.
We have based the projects, as was commented earlier in this call, on sort of a normalized margin, which will yield in our Bruck EUR 70 million-EUR 80 million EBITDA from a full production on two machines. We still guide that, but at the same time, the margins today are still above average, indicating a reasonable supply-demand picture. We don't... I don't think we can provide too much sort of new insights to what you hear from others.
Okay, excellent. Thanks for that.
Any more questions from you, Sven?
That's it from my end. Thanks very much.
Okay, thank you very much. The next one on the list is Sindre Sørbye. You're welcome to raise your questions.
Yes. Hi, good morning. Good results. Just briefly, are there any news about a potential divestment or deal in Australia for Boyer?
There's obviously no news, otherwise we would have known it already. We're still working on it. I think it's. We have said this before that the exit from Australasia is, it's a bit of a long-winded road, because we do really think that there is significant value in these assets as we have been able to demonstrate through the Albury transaction and through the Forest transaction. I think we will, we will look at a significant cash release also from Boyer. That will take some craft and some time to accomplish.
Okay. You said that you were aiming to increase the result from the current level of, around-
Yes
... 40-ish. How realistic would that be in a, let's say, slightly softening market?
I think, yeah, the cycle in Australia, because of the long-term nature of both the contracts and shipping routes, et cetera, I think that is, that's very realistic. If you look at the margins, I think we certainly aim to improve those from sort of 5% to 10% area to 15%+, which is what we think this position should yield. I think that will happen in 2023.
Okay, great. Thanks.
Okay. Sindre was the last person on the list. Is there anybody else who wants to raise a questions or give a comment? No? I will thank you all for participating in this... No, it's Fredrik Kapperud. You're welcome to raise your questions.
Congratulations with strong results. A questions in relation to the dividend, the proposed dividend. How should we read that? Is that a one-off, or is this a start of a permanent annual NOK 5 per share?
Well, first of all, we need to read it as the board asking the AGM for an approval, first of all, and we still have to get the waiver from the lenders in the Golbey facility before it can be paid. That's the first comment. The second comment is that, as you very well know, Fredrik, the dividend is dependent on the result. Obviously the balance sheet today is facilitating a shareholder distribution.
Okay. Any more questions, Fredrik?
No, thank you.
Okay, thanks to you. There is no one else on the list. By this, we will conclude the webinar, and I will thank you all participating, and I wish you all a nice day.