Sorry for the delay this morning. We had an incident that will be explained in shortly. Welcome to this quarterly presentation webcast at Norske Skog, where Norske Skog CEO Sven Ombudstvedt will present highlights from a very good quarter. The CEO and also members of the corporate managements are present. We have Tore Hansesætre at present. We have Rune Sollie, Robert Wood, Lars Sperre, Amund Saxrud, and also investor relations Even Lund present. After the presentation, you'll be able to raise questions to the CEO by raising the yellow hand in the Teams. Please keep the microphone on mute. The word is yours, Sven.
Thank you, Karsten, and good morning, ladies and gentlemen, and welcome to this short call on the quarter. I will commence comments on the quarter in a little while, but we will start this morning's session by giving a few words about what happened during the night at our Saugbrugs mill in Halden. As you can see on the screen, there has been a landslide in the early hours of the morning behind the walls of the PM6 building where the paper machine number six is located, and that has caused severe damage to the building infrastructure.
Luckily, there was no personal harm, so there's no physical damage, but there were indeed people at work during the night inside the machine hall, which means that we had people inside and clearly they have had traumatic experiences. Our thoughts and well wishes are of course with the people most affected, the people who were at work. Our sympathies go out to those. When it comes to the damage to the building and the impact of the business, it's a bit too early to be too precise, but obviously there's been material damage to cranes, to machinery and other equipment related to PM6. Thus far it's impossible to be too precise on the lasting impacts of, for instance, production.
it's clear that production at PM6 is stopped, 260,000 tons of annual capacity. it will be a longer production stop. We will obviously revert with more information when we have a better picture, but thus far, we can only guide to a longer stop. What that means, it's clearly more than a few days, but how long and what the eventual impact will be, we cannot say at present. However, PM4 will continue. We have confirmation that the mill is operational, and we are able to produce at PM4, which has an annual capacity of 100,000 tons. there will still be SC paper coming from Saugbrugs to the market. Again, impact is uncertain, both in terms of production and eventual financial impact.
We will, we will provide that. Obviously, the Saugbrugs mill is insured as the rest of the Norske Skog critical infrastructure, but it's again, it's far too early to say anything precise about that for the moment. That's what I was going to say about last night's incident. I will turn briefly to the quarter. Most of you have probably seen our presentation and the material, and there is also a webcast, I will be relatively brief now this morning. Just note that we have reported an EBITDA of NOK 675 million, which we think is a strong quarter. Even looking backwards, we have an LTM of NOK 3.2 billion now. Also the operational cash flow in the quarter was satisfactory at NOK 430 million.
Paper prices declined in local currencies in euro terms and dollar terms from the fourth quarter to the first quarter, mainly driven by lower input cost, but also driven by softer demand. I think most segments in the paper and pulp industry see this, and probably most segments in most industries in Europe see that there is soft demand, which has continued since basically the summer of last year. This also affects containerboard and we are for both containerboard and publication paper, a bit uncertain what is actually demand driven and what is the stock variations. There was some buildup of stock last year in both segments, but we will have maybe a better view and most of the destocking should be done at least during the second quarter.
However, we are also proud and pleased to talk about the containerboard production at Bruck, which is now has started up and is in operations, a successful startup. We reached first paper on reel just before March turned into April, so really at the end of the first quarter. Now the first deliveries are scheduled to go to customers during the second quarter. We all wish the best for the Bruck team, which has done a fantastic job on the project team and management to deliver this on time and on budget. Here you can see the team. Briefly, there is the first timber on the reel, which was then produced between the March 31st and the April 1st.
On the right-hand side, also the waste-to-energy facility, which was opened and commissioned in April of last year and which is now running at its full design capacity after a prolonged stop in January this year with some modification work being done. Briefly on the financials, you can say that the numbers are impacted by lower volumes. You can clearly see that on the revenue line and also the sales numbers. We have sold 301,000 tons in the first quarter, which is clearly lower than the four preceding quarters. Impacted, of course, by the rebuilds both in Austria and in France. The...
If you look at the last four quarters and if you average them out, it's, I think also you can say that the first quarter this year is a satisfactory quarter with a margin above 20% on an EBITDA level. Cash flow, I briefly commented on. Still, the first quarter is normally where we build inventory this year as well, which normally leads us to have a weaker cash flow in the first quarter. This quarter is still a relatively healthy cash flow. On the net debt, that has increased from year-end by about NOK 200 million. Most of that increase is attributable to currency, where the euro has strengthened to the NOK, or maybe more correctly, the NOK has weakened, which explains most of that impact.
We should also note here that the CO2 compensation in Norway was received in April, so it's not included in any of the figures for the quarter. Not going to spend too much time on the segments at this stage. Just comment on Australia briefly, which is negative in the quarter. Disappointing clearly, but also impacted heavily by a full mill stop, which happened in March with problems both coming into the stop and restarting after the stop, which led to higher costs and, let's say unfortunate downtime. This is not something we will repeat, and partly we should never repeat exactly that stop, but also this is a one-time, once-a-year effect which hits the first quarter.
We still expect the year to be materially better than the first quarter also in Australia. On the other segment, a negative NOK 27 million was booked in the EBITDA, which is a one-time effect by the LTI program, which we exercised in early February. Input costs, again, most people are familiar with this. I just note that while energy and recovered paper prices are significantly down from the top levels of 2022, they are still at historical, relatively high levels. Likewise for pulpwood prices in Norway. There is still a cost pressure up, so we cannot see... When we look at paper prices here, you cannot expect to see historical levels. We still need and we will still see higher prices, even if they are down from the peaks also.
We will still see higher prices, and we can see now that there is reaction on the supply side, both on the, on the containerboard, which we expect that there will be, as there always is when the market is turning, and also on publication paper, where we've seen significant capacity announcements from competitors in the last few weeks. Also noting that the CO2 quota prices the European Union announces remain at a reasonable, at least historically high level, which is clearly important for us as we both have quotas to sell, and it impacts the CO2 compensation scheme.
Again, softening demand impacts utilization, we have seen then significant closures, as I said, we expect that there is more reaction, particularly on containerboard, which always happens when the demand is turning and the price again approaches the marginal producer's cash cost, which is what we see today. Then on the outlook, again, raw material and energy costs are lower but are still at reasonably high levels compared to the history, we still expect some volatility here going forward. Pricing in nominal terms is lower than they were last year but still at higher levels than what we've seen in the past. We are uncertain on the demand development.
We don't know exactly what is destocking, what is the weaker economic trend, but it's clear that the European economic trends are impacting our industry and most industries at this point. The conversion projects, as mentioned, with Bruck, we have started up that machine. The Golbey machine is expected to be started in the fourth quarter. We still can indeed reiterate that we are on time and on budget what we have communicated around this project, which in itself is an important achievement. Just a very brief comment on the new segment, the packaging paper segment. We have allocated costs to that, and there is not a lot of volumes, and in the first quarter, no paper to be sold. You will still see a negative EBITDA from that until production ramps up.
We have previously guided in normalized market circumstances with full volume EUR 70 million-EUR 80 million EBITDA from this segment, and that guidance remains. I'm happy to announce that we have a new CEO in Norske Skog from the June 1st. Tore Hansesætre will take up that position. Tore, then, I invite you to say a few words about what I'm sure is your favorite subjects, namely yourself.
Thank you, Sven. Hello, everybody. Yes, my name is Tore Hansesætre. I think, for those following Norske Skog, it's not a complete new face. Anyway, I'm 38 years old, married, two kids. Been in Norske Skog a little bit more than one-third of my life and in various positions. Educated with master degree from NTNU in Trondheim in Norway. Started in 2009 in the strategy department before switching to operations in 2011. From 2019, where we intensified the work towards the study for conversions of our machines to containerboard, I have been heading that.
Of course, looking very much forward to the position I will take on from 1st of June, with taking the bat from a long lap from well run from Sven. That's me in a nutshell.
Okay, Karsten, I guess we can go to the Q&A.
Yes. Thank you, Tor and Sven. Anybody who wants to have the word may raise their hand in the room. We have Kenneth Syversen from, who wants to raise questions. The word is yours, yeah, Kenneth.
Okay. Sorry to hear about that you're leaving the company, Sven, but congratulations to Tore. I guess it will be business as always here for you guys. First, a few questions on Australia. I jumped into the call a bit late, but if you could just give some comments on the quarter and what to expect in the next quarter, that would be nice. Secondly, you have sent out a press release. As I mentioned, I came in late to call, but any impact, financial impact will be appreciated if you can give any guesstimate there. Yes. And that's... Finally, on the remaining CapEx, I didn't find it.
I probably will find if I look, but if the remaining CapEx on the conversion project will be appreciated as well. Last and final, some general comment on the market into Q2, how to expect overall for the company will also be appreciated.
Yeah. Yeah. Kenneth, thank you for that. I think this, relatively comprehensive, question list. I'm not sure if I got, the first question, if this was about Australia. I think it was, I will answer based on that, on that basis. Australia was of course weak in the, in the quarter with the negative EBITA impacted significantly by the stock we had in March. Every year there's a full mill shut. This time we had problems both going into the shut. Not so much with the shut itself, but we had problems with the start-up again. This, led to additional costs and, also additional downtime. We could have sold more volumes, but we did not have those because of the, the stock issue.
We still think that because of also how we have to push maintenance costs, et cetera, we will not repeat that, of course, in the next quarters. In general, we also expect a positive margin for the Golbey mill. All in all, of course, the remaining nine months should be clearly significantly better than the number we reported, but also at margins somewhere between 5% and 10% as certainly minimum guidance so far for Golbey. When it comes to the general market situations, we have done some, let's say, in the outlook and over in the report itself.
We've talked a little bit about the weakness which we see in Europe that is clearly impacting us in the various segments. However, we do see clearly supply responses to that, both from announcements from our competitors on publication paper, and we also expect based on history that the same will happen in the containerboard market. We also note that the cost levels are still higher than what they historically have been. The zero cash margin for marginal producers are approaching as we see signs on containerboard, but probably also in the publication paper markets.
It's a bit we cannot be too precise on, let's say, the demand guidance because it has been weak in the quarter, but it's also influenced by inventory shifts, and people are careful and will probably work through inventories. Most of that may have happened. Some of it may also still be ongoing now in April, but we cannot be too precise. I'm not sure, Tore, if you wanted to say something about the CapEx and the remaining CapEx for the projects.
No.
How specific you want to be.
I think we have guided around net EUR 370, I guess, on the cash estimate for these conversion projects. I would say around EUR 130-EUR 140 is still to come on that.
Yeah. Obviously, Bruck is now mostly spent, so this is.
Yes
... relates to over.
Mainly on this.
Yeah. I think maybe we should give the opportunity.
Yes
... question.
Any other questions? We have Johannes Grunselius on the list. You're welcome to raise your questions.
Yes. I have a few questions on your packaging, new packaging business, and if you can remind us about how you're seeing the economics of the new Bruck volumes, because there are obviously a lot of moving parts. If you could just sort of maybe indicate what kind of margins you are foresee when that is up and running fully. Also, if you can give us an indication when you are expecting to reach the EBITDA break-even on that operation. Thanks.
I think what we have guided in general for these two projects and then the total volume will be probably in at full production somewhere in the range of 750,000-760,000 tons. We have said EUR 70 million-EUR 80 million EBITDA total. We have not given individual guidance on the mills. I don't think we will do that either. Clearly this year there will be a negative EBITDA for the segment. I think next year we should definitely expect a positive one. From 2025 onwards, we reached the guidance we have given, in other words, the EUR 70 million-EUR 80 million, on a normalized level.
The moving parts, as you said, means that if prices are higher, for instance, due to energy costs and other factors, then that estimate is probably a bit on the low side. In sort of, historical normalized margins, it should be around EUR 70 million-EUR 80 million.
Okay. That's helpful. Can I also ask you about the near-term outlook? You're saying the outlook comments that you are will take response on and make curtailments. I mean, you also did that in Q1.
Yes.
How should we think about the delta Q2 versus Q1? I mean, you obviously have the incident in Halden now.
Yes.
Are you planning for similar volumes Q2 versus Q1 in Europe?
I think the, Let's say the second quarter, will probably not be too dissimilar to the, to the first quarter. However, as you correctly point out, the impact of the Halden stop will influence that final number. We cannot, unfortunately give too much precise guidance. Before that happened, I would have said you should look similarly to the volumes in the first and the second quarter in terms of what downtime we will take. Again, that's a bit up in the air now with the PM6 stop. We simply don't know how long we have to be standing on PM6.
Okay. Got you. Thank you.
Next on the list is Martin Mølbach . You're welcome.
Good morning. I was wondering about the cash flow. In this report, how much of the Skog sale and the CO2 compensation was booked in this quarter, and how much is yet to come in the second quarter?
On the CO2, let's say, to make it simple, the Norwegian CO2 compensation was received in April, which is about NOK 270 million, which comes into April. The dividend from the sale of the Skog is about NOK 200 million.
The Skog is yet to come, or did it?
The Skog was booked in EBITDA in the fourth quarter, and the cash was received as a dividend in the first quarter.
Okay. You said, EUR 140 million was outstanding of the CapEx.
That's roughly what we said.
That's the net cash we expect out, yes.
Okay. I see that you built inventories in this quarter. That could be good news for the segment. Was that normal, or was that?
Well, first of all, it is normal that we build inventories in the first quarter. Probably has happened every year. We probably have to admit that we have built maybe slightly more inventory than we planned because of somewhat weaker demand side. As you correctly indicate, that is probably not necessarily such a bad idea with the incidents today. In general, I would say that we have also taken downtime in the first quarter, as you see. We will always try to match this in a reasonable way with supply and demand. I think we've also done that despite the inventory build.
Thank you.
I have no others on the list who wants to raise questions. If that's true, I would like to thank everybody for participating in this webinar, and I would wish you all a happy and nice day.