Good morning, everybody. My name is Carsten Dybevig, and I'm the Vice President of Communication and Public Affairs. Welcome to our short webinar, where Norske Skog's CEO, Geir Drangsland, will present highlights from the last quarter. The CEO and the Corporate Management are present. Present here also in the studio are also the CFO, Rune Sollie, and the VP Corporate Finance, Even Lund. After the presentation, you will be able to raise questions to the CEO by raising the yellow hand in the Teams. Please keep your microphones on mute during the session. The word is yours, Geir.
Hi, everybody. Thank you for spending time with us this morning to look into the figures for the fourth quarter of Norske Skog. There's already been a published webcast of the presentation, so I will do this as a short presentation of the core content of the presentation. Yeah, this is a visualizing of what's going on in Norske Skog. As you see, the dark green bar is the traditional income stream, which has been created for many years in publication paper. And what we're doing, we are investing NOK 5.5 million-NOK 6 million into rebuilt machines in Austria and in France to create income streams on the light green bar, which is being grown now, as you see in 2023, 2024.
The ramp up is going on, and it will in 2025-2026 be finished, so that will in a way transform us to have two big income streams. It's from publication paper, but also in addition, we will have a large income stream from container packaging paper. Next. Quarter highlights. Fourth quarter 2023, earnings positively impacted by insurance settlement. Quarterly EBITDA of NOK 760 million, including extraordinary net positive impact of NOK 655 million from Saugbrugs and NOK 57 million gain from Tasman sale. Improved financial position and liquidity due to receipt of NOK 720 million in insurance proceeds in the quarter. Paper and containerboard prices stabilized. Publication paper markets remain weak, and further capacity closures are required. Containerboard demand returning, but market still experiencing excess capacity.
Bruck PM3 ramp up on plan in challenging market. Very positive customer feedback on containerboard deliveries from Bruck. Increased deliveries in January 2024. We're very pleased with that. Golbey machine progressing towards startup in second half of 2024. Saugbrugs paper machine number five restarted end of fourth quarter 2023. Successful startup of paper machine number five, and expect close to normal production and on-time deliveries during first quarter 2024. Progressing with evaluation of opportunities for paper machine six and related infrastructure. Maintained good balance sheet following shareholders distributions. Equity ratio of 42% and interest coverage ratio of 18.4%. Completed NOK 450 million share repurchase program, and paid dividend of NOK 67 per share, equivalent to NOK 57 million. Next. Here we are visualizing some key figures from fourth quarter.
As you see on the, on the volume, we are slight up on volumes in fourth quarter compared to third quarter 2023. We're pleased with that. Also, the income stream is more relatively increased because there is booked incomes from the insurance proceeds, so that impacts a lot on the income stream. And also, of course, that is directly on the EBITDA, the income from insurance, so that's a substantial increase of the EBITDA in fourth quarter, which is NOK 760 million. Also, pre-tax profits, very strong. We're very pleased after in two years, investing NOK 5.5 billion in rebuilding machines in Bruck and in Golbey, still having an equity ratio of 42%. Also, interest coverage ratio is very good.
Cash is very strong, still on the balance sheet, NOK 2.463 billion in cash. Net debt also reduced actually fourth quarter compared to third quarter, 2023. Next. This is a lot of details where we can analyze the development from quarter to quarter, so I won't go into detail with that now, so I think we take the next one. This is a picture of the containerboard machine in Golbey. Production will start up, as I said, in second half 2024. Mechanical equipment all delivered. The remaining work is mainly on piping and electrical work, which will be completed during summer. Bruck paper machine 3 is very very happy with the development there.
On the bar, you see here the volumes, which started in April 2023, and actually, for January, you see 12.8 million, 12.8 thousand tons, which is above plan and expectation. So it's very well received from our customer side, both the quality and on-time deliveries from the mill in Austria. Next. Here you see an overview picture of our mill in Halden, the Saugbrugs mill. Where revenues from paper machine four and paper machine five is developing as planned. Very pleased that we have started up the machine number five after it's been not going, been running for three years. So that's well done by the management in the plant. We are exploring opportunities for the machine number six.
It's ongoing in the company, and we will come back later with news, what's gonna happen there. Next. This is just some monitoring of sourcing of energy and pay, fiber prices and the union allowances, where you can see energy has come down. Also recycled paper come down, but it's a pressure on spruce pulpwood prices in Norway, which impacts the millgate cash cost for Skogn and Saugbrugs. We are in way challenge, challenging environments there, but also the union allowance has dropped a little late, latest months. Next. Yeah, as you see here, the paper prices on publication market has been challenging during 2023. But we see, hopefully, it's in a way, more balanced price development in 2024 is our expectation.
But as we also have commented, several times, there is a need for more reduced supply of publication paper. Next. Here we see the packaging paper market, which also a little surprisingly for so many, after many years, as you see on the bar chart here from 2018, quite stable increase in demand, but suddenly in 2023, there is a drop. But our expectations is for 2024, that it will be recovered, so more balanced the demand supply situation for 2024 than in 2023, which was challenging. So concluding remarks, recycled fiber energy costs stabilizing at lower levels, but pulpwood costs remain high. Publication paper prices under continued pressure from weak market balance and lower input costs. Containerboard prices stabilizing at production cost in a challenging market with excess capacity.
Expect negative EBITDA from packaging paper segment in 2024 due to Golbey paper machine startup in second half of 2024. Maintaining a strong liquidity position as investments near completion and debt repayment increase. Significant focus on reducing production cost and working capital to maintain competitive position. That's the concluding remarks from us.
Yeah, and then you are welcome to raise questions to the CEO or other members of the management here. I can see that Kenneth, no, Morten Normann, you are welcome to raise a question.
Yeah. Hi, thank you. You mentioned that, regarding Golbey, and the conversion, you said that the electrical works are being completed during summer. In my world, July and August is also summer. So could you be a little bit more precise when you expect the first containerboard to be out in the market?
Well, if you want to go deeper into details on that timeline, I will actually give the word to Amund Saxrud, which is in charge of that project.
Well, we are in the phase in a way to complete erection of both piping and cabling, and this is ongoing. And after we have finalized that, we will also go into the commissioning phase. That is in a way a normal procedure in project and then the startup. And at the moment, I think we are not more precise than saying second half at the startup, and we still believe that we will start up in second half, but at this point, we will not be any more precise than saying second half.
Okay.
Any other questions, Morten? Okay, thank you.
No, I think it's still, yeah, confused, but at the high level, so that's okay.
Do you have other questions? Okay, next one.
Can I.
Kenneth?
Yeah. Hey, Kenneth from Pareto here. Just on the market side, just following up, it seems like, and you also mentioned that it is oversupplied, publication market. So any signs of curtailments or closure that you know about? That's one.
Actually, I will leave that to the Sales Director, Rob Wood. He is closest to the players.
Yeah, so, so far, we have no indications of any more permanent curtailments. I think everyone's watching the market development closely. Everyone's aware of the overcapacity. Everyone's trying to run, obviously, where they can as efficiently as possible. But as we've stated, no doubt that for the pricing to move significantly in a positive direction, we would need some capacity closures across all grades. I think you're aware of that yourselves. No rumors so far.
Thank you. Okay, thank you. I appreciate it. On moving on to the earnings now, some cost relief and some price pressure, but if you could give us some high-level bridge on the EBITDA compared to Q4 going into Q1, now you're in the midst of Q1. If you can give us high-level thoughts here, it would be appreciated.
The bridge from which time to what time did you actually mean now? We cannot give details for January in knowing in for.
No, I understand. I understand that you cannot give details, and, but, it's more on the high-level thoughts. At the current market, how should we think about Q1?
What we are seeing, and at this, on publication paper prices published by RISI, there was obviously a slight move downwards in January, mainly on the magazine grades. Newsprint was flat. So there is still pressure on our product prices going into the first quarter. Wood costs in Norway, pulpwood, they are high. We expect it to remain high. It's difficult to say whether they will be flat or continue to move upwards. We think we also have some room to navigate in terms of being more efficient in our purchasing and logistics, so net effect is difficult to say, but definitely will stay at a high level. Recycled paper is, i t's come down a lot from the peaks we saw.
We think it will stay around the current levels, but it's difficult to say. Energy has come down a lot, especially natural gas, which is favorable in Bruck, so some tailwind from the gas prices coming down, definitely, and also spot market electricity prices. Of course, we are hedged quite thoroughly. I think around 85% of our energy exposure is either internally generated or on long-term contracts, but we have some spot exposure, which is benefiting from lower spot market prices, so some tailwind also on the cost side there. So all in all, it's, I mean, we're seeing lower costs going into Q1, but also pressure on prices, so we'll have to see where it ends up at the end.
Okay, thank you.
Any other who wants to raise questions or give comments to the quarterly results?
Morten.
Yeah, Morten, you're welcome.
Yeah, I have technical questions regarding the pulpwood prices in Norway. They're quite high. I should have known this, but what is the sensitivity if they let the prices were to move down, let's say, NOK 100 per cubic meter? What effect would that have on EBITDA?
Well, how is the purchase, and how much is it? 1.2 million cubics in Skogn and 500,000 cubics in Saugbrugs.
Yeah, that's-
1.7 million x 100 means, that's just. The calculator.
Uh.
170 ? Yeah, so NOK 100 means NOK 170 million in increased EBITDA generation to us.
Yeah. Thank you. It's very precise. Thank you.
Yeah, Sean Horgan, you're welcome to raise questions.
Good morning. Thank you, for the opportunity to ask a question. Just relating to Testl iner prices, I think or recall in a presentation or two back, you mentioned, or flagged quite significant discounting to the sort of index. I can't recall. I think it was like 30%-40%. Could you maybe provide any insights as to how that has evolved the last couple of quarters or closer to that now? Anything on that would be pretty useful. Thanks.
Good morning, Sean. So, yeah, we, we haven't provided the specific details in, in the presentation here, but obviously, looking at our segment reporting, the packaging paper segment, you can sort of see the implied development for the, call it, the net test liner price that we are able to achieve in each quarter. So if you take that implied price and then, of course, translate to euros with the prevailing rate, you get around EUR 327 per ton for the quarter.
Okay, excellent. That's very useful. Thank you. And then, just, continuing on the, on the test liner upfront, you're obviously flagging excess capacity still. I think in previous presentations, I think the communication was more around requiring quite a bit of capacity to come out of the market. Is, do you think we've seen enough come out of the market? I mean, how far from sort of balanced market do you think we, we need to go? Or do you still expect significant closures, or do you think that's largely done?
There is still clearly a need for more closures in the market. Utilization rates now are mid-80s, and we should be at mid 90s. If you see sort of annualized run rate demand at the moment, it's maybe around 23 million-23.5 million tons in Western Europe for the recycled brown containerboard grades. Capacity is high, 26 million tons, and expected to move up as we see more conversions being completed through 2024 and 2025. So there's definitely a need for several million tons of capacity to either come out or for projects to be postponed going forward in order for the market to reach balance. We expect some demand growth to pick up in '2024, which will, of course, help the situation, but capacity closures should be required as well.
Appreciate.
Thank you, Rune.
Thank you.
Okay. Thank you to Sean, Rune. Any other who wants to raise questions or give comments? I can't see any hands raised. Well, then we will finish from here. And thank you all for participating in this webinar. No, it's Morten Normann. You are welcome to raise a question.
Yeah, looking at the publication paper Europe, you have about NOK 811 million in operating income, and I guess the insurance settlement of NOK 625 million is within that. What is the remaining factors in other operating income, and what is the EBITDA effect from those, apart from the insurance settlement?
Yes, so you are correct. There is a large share of the other operating income in Europe coming from the business interruption insurance at Saugbrugs . In addition, we booked another EUR 103 million in property damage insurance at Saugbrugs for the, i n other operating income, the remaining part mainly booked CO2 allowances and also other bits and pieces at the mills. Does that help your.
Yeah.
Uh, c alculation?
Yep. Yes, thank you.
Okay. Any other questions? Okay, then we will thank you all for participating in this webinar, and we wish you all a nice day.
Thank you.