Norwegian paper maker Norske Skog reports surge in Q4 profits despite weak market

Paper maker Norske Skog reports surging Q4 profits

OSLO — Norwegian newsprint maker Norske Skog reported Thursday that fourth-quarter net profits surged to 667 million kroner ($113.5 million) from a 1.28 billion kroner loss a year earlier, as cost reductions made up for a drop in sales.

Revenue decreased to 4.9 billion kroner in the October-December period from 7.4 billion kroner a year earlier.

Norske Skog shares slumped 4.5 percent to close at 8.74 kroner ($1.48) on the Oslo Stock Exchange.

The troubled paper maker sold its plant in Hebei, in eastern China, effective Nov. 1. The fourth quarter also saw higher sales volumes in European and Australian markets offsetting losses from the plummeting price of newsprint and magazine paper in Europe and South America.

“Major improvements have been made, and the company’s financial situation has been strengthened considerably,” said Norske Skog Chief Executive Officer Sven Ombudstvedt, whose tenure began on Jan. 1 after his predecessor left to head Norwegian state-owned energy concern Statkraft.

Kenneth Sivertsen, an analyst at Arctic Securities, said that while the result was “more or less in line with expectations, the outlook was disappointing,” with Norske Skog poised to make even deeper cuts on top of an already drastic cost-reduction program.

With 14 mills in 11 countries, Norske Skog layoffs for 2009 totaled about 1,300, leaving the paper maker with 5,600 employees as it struggles, like its competitors, to adapt to falling demand and prices coupled with higher costs.

Ombudstvedt said the company was continuing to look for methods to reduce costs as the precipitous decline in newsprint and magazine paper prices were likely to affect Norske Skog in 2010. Current prices are “not sustainable in the long term,” the company said.

“The main task ahead is to create a better balance between supply and demand, improve productivity and cut expenses to ensure consistency between cost level and profit,” Ombudstvedt said, pointing to further layoffs in 2010.

On the Net:

www.norskeskog.com