June 12, 2009 / 8:04 AM / 10 years ago

UPDATE 2-Norske Skog announces job, cost cuts

* To cut 9 pct of workforce, cut 2009 capex by up to $95 mln

* To permanently shut paper machine at Dutch mill

* Announces 300 mln crown Q2 provision, 900 mln writedown

* Shares initially surge but pare gains to 2.9 percent

(Adds details, company and analyst quotes, updates shares)

By Wojciech Moskwa and Ole Petter Skonnord

OSLO, June 12 (Reuters) - Norwegian papermaker Norske Skog NSG.OL on Friday laid out plans to cut costs, shut capacity, curb investments and slash jobs in its latest move to confront anaemic markets.

The company, one of the world’s biggest newsprint producers, will cut 2009 capex by 400-600 million crowns ($63-$95 million) and shed 600 jobs, or about 9 percent of its workforce.

The plan is seen boosting earnings by 230 million crowns in the second half of 2009 and by 600-700 million in 2010. It will entail a 300 million crown provision in the second quarter for workforce cuts and a writedown of 900 million crowns for shutting a paper machine at a Dutch mill.

The 225,000-tonnes-per-year machine at its Parenco mill in the Netherlands has been “temporarily stopped” since April.

“We cannot sit idly by and watch our earnings decline,” CEO Christian Rynning-Toennesen said in a statement. “Therefore, we are implementing vigorous new measures to reduce the group’s overall costs, improve cashflow and eliminate surplus capacity.”

Shares in Norske Skog traded up 2.9 percent at 11.16 crowns by 0849 GMT, outpacing a 0.3 percent rise in the Oslo bourse benchmark index .OSEBX and against the trend of a falling DJ Stoxx basic resources index .SXPP.

“This is positive, because the industry is struggling significantly, and (Norske Skog) is cutting costs and capacity — two things that are important for the industry,” Arctic Securities analyst Kenneth Sivertsen said.

“Norske Skog’s share price has lagged behind its competitors in Scandinavia. It is rising today but it is still priced low,” Sivertsen said.

The paper industry has struggled for more than six years to climb out of a slump, as soft demand and overcapacity have kept prices down and earnings poor.

The current global downturn has further eroded demand for basic materials, including paper, as print advertising has dropped steeply in the crisis.

“This is more of the same,” Norske Skog’s spokesman Tom Bratlie said what asked if the new cost cuts were a response to a further weakening.

CHALLENGING MARKETS

“There are two forces we are struggling with, one is the structural changes that we have seen already for a long time, especially in North America where consumption is falling, and which we have seen also in other mature markets,” he said.

“The other is the financial crisis, advertising volumes are being cut and newspapers are vanishing. In sum, this amounts to challenging markets,” Bratlie said.

Bratlie said the company would continue to do what was needed to face the weakness.

“To drive profitability in such a large industry we must have a sharp focus on costs,” he said, noting that the company completed a 3-billion-crowns profit improvement programme in 2008. “A new one is being announced today, and we will certainly take new actions in the future.”

“We continue to have a good financial situation and a lot of cash,” Bratlie said. “That is important but in a terribly challenging industry it is important to show that we can change when the market is changing, and that is what we are doing.”

Norske Skog said it may build a new cost-effective bleaching plant in Skogn, Norway, to which it may move some capacity from Parenco and the Follum mill in Norway during 2010.

Ninety of the planned job cuts will be at Follum. ($1=6.345 Norwegian crowns) (Additional reporting Brett Young in Helsinki and Aasa Christine Stoltz in Oslo; editing by Mike Nesbit and David Cowell)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below