Forestry firm still chopping assets

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Norske Skog, once one of Norway’s most expansive companies, readily admits that its profitability remains poor and that it still needs to sell off assets to raise cash. The forestry firm, however, now seems to be seeing light through the trees.

Sven Ombudstvedt may have more reasons to smile, as he works to get Norske Skog out of the woods. PHOTO: Views and News

Norske Skog still faces difficult markets for its paper products, and its debt remains high. CEO Sven Ombudstvedt insists, though, that Norske Skog’s debt situation does not present a crisis and he could list several steps taken already to raise funds.

The company, he told analysts, sold excess power supplies to Elkem for around NOK 800 million. Ombudstvedt thinks a sale of the company’s real estate at Klosterøya in Skien can raise another NOK 200 million and the company is also in the process of selling a plantation in Brazil that can bring in NOK 500 million more.

The company reported second-quarter revenues of NOK 4.5 billion, slightly higher than in the first quarter but down from NOK 5.1 billion in the same quarter last year. Gross operating earnings were also stable from the first quarter at NOK 275 million, but down from NOK 568 million in the same period last year.

There were some signs of improvement, but the company continues to be battered by the strong Norwegian currency and mostly its heavy debt, which Ombudstvedt said “we’re actively working with.” He told newspaper Dagens Næringsliv (DN) that “if we didn’t think we could meet our debt obligations through operations, we would have found something else.”

As he told reporters at a Foreign Press Association meeting in May, the company also has been cutting costs on an ongoing basis and employment levels are way down from the firm’s glory days in the 1990s. 

One analyst noted that if it weren’t for the debt, Norske Skog could be generating a substantial positive cash flow. Prices for its paper products may also have bottomed out.

Norske Skog now owns 14 paper mills around the world, where it mostly produces newsprint and magazine paper. 

Views and News from Norway/Nina Berglund
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