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Introduction & Market Context
Norske Skog ASA (OB:NSKOG) presented its first quarter 2025 results on April 23, showcasing a significant EBITDA boost primarily driven by an insurance settlement, while continuing its strategic transition from publication paper to packaging products. The Norwegian paper manufacturer’s shares closed at NOK 19.12 on April 22, up 5.64% ahead of the results announcement.
The company reported its performance against a backdrop of challenging market conditions in the publication paper segment, with declining demand across Western Europe for newsprint, uncoated mechanical, and coated mechanical paper products.
Quarterly Performance Highlights
Norske Skog reported an EBITDA of NOK 612 million for Q1 2025, a substantial increase from NOK 150 million in Q1 2024. However, this figure includes NOK 540 million from an insurance settlement, with a total of NOK 560 million recognized in EBITDA. The company’s EBITDA margin expanded to 20% in Q1 2025, compared to 7% in the same period last year.
Pre-tax profit reached NOK 442 million in Q1 2025, up from NOK 341 million in Q1 2024, reflecting the positive impact of the insurance settlement despite continued pressure on margins across all mills.
As shown in the following chart of key financial figures across recent quarters:
The company maintained relatively stable delivery volumes at 273,000 tonnes in Q1 2025 compared to 262,000 tonnes in Q1 2024, while implementing cost reduction measures across all mills to address margin pressures.
Strategic Initiatives
Norske Skog continues its transformation journey from a traditional publication paper producer to a more diversified company focused on packaging paper and fiber projects. This strategic shift is visualized in the company’s presentation:
The company is progressing with key strategic projects at its European facilities. At Norske Skog Golbey, the new containerboard production line (PM1) is scheduled to start at the end of April 2025, with full utilization expected by H1 2027. The project has a capacity of 550,000 tonnes, with remaining gross capex of EUR 35-40 million and expected grants of approximately EUR 50 million.
At Norske Skog Bruck, the containerboard production that started in Q1 2023 is expected to reach 95% capacity utilization in H2 2025. These strategic projects are central to the company’s transformation:
Additionally, Norske Skog signed a share sale agreement for its Australasian operations, which closed on April 16, resulting in a NOK 150 million payment expected in Q2 2025.
Detailed Financial Analysis
Norske Skog’s financial position remains stable despite ongoing investments in strategic projects. The company’s net debt stood at NOK 4,087 million in Q1 2025, slightly down from NOK 4,119 million in Q4 2024, with a leverage ratio of 2.2x.
The equity ratio was 37% in Q1 2025, down from 41% in Q1 2024 but still well above the group covenant minimum of 25%. The interest coverage ratio was 7.9x in Q1 2025, comfortably exceeding the minimum covenant requirement of 2.0x.
The following chart illustrates the company’s financial position:
In terms of segment performance, the Publication Paper segment reported a positive EBITDA contribution of NOK 560 million, while the Packaging (NYSE:PKG) Paper segment continued to develop as the company increases production capacity and market presence.
Market Position and Industry Outlook
The publication paper market in Western Europe continues to face structural challenges with declining demand. Norske Skog’s presentation shows the market balance for different paper grades:
Despite these challenges, Norske Skog reports increasing market share and maintaining high deliveries for both newsprint and magazine paper. The company is also increasing containerboard deliveries and prices in its growing packaging segment.
The recycled containerboard market (RCCM) in Western Europe is also experiencing some demand pressure, though Norske Skog is well-positioned with competitive production costs:
Forward-Looking Statements
Norske Skog is reviewing future opportunities at its Saugbrugs facility, including a completed study for the BCTMP (Bleached Chemi-Thermo Mechanical Pulp) project with an expected net investment of NOK 1.5-2.0 billion, and a Paper Machine 6 (PM6) restart with an expected net investment of NOK 300-350 million.
The company provided the following details about these potential projects:
Looking ahead, Norske Skog acknowledges an uncertain and volatile operating environment and emphasizes its focus on cost reduction. The company will continue monitoring its capital and liquidity position while progressing with its strategic transformation.
The completion of the Golbey PM1 project and the ramp-up of Bruck PM3 to 95% capacity utilization in H2 2025 represent significant milestones in Norske Skog’s strategic shift toward packaging paper, positioning the company for more sustainable growth despite challenging market conditions in its traditional publication paper business.
Full presentation:
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