Norske Skog Q2 2025 slides: modest EBITDA amid challenging markets, strategic transition continues

Norske Skog (OB:NSKOG) reported EBITDA of NOK 106 million in the second quarter of 2025, representing a significant sequential decline from Q1’s NOK 649 million but maintaining positive territory despite challenging market conditions. The company presented its quarterly results on July 15, highlighting progress in its strategic transformation from publication paper to packaging paper producer, while acknowledging ongoing market headwinds.

Quarterly Performance Highlights

Norske Skog delivered a pre-tax profit of NOK 40 million in Q2 2025, a substantial improvement from the NOK 470 million loss reported in the previous quarter. However, the company’s total operating income declined to NOK 2,389 million from NOK 3,101 million in Q1 2025. The second quarter results benefited from energy refunds and contract mechanisms that performed better than expected.

As shown in the following quarterly performance chart:

The company’s publication paper segment remained profitable with an EBITDA of NOK 172 million and an 8% margin, while the packaging paper segment continued to generate losses with an EBITDA of negative NOK 52 million and a -19% margin. The negative performance in packaging reflects ongoing start-up costs as the company ramps up its containerboard production.

"The operating environment is expected to remain uncertain and volatile with pressure on profitability for most of our product grades," noted Ewen Lund, SVP Corporate Finance, during the company’s previous earnings call.

Detailed Financial Analysis

Norske Skog maintained a solid financial position in Q2 2025, with an equity ratio of 41%, well above the company’s covenant minimum of 25%. The interest coverage ratio stood at 5.5x, exceeding the covenant minimum of 2.0x, while cash reserves totaled NOK 1,116 million against a minimum requirement of NOK 100 million.

The following chart illustrates the company’s financial position:

Net debt decreased significantly to NOK 2,970 million from NOK 3,960 million in the previous quarter, though the leverage ratio increased to 5.0x from 3.6x due to lower trailing twelve-month EBITDA. This represents a continued improvement from the company’s Q1 2025 earnings report, which showed a cash balance of approximately NOK 1 billion and net debt of NOK 4.1 billion.

The segment breakdown reveals the contrasting performance of the company’s business units:

Publication paper remains the company’s profit engine with 266,000 tonnes delivered in the quarter, while packaging paper volumes reached 47,000 tonnes but continued to generate losses during the ramp-up phase.

Strategic Initiatives

Norske Skog has secured an agreement with lenders to revise loan repayment schedules, better aligning them with the containerboard business ramp-up timeline. This restructuring provides financial flexibility as the company continues its strategic transformation.

The loan facility revisions are illustrated in the following chart:

The company continues to make progress on its strategic projects, particularly at the Golbey and Bruck mills. The Golbey PM1 containerboard production achieved "paper on reel" status with first volumes delivered to customers, though full utilization is not expected until the first half of 2027. The project represents a net capital expenditure of EUR 320 million, with remaining capex of EUR 20-25 million.

As shown in the following strategic projects overview:

At the Saugbrugs mill, the company is evaluating the potential restart of PM6 in the second half of 2025, which would increase production capacity from 200,000 to 240,000 tonnes with an expected net investment of NOK 300 million. However, the previously planned BCTMP project has been put on hold due to its investment size and challenging pulp markets.

Forward-Looking Statements

Norske Skog’s outlook acknowledges ongoing volatility in its operating environment. The company is focusing on completing the Golbey PM1 project with remaining gross capex of EUR 20-25 million and improving utilization across its production units.

The company’s transformation journey continues with a strategic shift from publication paper to packaging paper:

Market conditions remain challenging across both publication and packaging segments. Publication paper utilization rates in Western Europe are projected at 84% for newsprint, 77% for uncoated mechanical, and 69% for coated mechanical in 2025. Meanwhile, the RCCM (recycled containerboard) market utilization rate is expected to be 86% in 2025.

Norske Skog’s stock closed at NOK 21.90 on July 14, 2025, well above its 52-week low of NOK 15.00 but significantly below its 52-week high of NOK 42.64. The stock has shown resilience despite the company’s earnings challenges, suggesting investor confidence in its long-term strategic transformation.

Full presentation:

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