Earnings call transcript: Norske Skog Q3 2025 sees profit, stock dips

Norske Skog reported its Q3 2025 earnings on October 24, revealing a pre-tax profit of 120 million Norwegian kroner (NOK) and an EBITDA of 38 million NOK. Despite this, the company’s stock price fell by 0.92% in pre-market trading. According to InvestingPro data, the company’s LTM EBITDA stands at $77.79 million, while operating with a significant debt burden of $503.65 million. The company faces a challenging market with declining demand in publication paper but sees growth potential in packaging paper markets.

Key Takeaways

• Norske Skog achieved a pre-tax profit of 120 million NOK in Q3 2025.
• EBITDA decreased compared to the previous quarter.
• The company’s equity ratio increased to 43%.
• Stock price fell by 0.92% in pre-market trading following the earnings release.
• Market demand for publication paper is declining, while packaging paper shows growth potential.

Company Performance

Norske Skog’s Q3 performance reflects a mixed picture. The company reported a pre-tax profit of 120 million NOK, contributing to a year-to-date pre-tax profit of 610 million NOK. However, the EBITDA of 38 million NOK marks a decrease from the previous quarter, indicating potential challenges in operational efficiency or market conditions. The company’s equity ratio improved to 43%, suggesting a stronger financial position.

Financial Highlights

• Q3 2025 Pre-tax profit: 120 million NOK
• Year-to-date Pre-tax profit: 610 million NOK
• EBITDA: 38 million NOK (decreased from previous quarter)
• Equity ratio: 43%
• Cash balance: 758 million NOK
• Net debt: 4.2 billion NOK

Market Reaction

Following the earnings announcement, Norske Skog’s stock price decreased by 0.92%, closing at 17.36 NOK. InvestingPro analysis indicates the stock is currently trading in oversold territory, with a Price/Book ratio of just 0.25. This movement places the stock closer to its 52-week low of 15 NOK, reflecting investor concerns over the company’s declining EBITDA and challenging market conditions. The broader market trend shows stability, suggesting that the stock’s decline is driven by company-specific factors. InvestingPro subscribers have access to 8 additional key insights about Norske Skog’s valuation and financial health.

Outlook & Guidance

Looking forward, Norske Skog faces an uncertain and volatile operating environment. The company is focusing on reducing production costs and expects full utilization of the Golbey PM1 machine by the first half of 2027. Despite current challenges, the company remains optimistic about improving market balance in the packaging paper segment by 2027-2029.

Executive Commentary

• Tord Torvund, CFO, emphasized the company’s commitment to being a cost-efficient supplier.
• Even Lund, SVP Corporate Finance, highlighted the ongoing pressure on profitability due to the volatile market environment.
• Robert Wood, Sales Director, noted the company’s focus on securing volumes over pricing.

Risks and Challenges

• Declining market demand for publication paper may impact revenue.
• Volatility in the operating environment could pressure profitability.
• The company’s ability to fully utilize the Golbey PM1 machine by 2027 is crucial for future growth.
• Potential supply chain disruptions could affect production efficiency.
• Economic uncertainties in Europe may influence market dynamics.

Q&A

During the earnings call, analysts inquired about the Golbey ramp-up strategy, focusing on volume over pricing. The company’s liquidity position was also discussed, with management expressing comfort despite the absence of an active revolving credit facility. Ongoing discussions with major packaging industry players were noted as part of the company’s strategic initiatives.

Full transcript - Norske Skog Asa (NSKOG) Q3 2025:

Geir, Moderator/Host, Norske Skog: Good morning, everybody. Thank you for sharing time with the management of Norske Skog to introduce you for the 3Q2025 presentation of our figures. We have Sales Director Robert Wood with us. We have CFO Tord Torvund, SVP Finance Even Lund, Communication Director Carsten Dybevig, and Legal VP Einar Blerk. I think we just start with the numbers, and I leave it to you, Tord, and Even, to do the presentation. Thank you.

Tord Torvund, CFO, Norske Skog: Thank you, Geir. In Norske Skog, we continue to focus on our strategy of being a committed and cost-efficient supplier of publication paper to all our customers. In addition, growing our deliveries of packaging paper and also exploring new profitable projects across all our four mills in Europe. We always have a strong focus on sustainable business practices, as illustrated here with the CDP climate score rating we received for 2024. Moving to the quarter highlights, pre-tax profit came in at NOK 120 million in the quarter, which gives a year-to-date pre-tax profit of NOK 610 million. EBITDA was NOK 38 million in this quarter, which is a decrease from the prior quarter. Price decreases on both publication paper and packaging paper, and the ramp-up production at Golbey PM1 has a negative impact on our overall EBITDA margin, while lower fiber costs, both on pulpwood and recycled paper, contribute positively.

On the pre-tax profit number, a higher valuation of our Norwegian power contracts had a positive impact. We have done the formal takeover of PM1, the containerboard machine at Golbey, and we have produced 28,000 salable tons in this quarter. We expect the machine to be in full utilization during the first half of 2027. We have several initiatives to improve profitability across our mills. As recently announced, we have a concrete plan to reduce the number of FTEs in the group by 200 when comparing the start of 2025 level to the end of 2027. This is done primarily through natural attrition and hiring freezes, but also some use of voluntary packages. We also work continuously to improve our working capital position. On Saugbrugs, we do expect to reach a conclusion on whether to restart PM6 during the fourth quarter.

We stress again that a potential restart of PM6 would be done in parallel with the permanent closure of PM4 and PM5 at the mill. These are the key figures for the quarter. Deliveries of publication papers are in line with the prior quarter, with slight increases on the magazine paper qualities, offset by a decrease in newsprint. On containerboard, Golbey PM1 had a utilization of about 20%, and we sold 24,000 tons from this machine in this quarter. Operating revenue and other operating income are in line with the prior quarter, as higher volumes are offset by somewhat lower prices on all grades. Pre-tax profits came in at NOK 120 million, and the increase from the prior quarter is mainly due to a higher valuation of Norwegian power contracts without cash effect.

Moving to the financial position, the equity ratio increased to 43%, and the interest coverage ratio stands at 4.4 times. The cash balance decreased to NOK 758 million, as we had, like in previous quarters, quite significant investments and CapEx at Golbey PM1. The remaining amount is now about €15 million, and the remaining amount to be received from energy certificates and grants is about €50 million. Further, the timing of the CO2 compensation with annual payout means that in the quarters we do not receive this compensation, like in this quarter, we are building some working capital related to this or building some receivables. The net debt increased then to NOK 4.2 billion. Looking at the segments, for publication paper, deliveries are in line with the prior quarter, which means that we are still below our full potential due to some unplanned shuts on the newsprint side.

Average prices for the segments are slightly down on all grades, but more or less flat on newsprint and SC, and a bit steeper decline on LWC. Customer materials are also in line with the prior quarter due to lower fiber costs, positive estimate changes on the CO2 compensation, and improved operational efficiency. On packaging paper, Bruck PM3 delivered a positive EBITDA of NOK 5 million in the quarter, which is a decrease from the NOK 26 million in the prior quarter, and this is driven by lower containerboard prices, which are not fully mitigated by lower OCC costs. On Golbey PM1, the ramp-up is ongoing, and again, as mentioned, we made 28,000 tons of salable containerboard and sold 24,000 tons.

The deliveries from Golbey PM1 will and is expected to continue to receive a lower average sales price in these initial months due to trial volumes to customers and exports out of Europe, when you compare it to the prices we receive at Bruck and the general European containerboard markets. As mentioned, the remaining CapEx in Golbey is about €15 million, and the remaining energy certificates and grants to be received in the period 2025 to 2027 is about €50 million. With that, I hand over the word to Senior Vice President Corporate Finance, Even Lund, for an update on the paper markets and raw materials.

Even Lund, SVP Corporate Finance, Norske Skog: Thank you, Tord. Here we see the publication paper market development. It’s fairly similar as we presented last quarter, with utilization rates in the 70% to 80% range across the different grades. Following a few years of more stability on the demand side in 2023 and 2024, we now see that we are back to a decline in the market demand, noting that a few mills have closed and also been announced to close over the coming months, which will improve this somewhat going forward. In the commodity market, it’s all about being cash cost competitive. These are the cash cost curves for the relevant publication paper grades for Norske Skog. Starting with the newsprint, we are very well positioned both with Golbey PM2 and our Skogn mill in the lower quartile of the cash cost curve.

Looking at the uncoated mechanical or SC magazine paper side, we see that Skogn is well positioned with a few tons delivered into this market, but Saugbrugs is unfortunately at the higher end as we currently only operate the smaller PM4 and PM5 machines at the site. As stated previously, we are looking at the potential restart of PM6, which would then, of course, result in the closure of PM4 and PM5, but this is still under review. We expect that if PM6 is restarted, it would be in the first quartile and a very competitive SC magazine paper machine in the market. Lastly, LWC or coated mechanical, we have Bruck PM4 in this market, approximately in the middle, slightly to the left in the cash cost curve, quite competitive.

Unfortunately, this market is the most challenging market at the moment and in need of further capacity closure, but for the moment, we are faring fairly well with the Bruck PM4 machine given the circumstances. On the packaging paper market side, this market is starting to grow again after a few challenging years following the COVID-19 pandemic boost, but the market balance is weak as several publication paper machines have been converted into this market over the past couple of years, and several are now also in the ramp-up phase, including our own Golbey PM1. We expect that unless there are new announcements, this market will become balanced once we get into 2027, 2028, and 2029, but for the moment, it remains unbalanced. This market is then, of course, also in need of further capacity closures.

On the cash cost curve, Bruck PM3 is approximately in the middle of the curve. We expect it to become more competitive and also highlight that we have a waste-to-energy boiler at the mill, which is not fully accounted for in this cash cost curve, which further improves the position of that machine. Golbey PM1 is not included in this overview as the overview is based on data prior to the startup of Golbey in May. On the raw materials side, energy has, of course, come down from the peaks seen a couple of years ago, but still at a significantly higher level than prior to the COVID-19 pandemic. Fortunately, we are well covered with energy contracts across most of our mills and see a fairly stable energy price environment on our side.

Recycled paper prices, these have been extremely volatile over the past few years and are now at what we consider a high level. We see more pressure on the RCP or old newspaper side than we do at the OCC side and expect there to be a more challenging RCP market going forward than what we see for OCC. On pulpwood, we have now started to see declines in the pulpwood price. We saw a price decline of approximately 10% in the second half of 2025, representing around NOK 60 per solid cubic meter, and we are now also negotiating for the contracts to be put in place for the first half of 2026. The EUA price has varied, or the CO2 quota price, as it’s better known, has varied between 65 to 75 for some time now and has remained in that area.

Of course, following the regulation that potentially will result in the loss of CO2 surplus in Norway, the EUA price will have less relevance for us in future years, but we are still in the process to try to appeal that decision. On the paper prices, starting with publication paper, it has been fairly flat for quite some time. Some price declines now in the second half of 2025 and through the third quarter, but we expect it to be fairly stable going into the fourth quarter despite the low utilization rates. On the containerboard side, it has been a bit more volatile, starting 2025 quite positively, especially the first half. Before then, seeing price declines now in the second half, and we expect the prices to remain fairly stable going into the fourth quarter and into 2026.

On the outlook, uncertain and volatile operating environment with continued pressure on profitability, I think that has been a headline for us for quite a few quarters in a row now. We have ongoing initiatives to reduce production costs and working capital to maintain our competitive position. Tord also touched upon this earlier in the presentation. We now have significant focus on the ramp-up of Golbey PM1 and expect to reach full utilization in the first half of 2027. As already mentioned by Tord, we have a remaining CapEx of around €15 million relating to the Golbey containerboard project and yet to receive around €50 million in energy certificates and grants over the coming years. As always, we monitor our capital and liquidity position closely and maintain good and open dialogue with all of our lenders. I think we can open up for the Q&A.

Geir, Moderator/Host, Norske Skog: Yes, you may raise questions. I didn’t see anybody yet wanting to raise questions. Okay, it’s clear. I cannot see any other wanting to comment or ask questions. Yes, we have Alexander Eppelon. You’re welcome to raise your question.

Hello, can you hear me?

Yes.

Could you please elaborate on the timing of the grants? When do you expect to receive those, and when are you expecting those to have cash flow impact?

Even Lund, SVP Corporate Finance, Norske Skog: We have ongoing dialogue with the authorities in France regarding this item. Originally, it requires 180 days of more than 1,000 tons production at the mill to provide the data that will go into a report which forms the basis for allocation of the energy certificates. However, there is certain flexibility in this process, so we might be able to have a quicker review, but at the earliest, it will be received in the second quarter of 2026 and the second quarter of 2027. There are two tranches, but it might come also a bit later than that, depending on the process with the relevant authorities.

Geir, Moderator/Host, Norske Skog: Thank you.

Even Lund, SVP Corporate Finance, Norske Skog: That would be both the recognized EBITDA impact and also the cash received in those quarters.

Geir, Moderator/Host, Norske Skog: Do you have any further questions, Alexander?

No, that’s it for me. Thank you.

Okay, thank you. Cole Hawthorne, the word is yours.

Morning, thanks for taking my question. I’d just like to understand better how you’re thinking about the ramp-up of Golbey with kind of the annual volume contract negotiations with customers now. I mean, the industry is trying to push through some price hikes off the lows, and I understand demand is very weak, but you know how do you balance kind of securing volumes in those annual negotiations with customers versus you know trying to push for price at the moment? Just like to understand the pros and cons, if it’s better for you to push for volumes or you know try and get some pricing here. Then, you know just considering it’s a tough environment, would you mind just giving a bit of context on the liquidity situation at the moment? A bit of color on you know your RCF facility on the near term. Thank you.

We have the SVP Commercial, Robert Wood, here. He will answer the questions.

Robert Wood, Sales Director, Norske Skog: I’ll answer the first one.

Geir, Moderator/Host, Norske Skog: The first one.

Robert Wood, Sales Director, Norske Skog: Of course, we’re trying to get our deliveries from Golbey ramped up, as you suggest. In that situation, we are not pushing the price agenda here. We have to follow at this stage, as you can understand, because we’ve got the situation where we’re ramping up and we’re getting the deliveries out to the customers. We will follow what happens on the pricing to a certain extent. Although we’re established with Bruck, we still don’t have a significantly big enough position to be a price leader. For a certain period, we will be more of a follower. We are focusing more on securing those volumes rather than pushing the price agenda at the moment. Is that okay?

That’s helpful. Maybe just before we go on to question two, just a follow-up on question one. You know there has been a bit of M&A and kind of change in block plant box plant ownership in that region. Have you been able to secure any off-take agreements or anything that you’re in negotiation to talk about for off-take agreement with some of the bigger players like Palm and International Paper?

I wouldn’t be divulging those because they’re commercially sensitive, but we are in discussions with all the big players, and we have made headway.

Okay.

Do you understand the second question?

Even Lund, SVP Corporate Finance, Norske Skog: Yes. Second question, you mentioned the RCF. That was replaced with a term loan at the Skogn mill last year, so we don’t have access to the RCF following that transaction last year. On the liquidity side, in general, I think we are comfortable with the liquidity position. We have, as mentioned, now completed the Golbey containerboard project, and there’s only a limited investment amount left. We think we will stand firm with the liquidity position that we have currently and also see more and more positive benefit from the ramp-up of the containerboard production in Golbey.

Thank you.

Geir, Moderator/Host, Norske Skog: Any other questions?

If you allow me one follow-up on the waste paper markets. You talked about stabilization. Was that in the old newsprint side of things, or was that referring to OCC? A lot of your peers have said kind of stabilization in the OCC markets, except Poland, where there’s a little bit of upward pressure. I’m just wondering your views on waste paper trends from here. Thank you.

Even Lund, SVP Corporate Finance, Norske Skog: I think we see the same picture. We see stabilization both on RCP and also on OCC, but we do see that there is sort of a bit more pressure on the RCP side. That’s also the price differential that we now see between the two grades.

Geir, Moderator/Host, Norske Skog: Yeah, the RCP prices are still relatively high.

Thank you.

Okay, thank you, Cole. I cannot see any others wanting to comment or ask questions. That will conclude this webcast. Thank you all for participating, and have a really nice day.

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