Norske Skog Australian sales dive 18 per cent

Norske Skog’s Australian operations made a $12.9m pre-tax loss as demand for magazine and newsprint paper continues to fall, and the converted Boyer mill takes time to ramp up.

Australasian sales fell 18.4 per cent to $528.5m for the 2014 calendar year and sent operating earnings into the red from last year’s $9.5m positive operating earnings. Gross margins were slashed from 15.3 down to 9.1 per cent.

Its three Australian mills in Boyer, Tasman and Albury produced 626,000 tonnes of paper, down 22.4 per cent, reflecting a decline in demand for newsprint by six per cent and magazines by two per cent.

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Norske Skog hopes to turn things around in 2015 with the Boyer mill coming back to full production after the $85m conversion of one of its two paper machines to produce lightweight coated (LWC) paper for magazines and catalogues.

The Norwegian manufacturer says the machine “should give a significantly positive contribution to gross operating earnings in 2015. Last year the machine was a significant negative contributor due to a prolonged ramp-up.”

Last year Norske Skog converted the machine to become the only producer LWC paper in Australia in an effort to diversify away from the declining newspaper sector.

Production improved from 88 to 92 per cent of its 720,000 tonne capacity as the mill returned to full production in Q4, during which revenue was up 7.8 per cent from Q4 2013.

The Australasian results were a drag on the rest of the company, as while European revenue fell 4.6 per cent the operation went from a $26.5m operating earning loss to a $29.6m gain.

Global revenue fell 9.1 per cent to $2bn but losses improved 18.5 per cent to $251.7m.

The company expects magazine and newsprint market balance to improve this year with its competitors closing at least 13 mills in Europe.

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