Business News
Norske Skog: Currency effects etc in the fourth quarter of 2007
Wednesday 23. January 2008 - The underlying operating result before special items is somewhat lower than in the third quarter.
Norske Skog’s accounts for the fourth quarter of 2007 will be made public on Thursday 7 February at 0800 CET.
A webcasted presentation will be held at the company’s premises at 1300 hrs. on the same date. More information about this event will be published on Norske Skog’s webpage.
The silent period preceding the presentation will start on Friday 25 January.
Fourth quarter operating result
The underlying operating result before special items is somewhat lower than in the third quarter. The main causes of this are the implemented production curtailments which have had a negative effect on the result of about NOK 30 million, and the effect of a stronger Norwegian currency, which has had a negative effect of about NOK 20 million.
The effect on the result of energy hedging and currency effects under financial items
The net effect on the result of energy hedging related to Norske Skog’s energy contracts is a gain of about NOK 450 million in the fourth quarter. This gain consists of unrealised changes in value on long-term energy contracts in Norway and Brazil, related to embedded derivatives. The amount is included in the operating result, but is excluded from the segment results and has no cash effect.
Total currency effects included under financial items amount to a gain of about NOK 25 million.
Norske Skog’s trade-weighted currency basket (“The Norske Skog index”) had an average value of 82.3 in the fourth quarter of 2007, compared with 84.8 in the third quarter of 2007 and 90.1 in the fourth quarter of 2006. The final value of the index was 81.7 as of 31 December 2007 against 81.3 as of 30 September 2007. The index starts at 1 January 2002.
Recognising energy contracts as income and write down of fixed assets
Reference is made to the stock exchange announcement dated 3 December 2007 which included preliminary figures for market evaluation and recognition of energy contracts as income in Norway, as well as the information about write-down of fixed assets and goodwill.
The recognition of energy contracts as income with a basis in forward prices as of 31 December 2007 gives a value of about NOK 4.5 billion after deducting “grunnrenteskatt”. The amount has been included in the group’s operating result under IFRS, but it has not been included in the segment results and has no cash effect. A calculated tax cost of 28 per cent will be deducted. The preliminary calculation gave a value of about NOK 5.2 billion after “grunnrenteskatt” and it is the reduction in forward prices that leads to this reduction.
As concerns the write-down of fixed assets, up-dated calculations give a total write-down of about NOK 4.8 billion in the fourth quarter. This consists of a write-down which is a result of changed useful life and the effect of market energy prices of NOK 2 billion in total, and the write-down of goodwill of about NOK 2.8 billion. The write-downs are in total 0.3 billion higher than estimated in the preliminary calculations.
The detailed reasoning for recognising the energy contracts as income and for the write-downs is described in the stock exchange announcement dated 3 December.