Business News

Selling Norske Skog Hebei in China for RMB 925 million (approx NOK 800 million)

Monday 28. September 2009 - Norske Skog has entered into an agreement with Chinese company Shandong Huatai Paper to sell Norske Skog Hebei in Zhaoxian, China. The sale will reduce Norske Skog's net debt by around NOK 800 million while freeing up resources to strengthen the effort to improve profitability at Norske Skog's other mills.

“In spite of hard work for several years we have not managed to turn a profit in China. In June this year, we announced the sale of our mill in Shanghai. With the sale of Hebei, Norske Skog is no longer producing paper in China. The sale of Norske Skog Hebei is a continuation of our effort to reduce Norske Skog’s net debt and improve profitability,” says CEO Christian Rynning-Tønnesen.
 
Norske Skog Hebei has a production capacity of 330 000 tonnes of newsprint. There are about 250 employees at the mill.
 
Norske Skog’s pro forma net debt after the transaction will be NOK 11.4 billion, down from NOK 12.2 after the second quarter of 2009, while gearing will be marginally improved. The sale entails an accounting loss of around NOK 650 million.
 
Key figures Hebei (million NOK)
 
2009 Q2
2009 Q1
2008
2007
2006
Operating revenue
193
125
799
810
747
Gross operating earnings (adjusted EBITDA)
-13
-38
8
21
33
Net profit/loss (ex impairments)
-61
-92
-54
-113
-113

The transaction is contingent upon approval from Chinese authorities. It is expected that the transaction will be concluded by the end of 2009. The accounting effects will be recognised in the third quarter of 2009, and a more detailed overview will be published in connection with the presentation of the results for the third quarter of 2009.
 
Norske Skog has operated the two Chinese newsprint mills Norske Skog Hebei and Shanghai Norske Skog Potential Paper since 2005, when Norske Skog bought out its partner and became the sole owner of the PanAsia Paper Company.
 
The buyer, Shandong Huatai Paper, is China’s largest producer of newsprint, and has also other business activities. The company is headquartered in the Shandong province in Eastern China and listed on the Shanghai Stock Exchange.