Lysaker, Finland 05 June 2015 -- In 2015, Walsum's cash flow to the Norske Skog group has been negative with up to NOK 10 million per month. Therefore, the board of Norske Skog has decided to discontinue operations at Walsum in order to prevent further losses for the group. There are 291 employees at the mill, which has an annual production capacity of 205,000 tons of light-weight coated (LWC) paper.
- Walsum has recently had a significant negative cash flow, a trend unlikely to reverse given the unfavorable cost position. In recent years, we have completed several improvement programs with respect to energy, raw materials, number of employees and the level of working capital without achieving profitability, says CEO Sven Ombudstvedt
In December 2013, Norske Skog closed the production at paper machine PM4, which had an annual production capacity of 225,000 tons. At the time, Norske Skog decided to continue production at the mill's second paper machine, PM10. The employees have made significant efforts to improve the remaining activities at the mill.
- Despite solid efforts from the employees, Walsum is in a loss position. Given the challenging market situation and the mill's high costs relative to competitors, it is very difficult to see a return to profitability, says Ombudstvedt.
The market for publication paper has been demanding for an extended period. Capacity closures of more than 3.0 million tonnes in Europe and North America in 2014 and 2015, in Norske Skog's product segments, contribute to a better market balance, but do not improve the economic fundament of Walsum.
Norske Skog has therefore decided to end the support of the cash negative operations at Walsum. This has led the local management of Walsum to file for opening of insolvency proceedings with the local court in Duisburg.
The closure will not affect agreements that suppliers and customers have with other Norske Skog companies. The closure will have no effect on any of the other business units of Norske Skog. The closure will have no effect on the financing of the Norske Skog group. The closure will for the Norske Skog group have an estimated negative equity effect of around NOK 30-40 million before costs related to the closure. Cash effects beyond the operating losses at Walsum are limited.
This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.