Norske Skog is proposing that about 7% (450,000 tonnes) of its production capacity be shut down across a number of global sites. The paper industry is suffering from a six-year slump because of surplus capacity and low prices.
The company's board is recommending to today's corporate assembly, which monitors the firm's management and ratifies major operational decisions, that it vote for three measures: To permanently close the Steti mill in the Czech Republic; indefinitely "idle production" at the Follum mill in Norway; and indefinitely suspend production at Norske Skog Cheongwon in Korea. A decision is expected to be reached later today.
Norske Skog chief executive Christian Rynning-Toennesen told daily Norwegian business title Dagens Naeringsliv that "the right word is crisis" when describing the company.
"An increasingly weak market has resulted in temporary production shut-downs at several Norske Skog mills in recent years," the company said in a statement. "Production capacity is therefore not being utilised in an efficient manner. At the same time, the continued excess capacity has resulted in weak price development for the company's products."
Yesterday, the group warned that its Q1 results would fall well below those for the last three months of 2007, causing its share price to dive to a 15-year low.
The paper group also said that its board had made the decision not to go ahead with the installation of a paper machine at its mill in Brazil due to cost overruns.
The firm's website provided the following statement: "Norske Skog's results are still impacted by continued strong cost increases, currency changes and lower prices in certain markets. Because of this, it is expected that Norske Skog's underlying EBITDA (i.e. EBITDA before all special items) will be significantly weaker in Q1, 2008, compared with Q4, 2007."
Last week, speculation was mounting as to whether Norske Skog was on the verge of a sale to one of its Scandinavian rivals (PrintWeek, 6 March). Trading in the firm's shares was suspended after they jumped 10%. This followed a report on Norwegian public broadcaster NRK, which claimed one of the big paper manufacturers, such as UPM-Kymmene or Stora Enso, could be planning a bid.
Norske Skog recommends heavy production cut backs and closures
Norwegian paper manufacturer Norske Skog is today holding an emergency meeting with shareholders and workers to decide whether to shut down 450,000 tonnes of production capacity across its business, a move it hopes will reverse it out of "crisis".
