Norske Skogindustrier ASA, Prospectus of 10 July 2009
Registration Document
Registration Document
Norske Skogindustrier ASA
Registration Document
Joint Arrangers:
Oslo, 10 July 2009
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Registration Document Important information
The Registration Document is based on sources such as annual reports and publicly available information and forward looking information based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for the Company's (including subsidiaries and affiliates) lines of business. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the company's businesses, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Registration Document. Although it is believed that the expectations are based upon reasonable assumptions, the Borrower can give no assurance that those expectations will be achieved or that the actual results will be as set out in the presentation.
This Registration Document is subject to the general business terms of the Arrangers, available at their websites. Confidentiality rules and internal rules restricting the exchange of information between different parts of the Arrangers may prevent employees of the Arrangers who are preparing this presentation from utilizing or being aware of information available to the Arrangers and/or affiliated companies and which may be relevant to the recipients decisions.
The Arrangers and/or affiliated companies and/or officers, directors and employees may be a market maker or hold a position in any instrument or related instrument discussed in this Registration Document, and may perform or seek to perform financial advisory or banking services related to such instruments. The Arrangers’ corporate finance department may act as manager or co-manager for this Company in private and/or public placement and/or resale not publicly available or commonly known.
Copies of this presentation are not being mailed or otherwise distributed or sent in or into or made available in the United States. Persons receiving this document (including custodians, nominees and trustees) must not distribute or send such documents or any related documents in or into the United States.
Other than in compliance with applicable United States securities laws, no solicitations are being made or will be made, directly or indirectly, in the United States. Securities will not be registered under the United States Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
The distribution of the Registration Document may be limited by law also in other jurisdictions, for example in Canada, Japan and in the United Kingdom. Verification and approval of the Registration Document by Oslo Børs implies that the Registration Document may be used in any EEA country. No other measures have been taken to obtain authorisation to distribute the Registration Document in any jurisdiction where such action is required.
The Registration Document together with the Securities Note constitutes the Prospectus.
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Registration Document Table of Contents:
1. Risk factors...... 4 2. Definitions ...... 8 3. Persons responsible ...... 9 4. Statutory Auditors ...... 10 5. Information about the issuer ...... 11 6. Business overview ...... 14 7. Organizational structure...... 21 8. Trend information ...... 27 9. Administrative, management and supervisory bodies ...... 31 10. Major shareholders...... 34 11. Financial information concerning the issuer's assets and liabilities, financial position and profits and losses ...... 36 12. Documents on display...... 37 Cross Reference List ...... 38 Articles of association for Norske Skogindustrier ASA ...... 39
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1. Risk factors
Readers of this Registration Document should carefully consider all of the information contained herein and in particular the following factors, which may affect some or all of the Company’s activities and its ability to service the bond debt. The risk factors described below will have the same meaning and possible impact on the Company even though the term Group is used in the text. This list is not exhaustive. The actual results of the Group could be impacted by the result of many factors, including the risks described below and elsewhere in this Registration Document.
Global economic crisis The disruptions of the global economy since the global credit crisis emerged in August 2007 have been characterized by a general economic slowdown, a loss of consumer confidence, reduced liquidity and increased cost of funding for borrowers. As a result, the advertising markets have become weaker, causing demand and prices for publication paper to fall.
If the economic crisis deepens or fails to recover, this is likely to have a further negative impact on paper consumption and demand for publication paper as well as affecting the cost of Norske Skog’s input factors.
Consumer preference The increased use of the internet and electronic media represent the most significant change in consumer preferences for the publication paper industry. The internet as a source of information, advertising vehicle and publication medium reduces the circulation of newspapers and magazines. This is resulting in downward pressure on the demand in various markets and risk of price pressure in the publication paper industry.
Price volatility The markets for paper products such as newsprint and magazine paper are cyclical and have historically experienced price volatility due to imbalances between supply and demand. Supply depends primarily on available manufacturing capacity, capacity utilization rates and trade between regions. Demand for paper products is affected by the overall strength of the economy, fluctuations in inventory levels and consumer preferences.
Despite capacity reductions and industry wide efforts to consolidate, supply continues to exceed demand in the publication paper industry, putting a downward pressure on prices and changing the pattern of imports and exports between regions. The imbalance between production capacity and demand remains the largest challenge for the paper industry.
Norske Skog has limited influence over the timing and extent of price changes for the company’s products. Any significant downturn in the price levels for publication paper products or the quantity of deliveries the company is able to make could have a material adverse effect on its financial condition and results of operations. In addition, because Norske Skog is focused on the production of publication paper, a sharp downturn in prices for newsprint and magazine paper would likely affect the company more than it would affect a more diversified paper producer.
Paper products are, in many cases, sold in local currencies under annual contracts with stated pricing formulae. Accordingly, prices for publication paper are subject to currency fluctuations.
Cost of energy and raw materials As a focused company, Norske Skog is dependent on the price of relatively few raw materials, including wood, recovered paper, chemical pulp and chemicals. The cost of these raw materials has historically changed unexpectedly and has not necessarily correlated to changes in the market price for the company’s products.
Wood and recovered paper both contribute to between 10 per cent and 15 per cent of the total cost in Norske Skog’s present production portfolio. The cost of wood in Norway increased in 2008 while wood outside Europe was more stable. Recovered paper prices increased in the first half of 2008, but leveled out later. Towards the end of the year, prices in the recovered paper spot market plunged, however with limited effect on the 2008 income statement due to time lags. Any unexpected increase in raw material costs would have an adverse effect on the company’s financial performance.
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Registration Document Energy is the largest single production cost for Norske Skog, constituting almost 20 per cent of total cost. There is no guarantee that long term contracts and hedging strategies will be successful in stabilizing energy costs and ensuring availability. As such, an increase in the price of energy or restriction in availability may have a material adverse effect on Norske Skog’s business, financial condition and results of operations if the company is unable to increase the publication paper prices accordingly, or find an alternative energy source.
Valuation of energy contracts Paper production is heavily dependent on energy, and Norske Skog primarily seeks to secure its supply of energy through long-term electricity contracts. The company has long-term electricity purchase contracts in Norway and Brazil, and currently contract volume exceeds electricity consumed. Hence, the company may resell excess electricity in the market. In Australia, such agreements currently cover more than 80 per cent of the expected consumption over the next ten years.
The main energy contracts are recorded at fair value, calculated as the present value of cashflows over the life of the contract. As market expectations for energy prices and currency fluctuate, along with interest rates and prices indices, the income or expense resulting from value changes of electricity contracts may be volatile and could cause a material adverse effect on Norske Skog’s business, financial condition, result of operations and future prospects. The energy contracts are revalued quarterly.
Impairments of assets Assets that are subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Deteriorating market conditions may force the company to make downward value adjustments to assets through impairments. Such impairments, if substantial, may have a material adverse affect on Norske Skog’s balance sheet and hence the financial position of the company.
Exchange rate fluctuations Norske Skog is exposed to exchange rate risk in several ways. The currencies of the company’s revenues often do not match the currencies of its operating costs. As a consequence, there is a risk that changes in exchange rates could have a significant adverse effect on reported profits.
Furthermore, changes in exchange rates can affect the relative competitive position of a paper mill. There is a risk that fluctuations in exchange rates could adversely affect Norske Skog’s competitiveness relative to its competitors in other countries.
Norske Skog’s financial statements are reported in Norwegian kroner, while only a portion of the company’s operations and assets are located in Norway. Therefore, exchange rate fluctuations could have a significant adverse effect on the financial statements. Norske Skog hedges against exchange rate fluctuations. However, the company cannot guarantee that the hedging transactions will fully protect the company from currency fluctuations. As such, there is a risk that changes in exchange rates may have a material adverse effect on the company’s financial condition or results of operations.
Refinancing risk Due to the current global credit crisis, Norske Skog’s ability to obtain financing, or to refinance existing indebtedness, may be severely restricted and the cost of financing may also be considerable, which may affect the company’s ability to react to changing economic and business conditions. Furthermore, the level of indebtedness is significant and may require a significant portion of the cash flow generated to be allocated to servicing debt, which could impair the company’s future ability to make substantial capital expenditures that may be required.
Subsidiaries outside the European Economic Area Norske Skog has operations in countries outside the European Economic Area, including (but not limited to) Brazil, Chile, China, Thailand and Malaysia. The political, economic and legal systems in these countries are less predictable than in countries with more developed institutional structures. Political or economic upheaval, changes in law or other factors could have a material adverse affect upon the company’s operations and the value of investments made in such countries.
Environmental regulations Norske Skog is subject to a wide variety of environmental regulations in multiple jurisdictions around the world. Compliance with these rules and regulations at the federal, state, provincial and local levels is an important aspect of the company’s ability to continue its operations. Norske Skog cannot
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Registration Document guarantee that it will not incur significant additional environmental costs and liabilities in the future. In addition, countries could adopt tighter, more stringent environmental laws, regulations and enforcement policies than apply at present.
RISK MANAGEMENT IN NORSKE SKOG
Financial risk management Financial risk management at Norske Skog primarily covers currency, interest rate and liquidity risk.
Currency In order to manage exchange rate risk, Norske Skog hedges its cash flow and its balance sheet. Cash flow hedging is intended to postpone the impact from currency fluctuations on the group’s cash flow. On average, Norske Skog hedges 75 per cent of its expected cash flow in foreign currencies over the next 12 months. Instruments used for such hedging include foreign exchange forward contracts, currency options, currency swaps, cross-currency swaps and loans denominated in foreign currencies.
Since a substantial part of the group’s assets are outside Norway, and therefore booked in a foreign currency, exchange rate fluctuations may affect book equity and debt-related figures impacting key ratios such as gearing (net interest-bearing debt to equity). The balance sheet is primarily hedged by drawing debt in the currencies where Norske Skog has a positive book value of its assets. Such a debt allocation will help reduce fluctuations in key financial ratios resulting from currency rate movements. In addition to borrowing in foreign currencies, forward contracts and currency swaps are used. The requirements for hedge accounting under IFRS are mainly being met for these instruments.
Interest rates There has historically been a correlation between economic trends and interest rates, with lower interest rates during an economic downturn and higher interest rates in an economic upswing. Norske Skog aims to structure its loan portfolio such that its interest costs partly offset changes in revenue as a consequence of changes in the economic climate. As such, loans have a mix between floating and fixed interest rates. Derivative instruments are used to hedge interest rate risks. The goal of managing interest rate risk has been to secure low interest costs over time and contribute to an acceptable management of financial risk exposure.
Generally, the company holds the belief that a floating interest rate on its debt reduces risk and interest costs in the long run. This relates to the correlation between earnings and economic cycles, where interest rates are normally high during boom conditions and low during recessions. However, in situations where the cash flow is weakened due to difficult sector-specific market conditions, predictable interest costs have greater priority. In such cases, the company seeks to expand the fixed rate portion of its debt obligations. When the economic situation improves and the sensitivity regarding interest costs is reduced, a shift towards a larger portion of debt on floating rate terms will be considered.
Liquidity Norske Skog’s liquidity risk management strategy is focused on maintaining sufficient cash and marketable securities. The company’s liquidity risk management strategy focuses on maximizing the return on surplus cash as well as minimizing the cost of short term borrowings and other transaction costs. Managing liquidity risk is centralized on a group level except for countries that have imposed restrictions on cross-border capital flow. In such countries, liquidity risk is managed locally.
In order to manage future liquidity risk, forecasts are produced for both short- and long-term cash flows. Cash flow forecasts include cash flows stemming from operations, investments, financing activities and financial instruments.
Energy Norske Skog seeks to stabilise energy costs and ensure availability by entering into long-term contracts (with fixed prices or pricing formulas) for energy supply, implementing a comprehensive hedging programme, reducing consumption through more efficient use and implementing various energy saving initiatives.
Financing Management of refinancing risk has always been an important area for Norske Skog due to the capital intensive and highly cyclical nature of the publication paper business. Managing this risk is even more crucial in light of the global financial crisis. The main principle is to have a smooth and long term
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Registration Document repayment profile. At 31.03.2009, the average term to maturity for the interest-bearing debt was 5.8 years.
Credit Risk To manage the risk of losses on accounts payable, Norske Skog has developed clear guidelines for credit control per customer. Internal credit ratings and credit lines are set for each customer, based on financial quality. In cases where the risk is high, credit insurance, or other hedging instruments are considered where applicable.
Insurance Norske Skog has centralized the management of its group wide insurance program. This program includes insurance covering property damage and business interruption, general third party liability and transportation.
The aim is to achieve the best insurance coverage based on competitive terms in the global insurance market. The total cost of risk is minimized by, among other things, implementing risk reducing activities. Focus is on finding an appropriate balance between retained insurable risks and risks that are transferred to the external insurance market. The business units are responsible for maintaining a high standard regarding all loss prevention activities in accordance with internal standards and procedures. Central support is offered in identifying risks through comprehensive technical surveys. Among other things, these surveys form the basis for exchanging best practices between different mills.
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2. Definitions
Annual Report of 2007 - Norske Skogindustrier ASA's annual report of 2007.
Annual Report of 2008 - Norske Skogindustrier ASA's annual report of 2008.
Quarterly report 1st quarter 2009 - Norske Skogs quarterly report of 1st quarter 2009.
Board or Board of Directors - the board of directors of the Company
Companies Registry - the Norwegian Registry of Business Enterprises (Foretaksregisteret)
EBIT - earnings before interest and taxes (Operating earnings)
EBITA - earnings before interest, taxes and amortisation (Gross operating earnings after depreciation)
EBITDA - earnings before interest, taxes, depreciation and amortisation (Gross operating earnings)
Group - the Company and its subsidiaries from time to time
IFRS - International Financial Reporting Standards
ISIN - International Securities Identification Number
NOK - the lawful currency for the time being in Norway
NGAAP - generally accepted account principles in Norway
Oslo Børs - Oslo Børs ASA
Norske Skog or the Company or the Issuer or the Borrower - Norske Skogindustrier ASA, company reg. no. 911 750 961
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3. Persons responsible
3.1 Persons responsible for the information Persons responsible for the information given in the registration document are as follows: Nordea Bank Norge ASA, Middelthuns gate 17, N-0368 Oslo, Norway Pareto AS, Dronning Mauds gt. 3, P.O. Box 1396 Vika, N-0114 Oslo Norske Skogindustrier ASA, P.O Box 329, N-1326 Lysaker, Norway
3.2 Declaration by persons responsible Responsibility statement: This Registration Document has been prepared by Norske Skogindustrier ASA with a view to providing a description of relevant aspects of Norske Skogindustrier ASA in connection with the Bond Issue and an investment therein. We confirm that, taken all reasonable care to ensure that such is the case, the information contained in the registration document is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
Lysaker (Norway), 10 July 2009
Norske Skogindustrier ASA
Disclaimers: Joint Arrangers Nordea Bank ASA, Nordea Markets and Pareto AS, has assisted the Company in preparing the Registration Document. Neither Nordea Bank ASA, Nordea Markets nor Pareto AS have separately verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and the Joint Arrangers expressively disclaim any legal or financial liability as to the accuracy or completeness of the information contained in this Registration Document or any other information supplied in connection with bonds issued by Norske Skogindustrier ASA or their distribution. The statements made in this paragraph are without prejudice to the responsibility of the Company. Each person receiving this Registration Document acknowledges that such person has not relied on the Joint Arrangers or on any person affiliated with it in connection with its investigation of the accuracy of such information or its investment decision.
Oslo (Norway), 10 July 2009
Nordea bank ASA, Nordea Markets Pareto AS
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4. Statutory Auditors
4.1 Names and addresses The Company’s auditor for 2007 and 2008 has been PricewaterhouseCoopers AS, located at Dronning Eufemias gate 8, 0106 Oslo, Norway.
State Authorized Public Accountant (Norway) Erling Elsrud has been liable for the Auditor's report for 2007 and 2008.
PricewaterhouseCoopers AS is member of The Norwegian Institute of Public Accountants.
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5. Information about the issuer
5.1 History and development of the issuer
5.1.1 Legal and commercial name The legal name of the issuer is Norske Skogindustrier ASA, the commercial name is Norske Skog.
5.1.2 Place of registration and registration number The Company was registered in the Norwegian Companies Registry on 22 March 1989 with registration number 911 750 961.
5.1.3 Date of incorporation Follum was established in 18 March 1873 and was merged with Norske Skog in 1989. As Follum owned power stations which could not easily be transferred to another company, Follum Fabrikker A/S was the surviving entity in the merger, and was immediately re-named Norske Skogindustrier.
5.1.4 Domicile and legal form The Company is a publicly listed company organized under the laws of Norway, including the Public Limited Companies Act. See also section 7.1 Description of group that issuer is part of.
The Company's mailing address is P.O Box 329, N-1326 Lysaker, Norway, and telephone +47 67 59 90 00.
5.1.5 Recent events relevant to evaluation of solvency
COMPLETION OF THE PROFIT IMPROVEMENT PROGRAM
Norske Skog completed its comprehensive improvement program which aimed for improvement of NOK 3 billion by the end of 2008. The program was initiated in 2006 and yielded a gain of NOK 2.95 billion.
CAPACITY CLOSURES, DIVESTMENTS AND COST SAVINGS
Closure at Follum In March 2008, a decision was made to shut down one of the paper machines at Norske Skog Follum indefinitely.
Closure of Steti and subsequent sale of the mill site Newsprint production at Norske Skog Steti in the Czech Republic ceased at the end of May 2008. In July 2008, Norske Skog entered into an agreement regarding sale of the property to Mondi as part of a rationalization of the existing mill site.
Sale of Korea In June 2008, Norske Skog entered into an agreement to sell the wholly owned subsidiary Norske Skog Korea to Morgan Stanley Private Equity Asia and Shinhan Private Equity. The transaction comprised the two newsprint mills Jeonju and Cheongwon. The transaction was completed in August 2008, resulting in a net debt reduction of NOK 3.8 billion for the company.
Sale of the main office In September, 2008, Norske Skog sold the main office property Oxenøen for NOK 429.5 mill. The sale of Oxenøen and other properties contributed to reduce the net debt by approximately NOK 500 mill.
Closure of Parenco PM2 In April 2009, one of the two paper machines at Norske Skog Parenco in the Netherlands was temporarily shut down. The company decided in June, following a program of new measures, that this paper machine, with a production capacity of 225 000 tonnes per year, would be indefinitely idled.
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Registration Document Cost savings Workforce reductions will be implemented in all of the group's units. The total effect of these measures is expected to result in a reduction of about 600 positions, which amounts to nine per cent of the group's global workforce. Costs at Norske Skog's headquarters will be cut by 20 per cent, compared with 2008 levels. The savings will be achieved both by means of workforce reductions and cost cuts in other areas.
To further improve Norske Skog's financial position, a decision was made to reduce the group's overall investment level by NOK 400 million to NOK 600 million in 2009. Investments in existing activities will be reduced further in the years to come.
BOND BUYBACKS
During 2008 and 2009 Norske Skog has done various bond buybacks to reduce the gross debt and improve the maturity profile. The buybacks have also reduced the net debt due to the discounts to par value. One tender offer in connection with the US bond due 2011 has been carried out, The rest of the transactions have been smaller opportunistic purchases in the open market. In par value, the total amount of bond buybacks was close to NOK 1.1 billion in 2008. The same amount has been acquired so far in 2009 (including the above mentioned US2011 tender offer and the voluntarily redemption of NSG16 in connection with this issue).
INVESTMENT PROJECTS
Filler project at Skogn Norske Skog is in the middle of an investment program of approximately. NOK 330 million at its Norske Skog Skogn mill in mid-Norway in order to boost its competitiveness and further improve the quality of the paper it produces. The project will cut annual electricity consumption at the mill by 250 GWh or 17 per cent. State-owned company Enova is contributing NOK 50 million to the work and in Q2 2009 the Company has been granted a loan of NOK 250 million from Innovation Norway which is linked to this project.
The project is estimated to be completed in Q1 2010. Skogn's production is currently based on pulp from wood and recovered paper. Once the work has been done, the proportion of wood will be slightly reduced and replaced by cheaper fillers and increased use of recovered paper. That will enhance the mill's competitiveness while meeting customer requirements for a larger proportion of recycled fibre in their newsprint.
Softwood conversion project at Boyer Cost saving initiative at Norske Skog Boyer in Australia, replacing eucalyptus with pine as raw material. The project, with an AUD 50 million cost frame, has been in development since October 2006. Funding for the project is given through a grant and loan from the Tasmanian Government in addition to equity from Norske Skog and a third party. The new wood mill is planned to be operational at the start of Q4 2009.
Possible bleaching plant at Skogn and long term changes at Follum A main study to evaluate the construction of a new bleaching plant at Norske Skog Skogn was started in June 2009. If this project is carried out, production of improved newsprint will be moved from Norske Skog Follum and Norske Skog Parenco to Norske Skog Skogn during the course of 2010.
The Skogn mill is one of the group's most cost-effective units. A new bleaching plant will expand the range of products offered, and further improve profitability.
Upon completion of the project, 160 000 tonnes of the capacity at Norske Skog Skogn will be converted from standard newsprint to improved newsprint.
The production of improved newsprint will be transferred from Norske Skog Follum to Norske Skog Skogn, assuming that the above mentioned investment in a new bleaching plant at Skogn is carried out. Following the potential transfer of production from Follum to Skogn, continued operation of Follum PM1 will be focusing on the book paper market.
Bio fuel at Follum Norske Skog is in the process of establishing new activities at Follum in the field of bio energy, and this work will be reinforced in the time to come. Today Norske Skog has a 71 per cent ownership in
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Registration Document Xynergo whose ambition is to convert wood into 2nd generation bio diesel in a full scale plant. Today a pilot plant for bio oil (for heating purposes) is in the pipeline at Norske Skog Follum.
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6. Business overview
6.1 Principal activities
6.1.1 Introduction As of October 2008, Norske Skog was the second largest producer of newsprint and the fifth largest producer of magazine paper in the world (source: RISI Capacity Report 2008 pages 8-10 in attachment). Through its subsidiaries and interests in other companies, Norske Skog wholly or partly owns 16 mills in 12 countries on four continents. Norske Skog’s headquarters are located in Lysaker, Norway.
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6.1.2. Products
Norcote Lightweight coated (LWC) paper is produced in several variants with standard and improved brightness levels, gloss or matt finish and a wide selection of basis weights for printing magazines, catalogues, promotion materials and other commercial literature. The physical qualities of the paper, including uniform web profile and high winding quality, makes the product range truly easy to handle.
Product brand: Norcote End use: Magazines, catalogues, supplementsdirect mail, inserts/flyers Printing method: Heat set web offset, rotogravure Mills: Bruck, Walsum
Directory Paper Directory paper is produced in Australasia and South America. This is a lightweight paper with good sheet strength aimed at achieving exceptional press performance whilst still providing the opacity and brightness required to attain superior colour reproduction - including sharper four colour images.
Product brand: BioBio Directory, Tasman Directory End use: Telephone directories, catalogues Printing method: Cold set web offset, Heat set web offset Mills: BioBio, Tasman
NorSC Norske Skog’s SC (super calandered) paper is a high-quality uncoated publication paper suitable for magazines, catalogues and advertising material. By strict quality control of raw materials and special fillers, we are able to produce an SC paper especially designed for either rotogravure or heat set web offset printing. In many cases, these SC products are a good alternative to coated publishing grades
Product brand: Norsc End use: Magazines, catalogues, inserts/flyers, direct mail, supplements Printing method: Heat set web offset, rotogravure Mills: Saugbrugs
Norbright, Norstar and NorX This product range embraces paper grades suited for both cold set and heat set web offset printing. The feel and appearance of these products are different from newsprint in terms of brightness and bulk. This allows their use for innovative and cost effective advertising, inserts and flyer production.
Product brand: Norbright, Norstar, NorX End use: Supplements, inserts/flyers, direct mail, Nornews newspapers, freesheets, directories, Newspapers today must cover a broad range of activities, magazines, books and must present them in new ways to new readers. Norske Printing method: Cold set web offset, Heat set web offset, Skog’s Nornews brand is a high-quality newsprint product letterpress recognised for its excellent printability and runnability Mills: BioBio, Boyer, Follum, Golbey, Parenco, characteristics. It is suitable for use on all types of cold set Bruck, Tasman newspaper printing presses. Newsprint from Norske Skog is Norset manufactured around the world using a combination of Machine finished coated (MFC) is a high brightness film- virgin and recycled fibres. coated publication paper with a unique combination of bulkiness and good printability in heat set web offset. The Product brand: Nornews combination of thermomechanical pulp and a small amount End use: Newspapers, free-sheets, directories, of high efficient filler result in a bulky and stiff base sheet. supplements, insert/flyers This combined with on-machine film coating and soft Printing method: Cold set web offset, flexo, letterpress calendaring optimises surface and paper strength. Mills: A lbury, BioBio, Boyer, Bruck, Golbey, Hebei, Product brand: Norset Parenco, Pisa, Shanghai, Singburi, Skogn, End use: Magazines, catalogues, supplements, Tasman inserts/flyers, direct mail, books Printing method: Heat set web offset Mills: Follum
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6.1.3 History Norske Skog was founded in 1962 by Norwegian forest owners associations in co-operation with public and private interests. In 1989, the company merged with Follum Fabrikker A/S and A/S Tofte Industrier. Acquisitions, construction of new capacity and mergers made the company the leader of Norway’s paper and pulp industry during the 1970s and 1980s. In the 1990s, Norske Skog built a strong European platform. Since 2000 the company has become one of the leading global players, with activities in Asia, South America and Australasia. Since 2005, some mills have been closed to deal with overcapacity in the industry and in the Summer of 2008 Norske Skog Korea was sold.
6.1.4 Vision, goal, strategy and values Norske Skog’s vision is to be recognised as a world leader in the paper industry and the company’s goal is to create the best shareholder values in the paper industry.
The purpose of the company is to operate wood processing and related activities. Norske Skog is one of the leading producers of publication paper and maintains a strong focus on restructuring and further developing this industry. In addition, the company wishes to develop other related activity areas on a global bais, such as purchase/sale and distribution of of recovered paper, both for own raw material consumption and resale.
Norske Skog’s activities are based on the company’s core values openness, honesty and cooperation. These constitute the basis for cooperation between employees from many different countries and cultures, and for ethical business conduct.
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6.2 Business operations
PRODUCTION CAPACITIES, tonnes June 2009 (after closure of one paper machine in Parenco)
Newsprint SC LWC/MFC Sum Paper mill (incl. (magazine (magazine improved paper) paper) etc.) Skogn, Norway 600 000 600 000 Saugbrugs, Norway 550 000 550 000 Follum, Norway 150 000 140 000 290 000 Golbey, France 640 000 640 000 Bruck, Austria 130 000 275 000 405 000 Walsum, Germany 435 000 435 000 Parenco, The Netherlands 245 000 245 000 Total Europe 1 765 000 550 000 850 000 3 165 000 Shanghai, China 145 000 145 000 Hebei, China 330 000 330 000 Singburi, Thailand 130 000 130 000 Total Asia 605 000 605 000 Tasman, New Zealand 320 000 320 000 Albury, Australia 265 000 265 000 Boyer, Australia 300 000 300 000 Total Australasia 885 000 885 000 Pisa, Brazil 185 000 185 000 BioBio, Chile 125 000 125 000 Total South America 310 000 310 000 Total Norske Skog 3 565 000 550 000 850 000 4 965 000
Not consolidated: MNI, Malaysia – 33.65% 85 000 85 000
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6.2.1 Operations in the segments Norske Skog’s reporting structure was changed with effect from 1 January 2008. The operations were divided into the main segments newsprint, magazine paper and energy. The newsprint segment has four geographical subsegments.
Main segment newsprint The segment includes Norske Skog’s newsprint production and sales. The total capacity as of 31 December 2008 was 3.8 million tonnes at the mills in Europe, Asia, Australasia and South America. This makes up 73 per cent of the group's total production capacity. Operating income in 2008 was NOK 17 933 million (NOK 19 793 million in 2007) and gross operating earnings NOK 2 102 million (NOK 3 659 million). Operating income saw a reduction compared with previous year due to lower prices in several markets, and 600-700 000 tonnes’ lower volumes following the shutdown of two paper machines in Europe and the sale of two mills in South Korea. The reduction in gross operating earnings was also connected with the fact that the prices of important input factors were on average higher in 2008 than in 2007. On a comparable basis, Norske Skog’s production volumes were two per cent lower in 2008 than in 2007, and all geographical subsegments had lower gross operating earnings. Globally, newsprint consumption is estimated to have fallen by 2.5 per cent in 2008 compared with 2007.
Gross operating earnings in the first quarter of 2009 were NOK 298 mill lower than in the fourth quarter of 2008, but NOK 25 mill higher than in the first quarter of 2008 on a comparable basis. Demand was weak in the beginning of 2009 and estimated global demand for newsprint was around 15-20 per cent lower compared with the first quarter of 2008.
Newsprint Europe The region includes the newsprint mills Norske Skog Skogn, Norske Skog Golbey and Norske Skog Parenco, in addition to one of the paper machines at Norske Skog Follum and one at Norske Skog Bruck. Norske Skog Steti and PM 2 at Norske Skog Follum were shut down in the second quarter of 2008. The two paper machines had a total production capacity of 260 000 tonnes, and this must be taken into account when comparing 2008 with 2007 and 2009. The shut-downs resulted in higher capacity utilisation at other mills and lower fixed costs.
At the end of the year, Norske Skog’s newsprint capacity in Europe was 1.95 million tonnes, 38 per cent of the company's overall production capacity. Operating income in 2008 was NOK 8 076 million (NOK 8 689 million) and gross operating earnings were NOK 931 million (NOK 1 638 million). The newsprint price in Europe in 2008 was about five per cent lower than in 2007, measured in local currency. The earnings were also influenced by higher input factor prices in 2008, but the cost growth levelled off towards the end of the year. The demand for standard newsprint in Europe was four per cent lower in 2008 than in 2007. However, there was a good balance between supply and demand in Europe at the end of 2008 as a result of major capacity shutdowns.
Gross operating earnings in the first quarter of 2009 were weak at NOK 165 mill lower than in the fourth quarter of 2008, but higher than in the first quarter of 2008. There was a major negative impact from lower volumes. Price increases were to some extent offset by a weak GBP, the result was also negatively influenced by currency effects on accounts reeciveable and accounts payable. The demand for standard newsprint in Europe in the first quarter of 2009 was 15 per cent lower than in the corresponding quarter in 2008.
Asia In the first half of 2008, the region included Norske Skog Jeonju and Norske Skog Cheongwon in South Korea, Norske Skog Singburi in Thailand and the two mills Heibei and Shanghai in China. The mills in South Korea were sold with accounting effect from the third quarter of 2008. After the sale, the remaining production capacity in the second half of the year was approximately 600 000 tonnes, equalling 13 per cent of Norske Skog’s overall capacity.
The sale of the two mills in South Korea is significant for the comparison of 2008 and 2007. Operating income in 2008 was NOK 3 390 million (NOK 5 460 million) and the gross operating earnings were NOK 272 million (NOK 817 million). Most of the earnings from both years were generated in South Korea, and the comparable gross operating earnings when excluding the mills in South Korea for both years are not materially different. Most Asia markets saw a significant price
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Registration Document increase for newsprint in 2008, but this was offset by substantially higher prices for recovered paper and energy. Recovered paper prices plunged towards the end of 2008, but this had little effect on the result. Based on preliminary statistics, newsprint demand increased by 2.5 per cent in 2008 in Asia (excluding Japan). After a very strong first half of 2008, demand in China weakened in the second half, and production curtailments were implemented at the mill in Hebei.
In the first quarter of 2009, gross operating earnings were negative at - NOK 42 mill. The main reason for this was significantly reduced prices, which were to some degree offset by lower recovered paper prices. In the first quarter of 2009, demand in Asia was about 20 per cent lower compared with the first quarter of 2008, partially based on estimates.
Australasia The region includes the mills Norske Skog Albury and Norske Skog Boyer in Australia, and Norske Skog Tasman in New Zealand. The production capacity is approximately 900 000 tonnes, which is 16 per cent of the group's overall capacity. Operating income in 2008 was NOK 3 757 million (NOK 3 725 million) and gross operating earnings were NOK 628 million (NOK 928 million). The weaker result was mainly due to price reductions in Australia, implemented on both 1 July 2007 and 1 July 2008, and lower prices in New Zealand from 1 January 2008. A geothermal power plant was put into operation in connection with Norske Skog Tasman in the third quarter of 2008, and this will provide competitive prices for large parts of the mill's electricity consumption. For 2008 as a whole, the demand in the Australasia region was about six per cent lower than in 2007. Some of this reduction is due to reduced customer stocks in the first half of 2008.
In the first quarter of 2009, the result was lower than in the fourth quarter of 2008 (gross operating earnings of NOK 104 mill vs. NOK 173 mill). The decline was primarily due to lower volumes as a result of maintenance related shutdown of production and shutdowns to respond to market conditions. A price increase of 6.5 per cent was implemented in New Zealand from 1 January 2009. Demand in the region fell by around 15 per cent during the first quarter of 2009 compared with the corresponding period previous yeardue to a weak advertising market.
South America The region includes the mills Norske Skog Pisa in Brazil and Norske Skog BioBio in Chile, with an overall production capacity of 310 000 tonnes, corresponding to six per cent of the group's overall capacity. Operating income in 2008 was NOK 1 316 million (NOK 1 284 million) and gross operating earnings were NOK 211 million (NOK 257 million). The main reason for the lower earnings was higher wood and energy costs on average in 2008 compared with 2007. At Norske Skog Pisa, energy has been purchased under the terms of a one-year price agreement, which from 2009 has been replaced by a new long-term price agreement which runs until 2025. Based on preliminary statistics, newsprint demand increased by about eight per cent in 2008, compared with 2007. Developments were particularly positive in Brazil. However, demand fell clearly towards the close of the year.
In the first quarter of 2009, South America recorded gross operating earnings at NOK 87 mill, equal to the fourth quarter of 2008. This was mainly due to high prices, but these are expected to fall in the subsequent quarters. The demand in the region, partially based on estimates, was around 20 per cent lower in the first quarter of 2009 than in the first quarter of 2008.
Magazine paper Europe The region includes the mills Norske Skog Saugbrugs and Norske Skog Walsum, in addition to one paper machine at Norske Skog Follum and one at Norske Skog Bruck. The production capacity is 1.4 million tonnes, corresponding to 27 per cent of the group's overall capacity. Operating income in 2008 was NOK 7 244 million (NOK 6 509 million) and gross operating earnings were NOK 816 million (NOK 521 million). The magazine paper segment was the only segment with an improved result from 2007, and the main reason was a higher price level for finished products. In 2008, demand for uncoated (SC) magazine paper increased by 6 per cent in Europe, while demand for coated (LWC or CMR) magazine paper fell by four per cent. This trend is mostly a result of many customers switching from coated to uncoated paper due to the price difference. The trend of falling demand for coated magazine paper grew stronger towards the end of 2008. Some price increases were implemented for both magazine paper qualities over the course of 2008, and in general, the market balance for magazine paper was positively influenced by implemented shut-downs.
The magazine paper segment had a weak result in the first quarter of 2009 with gross operating earnings of NOK 201 mill compared with NOK 331 mill in thefourth quarter of 2008. Like the other segments, the main cause of the weak results was the lower volumes, with some impact from
19 / 40 Norske Skogindustrier ASA, Prospectus of 10 July 2009
Registration Document negative translation differences on accounts receivable and accounts payable. Some price increases were implemented for uncoated magazine paper from the beginning of 2009, but prices in general are under pressure due to the weak market. Demand for magazine paper in Europe in the first quarter of 2009 was 20 per cent lower compared with the first quarter of 2008. The situation is somewhat better for uncoated magazine paper than for coated magazine paper.
Energy The energy segment was established in 2008, and the activities are primarily purchase and sale of energy to the Norwegian mills. For accounting purposes, purchase of energy in Norway is recognised as cost of materials in the segment, with resale at contract prices to the Norwegian mills. In addition to sale of surplus energy to external parties, operating income consists of surplus energy following the shut-down of PM 2 at Norske Skog Follum. Operating earnings under IFRS in the energy segment also includes value changes on energy contracts and embedded derivatives. The contracts are recognised in the balance sheet in accordance with IAS 39, which means that the value is made up of the difference between the expected market price and the contract price over the contract period, discounted to present value. The value may fluctuate substantially from quarter to quarter due to changes in future energy prices, and is also influenced by currency, price indices and discount rates. The main elements in the energy contracts that are presented in the balance sheet apply to Norway and Brazil. The value of a long-term energy agreement in Brazil was recognised in the balance sheet in 2008, but due to loss of value and amortisation of the Norwegian energy agreements, the total balance sheet value changed only marginally over the course of the year.
6.3 Basis for statements regarding competitive position
Statements regarding the competitive positions are supported by RISI. RISI is the leading information provider for the global forest products industry.
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7. Organizational structure
7.1 Description of group that issuer is part of
Norske Skogindustrier ASA is a publicly listed company organized under the laws of Norway, including the Public Limited Companies Act.
Norske Skogindustrier ASA is the parent company of the Norske Skog group.
Organisation chart
Corporate Management
President and CEO
Christian Rynning-Tønnesen
CFO SVP HR & Organisation
Audun Røneid Kristin S. Klitzing
SVP Strategy
Rune Gjessing
SVP Europe SVP Australasia, Asia & South America
Jan H. Clasen Terry Hamilton
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7.2 Norske Skog and it's subsidiares
Norske Skogindustrier ASA Group (the Group) consists of Norske Skogindustrier ASA (the Company) and its subsidiaries.
Shares in subsidiaries Norske Skog's subsidiaries may be found in Note 18 in the Annual Report for 2008. The foreign currency designation indicates country of domicile.
Share capital Book value Shares included as financial assets Currency NOK 1 000 Ownership % NOK 1 000
Shares owned by the parent company Sikon Øst ASA, Norway NOK 50 000 2.0 2 000 Other shares, booked value below NOK 1 million NOK 10.0 7 279
Total 9 279
Share capital Book value Shares in subsidiaries and joint ventures Currency NOK 1 000 Ownership % NOK 1 000
Shares in Norwegian subsidiaries owned by the parent company Lysaker Invest AS, Lysaker NOK 1 504 371 100 2 004 371 Nornews AS, Lysaker NOK 100 100 100 Norske Skog Eiendom AS, Lysaker NOK 1 500 100 190 681 Norske Skog Holding AS, Lysaker NOK 5 000 100 8 554 Norske Treindustrier AS, Lysaker NOK 3 917 340 100 15 264 196 Reparco Global Holding AS, Lysaker NOK 100 100 120 NSI Focus AS, Lysaker NOK 100 100 100 Wood og Logistics AS, Lysaker NOK 3 000 72 2 175 Xynergo AS, Hønefoss NOK 1 000 71 21 314 Total 17 491 611
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Shares in foreign subsidiaries and joint Book value ventures owned by the parent company Share capital in
in 1 000 Ownership NOK 1 000 Currency % Norske Skog Golbey SA, Golbey, France EUR 253 164 100 2 063 850 Norske Skog France sarl., Paris, France EUR 235 100 7 939 Norske Skog Europe Recovered Paper N.V., Antwerp, Belgium EUR 62 99.9 493 Norske Skog Belgium B.V., Antwerp, Belgium EUR 480 100 3 235 Norske Skog Logistics N.V., Antwerp, Belgium EUR 62 100 540 Norske Skog Bruck GmbH, Bruck, Austria EUR 1 817 99.9 165 918 Norske Skog Österreich GmbH, Graz, Austria EUR 150 100 1 292 Norske Skog Deutschland GmbH, Wiesbaden, Germany EUR 520 100 10 063 Norske Skog Walsum GmbH, Duisberg, Germany EUR 150 025 100 1 490 197
Norske Skog (UK) Ltd., London, United Kingdom GBP 100 100 2 Markproject Ltd., London, United Kingdom GBP 300 100 0 Norske Skog Holland B.V., Amsterdam, The Netherlands EUR 45 100 401 Norske Skog Holdings B.V., Amsterdam, The Netherlands EUR 170 100 100 1 545 322 Nornews Portugal LDA, Lisbon, Portugal EUR 400 75 0 Norske Skog Espana S.A., Madrid, Spain EUR 90 100 3 607 Norske Skog (Ireland) Ltd., Clonmel, Ireland EUR 3 100 0 Norske Skog (Schweiz) AG, Zürich, Switzerland CHF 50 100 193 Norske Skog Danmark ApS, Værløse, Denmark DKK 200 100 0 NSI Forsikring A/S, Hvidovre, Denmark DKK 54 000 100 58 531 Norske Skog Italia srl., Milan, Italy EUR 10 95 84 Norske Skog Steti a.s., Steti, Czech Republic CZK 573 100 100 52 216 Norske Skog Czech & Slovak Republic spol. s.r.o., Steti, Czech Republic CZK 495 100 0 Norske Skog Jämtland AB, Trångsviken, Sweden SEK 200 100 780 Norske Skog (Cyprus) Ltd., Paphos, Cyprus CYP 1 95 0 Norske Skog Polska Sp. z.o.o., Warsaw, Poland PLN 50 100 0 Norske Skog Hungary Kft., Budapest, Hungary HUF 3 000 100 0 Norske Skog Adria d.o.o., Ljubljana, Slovenia EUR 21 100 0 Norske Skog Pan Asia Co. Pte. Ltd., Singapore USD 723 322 100 6 239 989 Norske Skog Japan Co. Ltd., Tokyo, Japan JPY 3 000 100 0 Norske Skog Papers (Malaysia) SDN. BHD, Kuala Lumpur, Malaysia MYR 5 007 100 185 430 Norske Skog Pisa Ltda., Jaguariaíva, Brazil BRL 110 269 99.9 1 137 613 Papeles Norske Skog Bio Bio Ltda., Concepcion, Chile USD 15 000 0.1 614 THP Paper Company, Seattle, USA USD 0 100 0 Total 12 968 309 Total shares owned by the parent company 30 459 920
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Shares in foreign subsidiaries and joint ventures Share capital Ownership Currency owned by consolidated companies in 1 000 % Fletcher Paper Sales North America Inc., Delaware, USA USD 10 100 Forest Terminals Corporation, California, USA USD 5 100 Norske Skog (USA) Inc., Southport, USA USD 2 200 100 Norske Skog US Recovered Paper Inc., USA USD 250 100 Norske Skog (Australasia) Pty Ltd., Sydney, Australia AUD 21 000 100 Norske Skog (Australia) No. 1 Pty Ltd., Sydney, Australia AUD 10 100 Norske Skog (Australia) No. 2 Pty Ltd., Sydney, Australia AUD 0 100 Norske Skog Asia Pacific Pte. Ltd., Singapore AUD 565 078 100 Norske Skog Capital (Australia) Pty Ltd., Sydney, Australia AUD 223 000 100 Norske Skog Industries Australia Ltd. AUD 0 100 Norske Skog Paper Mills (Australia) Ltd., Tasmania, Australia AUD 7 539 100 Pan Asia Paper Sales (Australasia) Pty. Ltd. (Australia) AUD 0 100 Norske Skog Holdings (NO.1) Ltd., Auckland, New Zealand NZD 0 100 Norske Skog Holdings (NO.2) Ltd., Auckland, New Zealand NZD 0 100 Norske Skog Holdings (NO.3) Ltd., Auckland, New Zealand NZD 1 100 Norske Skog Tasman Ltd., Auckland, New Zealand NZD 600 000 100 33027 YUKON INC, British Columbia, Canada CAD 19 245 100 33038 YUKON INC, British Columbia, Canada CAD 27 382 100 4159641 Canada Inc. CAD 1 100 4246799 Canada Inc. CAD 1 353 843 100 Crown Forest Holdings (1995) Inc., Whitehorse, Canada CAD 154 360 100 Crown Forest Industries Ltd., Whitehorse, Canada CAD 1 691 813 100 NS Industries Canada Ltd., BC, Canada CAD 567 380 100 Tasman Equipment Ltd., Vancouver, Canada CAD 1 100 Norske Skog CI Ltd., Georgetown, Caymen Islands CHF 1 300 000 100 Norske Skog Forest Holdings AG, Zürich, Switzerland CHF 63 173 100 Norske Skog Holdings (Schweiz) AG, Zürich, Switzerland CHF 100 100 100 Norske Skog Overseas Holdings AG, Zürich, Switzerland CHF 35 000 100 Nornews Portugal LDA, Lisbon, Portugal EUR 400 25 Norske Skog Italia srl., Milan, Italy EUR 10 5 Norske Skog (Cyprus) Ltd., Paphos, Cyprus CYP 1 5 Norske Skog Parenco B.V., Renkum, The Netherlands EUR 75 456 100 Parenco Finance B.V., Renkum, The Netherlands EUR 18 100 Reparco Nederland B.V., Nijmegen, The Netherlands EUR 227 100 Reparco Nijmegen B.V., Nijmegen, The Netherlands EUR 18 100 Reparco Randstad B.V., Gravenhage, The Netherlands EUR 14 100 Reparco Renkum B.V., Renkum, The Netherlands EUR 18 100 Reparco Trading B.V., Nijmegen, The Netherlands EUR 46 100 Reparco Rohstoffverwertung GmbH, Essen, Germany EUR 130 100 Reparco UK Ltd., United Kingdom GBP 20 100 Norske Skog Industries (UK) Ltd., London, United Kingdom GBP 0 100 Norske Skog Bruck GmbH, Bruck, Austria EUR 1 817 0.1 Norske Skog Papier Recycling GmbH, Bruck, Austria EUR 291 100 Norske Skog Europe Recovered Paper NV, Antwerp, Belgium EUR 62 0.1 Eidsverket AS, Lysaker, Norway NOK 620 100 Klosterøya AS, Lysaker, Norway NOK 10 100 100 Oxenøen Eiendom AS, Lysaker, Norway NOK 1 120 100 Oxenøen Utvikling AS, Lysaker, Norway NOK 1 120 100 Ranheim Eiendomsutvikling AS, Lysaker, Norway NOK 120 100 Enerpar-Energias do Parana Ltda., Jaguariaíva, Brazil BRL 1 99.9 Norske Skog Florestal Ltda., Jaguariaíva, Brazil BRL 89 400 99.9 Papeles Norske Skog Bio Bio Ltda., Concepcion, Chile USD 15 000 99.9 Norske Skog (Hebei) Paper Co., Ltd., Zhaoxian, China CNY 849 978 100 Norske Skog Sales (Hong Kong) Ltd., Hong Kong, China HKD 0 100 Shanghai Norske Skog Pan Asia Potential Paper Co. Ltd., Shanghai, China CNY 365 070 56 Norske Skog (Thailand) Company Ltd., Bangkok, Thailand THB 1 083 750 94 Norske Skog PanAsia (Shanghai) Commercial Consulting Co. Ltd., China CNY 1 126 67 Reparco Trading (Tianjin) Co. Ltd., China USD 200 100
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7.3 Issuer dependent upon other entities Norske Skog is a holding company, and is therefore dependent upon cash flow from its operating entities. The Company also provides financing to most of the subsidiary companies in Norway as well as abroad.
Guarantees: The company had guaranteed debts totaling NOK 1 256 million on behalf of its subsidiaries at 31 December 2008. At the same time other guarantees amounted to NOK 409 million. These figures may be found in Note 20 (Company accounts) in the Annual Report for 2008.
Intercompany receivables/liabilities: Intercompany receivables/liabilities may be found in Note 13 in the Annual Report for 2008.
Intercompany receivables 31/05/2009 2008 2007 Crown Forest Industries Ltd. 245 247 - Norske Skog Holdings B.V. 1 266 1 429 1 226 Norske Skog Walsum Gmbh 1 169 1 284 1 003 Other intercompany receivables 63 42 34 Total intercompany receivables 2 743 3 002 2 263
Current intercompany receivables 31/05/2009 2008 2007 4246799 Canada Inc. 0 0 171 Crown Forest Industries Ltd. 0 0 235 Klosterøya AS 53 41 14 Lysaker Invest AS 10 158 0 Nornews AS 9 9 7 Norske Skog France 0 0 19 Norske Skog Golbey S.A 35 136 27 Norske Skog Holdings B.V. 160 185 122 Norske Skog Tasman Ltd. 64 0 0 Norske Skog USA Inc. 0 133 50 Norske Skog Walsum Gmbh 0 0 102 Oxenøen Eiendom AS 0 3 121 Norske Skog Pisa Ltda 71 72 45 Reparco Netherland BV 10 21 16 Other current intercompany receivables 123 86 75 Total current intercompany receivables 536 845 1 004
Long-term intercompany liabilities 31/05/2009 2008 2007 4246799 Canada Inc. 0 838 960 Lysaker Invest AS 56 55 52 Nornews AS 52 52 49 Norske Skog Bruck PM3 511 564 612 Norske Skog Golbey S.A. 1 929 2 129 1 207 Norske Skog Holding AS 39 39 37 Norske Skog Industries (UK) Ltd 3 130 3 091 2 857 Norske Skog Holland B.V. 0 0 14 Norske Skog PanAsia Co. Pte. Ltd. 120 544 0 Norske Skog Paper Holding (Schweiz) AG 0 0 0 Norske Skog Steti 0 61 Norske Treindustrier AS 6 047 6 067 6 092 Other long-term intercompany liabilities 0 0 4 Total long-term intercompany liabilities 11 884 13 379 11 946
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Registration Document All long-term intercompany debt matures more than 12 months after the end of the fiscal year. The majority of this debt has a considerably longer maturity.
Current intercompany liabilities 31/05/2009 2008 2007 Klosterøya AS 0 0 27 Lysaker Invest AS 0 0 25 Norske Skog Bruck Gmbh 253 136 59 Norske Skog Deutschland Gmbh 39 50 31 Norske Skog Golbey S.A 52 169 72 Norske Skog Holding AS 14 14 17 Norske Skog Holland BV 15 18 17 Norske Skog Asia Pacific Pte. Ltd. 12 22 23 Norske Skog Industries Australia 466 410 129 Norske Skog Parenco BV 0 0 26 Norske Skog Tasman Ltd. 87 52 Norske Skog UK Ltd. 27 40 25 Norske Treindustrier AS 1 360 347 274 Oxenøen Eiendom AS 237 245 4 Oxenøen Utvikling AS 68 67 54 Wood and Logistics AS 32 54 82 Other current intercompany liabilities 133 135 64 Total current intercompany liabilities 2 710 1 795 979 A
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8. Trend information
8.1 Global markets
In 2008 there was growth in newsprint consumption in Asia and South America, while consumption in Europe and Australasia fell. The strong decline in North America continued, and it is estimated that global consumption fell by approximately 2.5 per cent.
In spite of weaker demand both in North America and Europe, the market balance was maintained or improved as a result of comprehensive capacity reductions. This resulted in the implementation of several price increases in North America, also directly and indirectly affecting price levels in both Asia and South America. The price level in Europe was stable, while prices in Asia fell towards the end of the year due to surplus capacity and lower growth in consumption.
2009 has started with an unexpected large decline in demand. YTD April April the demand for newsprint globally fell 18 per cent compared to last year. The large decline is explained by a lower advertising and a structural decline, In addition the customer destocking may contribute as a third factor.
Demand for the two main grades of magazine paper developed differently in 2008, with significantly reduced demand for coated magazine paper (LWC) and continued growth for the uncoated paper. Capacity for both paper grades was closed, enabling the implementation of price increases. The same development has been seen for coated paper in 2009 where the decline in LWC YTD April was 27 per cent compared to last year. The decline for uncoated paper is down for the same period a modest seven per cent.
NEWSPRINT
EUROPE: Demand for standard newsprint in 2008 was around four per cent lower than in 2007, with the greatest reduction in demand in the UK and Spain. The housing market in both of these countries fell during the course of 2008, a factor which affects paper advertising to a large extent.
The price level in Europe, measured in local currency, was stable during 2008 because of the one- year contracts. Converted into EUR as a reference currency, the price level in the UK became much lower as a result of a weaker GBP. At the end of the year, prices both in the UK and continental Europe were significantly lower than in North America, measured in comparable currencies. This is due to both price increases in North America and the fact that the USD has strengthened compared with most other currencies through the year. Imports from Canada to Europe were approximately 15 per cent lower in 2008 than in 2007.
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Registration Document In the first half of 2008, Norske Skog shut down two paper machines in Europe with capacity totalling 260 000 tonnes. Combined with closures made by other producers, this resulted in an estimated reduction in European production capacity of seven per cent through the year. This has improved market balance, enabling the implementation of price increases in all European markets in 2009. In North America, the production capacity for newsprint was reduced by 11 per cent in 2008.
On the background of the international financial crisis, the fall in newsprint demand has been unexpectedly high in Europe and mature markets. Norske Skog met this situation with a production curtailment of 200 000 tonnes in Q1 2009. In total, Norske Skog had newsprint production capacity of approximately 1.95 million tonnes in Europe in the beginning of the year, corresponding to 38 per cent of the company’s overall production capacity. 225 000 tonnes was announced permanently shut in Q2 (re 5.1.5) when indefinitely idling one paper machine at Norske Skog Parenco.
ASIA: Asia is the world’s largest newsprint market. The demand increased by approximately three per cent in 2008 when excluding the mature Japanese market. In several Asian countries, in particular in China, the market became weaker in the second half of 2008.
At present, there are no new newsprint machines under construction in China, but due to the great increase in capacity in the years 2005 – 2007, local surplus capacity remains, which resulted in a price drop in the second half of 2008. Norske Skog implemented a comprehensive production curtailment at the mill in Hebei, China, towards the end of the year.
There is still great uncertainty concerning the demand development in Asia in 2009. YTD April the demand in Non-Japan Far East was down 18 per cent compared to the same period last year. There has been some improvement in demand from February and China has on the contrary a positive demand development compared to same periode in 2008. In a more long-term perspective, there are good prospects for continued high growth in many of the countries.
AUSTRALASIA: Based on delivery statistics, demand for newsprint in Australia and New Zealand fell by six per cent in 2008. The main factor was reduced underlying consumption, but to some extent also because of a reduction in customer inventories. As a result of long-term price agreement clauses, prices were reduced by seven per cent in Australia with effect from 1 July 2008.
Lower volumes were expected in Australasia in 2009 and compared to the other regions Austalasia have the smallest decline in demand YTD April of 13 per cent. A price increase for newsprint was implemented in New Zealand from 1 January 2009, and there were also price increases in Australia from 1 July 2009. The long term price contracts expire summer 2010 and Norske Skog is currently negotiatiating new long term contracts.
SOUTH AMERICA: The South American newsprint market grew by approximately nine per cent in 2008. Most of the growth took place in Brazil. The demand fell off somewhat towards the close of the year and has continued sharply in 2009 with a fall of 24 per cent YTD April compared to same periode last year.
To a large degree, prices in South America follow the prices in North America, so that the price level became gradually higher through 2008.
MAGAZINE PAPER: Demand for magazine paper in Europe was one per cent lower in 2008 compared with 2007. Uncoated (SC) magazine paper, which amounts to 35 per cent of the total market, saw an increase in demand of approximately six per cent, while demand for coated (LWC) magazine paper fell by four per cent. LWC is 65 per cent of the total market for magazine paper in Europe. The development in the magazine paper market in North America is mostly the same, as this market sees substantial imports from Europe.
Due to extensive shut-down of capacity, price increases were carried out both for SC and LWC in Europe in 2008.
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Registration Document For 2009, the demand for magazine paper in Europe has dropped 21 per cent, with better development in SC than for LWC. Norske Skog announced temporary production curtailments of 75,000 tonnes of magazine paper in Q1 2009 to improve the supply balance.
Regional demand for publication paper 2008 demand & change ’08/’07
16 -1.2% 3.0% 14
12 -9.5% -3.8% 10
8 -11.2%
6 6.8% million tonnes million 4 8.3% 2 6.5% -6.2% 12.9% 0 Europe North America Asia Latin America Australasia
Newsprint Magazine Sources: PPPC Newsprint = Standard newsprint Magazine = Coated, supercalendered and other (improved newsprint etc.)
8.2 Environment The importance and the emphasis placed on environmental issues vary at local, regional and national levels but as a company, Norske Skog believes it is important to understand and continuously improve the performance in this area. Climate change is the environmental issue receiving the greatest attention today.
In the pulp and paper industry the main topics that producers focus on are fibre supply, energy source and use, greenhouse gas emissions, the efficiency of mill production processes and emissions, and the fate of the product at the end of its life. The forest-based industry has some unique features in that the raw material is renewable, the products are highly recyclable and both raw materials and products store carbon. Sustainably managed forests will absorb the carbon dioxide from the combustion of forest-based material. At the end of their life cycle the products can be used to produce bio-energy, which is neutral with regard to climate change.
Norske Skog has developed an internal environmental index to set targets and review the work to improve resource use efficiency and reduce emissions on a continuous basis. Norske Skog’s long term goal is for all mills to operate at standards comparable to the limits defined in EU Best Available Technology documents. In 2007 Norske Skog established a 25 per cent greenhouse gas reduction target in total emissions by 2020 in order to provide added focus on this issue. The total emission reduction to date compared to the revised 2006 base year emission is six per cent.
Norske Skog’s emissions of greenhouse gases are primarily associated with use of energy. Greenhouse gas emission rates differ considerably between the company’s mills. The main reason for this lies in the different energy sources used both for externally purchased energy and for energy produced on-site. Purchased energy is mainly electrical energy used for fibre processing and to operate machinery. On-site produced energy is mainly used to dry paper on the production line. In many cases Norske Skog uses energy several times through heat recovery systems. The Norske Skog energy consumption by source was in 2008; electricity 52 per cent, Fossil 17 per cent, bioenergy 14 per cent, recovered process heat 10 per cent and other sources, mainly geothermal heat, seven per cent. The main strategies available to reduce greenhouse gas emissions involve reducing the consumption of energy and/or changing the source of the used energy.
Norske Skog uses a combination of fresh fibre and recovered paper as raw material source depending on local conditions. Both sources are needed to make sustainable use of the global fibre resource. The per cent fresh fibre (roundwood and saw mill chips) of the total raw material source
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Registration Document was 48 per cent in 2008 and the per cent recovered paper was 39 per cent. In Europe the forest areas are increasing in every country where Norske Skog sources wood. In South America and Australasia (from 2010) only plantation forests are used to supply fresh fibre. In Asia only recovered paper is used as raw material.
Norske Skog only sources wood from sustainably managed forests and do not source raw materials from high risk regions or controversial areas. All Norske Skog mills have Chain of Custody certification in place for their wood supply and the areas where the wood is sourced are thereby identified.
8.3 Outlook An assessment of the outlook involves considerable uncertainties. Demand for publication paper was very weak all over the world at the beginning of 2009, resulting from weak advertising markets and from structural decline in certain markets. The development is also partly related to reduced customer stocks in some regions. Overcapacity in Europe, North America and China remains a challenge for the sector. Curtailments are taken by virtually all players while permanent capacity closures are put on hold due to the large uncertainty. Norske Skog is the only European producer who has announced closures in 2009 (see point 5.1.5) and the sector needs more firm actions in this respect to face the weak demand and lower advertising.
Except for a newsprint paper machine with estimated start-up in the autumn of 2009 in UK, there are currently no major capacity additions within the publication paper segment.
Management’s focus is to improve the financial position of the company through longer maturities on the debt and increased cash flow from operations and from possible transactions.
8.4 Statement of no material adverse change There has been no material adverse change in the prospects of the issuer since the date of its last published audited financial statements.
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9. Administrative, management and supervisory bodies
9.1 Information about persons
Board of Directors The board of directors has an overall responsibility for determining the company's goals and strategy, and accordingly assesses its overall vision, values, goals and strategies at regular intervals. In the interim, the focus is on updating strategic plans, implementation and meeting goals.
The table below set out the names of the members of the Company's Board:
Name Position Business address Eivind Reiten Chair of the Board, elected P.O Box 329, N-1326, Lysaker, Norway April 2009 Svein Rennemo Deputy chair since 2009 P.O Box 329, N-1326, Lysaker, Norway Halvor Bjørken Board member since 2000 P.O Box 329, N-1326, Lysaker, Norway Wenche Holen Board member since 2008 P.O Box 329, N-1326, Lysaker, Norway Gisèle Marchand Board member since 2002 P.O Box 329, N-1326, Lysaker, Norway Ingrid Wiik Board member since 2005 P.O Box 329, N-1326, Lysaker, Norway Stein-Roar Eriksen Worker director since 2005 P.O Box 329, N-1326, Lysaker, Norway Paul Kristiansen Worker director since 2009 P.O Box 329, N-1326, Lysaker, Norway Inge Myrlund Worker director since 2009 P.O Box 329, N-1326, Lysaker, Norway
Alternates for worker directors Name Position Business address Jonas Kartum Alternates for worker directors P.O Box 329, N-1326, Lysaker, Norway Kjell R. Evju Alternates for worker directors P.O Box 329, N-1326, Lysaker, Norway Wenche Redzepi Alternates for worker directors P.O Box 329, N-1326, Lysaker, Norway
Eivind Reiten (56) Chair of the board, elected in April 2009. Cand. Oecon (economist) University of Oslo (1978). Member of Norske Skog's board in 1995 - 2000. President and CEO in Norsk Hydro, 2001 – 2009. Board member AGR Group ASA, board member Constructor Group, board member Backe Gruppen AS, board member Værdalsbruket AS.
Svein Rennemo (61) Deputy Chair since 2009, board member since 2008. Cand. Oceon (social economist) University of Oslo (1971). Chair of the board of StatoilHydro ASA, Pharmaq AS and Integrated Optoelectronics AS.
Halvor Bjørken (54) Board member since 2000. Forest owner. Chair of the board of TGG, deputy chair of the board of Midtnorsk Tømmerimport, member of the corporate assembly of the insurance company Storebrand and member of the board of the Ministry of Education and Research's development fund.
Wenche Holen (44) Board member since 2008. Managing director of Eniro AS. Business economist from the Norwegian School of Economics and Business Administration, technical engineer from Gjøvik School of Engineering. Chair of the board Findexia Forlag AS, board member Birdstep ASA, board member the Association for the Promotion of Skiing, board member New Media Network, board member 1880 AS.
Gisèle Marchand (50) Board member since 2002. CEO of Eksportfinans ASA. Deputy chair of the board of in Scandinavian Property Development ASA, deputy chair of the board of Oslo Børs VPS Holding ASA, board member of GK Kredittforsikring AS and Flyktningehjelpen.
Ingrid Wiik (64) Board member since 2005. CEO of Alpharma Inc. 2000-2006. Board member of the same company 2000-2007. Board member of Coloplast AS (DK) from 2003. Board member of Biotech Pharmacon ASA from 2007, Algeta ASA from 2007 and Human Care AB (S) from 2007.
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Registration Document Stein Roar Eriksen (54) Board Member since 2005, elected by the employees. Member of the executive committee of the Norwegian United Federation of Trade Unions. Member and secretary of the company's European Works Council and member of the Global Works Council. Chair of the Follum Works Council and the Norwegian Works Council.
Paul Kristiansen (53 ) Board member since April 2009, elected by the employees.
Inge Myrlund (40) Board member since April 2009, elected by the employees. Member of Norske Skog’s corporate assembly 2007 – 2009. Chair of FLT (technical council) at Norske Skog Follum, and board member of FLT 10 Ringerike.
Corporate management group The table below sets out the names of the members of the Company’s management:
Name Position Business address Christian Rynning- President and CEO P.O Box 329, N-1326 Lysaker, Norway Tønnesen Audun Røneid CFO P.O Box 329, N-1326 Lysaker, Norway Jan Clasen Senior Vice President, P.O Box 329, N-1326 Lysaker, Norway operations in Europe Terry Hamiliton Senior Vice President, P.O Box 329, N-1326 Lysaker, Norway operations in Asia, Australasia and South America Kristin Slyngstad Klitzing Senior Vice President, HR and P.O Box 329, N-1326 Lysaker, Norway organisation Rune Gjessing Senior Vice President, P.O Box 329, N-1326 Lysaker, Norway Strategy
Christian Rynning-Tønnesen (49), President and CEO
Has worked in Norske Skog since 2005. Chartered engineer from the Norwegian University of Science and Technology. Researcher at SINTEF 1984-85. Refinery analyst and product coordinator in Esso Norge 1985-89. Consultant and energy specialist in McKinsey Norge 1989-92. Director of strategic planning, director of supply Northern Europe, market director, executive vice president strategy, and executive vice president economy and finance in Statkraft 1992-2005. Chief Financial Officer Norske Skog 2005-2006. CEO since 6 June 2006.
Audun Røneid (52), Chief Financial Officer (CFO)
In Norske Skog since November 2008. Master in International Business Norwegian School of Management BI 1982. Finance consultant Sørumsand Verksted (Kværner Brug) 1982-1984. Chief accountant, section manager Kværner Rosenberg Verft Stavanger 1984-1989. Controller Mechanical Engineering Division in Kværner 1989-1991. Senior vice president (SVP) Finance in Kværner Eureka 1992-1994. SVP in Kværner Ships Equipment 1994-1998. Executive vice president finance/CFO of Aker Yards 1998-1999. SVP Finance of Kværner Oil & Gas Field Development 1999- 2002. CFO of Jotun 2002-2007. CFO of Davie Yards Inc. 2007-2008. Chief financial officer of Norske Skog since 1 November 2008.
Rune Gjessing (46), Senior vice president strategy
With Norske Skog since 2002, Bachelor of Science (wood science), University of British Columbia, Canada. MBA in finance and marketing, Simon Fraser University, Canada. Chartered Financial Analyst, finance and market analyst in Simons Consulting Group, Vancouver BC, 1992-1999. Share analyst for paper and forest products, National Bank Financial, Vancouver BC, 1999-2002. Director of investor relations & group secretary, Norske Skog, 2002-2006. Director of control functions, Norske Skog, March 2006-August 2006. Director of strategic business analysis, Norske Skog, August 2006-November 2007. Senior vice president strategy, Norske Skog since 2007.
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Registration Document Kristin Slyngstad Klitzing (44), Senior vice president HR and organisation
Has worked in Norske Skog since 2007. Cand.mag. (organisation and management) from the University of Oslo. International product manager and director of marketing services Europe in Nycomed Amersham (now GE Healthcare) 1988-2004. Senior consultant in Mercuri Urval AS 2004- 2006. Senior vice president HR & Organisation since 1 January 2007.
Jan-Hinrich Clasen (51), Senior vice president, operations in Europe
In Norske Skog 1992-1996 and from 1999. Chartered engineer with a Master of Engineering and Doktor-Ing., from the Technical University of Claustral-Zellerfeld, Germany. Sales director magazine 1992-1996 and print-shop manager for magazine print shop in Ahrensburg, Axel Springer Verlag AG, 1996-1998. Senior vice president and Chief Sales Officer Pan Asia Paper, Singapore, 1999 – 2003. Vice president Newsprint Norske Skog Europe 2003. Senior vice president sales and marketing Norske Skog group 2004-2006. Business unit general manager Norske Skog Walsum in Duisburg, Germany, 2006-2008. Senior vice president responsible for Europe since 1 March 2008.
Terry Hamilton (46), Senior vice president, operations in Asia, Australasia and South America
In Norske Skog (Fletcher Challenge) since 1987. Bachelor of Science in Mechanical Engineering (1986) and Master of Engineering (1987) from University of BC, Vancouver. MBA from Simon Fraser University in Vancouver 1997. Employee in Fletcher Challenge in Vancouver and Elk Falls, Canada, 1987-1996. Mill manager in Fletcher Challenge in Crofton 1996-2000. Managing director of Malaysian Newsprint Industries 2000-2003. Managing director in PanAsia Paper in Thailand 2003-2005. Vice president operations and strategy in Norske Skog PanAsia in 2006. Vice president NSPS in Norske Skog from 2006. Senior vice president Asia and Australasia in 2008. Senior vice president Asia, Australasia and South America since 1 January 2009.
9.2 Administrative, management and supervisory bodies conflicts of interest There are no conflicts of interests between any duties to the issuing entity of the persons referred to in item 9.1 and their private interests and or other duties.
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10. Major shareholders
10.1 Ownership As of 26 June 2009 Norske Skogindustrier ASA had a share capital of NOK 1,899,456,260 consisting of 189,945,626 ordinary shares at NOK 10.00 per share. Number of Norwegian was shareholders 26,562 and number of foreign shareholders was 1,372.
The following table lists Norske Skogindustrier ASA' principal shareholders as of 26 June 2009
Principal shareholders Number % VIKEN SKOG BA 10 897 825 5.74 FOLKETRYGDFONDET 9 254 155 4.87 AT SKOG BA 6 671 000 3.51 SKAGEN VEKST 5 600 000 2.95 STATE OF NEW JERSEY PENSION FUND C/O BANK OF NEW YORK, USA 5 000 000 2.63 JP MORGAN CLEARING CORP., A/C CUSTOMER SAFE KEEPING ACCOUNT, USA (NOM) 3 791 259 2.00 ALLSKOG BA 3 458 990 1.82 MJØSEN SKOG BA 3 407 270 1.79 GLOMMEN SKOG AB 3 348 000 1.76 BANK OF NEW YORK MELLON, S/A MELLON NOMINEE 15 OMNIBUS, USA (NOM) 3 319 424 1.75 UTHALDEN A/S, V/HARALD MORÆUS HANSSEN 2 355 500 1.24 THE NORTHERN TRUST CO., GBR (NOM) 2 291 216 1.21 A/S HAVLIDE 2 272 136 1.20 JPMORGAN CHASE BANK, SPECIAL TREATY LENDING ACCOUNT, GBR (NOM) 2 129 483 1.12 STATE STREET BANK AND TRUST CO., A/C CLIENT OMNIBUS D, REF: OM04, USA (NOM) 2 087 517 1.10 A/S HERDEBRED 2 036 585 1.07 ALLSKOG HOLDING AS 1 802 424 0.95 DNB NOR NORGE SELEKTV (III) 1 740 948 0.92 DNB NOR BANK ASA 1 652 087 0.87 BANK OF NEW YORK MELLON S/A EQUITY TRI-PARTY (3), GBR 1 531 750 0.81 CLEARSTREAM BANKING S.A., LUX (NOM) 1 522 259 0.80 SKIENS AKTIEMØLLE ASA 1 507 623 0.79 STATE STREET BANK & TRUST CO., A/C CLIENT FUND NUMBER: OM79 , USA (NOM) 1 327 567 0.70 CITIBANK N.A. NEW YORK BRANCH, USA (NOM) 1 236 451 0.65 DNB NOR SMB VPF 1 200 000 0.63 DNB NOR NORGE (IV) VPF 1 194 262 0.63 STATE STREET BANK AND TRUST CO., A/C CLIENT OMNIBUS F, REF: OM06, USA (NOM) 1 188 647 0.63 AVANSE NORGE (II) 1 116 021 0.59 SYDBANK, SEGREGATED ACCOUNT CLIENTS, DNK (NOM) 1 061 335 0.56 SKANDINAVISKA ENSKILDA BANKEN, A/C CLIENTS ACCOUNT, SWE (NOM) 1 048 028 0.55 DANSKE BANK A/S, DNK (NOM) 1 017 317 0.54 HANASAND, EINAR MIKAL 1 013 000 0.53 WENAASGRUPPEN AS 1 000 000 0.53 THE NORTHERN TRUST CO., TREATY ACCOUNT , GBR (NOM) 996 722 0.52 INTERNATIONAL EQUITY PORTFOLIO, USA 978 371 0.52 VITAL FORSIKRING ASA 960 941 0.51 Number of shares >0.5% 96 929 513 51.03 Total number of shares 189 945 626 100.00
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Registration Document Primary insiders holdings as of 1 July 2009
Shares and options in Norske Skogindustrier ASA
SVP= Senior Vice President, CEO=Chief Executive Officer, CFO=Chief Financial Officer, VP=Vice President, BOD= Board of Directors
Shareholders Position Shares Christian Rynning-Tønnessen President and CEO 49 158 Audun Røneid CFO 5 109 Rune Gjessing SVP 9 057 Jan Clasen SVP 7 167 Kristin Slyngstad Klitzing SVP 22 305 Terry Hamilton SVP 3 294
Lars Sperre VP Legal 6 895 Asbjørn U. Lundberg VP Internal Audit 5 635 Tom Bratlie VP Corporate Affairs 9 890 Carsten Dybevig Company Secretary 11 288 Odd-Geir Lyngstad Treasurer and deputy CFO 2 525 Jarle E. Langfjæran VP Investor Relations 10 426 Knut Kårbø Erichsen Director Corporate Accounting 5 604 Ole Martin Grimsrud VP Business Development 300
Eivind K. Reiten Chairman, BOD 0 Svein Rennemo Deputy chairman, BOD 0 Halvor Bjørken Director, BOD 6 885 Wenche Holen Director, BOD 0 Giséle Marchand Director, BOD 838 Ingrid Wiik Director, BOD 6 198 Stein-Roar Eriksen Worker director, BOD 0 Paul Kristiansen Worker director, BOD 4 395 Inge Myrlund Worker director, BOD 1 730
Tom Ruud Chairman, Corporate Assembly 410
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11. Financial information concerning the issuer's assets and liabilities, financial position and profits and losses
11.1 Historical Financial Information From January 1, 2005 Norske Skog’s financial statements have been presented in accordance with IFRS (IAS). The official accounts for 2007 and 2008 are therefore made in accordance with IFRS.
Accounts Group Quarterly report Q1 Annual report 2008 Annual report 2009 2007 Income statement Page 4 Page 36 Page 46 Cash flow Page 5 Page 38 Page 48 Balance sheet Page 6 Page 37 Page 47 Notes Pages 40-77 Pages 50-79
11.2 Financial statements See section 6.2.1 for a brief summary of historical financial information in addition to the annual reports for 2007 and 2008 and the 1st quarter report for 2009.
Reports can be found on the Norske Skog corporate website www.norskeskog.com or by clicking on the following link (menu on the left hand side): http://www.norskeskog.com/Investors/Investors-English/Reports.aspx
11.3 Auditing of historical annual financial information
11.3.1 Statement of audited historical financial information The historical financial information for 2007 and 2008 has been audited.
A statement of audited historical financial information is given in Annual report 2007 page 93 and Annual report 2008 page 110.
11.4 Age of latest financial information
11.4.1 Last year of audited financial information The last year of audited financial information is 2008.
11.5 Legal and arbitration proceedings There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the issuer is aware), during a period covering at least the previous 12 months which may have, or have had in the recent past, significant effects on the Company and/or Group's financial position or profitability.
11.6 Significant change in the issuer's financial or trading position There has been no significant change in the financial or trading position of the group which has occurred since the end of the last financial period for which interim financial information has been published.
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12. Documents on display The following documents (or copies thereof) may be inspected for the life of the Registration Document at the headquarters of Norske Skogindustrier ASA, Oksenøyveien 80, 1366 Lysaker, Norway:
(a) the memorandum and articles of association of Norske Skogindustrier ASA; (b) all reports, letters, and other documents, historical financial information, valuations and statements prepared by any expert at Norske Skogindustrier ASA' request any part of which is included or referred to in the Registration Document; (c) the historical financial information of Norske Skogindustrier ASA and its subsidiary undertakings for each of the two financial years preceding the publication of the Registration Document.
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Cross Reference List Reference in Registration Document Refers to 8.2 Environment, Raw material and energy use Annual report 2008, page 94 (Sustainability report) 11.1 Historical Financial Information Annual Report 2008, Annual Report 2007, Quarterly Report Q1 2009 11.3.1 Statement from auditors Annual Report 2007 page 93 and Annual Report 2008, page 110
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Articles of association for Norske Skogindustrier ASA
(Last amended in general assembly 24 April 2008)
Article 1 The company’s form and name The company is a public limited company.
The company’s name is Norske Skogindustrier ASA.
Article 2 Objects The object of the company is to pursue pulp and paper operations and activities connected with these. The company can also participate in other commercial activity by subscribing to shares or in other ways.
Article 3 Registered off ice The company is registered in Norway, and has its management and registered office in Bærum local authority.
Article 4 Share capital and shares The company’s share capital amounts to NOK 1.899.456.260, divided into 189.945.626 shares each with a nominal value of NOK 10.
The company’s shares will be registered with the Norwegian Central Securities Depository (VPS).
Article 5 Board of directors The company’s board of directors will consist of a minimum of seven and a maximum of 10 directors. Directors are elected by the corporate assembly for terms of one year. No person can be elected to the board after reaching the age of 70.
The corporate assembly will elect the chair and deputy chair of the board every year. The corporate assembly will determine the remuneration payable to directors. The board of directors is responsible for appointing a chief executive, to be known as the president and chief executive officer, and for determining his/her remuneration. The board of directors can authorise its members, the chief executive or certain other designated employees to sign for the company.
Article 6 Corporate assembly The company will have a corporate assembly consisting of 18 members, including 12 members and four alternate members elected by the annual general meeting. Members elected by the annual general meeting serve for terms of two years. Alternate members are elected for terms of one year. The corporate assembly itself elects two of its members to act as chair and deputy chair for terms of one year.
Article 7 Election committee The company will have an election committee consisting of the chair of the corporate assembly and three members elected by the general meeting for terms of one year. The election committee will be chaired by the chair of the corporate assembly.
Article 8 General meeting Notice of a general meeting must be given within the time limit stipulated in the Norwegian Act on Public Limited Companies through the publication of notices in the Aftenposten and Dagens Næringsliv newspapers. This notice can specify that any shareholder wishing to attend the general meeting must notify the company within a certain time limit, which must not expire earlier than five days before the general meeting. Shareholders failing to notify the company within the
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Registration Document specified time limit may be denied entrance to the general meeting. The general meeting will be held in the local authority in which the company has its registered office or in Oslo.
The annual general meeting will: 1. Adopt the annual accounts, including the directors’ report, and the consolidated accounts, and approve the profit and loss account and balance sheet. 2. Determine the application of the profit or coverage of the loss for the year in accordance with the approved balance sheet, including the declaration of any dividend. 3. Determine possible remuneration to be paid to members and alternate members of the corporate assembly. 4. Elect the shareholders’ representatives and alternate representatives in the corporate assembly. 5. Elect three members of the election committee. 6. Approve the auditor’s fee. 7. Deal with any other business stated in the notice of the meeting. Shareholders wishing to have any matters dealt with at the general meeting must give notice in writing of these to the board of directors at least one month prior to the general meeting. Notice of the general meeting will be given, and the general meeting will be chaired, by the chair or deputy chair of the corporate assembly or, in their absence, by the chair of the board of directors.
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