Norske Skog to sell China mill stake
Norske Skog sells its 56 per cent stake in the newsprint mill Shanghai Norske Skog Potential Paper (SNP) and restructures the group’s other activities in China in order to improve profitability.
Norske Skog’s activities in China consist of the two newsprint mills SNP and Norske Skog Hebei as well as the administration and sales office in Shanghai. Norske Skog Hebei was completed in 2005 and has a newsprint production capacity of 330,000 tonnes. Norske Skog Hebei is one of the most modern newsprint mills in China.
SNP has a newsprint production capacity of 145,000 tonnes, and is thus one of the smallest mills in Norske Skog’s global portfolio. Since 2005, Norske Skog has owned SNP in partnership with Potential Industries (34 per cent) and Shanghai Baoshan Shi Dong-kou Economic and Trading General Co (10 per cent).
An agreement has been made under which Potential Industries will take over all of Norske Skog’s shares in SNP. The transaction entails that all debts and other commitments remain with SNP. Had Norske Skog continued to be an owner of the mill, the group would have had to inject additional capital to maintain operations at SNP.
“The sale of SNP frees up resources for the work to improve profitability at Norske Skog Hebei, while at the same time streamlining sales and administration in China. Avoiding further cash injections was also important for Norske Skog,” says CEO Christian Rynning-Tønnesen (photo).
The sale entails an accounting loss of NOK 255 million for Norske Skog. This will be recorded by minus NOK 315 million in the accounts for the second quarter of 2009, and by NOK 60 million from positive translation differences in the accounts for the third quarter of 2009. The new owners will assume all debt in SNP. This reduces Norske Skog’s gross interest-bearing debt by approximately NOK 150 million.
The transaction is contingent upon approval from Chinese authorities. Such approval is expected by the end of September this year.
Source: Norsk Skog