Norske Skog, Norway, reports that this year, the cash flow from its Walsum' mill in Duisburg, Germany, has been negative, by up to NOK 10 million per month. Therefore, the board of Norske Skog has decided to discontinue operations at Walsum to prevent further losses for the group. There are 291 employees at the mill, which has an annual production capacity of 205,000 metric tons of lightweight coated (LWC) paper.

 

"Walsum has recently had a significant negative cash flow, a trend unlikely to reverse given the unfavorable cost position. In recent years, we have completed several improvement programs with respect to energy, raw materials, number of employees, and the level of working capital without achieving profitability," said CEO Sven Ombudstvedt.

 

In December 2013, Norske Skog closed production on Walsum’s paper machine PM 4, which had an annual production capacity of 225,000 tons. At the time, the company decided to continue production on the mill's second paper machine, PM 10. Employees have made significant efforts to improve the remaining activities at the mill, the company notes.

 

"Despite solid efforts from the employees, Walsum is in a loss position. Given the challenging market situation and the mill's high costs relative to competitors, it is very difficult to see a return to profitability," Ombudstvedt said.

 

The market for publication paper has been demanding for an extended period. Capacity closures of more than 3.0 million metric tons in Europe and North America in 2014 and 2015, in Norske Skog's product segments, contribute to a better market balance, but do not improve the economic fundament of Walsum, the company pointed out, adding that Norske Skog has therefore decided to end the support of the cash negative operations at Walsum. This has led the local management of Walsum to file for opening of insolvency proceedings with the local court in Duisburg.  

 

The closure will not affect agreements that suppliers and customers have with other Norske Skog companies. The closure will have no effect on any of the other business units of Norske Skog, and will have no effect on the financing of the Norske Skog group. The closure will, for the Norske Skog group, have an estimated negative equity effect of around NOK 30-40 million before costs related to the closure. Cash effects beyond the operating losses at Walsum are limited.