Gains on bonds exchanged in a 290 million Euros refinancing helped Norske Skog to a substantial first-quarter profit.

President and chief executive Sven Ombudstvedt says the senior secured notes issue and bond exchange, extends the maturity profile, with gains the main contributor to a 663 million profit after tax.

"After these refinancing transactions, we have strengthened and secured our long-term capital structure by enhancing our liquidity position, realising immediate de-leveraging and extended debt maturities," he said.

Ombudstvedt said already completed and announced capacity cuts in the industry should lead to an improved market balance for newsprint and magazine paper in Europe effective in second half of 2015. "However, our effective cost reduction programs at every mill and a weaker Norwegian krone support operating margins, particularly for the Norwegian units."

Norske Skog's gross operating earnings (EBITDA) in the first quarter of 2015 were 
NOK 192 million, slightly up from 190 million in the fourth quarter.

Ombudstvedt says the positive effects of the machine conversion to LWC at Boyer were now apparent: "We are the sole producer of publication paper in Australia and New Zealand, which gives us a competitive edge in those markets."

Key figures, first quarter of 2015 (NOK million)

Operating revenue in Australasia decreased Australasia
Compared to the previous quarter due to "seasonality" and low Asian export prices for newsprint. The variable cost per tonne in Q1 2015 was flat compared to the previous quarter. Fixed costs were higher in Q1 2015 than in the comparing periods, reflecting a weaker NOK to AUD and increased operating expenses following the conversion.

Demand for newsprint in Australia decreased by around ten per cent in the first two months of the year compared to the same period last year, while demand for magazine paper was relatively stable. The mills reduced their capacity utilisation to 88 per cent (93 per cent in Q4 2014) to avoid low margin newsprint exports.

Ombudstvedt says the market balance for newsprint and magazine paper is expected to improve into the second half of 2015, "with all announced capacity closures in the industry completed, giving room for price increases".