Norske Skog is set to take a major step in its continued transformation towards a growing and high-margin business by converting two newsprint paper machines into containerboard production. The conversions at Golbey and Bruck will introduce 765,000 tonnes of containerboard capacity to meet the growing demand for corrugated packaging.
“This is a milestone in Norske Skog’s strategy to become a leading European packaging producer through conversion of publication paper capacity. We will continue to optimise our broad asset base to diversify within high-growth fibre segments, and maximise cash flows from the publication paper business. Norske Skog will still remain a committed supplier of high-quality publication paper products, and a strong and reliable partner for our customers. This marks an important step in Norske Skog’s evolution as we look to enhance long-term value for all stakeholders,” says Chair of the Board, John Chiang, who also represents the largest shareholder Oceanwood.
Norske Skog plans to invest approximately €350m in the conversion projects over an 18-month period commencing in H2 2021. The investments are expected to generate an annual EBITDA of approximately €70-80m at full utilisation, based on historical prices for containerboard and recovered paper.
“The conversions at the Golbey and Bruck mills are profitable investments that will enable Norske Skog to establish a strong presence in the growing packaging market. In addition, it represents a major step in our continued effort to direct Norske Skog into a growing business, enhancing value to our shareholders and ensuring sustainable cash flow growth,” says Sven Ombudstvedt, CEO.
At the Golbey mill in France, approximately €250m is planned to be invested to convert PM1 from its current 235,000 tonnes of newsprint capacity to 555,000 tonnes of recycled containerboard. Following the conversion in 2023, Golbey will have 555,000 tonnes of recycled containerboard capacity and 330,000 tonnes of newsprint capacity. At the Bruck mill in Austria, approximately €90m is planned to be invested to convert PM3 from its current 125,000 tonnes of newsprint capacity to 210,000 tonnes of recycled containerboard. Following the conversion in 2023, Bruck will have 210,000 tonnes of recycled containerboard capacity and 265,000 tonnes of light-weight coated magazine capacity.
Final investment decisions are planned in the first half of 2021, and start of containerboard production in the first half of 2023. Production standstill at the machines that will be converted is limited to three months during the final stages of the conversions, and full utilisation is expected by the end of 2025.
“Increased focus on sustainable packaging and growth in on-line economy are key market drivers in the packaging business. With the conversion investments in Golbey and Bruck, we will meet these trends with cost-leading capacity. Both mills are positioned close to the consumer markets of containerboard in continental Europe, have established access to recycled fibre, and represent some of the best brownfield conversion opportunities in the market,” concludes Ombudstvedt.