Norske Skog

Nordea Paper Seminar Helsinki 13 May 2008

Andreas Enger, CFO

2

Content

Overview and result 1Q 2008Strategic focus and recent actionsCosts and market fundamentals

3

Norske Skog headlines

World’s second largest producer

of newsprint, fourth largest of

magazine paper:

19 mills in 14 countries

Capacity: 6.5 mill. tonnes (6 mill.

tonnes after closures in 2008)

Revenue (2007) ~ NOK 27.1 billion

4

Main activities in first quarter

Increased focus on portfolio restructuring to reduce debtMeasures to improve operating rate by closing overcapacityReducing headquarter costHalting the Pisa PM2 projectContinued efforts on operational improvements

5

Measures to improve operating rate

Steti will be closed end of May 2008Capacity reduction of 130 000 t/yVolumes transferred to Golbey and Parenco

Follum PM2 will be stopped end ofJune 2008

Capacity reduction of 130 000 t/yMost volumes transferred to Skogn and Parenco

Cheongwon will close end 2008Capacity reduction of 190 000 t/yOptimizing Asian production structure

*= Target end 2008

6

Profitable to shut down capacity

▪ Moving production to the most profitable units

▪ Removing fixed costs at shut-down plants

▪ Reducing costs per tonne for the group

▪ Total profit improvement for newsprint in Europe of approx. NOK 400 million

Changes in European mills operating results after shut-downs

-150

-100

-50

0

50

100

150

200

250

300

Steti

Follum

Skogn Parenco Golbey Bruck

MNOK/year

7

Q1 2008 in brief

EBITDA NOK 489 mill(NOK 778 mill, Q4 2007)

Underlying gross operating earnings NOK 634 mill (NOK 926 mill)

including realised gains on cash flow hedging

Pre tax profit –NOK 1 108 mill(-NOK 82 mill)

including NOK 1 254 mill in impairments

Cash flow from operations NOK 832 mill(NOK 521 mill)

Weak results in all segmentsImprovement in magazine paper

8

Gross operating margins by region

12,4 %

25,2 %

10,9 %

20,0 %

5,0 %

0,0 %

5,0 %

10,0 %

15,0 %

20,0 %

25,0 %

30,0 %

Q4 07Q1 089,3 %

14,7 %

7,0 %

0,7 %

10,2 %

Newsprint Europe Newsprint Australasia

Newsprint Asia Newsprint South America

Magazine Europe

9

Balance sheet and cash flow

0,931,051,12Gearing

4,6 %0,7 %0,2 %ROCE

16 61116 40815 742Net interest-bearing debt

44 54043 26042 108Total assets

2,16(0,36)2,81Free cash flow per share

(199)(599)(390)Investments in operational fixed assets

607521832Net cash flow from operating activities

Q1 2007Q4 2007Q1 2008Million NOK

10

The debt situation

2008: Mainly local debt in Asia2009: Mainly NOK bonds2010: Bank debt, with covenants2011: USD bonds2017: Euro bonds31.03.2008:

Cash & cash equivalents: NOK 2 bnUndrawn credit facilities: NOK 6 bn (with covenants)Gearing: 1.12; should not exceed 1.4

1

4,1

1

1,2

3,3

4,5

1,5

1

0 1 2 3 4 5

2033

2017-19

2015-16

2012-14

2011

2010

2009

2008

Debt maturity schedule, 31. 03.2008

NOK billion

Strategic focus and recent actions

12

Skogn

SaugbrugsFollum

Golbey

Parenco WalsumSteti

Bruck

MNI (34%)

Sing Buri

Shanghai

Hebei

ChongwonJeonju

Albury

Boyer

Tasman Bio Bio

Pisa

Industrial strategy in four regions

Capacity management, Capacity management, restructuring and restructuring and consolidation in Europeconsolidation in Europe

Growth, restructuring Growth, restructuring and consolidation in Asiaand consolidation in Asia

Capitalize on our strong Capitalize on our strong position in Australasiaposition in Australasia

Participate in a Participate in a growth market growth market

13

Actions to realize significant values in 2008

Structured review of Norske Skog’s portfolioMillsOther assets (power contracts)

Work has started to sell properties not related to production activities

Corporate headquarter announced for sale New Zealand harbour area/warehouse sold

14

Actions to reduce costs

Closure of 450.000 tonnes of capacityReduced fixed costs by NOK 250 mill.Increased contribution by NOK 250 mill.

Reduce corporate administration cost by at least NOK 150 mill.

Substantially downsize the corporate headquarterReorganise corporate management

Continue the profit improvement programTarget: NOK 3 billion by 2008Implementing best practise globallyEstablish permanent improvement culture

15

Taking lead in climate change actions

Climate change target:Reducing emissions of green house gases by 25 percent in 2020

A good start in 2007:Emissions fell by 3 percentPhasing in bio-energyFocus on energy saving processes

Participating in 3C Combat Climate ChangeGlobal action for rapid and cost effective transition to low emission economy

16

Customers care about the environment

John HartiganChairman and chief executiveNews Limited

“...the biggest single step in carbon reduction by any of our partners to date”

Increasing costs and market fundamentals

18

Fighting increasing costs

Variable cost pr ton: + 35 %

Average sales price: - 2 %

Indexed with100 as startingpoint in 2002.

80

90

100

110

120

130

140

2002 2003 2004 2005 2006 2007

Fixed costs are reduced by 22 %

Totale costs + 12 %

19

38 % (14%)

29 % (11%)22 % (8%)

11 % (4%)

Total cost breakdown - 2007

Raw materials37 %

Energy17 %

Labour cost10 %

Other cost14 %

Depreciation12 %

Distribution10 %

Raw materials

Total cost

Wood

Recovered paper

Kraft pulp

Chemicals etc.

20

39 %

24 %

25 %

11 % 1 %Norway

Continental Europe

Australasia

South America

Asia

Wood consumption 2007

68 %

32 %

RoundwoodChips

Wood consumption ~ 6,6 mill. m3

21

The global newsprint market

Australasia

• Stable demand• Limited imports• Prices falling due to USD

development• Good cash flow

2000 2008

South America

• Increasing demand

• Import region• Good access to

raw materials• Strong cost

pressure

2000 2008

The graphs show the development in demand for newsprint in the individual regions in 2000 and 2008

North America

• Dramatic dip in newsprint consumption

• Large-scale shut-downs have improved market balance

• Price increase of more than 10 per cent

• Consolidation and continued capacity curtailments

2000 2008

• The world’ s largest newsprint market

• Great growth potential• Demand and prices rising

Asia

2000 2008

2000 2008

Europe Newsprint

• Import pressure• Prices falling• Implementing capacity

curtailments to improve prices• Need for restructuring Magazine paper:• Greatly improved market balance

following capacity curtailments• Significant price increase

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Global demand development (Q1 08 vs. Q1 07 - Partly based on preliminary statistics)

Better supply & demand balance- 0.7%World – Std News

Increased consumption, but also customer stock building+14.7%South Am – Std News

Stock variations-11.7%Australasia – Std News

Strong growth in China and India+4.6%Asia (ex Japan) – Std News

Still tight marked, but the heat is off+ 1.3%Europe – Magazine

Easter 2008 was in March, versus April last year-3.5%Europe – Std News

Down, but less than 2007-5.7%North America Std News

CommentsChange from

Q1 07 to Q1 08Region and product

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Global market update – Spring 2008

Decline in newsprint demand continues in North America6 % reduction in Q1 2008 compared with Q1 2007

European demand levelling offPrice decrease on newsprintWeak GBP and USD adding to the challengeCapacity management is key to improve profitability

Strong demand and significant price increases in Asia into Q2Magazine market still tight

Further price increases expected in Q3

24

Newsprint market in Asia & China

Strong growth in many Asian countries, expected to continueAnnounced projects are on holdLong term potential in China

Growth driven by increase in readership and GDPStrong growth despite restrictions on advertising and editorial writingLarge number of small and inefficient newsprint mills – closure of capacity and productions of other grades is happening

Prices up 10 per cent 1Q 2008 in ChinaPrices up 20 per cent in Hong Kong and Singapore 2Q 2008

Daily Copies Sold in the 5 Largest Markets

Regional Per Capita Newsprint Consumption

Source: World Association of Newspapers.

Source: PPPC, research reports.

100

7970

53

22

0

20

40

60

80

100

120

China India Japan USA Germany

Cop

ies

sold

M

Asia (ex Japan) Newsprint Deliveries ('000 tonnes)

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2003 2004 2005 2006 2007

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Presence in China of strategic value

Only Western company with a large presenceShanghai 145.000 ton newsprint capacityHebei 330.000 ton newsprint capacityTotals 10 per cent of Norske Skog’s newsprint capacity

Weak margins due to overcapacity so farSmall Chinese enterprises forced to close down

Energy shortagesStricter environmental regulations

Norske Skog is an interesting partner for consolidations

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Capacity Changes – Standard Newsprint Europe

Source: PPPC Supply&Demand, October 2007. Capacity 2008 and 2009 reduced by 550’ tonnes from closures announced after October 2007. Myllykoski/Germany (swing PM) and Palm in UK are included.

Europe Std News

02468

1012141618

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007(E)

2008(E)

2009(E)

Milli

on to

nnes

1997: 11.4 mill

Peak 2006:12.99 mill 2007: 12.95 mill

Europe Std News

-8

-6

-4

-2

0

2

4

6

8

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007(E)

2008(E)

2009(E)C

apac

ity C

hang

e (%

)

AAGR 1997- 2007: 1.4%

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Capacity Changes – Standard Newsprint North America

Source: PPPC Supply&Demand, October 2007. Capacity 2008 and 2009 reduced by 700’ tonnes from closures announced by AbitibiBowater and Tembec after October 2007.

North Am Std News

02468

1012141618

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007(E)

2008(E)

2009(E)

Milli

on to

nnes

2007: 11.86 mill

Capacity peak: 16.61 mill

North Am Std News

-8

-6

-4

-2

0

2

4

6

8

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007(E)

2008(E)

2009(E)

Cap

acity

Cha

nge

(%)

AAGR 1997- 2007: -2.9%

28

World Std News

05

1015202530354045

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007(E)

2008(E)

2009(E)

Milli

on to

nnes

World Std News

-4

-3

-2

-1

0

1

2

3

4

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007(E)

2008(E)

2009(E)

Cap

acity

Cha

nge

(%)

Capacity Changes – Standard Newsprint World

2007: 39.95 mill1997: 38.15 mill

Source: PPPC Supply&Demand, October 2007. Capacity 2008 and 2009 reduced by announced closures of 1.45 mill tonnes tonnes in North America, Europe and Asia after October 2007.2009 includes new PM by Shandong Huatai in Guangzhou, but the project will be delayed. Expected increase in 2009 will then be 1 %, coming from Palm in UK and Pisa PM 2 in Brazil.

Peak 2009: 40.3 mill

AAGR 1997- 2007: 0.7%

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Prices are edging upwards

Price improvements in balanced markets:Newsprint Northern America +10 percentChina +10 percentMagazine + 5 percent

Newsprint Europe is still laggingPrices down 5 percent in local currency Q 1 2008A stronger NOK adds 2,5 percent on the negative side

We expect price improvement to follow capacity adjustments in Europe

30

Capacity determines price developments

-5,0

-2,5

0,0

2,5

5,0

-15 -10 -5 0 5 10 15 20

2000

2001

2002

2003

2004

2005

2006

Price development the next year(%)

Chances in capacity utilisation in a given year(%)

European newsprint

Norske Skog

Nordea Paper Seminar, Helsinki 13 May 2008

Andreas Enger, CFO