Norske Skog discontinues operations at Walsum mill in Germany

Norwegian paper maker Norske Skog reports that it has closed its Walsum paper mill in Duisburg, Germany. The company cites high costs and the demanding market as factors in the closure. The mill has recently had a negative cash flow, according to Norske Skog.

According to a press release issued by the company, in 2015, Walsum’s cash flow to the Norske Skog group has been negative with 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, and local management of the mill has begun insolvency proceedings, the company says.

The company says the closure will 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, the company says.

The mill employed 291 people and has had an annual production capacity of 205,000 metric tons of lightweight coated (LWC) paper.

The company reports that cash flow situation is not likely to reverse, given the unfavorable cost position. In recent years Norske Skog says has completed several improvement programs with respect to energy, raw materials, the number of employees and the level of working capital without achieving profitability, says CEO Sven Ombudstvedt

In December 2013, Norske Skog idled paper machine Paper Mill 4 (PM4), which had an annual production capacity of 225,000 metric tons. Production continued at the mill’s second paper machine, PM10.

The company states that 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 economics of Walsum.

According to Norske Skog, the closure will not affect agreements that suppliers and customers have with other Norske Skog companies nor any of the other business units of the group.