Newsprint and magazine paper manufacturer Norske Skog is to replace newsprint production at its Austrian Bruck-based mill with tissue manufacture.
The Norwegian company made the announcement in its second quarter results, adding that it plans to move into “two new growth areas” – tissue and bioenergy – which will be produced alongside its current publication paper business.
The move into tissue will include a joint venture with Italian producer and tissue distributor Roto-cart.
Total investment for the tissue conversion project is around €80m, with project financing of 75% debt and 25% equity.
Norske Skog president and chief executive Sven Ombudstvedt said: “We are entering the tissue market through a joint venture structure with an experienced partner, which limits the market risk and the capital spend for Norske Skog.
“The joint venture will replace newsprint production at Bruck with tissue. Thus, supporting the market balance for newsprint and exposing Norske Skog towards the growing market for tissue.”
In July, Norske Skog reported lower margins in its 2015 second quarter results due to “a challenging market”.
EBITDA for the quarter was NOK 138m; down from 192m in the first quarter due largely to a “weak publication paper demand in 2015.”
It added that the net loss of NOK 571m in the quarter was “significantly impacted by negative other gains and losses amounting to NOK 276m”.
The company said demand for newsprint and magazine paper in Europe decreased by 10% and 4% respectively in the five first month of 2015 compared to the same period last year.
In Australasia, demand for newsprint in Australia decreased by around 10% in the first five months of the year compared to the same period last year, while demand for magazine paper was relatively stable.
Total annual production capacity for the group is 2.8m tonnes.
The company will also build biogas facilities at its mills as part of its move to diversify, leveraging bio-waste from the paper production to renewable energy. The construction of such a biogas facility, at Saugbrugs in Norway, will amount to around NOK 150m.
Enova has granted NOK 52m in support to the project, while Sparebank 1 Gruppen and Halden Municipality’s pension fund has provided around NOK 100m in debt financing.
Ombudstvedt added: “We are planning to commercialise bio-waste from raw material into gas at our mills.
“Despite challenging markets, we believe that our mill sites are sustainable, and will strengthen their competitiveness by constructing biogas facilities.”