Norske Skog to Halt Paper Machine Install in Brazil

March 14, 2008 - Norske Skog said that it has decided to stop a paper machine (PM2) installation project at its Pisa mill in Jaguariaiva, Brazil.

The net cost of stopping the project will be about US $82 million (NOK 450 million), Norske Skog said.

"To Norske Skog, it is decisive that we improve profitability and restructure the company so that the debt is reduced. As the costs of the construction of paper machine 2 in Brazil have turned out to be so high, we were forced to stop the project for financial reasons," said chief executive Christian Rynning-Tønnesen.

In 2006, Norske Skog decided to move a used paper machine from its shuttered Union mill in Norway to the Pisa in Brazil. The project had an original budget of US $210 million.

Following reports of possible cost overruns in the project earlier this year, a group of Norske Skog employees and external specialists were tasked with auditing the project. The group's report showed that total costs of completing the project would be significantly higher than budgeted.

Norske Skog said that paper machine 2 will be stored at the Pisa mill and the installation project may be re-visited in the future.

The Pisa mill operates one newsprint machine with a capacity of 185,000 tons per year.

SOURCE: Norske Skog

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