Newsprint Realities

By Glenn Dyer | More Articles by Glenn Dyer

What you didn’t learn from the wins this week by The Australian and The Weekend Australian in the Newspaper of The Year award handed out in Sydney. The sponsor, the Norwegian paper company, Norske Skog is teetering on the brink of collapse after the collapse of a shareholders meeting that was to have been held last month.

Now the company is drifting and its problems reflect the slide in the fortunes of its media customers in Australasia.Norske Skog’s problems as outlined in its second quarter report released last month, make this week’s awards night look like a noble last fling by a bunch of would be deck chairs on the Titanic.

“The Australian and The Weekend Australian were recognised last night at the 2017 PANPA Newspaper of the Year Awards, taking home the two major masthead trophies.It is the second year in succession the News Corp Australia daily masthead has won the industry’s highest award, while The Weekend Australian took out the Weekend Newspaper of the year – the third time it has done so in four years.The Australian also won the prize for Best Mobile Site – although Fairfax Media took out the trophies for the three major website awards,” the industry website, Newsmediaworks gushed.

The sponsor of the awards, Norske Skog, supplies newsprint and magazine quality papers to the print media companies in Australia and New Zealand – and you guessed it, News Corp is one of the major buyers. But ignore that and focus on the melancholy second quarter financial report from Norske Skog ( in which the state of the parlous state of the company’s finances was revealed.

The weakening Australian market is playing a major part – in fact it is not nice, as the company reported in its second quarter accounts issued in August.

"Demand for newsprint in Australasia declined by 17% through May this year compared to the same period last year. Demand for magazine paper declined by 9%,” the second quarter commentary on the Australian market revealed. That was a significant worsening in demand for media related paper. A year earlier, the company’s second quarter report revealed that "Demand for newsprint in Australasia decreased by 9% through May compared to the same period the year before. Demand for magazine paper was relatively stable.”

The worsening in demand for magazine paper is confirmed by the closures and restructuring going on at Seven West Media’s Pacific Magazines, Bauer (Cons Press) and News Life (News Corp Australia) as titles are closed, merged, reduced to websites and hundreds of staff have been sacked.

And it has been weak now for a while, with the second quarter report in 2014 revealing "Demand for newsprint in Oceania decreased by 3% in the first five months of the year, compared to the corresponding period last year. Demand for magazine paper in Australasia declined by 5% in the same period. Demand estimates are derived from shipment data. Underlying demand for magazine paper in Australasia was relatively flat.”

Back in the second quarter of 2007, the company reported that "The newsprint demand was up 3% in first half year 2007 compared to first half year 2006.” Second quarter production in Australasia in that quarter was 213,000 tonnes, production in the second quarter of 2017 was 164,000, a fall of 49,000 or 23%.

And in the second quarter of 2016, the company wrote down the value of some of its Australian paper producing assets by 947 million Krona, or around $A150 million – a sure sign (like this year’s $US310 million write downs in the long life assets of News Corp Australia) of the problems in the local print media.

To try and keep production in its Australian mills (especially Boyer near Hobart), the company (and its rivals are doing the same) are exporting into Asia, but low prices there are compounding the problem.”Continued weak newsprint price in Asia are a challenge due to higher export volumes from Australasia reflecting a structural decline in domestic demand,” directors said in August.

But you have to wonder how long can Norske Skog continue to limp along. The second quarter accounts from Norske Skog again revealed that it is in a highly stressed financial state with huge debts (over $A1 billion across the group), and no chance of repaying some of that debt when it falls due in 2019.

The board of directors recognizes the severity of the financial position and has called for an extraordinary general meeting on 24 August 2017 to provide the shareholders with, amongst other things, an update on the financial situation of the group. The board of directors has decided to use the 30-day interest payment grace periods on its exchange notes due in 2021 and 2023 and, thereby postponing interest payments of about EUR 8.3 million, to support the operating business. Reuters ( reported that the shareholder meeting was called off due to allow new directors to be updated on the company’s plans (and no doubt its parlous state).

And directors didn’t shy away from waring that if the company’s finances were not restructured, then collapse was not far away:

"The outcome of the recapitalization prosess is uncertain and, in the event that the recapitalisation described in note 11 are not successful, a security enforcement process may be executed by the holders of the Senior Secured Notes (SSN). An enforcement process may result in the secured bondholders taking control of Norske Skog AS and its subsidiaries as collateral for their debt. Norske Skogindustrier ASA, Norske Treindustrier AS and Norske Skog Holding AS may therafter be forced to file for insolvency procedings (sic).”

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →