NZ's Norske Skog mill in line for trim

By NZPA

Thursday 31st October 2002

Norske Skog's Kawerau paper mill will be included in a global round of cost-cutting even though demand for newsprint has not fallen as much in Australasia as in other markets, the New Zealand Herald reports today.

The world's second-biggest newsprint maker, which bought Fletcher Challenge Paper's assets in New Zealand in 2000, this week told employees about the global plan to cut costs by more than the 700 million Norwegian krona ($192 million). Details would be released with the third-quarter result on November 6.

Regional president David Kirk, a former All Black captain now based in Sydney, said yesterday that nothing would be excluded from consideration in New Zealand but customer service, safety and environmental performance would not be compromised.

Demand for newsprint -- driven by the size of newspapers, which in turn is determined by advertising -- had fallen about 12 percent in North America, 6 percent in Europe and 3 to 4 percent in Australasia.

A rise in the krona had also reduced income from Norske's exports to Europe, said Kirk.

Price increases for newsprint in North America last month had "probably stuck", while in New Zealand the price of newsprint was raised on January 1 and cut in Australia on July 1.

Mr Kirk said he was not signalling a review of contracts for wood supply. The company would invest between $40 million and $50 million in New Zealand next year.

He said the 700 million krona target came from global costs of about 20 billion krona and was therefore not "huge", but the industry was tough.

"Our business is a commodity business where prices go down about 1 per cent a year in real terms, so we have to constantly improve our productivity, which means getting more out for what we get in, both in terms of wood, chemicals, labour, maintenance costs and energy".

Mr Kirk has been critical of electricity price rises and the cost of transport in New Zealand.

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