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2016-10-19

Norske Skog: Continued good performance

Strong
dema
nd for Norske Skog's products in all regions resulted in high capacity
utilisation and net profit in the third quarter of NOK 190 million. This
demonstrate the long-term trend of good performance. So far this year, the
net profit is NOK 430 million.

Gross operating earnings (EBITDA) in the third quarter 2016 was NOK 251
million, which was a decrease from NOK 335 million in the second quarter,
mainly due to somewhat higher energy and recovered paper cost and weaken
pound. Net profit in the third quarter was NOK 190 million compared with a
negative NOK 874 million in the third quarter 2015.

- Despite a comprehensive refinancing of the group this year, the business
units have completed major cost reductions and seen significant progress on
new growth projects. The green shift transformation of Norske Skog into new
segments will be more prominent in the years to come. The improved market
balance should allow for a substantial increase in sales prices going
forward, especially after significant capacity closures in Europe and North
America combined with a flattening of the demand curve, says Sven
Ombudstvedt, CEO of Norske Skog.

Cash flow from operating activities before net financial items was NOK 115
million compared with NOK 321 million in Q2 2016. The cash balance at the end
of the quarter was NOK 570 million. Net interest bearing debt was reduced by
NOK 0.2 billion from the end of the second quarter, from NOK 6.4 billion to
NOK 6.2 billion, as a result of a stronger Norwegian krone against all major
currencies and bond buybacks. The equity was NOK 269 million at end of the
third quarter compared to NOK 190 million at the end of the second quarter.

Key figures, third quarter of 2016 (NOK million)

-------------------------------------------------------------------------------------------
| Q3 2016 Q2 2016 Q3 2015 2015 |
| Operating revenue 2 918 2 891 2 779 11 538 |
| Gross operating earnings (EBITDA) 251 335 163 753 |
| Gross operating margin (%) 8.6 11.6 5.9 6.5 |
| Gross operating earnings after depreciation 95 149 -27 -14 |
| Restructuring expenses -1 -46 -2 -53 |
| Impairment - -1 238 - - |
| Other gains and losses 20 -10 -137 -97 |
| Operating earnings 114 -1 146 -167 -164 |
| Share of profit in associated companies -3 -204 -7 -41 |
| Financial items 84 1 359 -782 -801 |
| Income taxes -5 220 81 -520 |
| Profit/loss for the period 190 229 -874 -1 526 |
| Cash flow from operations before net financial items 115 321 2 66 |
| Net interest bearing debt 6 172 6 353 8 377 8 523 |
-------------------------------------------------------------------------------------------
Market outlook

The market balance for publication paper in Europe is favorable with modest
demand declines and reduced supply due to capacity closures. The newsprint
market will tighten further in 2017 with significant additional European
capacity closures already announced, which should lead to price increases.

The Asian export market for newsprint, of increasing importance to Norske Skog
due to a smaller domestic market in Australasia, is encouraging with price
improvements.

Ongoing growth initiatives will begin to contribute meaningfully to gross
operating earnings from next year and reach full run-rate within a timeframe
of 3-4 years. Fixed costs initiatives continue at all mills towards a group
level run-rate of NOK 600 million per quarter.

Recent foreign exchange developments, particularly from GBP depreciation, but
also from NOK appreciation to EUR is a headwind for the group. Combined with
somewhat higher energy and recovered paper costs, this will diminish the
positive seasonal effect from higher sales volumes in the fourth quarter.

Markets and segments

Total annual production capacity for the group is 2.7 million. In Europe, the
group capacity is 2.0 million tonnes, while in Australasia the capacity is
0.7 million tonnes. Capacity utilization for the group in the third quarter
was 93% compared with 92% in the second quarter.

Europe
Operating revenue decreased from the previous quarter with somewhat lower
sales volumes and a negative Brexit impact from GBP depreciation. European
publication paper prices remained stable outside the UK, where import
inflation drove UK newsprint prices higher.

Variable costs increased per tonne due to higher energy and recovered paper
costs. Fixed costs remained unchanged from the second quarter. Gross
operating earnings decreased quarter-over-quarter with lower revenue, cost
inflation, and reduced contribution from Golbey in France due to its annual
maintenance stop.

Demand for newsprint and magazine paper in Europe decreased by 3% and 2%
respectively through August compared to the same period the year before.
Capacity utilisation remained high at 92% in the period (92% in Q2 2016).

Australasia
Operating revenue increased from the previous quarter with higher sales
volumes at Boyer. Publication paper prices in Australasia remained relatively
stable as long term contracts are an important constituent of the business.

Variable costs increased per tonne with a relatively higher share of magazine
paper production to newsprint production. Fixed costs were broadly flat.
Gross operating earnings decreased somewhat quarter-over-quarter with
increased costs offsetting the higher sales volumes.

Demand for newsprint in Australasia decreased by 6% through August compared to
the same period the year before. Demand for magazine paper was relatively
stable. Capacity utilisation was close to full at 97% in the period (91% in
Q2 2016).

Update on new growth opportunities

Growth project at Saugbrugs
The NOK 150 million biogas project at Saugbrugs is on schedule for completion
by year-end 2016. The biogas facility will be at full run-rate contribution
to gross operating earnings in 2017. Saugbrugs has, in addition, initiated
growth projects related to the development of microfibrillated cellulose
(MFC) and fibreboard.

Growth projects at Golbey
The Golbey biogas plant is under construction, and is expected to be completed
during 2017. The project will be financed locally. The plant will be
connected to the biological-chemical treatment plant and be dimensioned to
absorb all organic waste from the paper production. At the same time, Golbey
is implementing new projects, which will combine synergies from the existing
mill and nearby industrial clusters.

Tissue project at Bruck
Norske Skog is in partner discussions for a brownfield conversion of the
newsprint line at Bruck in Austria to tissue. The 125 000 tonnes newsprint
machine will be closed at the end of 2017, while the 265 000 tonnes LWC
machine will continue production.

Wood pellets in New Zealand
Nature's Flames pellets production has reached an annual capacity of 40 000
tonnes. Norske Skog considers to expand the production of pellets, given the
considerable competitive export advantage. Wood pellets are a renewable
alternative to fossil fuels in the large economies of South-East Asia.

Presentation and quarterly material

A recorded webcast of the CEO presentation, the quarterly financial statements
and the presentation package will be available onwww.norskeskog.com.

From 1 November 2016, Norske Skog's press- and stock exchange releases will
only be published through the Oslo Stock Exchange websitewww.newsweb.no, the
Norske Skog ticker or IssuerID beingNSG.

Norske Skog
Communications and Public Affairs

----------------------------------------------------------------------------
| For further information: |
| Norske Skog media: Norske Skog financial markets: |
|Vice President Corporate Communication Vice President Investor Relations |
|Carsten Dybevig Tom Rogn |
|Mob: +47 917 63 117 Mob: +47 948 55 659 |
|Twitter: @Norske_Skog |
----------------------------------------------------------------------------
Q3 2016 Norske Skog presentation
http://hugin.info/105/R/2049754/766584.pdf
Q3 2016 Norske Skog quarterly report
http://hugin.info/105/R/2049754/766583.pdf

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This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Norske Skog via Globenewswire

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