4 T H QUARTER 2019 O s l o , 5 F e b r u a r y 2 0 2 0 Agenda - - PowerPoint PPT Presentation

O s l o , 5 F e b r u a r y 2 0 2 0

4 T H QUARTER 2019

Agenda

• Per A Sørlie, President & CEO
• Highlights
• Proposed dividend
• Business areas
• Strategic projects update
• Sustainability
• Outlook
• Per Bjarne Lyngstad, CFO
• Financial performance

2

Highlights – 4th quarter 2019

• EBITA adj.1 73 mNOK (94 mNOK)
• 35 mNOK impact from operational incidents at the

Sarpsborg site, mainly affecting Speciality Cellulose

• Favourable product mix, but reduced sales volume

and higher costs and depreciation in Performance Chemicals

• Continued strong improvement in Ingredients
• Positive net currency impact
• Strong cash flow from operations1

1 Alternative performance measure, see Appendix for definition

3

Highlights – full year 2019

4

• EBITA adj.1 589 mNOK (580 mNOK)
• Favourable product mix, but higher costs and

increased depreciation in Performance Chemicals

• Improved product mix, higher wood costs and
• perational incidents in Speciality Cellulose
• Positive development for bioethanol
• Increased sales prices for wood based vanillin
• Positive net currency impact

1 Alternative performance measure, see Appendix for definition

Dividend proposal for 2019

• Borregaard’s dividend policy
• To pay regular and progressive dividends

reflecting the expected long-term earnings and cash flows of the Group

• Annual dividend is targeted between

30% and 50% of net profit

• A dividend of NOK 2.30 per share is

proposed by the Board of Directors

• 55% of net earnings
• Total dividend payment of 229 mNOK

5

Performance Chemicals markets – Q4

5 444 5 022 4 943 5 125 5 608 5 227 5 168 5 489 4 000 4 500 5 000 5 500 6 000 6 500 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19

NO NOK K per mt mtds ds

Average gross sales price1

107 122 122 116 114 125 119 111 25 50 75 100 125 150 Q1 Q2 Q3 Q4

‘000 mtds

Sales volume1

2018 2019

1 Average sales price and sales volume reflect 100% of sales and volume from the J/V in South Africa. 1 Average sales price is calculated using actual FX rates, excluding hedging impact.

6

• Average price in sales currency was in line with Q4-18
• Favourable product mix
• Sales to concrete admixtures declined, more than compensated by growth in other construction applications
• Sales volume declined by 4% vs Q4-18
• Lower Industrial volumes, Specialities and Construction in line with Q4-18
• Raw material supply from Flambeau ceased late in Q3-19
• Positive FX effects

Performance Chemicals markets – full year

5 500 5 331 5 229 5 124 5 366 3 000 3 500 4 000 4 500 5 000 5 500 6 000 6 500 2015 2016 2017 2018 2019

NO NOK K per mt mtds ds

Gross average sales price1

213 214 210 212 209 09

121

150 157 170 175 75 76

79 82 85 85 85

410 443 449 467 469 69

100 200 300 400 500 2015 2016 2017 2018 2019

‘000 mtds

Sales volume1

Construction Industrial Specialities

1 Average sales price and sales volume reflect 100% of sales and volume from the J/V in South Africa. 1 Average sales price is calculated using actual FX rates, excluding hedging impact.

7

• Average price in sales currency slightly below 2018
• Continued strong competition in concrete admixtures and certain low value Industrial applications
• Favourable product mix
• Sales to concrete admixtures declined, more than compensated by growth in other construction applications
• Sales volume increased marginally
• Growth for Industrial products, stable volume for Specialities and a slight decline in Construction
• Florida sales volume in accordance with the ramp-up plan, but profitability below expectations

Speciality Cellulose markets – Q4

10 105 10 179 10 473 10 485 10 645 10 439 10 908 10 357 9 500 10 000 10 500 11 000 11 500 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19

NO NOK K per mt mt

Average gross sales price1

40,0 39,1 33,2 37,7 34,5 42,4 37,6 38,6 10

20 30 40 50 Q1 Q2 Q3 Q4

‘000 mt

Sales volume

2018 2019 8

• 7% lower average price in sales currency
• Lower price for cellulose products which were declassified after operational incidents
• Slightly higher sales volume and a significant reduction in inventory
• Higher bioethanol sales volume
• Positive FX impact

1 Average sales price is calculated using actual FX rates, excluding hedging impact.

Speciality Cellulose markets – full year

9 546 9 986 10 575 10 301 10 580 7 000 8 000 9 000 10 000 11 000 12 000 2015 2016 2017 2018 2019

NO NOK K per mt mt

Gross average sales price1

153,6 152,3 150,7 150,0 153,1 57% 64% 72% 62% 73%

0% 20% 40% 60% 80%

50 100 150 200 2015 2016 2017 2018 2019

‘000 mtds

Sales volume

Highly specialised

1 Average sales price is calculated using actual FX rates, excluding hedging impact.

9

• Cellulose prices were slightly below 2018 mainly as a result of sales of declassified cellulose
• Improved product mix, sales of highly specialised grades increased to 73% (62%)
• Bioethanol had higher sales and production volume, improved product mix and lower production costs
• Positive FX effects

Ingredients & Fine Chemicals markets – Q4 & full year

116 104 113 138 139 146 139 160 25 50 75

100 125 150 175 Q1 Q2 Q3 Q4

mN mNOK

Ingredients - sales revenues

2018 2019 73 54 55 65 80 50 69 61 25 50 75 100 Q1 Q2 Q3 Q4

mN mNOK

Fine Chemicals - sales revenues

2018 2019 1 0

• Ingredients
• Strong demand and higher sales for wood based

vanillin

• Sales revenues increased by 24% in 2019 due to

higher sales prices for wood based vanillin

• Fine Chemicals
• Sales volume in line with Q4-18, but with a weaker

product mix

• Sales revenues increased by 5% in 2019

Completed and ongoing strategic projects

• Specialisation, diversification and growth within Performance Chemicals
• Florida plant (1st phase) started up mid 2018
• Upgrade and increased specialisation in Sarpsborg from Q3-2019
• Extension of joint venture agreement in South Africa to 2032
• Develop the unique biorefinery asset in Sarpsborg
• High-end bioethanol expansion started up in Q1-18
• Ice Bear capacity expansion completed end 2018
• Wood based vanillin capacity expansion, completion 1H-21
• Establish Cellulose Fibrils as a new business area
• Commercial-scale production facility completed in Q4-16
• Exilva market introduction ongoing

1 1

…… ➢ Expansion investments of 1.7 billion NOK in 2015-2019 ➢ All investments projects completed on time and within budget ➢ Going forward, focus will primarily be on market execution

Cellulose Fibrils – the SenseFi project discontinued

• Advanced texture system for food
• Market potential not considered

sufficient to move the project from demonstration phase to commercial

• peration
• Write-downs and costs of 11 mNOK as

Other expenses1 in Q4-19

• EBITA adj1 impact of -9 mNOK in 2019

1 Alternative performance measure, see Appendix for definition

1 2

Cellulose Fibrils – Exilva status

• Additive for industrial applications
• Improves flow, stability, flexibility and strength in

industrial formulations and materials

• Market introduction ongoing
• ≈50 regular customers
• Volumes still relatively small
• Strong pipeline growth
• >1800 prospective customers received samples

and/or in lab/trial phase

• More than 500 new prospects last six months
• Long lead times
• Horizon 2020 grant ends in April 2020

1 3 Exilva has received funding from the Bio-Based Industries Joint Undertaking (BBI) under the European Union’s Horizon 2020 research and innovation programme under grant agreement No 709746.

1 4

Sustainability - Integral part of market offering

P ROCE S S ES PRODUCT S RAW MAT E RIALS

Natural, renewable, sustainable raw materials Efficient and sustainable production and value chain Sustainable biochemicals

1 4

Sustainable and certified wood

• Documentation
• PEFC1) and FSC1) standards
• Lignin raw materials from certified

forests

1) PEFC: Programme for the Endorsement of Forest Certification, FSC: Forest Stewardship Council 2) Life Cycle Analysis 3) Environment, Health and Safety

Reduced emissions improve LCA2)

• Target based CO2-reductions
• Energy conservations
• New/Green energy sources
• Reduced emissions to water and air
• “Greener” logistical solutions

Products add sustainable value to customers

• Cl

Clim imate: LCA2) shows favourable GHG footprint

• Bi

Biob

• based: Natural raw materials preferred
• EHS

EHS3): Non-toxic, harmless products

Sustainability

Scie cience Bas ased Tar argets ts for

• r GHG em

emis issio ions app approved by CDP1

• Targeted reductions in greenhouse gas emissions:
• 53% by 2030
• 100% by 2050
• Base year = 2009
• Targets are in line with the ambitions in the Paris Agreement and

the Norwegian Climate law

Borregaard maintained a CDP ‘A’ rating in 2019

• Highlighted as a global leader in corporate climate action
• Achieved a place on the CDP Climate Change ‘A List’
• 8,400 companies reported to CDP in 2019
• 179 (2.1%) were awarded an ‘A’ rating

1 5

1 CDP: global non-profit organisation that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests

Outlook

• Performance Chemicals
• Continued strong competition and further price pressure for lignin products to concrete admixtures and certain low

value Industrial applications expected to be partly compensated by diversification and specialisation in 2020

• Sales volume forecast to increase by 0-5%
• 40 mNOK cost savings from the upgrade in Norway will be gradually realised through 2020, full effect from 2021
• 20 mNOK cost savings from restructuring of the German lignin operation will have full effect in 2020
• Speciality Cellulose
• Average price in sales currency expected to increase by 2% from 2019
• Wood cost in H1-20 will be 25-30 mNOK lower than in H1-19
• Sales volume in Q1-20 is expected to be higher vs Q1-19, with similar product mix
• Other Businesses
• The current price level for wood based vanillin is expected to continue
• Capacity expansion in Ingredients will be gradually realised in 2020 with full effect from H2-21
• No major changes in the market conditions for Fine Chemicals
• Sales are gradually increasing for Cellulose Fibrils, but lead time for sales prospects are long
• The remaining EU Horizon 2020 grant will end in April 2020

1 6

FIN AN CIAL PERFORMAN CE Q4 -1 9

Borregaard key figures – Q4

1 8 1 217 1 199 1 150 1 219 1 250 1 340 1 239 1 234 250 500 750 1 000 1 250 1 500 Q1 Q2 Q3 Q4

mN mNOK

Operating revenues

2018 2019

177 164 145 94 157 179 180 73 50 100 150 200 Q1 Q2 Q3 Q4

mN mNOK

EBITA adj.1

2018 2019

• Revenues 1% above Q4-18
• EBITA adj.1 73 mNOK for the Group
• Other Businesses improved, Performance Chemicals and Speciality Cellulose had weaker results vs Q4-18
• 35 mNOK impact from operational incidents at the Sarpsborg site
• Positive FX effects
• EPS at NOK 0.38 (NOK 0.80)
• 11 mNOK as Other expenses1 (SenseFi project) and 22 mNOK increase in Net financial expenses

14,5 13,7 12,6 7,7

12,6 13,4 14,5 5,9 5 10 15 20

Q1 Q2 Q3 Q4

%

EBITA adj. margin1

2018 2019 1,37 2,69 3,96 4,76

1,26 2,48 3,79 4,17 2 4 6

Q1 Q2 Q3 Q4

NO NOK

Earnings per share

Cumulative

1 Alternative performance measure, see Appendix for definition

Borregaard key figures – full year

1 9 4 164 4 492 4 618 4 785 5 063 1 000 2 000 3 000 4 000 5 000 2015 2016 2017 2018 2019

mN mNOK

Operating revenues

497 747 749 580 589

11,9 16,6 16,2 12,1 11,6 4 8 12 16

200 400 600 800 2015 2016 2017 2018 2019

% mN mNOK

EBITA adj.1 & margin1

• Revenues up 6% vs 2018
• Slightly improved EBITA adj.1
• Other Businesses improved significantly, Performance Chemicals and Speciality Cellulose had weaker results
• Positive FX impact
• Impact on EBITA adj.1 from implementation of IFRS 16 Leases was +10 mNOK
• EPS for 2019 ended at NOK 4.17 (4.76)
• Increased net financial expenses and -27 mNOK in Other income and expenses1

15,6 21,7 19,1 12,7 10,9 3,86 5,55 5,66 4,76 4,17

2 4 6 8 10 5 10 15 20 2015 2016 2017 2018 2019

NO NOK %

ROCE1 and earning per share

ROCE % EPS

1 Alternative performance measure, see Appendix for definition

Performance Chemicals key figures – Q4

2 0 555 571 559 552 600 618 564 548 100 200 300 400 500 600 Q1 Q2 Q3 Q4

mN mNOK 2018 2019

115 102 55 42 87 107 67 36 25 50 75 100 125 Q1 Q2 Q3 Q4

mN mNOK 2018 2019

• Revenues 1% below Q4-18
• Sales volume 4% lower
• Average price in sales currency in line with Q4-18
• Positive net FX impact
• Full year growth 4%

20,7 17,9 9,8 7,6

14,5 17,3 11,9 6,6

5 10 15 20 25 Q1 Q2 Q3 Q4

% 2018 2019

• Favourable product mix, but lower sales volume
• Higher operating costs
• Higher depreciation
• Positive net FX impact
• Full year EBITA adj.1 297 mNOK (314 mNOK)
• EBITA adj. margin1 declined vs Q4-18
• Full year EBITA adj. margin1 12.7 (14.0)

Operating revenues EBITA adj.1

EBITA adj. margin1

1 Alternative performance measure, see Appendix for definition

Speciality Cellulose key figures – Q4

2 1 434 427 381 427 392 482 425 426 100 200 300 400 500 Q1 Q2 Q3 Q4

mN mNOK 2018 2019

64 67 76 50

35 48 82 23 20 40 60 80 Q1 Q2 Q3 Q4

mN mNOK 2018 2019

• Revenues in line with Q4-18
• Slightly higher sales volume
• 7% lower sales prices, mainly from declassified cellulose products
• Positive FX effects
• Full year growth 3%

14,7 15,7 19,9 11,7

8,9 10,0 19,3 5,4

5 10 15 20 25 Q1 Q2 Q3 Q4

% 2018 2019

• Lower sales prices and production output due to the operational

incidents at the Sarpsborg site

• Higher sales volume and improved result for bioethanol
• Positive net FX impact
• Full year EBITA adj.1 188 mNOK (257mNOK)
• EBITA adj. margin1 below Q4-18
• Full year EBITA adj. margin1 10.9 (15.4)

Operating revenues EBITA adj.1

EBITA adj. margin1

1 Alternative performance measure, see Appendix for definition

Other Businesses key figures – Q4

2 2 239 212 223 253 274 256 266 277 50 100 150 200 250 300 Q1 Q2 Q3 Q4

mN mNOK 2018 2019

• 2
• 5

14 2 35 24 31 14

• 10

10 20 30 40 Q1 Q2 Q3 Q4

mN mNOK 2018 2019

• Revenues 9% above Q4-18
• Higher sales and strong demand for wood based vanillin
• Full year growth 16%
• Ing

ngredients: Continued strong result

• Fi

Fine ne Che Chemic icals ls: Weaker product mix and result vs Q4-18

• Cel

Cellu lulose Fi Fibr brils: ils: Reduced cost coverage2 not fully compensated by higher sales and improved productivity

• Co

Corp rpor

• rate cos
• sts were in line with Q4-18
• Positive net FX effects for Other Businesses
• Full year EBITA adj.1 104 mNOK (9 mNOK)

Operating revenues EBITA adj.1

1 Alternative performance measure, see Appendix for definition 2 The Exilva project has received funding from the Bio-Based Industries Joint Undertaking (BBI) under the European Union’s Horizon 2020 research

and innovation programme under grant agreement No 709746.

Currency impact

3

• 6
• 7
• 1
• 8
• 13
• 23
• 32
• 35
• 25
• 15
• 5

5 Q1 Q2 Q3 Q4

mN mNOK

Hedging effects2 on EBITA adj.1

2018 2019 97,8 98,9 100,7 102,7 104,3 104,7 106,9 109,8 96 98 100 102 104 106

108 110 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19

Borregaard’s currency basket3

1Alternative performance measure, see Appendix for definition. 2See appendix for currency hedging strategy, future hedges and hedging effects by segment. 3Currency basket based on Borregaard’s net exposure in 2018 (=100): USD 65% (approx. 190 mUSD), EUR 34% (approx. 84 mEUR), Other 1% (GBP, BRL, JPY, SEK, ZAR).

2 3

• Net FX EBITA adj.1 impact +15 mNOK vs Q4-18
• Includes change in hedging effects and based on estimated FX exposure
• Net FX EBITA adj.1 impact YTD +95 mNOK
• Net FX EBITA adj.1 impact in 2020 estimated to be +30 mNOK vs 2019
• Assuming rates as of 4 February (USD 9.23 and EUR 10.19) on expected FX exposure
• Net FX EBITA adj.1 impact in Q1 estimated to be +5 mNOK vs Q1-19
• Significant FX exposure, but delayed impact of FX rate fluctuations due to hedging policy

Cash flow, investments and NIBD

2 4 81 127 176 249 353 50 100 150 200 250 300 350 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19

mN mNOK

Cash flow from operations1

Cash flow from operations EBITDA adj.

189 76 54 58 182 24 47 92 43 31

213 123 146 101 213 50 100 150 200 250 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19

mN mNOK

Investments

Replacement Expansion

• Depr. ex IFRS16
• Cash flow from operations1 increased significantly vs Q4-18 and previous quarters in 2019
• Significant reduction in net working capital in Q4
• Investments in line with Q4-18 and slightly below forecast
• Expansion investments mainly related to completion of lignin operation upgrade in Norway
• Limited carry-over to 2020
• NIBD1 declined by 87 mNOK in Q4

1 576 1 489 183 171 13 213 67

1 100 1 200 1 300 1 400 1 500 1 600

mN mNOK

NIBD1 change

Increase Decrease

1 Alternative performance measure, see Appendix for definition

Investment forecast 2020-2021

2 5

370 350-400 350-400 100 200 300 400 500 2019 2020 2021 mN mNOK

Rep eplacemen ent investments - forecast1)

Actual Low Uncertainty Depreciation ex IFRS16 213 170-230 50-150 100 200 300 2019 2020 2021 mN mNOK

Exp Expansion investments - forecast1)

Actual Low Uncertainty

• Replacement investments
• Targeted at depreciation level
• Upgrade of caustic soda production facility cannot

be handled within target

• Expansion investments
• Capacity expansion for wood based vanillin the

main project (130 mNOK, H2-19 to mid 2021)

• A few smaller expansion projects are ongoing
• r planned
• New projects may lead to additional investments

1 Uncertainty is related to final investment decisions, timing of investment payments, execution time and risk and unexpected events e.g.

Q&A

• Per A Sørlie, President & CEO
• Per Bjarne Lyngstad, CFO

2 6

APPEN DIX

Borregaard – key figures

2 8

Amounts in NOK million Q4-2019 Q4-2018 Change YTD-2019 YTD-2018 Change Operating revenues 1 234 1 219 1 % 5 063 4 785 6 % EBITDA adj. 1 183 183 183 183 0 % 1 007 903 903 12 % EBITA adj. 1 73 73 94 94

• 22 %

589 589 580 580 2 % Amortisation intangible assets

• 1
• 1
• 4
• 4

Other income and expenses1

• 11
• 27

Operating profit 61 61 93 93

• 34 %

558 558 576 576

• 3 %

Financial items, net

• 31
• 9
• 91
• 14

Profit before taxes 30 30 84 84

• 64 %

467 467 562 562

• 17 %

Income tax expenses

• 12
• 19
• 116
• 137

Profit for the period 18 18 65 65

• 72 %

351 351 425 425

• 17 %

Profit attributable to non-controlling interests

• 20
• 15
• 66
• 51

Profit attributable to owners of the parent 38 80 417 476 Cash flow from operating activities (IFRS) 288 288 70 70 697 697 558 558 Earnings per share 0,38 0,80

• 53 %

4,17 4,76

• 12 %

EBITDA adj. Margin 1 14,8 % 15,0 % 19,9 % 18,9 % EBITA adj. Margin 1 5,9 % 7,7 % 11,6 % 12,1 %

1 Alternative performance measure, see Appendix for definition

Effects of IFRS 16 Leases – Ytd December 2019

0 4 . 0 2 . 2 0 2 0 2 9

1 Alternative performance measure, see Appendix for definition

INCOME STATEMENT (mNOK) OTHER KEY FIGURES AND RATIOS

IAS 17 IFRS 16 Change IAS 17 IFRS 16 Change EBITDA adj.1 935 1 007 72 EBITDA adj. margin1 18,5 % 19,9 % 1,4%-p Depreciation

• 356
• 418
• 62

EBITA adj. margin1 11,5 % 11,6 % 0,1%-p EBITA adj.1 579 589 10 Operating profit 548 558 10 Capital employed1 5 323 5 601 278 Net financial items

• 74
• 91
• 17

Return on capital employed1 10,9 % 10,5 %

• 0,6%-p

Profit before tax 474 467

• 7

Earnings per share 4,24 4,17

• 0,07

Net interest-bearing debt1 1 489 1 876 387 Leverage ratio1 1,59 1,86

• 0,27

BALANCE SHEET (mNOK)

Total assets 6 364 6 744 380 Equity ratio1 54,5 % 51,4 %

• 3,1%-p

Equity 3 471 3 464

• 7

IAS 17: Operating leases off-balance sheet as a single expense. Finance leases on balance sheet IFRS 16: Operating leases recognise assets and liabilities on balance sheet. Operating leases to report depreciation and interest separately. Green background: Reported figures in 2019

Operating revenues and EBITA adj.1 per segment

3 0

Amounts in NOK million Amounts in NOK million Operating revenues Q4-2019 Q4-2018 Change EBITA adj. 1 Q4-2019 Q4-2018 Change Borregaard 1 234 1 219 1 % Borregaard 73 73 94 94

• 22 %

Performance Chemicals 548 552

• 1 %

Performance Chemicals 36 42

• 14 %

Speciality Cellulose 426 427 0 % Speciality Cellulose 23 50

• 54 %

Other Businesses 277 253 9 % Other Businesses 14 2 Eliminations

• 17
• 13

Amounts in NOK million Amounts in NOK million Operating revenues YTD-2019 YTD-2018 Change EBITA adj. 1 YTD-2019 YTD-2018 Change Borregaard 5 063 4 785 6 % Borregaard 589 589 580 580 2 % Performance Chemicals 2 330 2 237 4 % Performance Chemicals 297 314

• 5 %

Speciality Cellulose 1 725 1 669 3 % Speciality Cellulose 188 257

• 27 %

Other Businesses 1 073 927 16 % Other Businesses 104 9 Eliminations

• 65
• 48

1 Alternative performance measure, see Appendix for definition

Cash flow

3 1

Amounts in NOK million Q4-2019 Q4-2018 YTD-2019 YTD-2018 Amounts in NOK million Profit before taxes 30 84 467 562 Amortisation, depreciation and impairment charges 121 90 432 327 Change in net working capital, etc 171

• 102
• 85
• 194

Dividend (share of profit) from JV 2 5 6 Taxes paid

• 36
• 2
• 122
• 143

Cash flow from operating activities 288 288 70 70 697 697 558 558 Investments property, plant and equipment and intangible assets *

• 213
• 213
• 583
• 762

Other capital transactions 8 2 29 13 Cash flow from Investing activities

• 205
• 211
• 554
• 749

Dividends

• 224
• 199

Proceeds from exercise of options/shares to employees 1 1 35 23 Buy-back of shares

• 4
• 60
• 32

Gain/(loss) on hedges for net investments in subsidiaries 5

• 40
• 26
• 22

Net paid to/from shareholders 2

• 39
• 275
• 230

Proceeds from interest-bearing liabilities 52 39 1 750 1 292 Repayment from interest-bearing liabilities

• 143
• 24
• 1 621
• 960

Change in interest-bearing receivables/other liabilities

• 1

14

• 3
• 2

Change in net interest-bearing liablities

• 92

29 29 126 126 330 330 Cash flow from financing activities

• 90
• 10
• 149

100 100 Change in cash and cash equivalents

• 7
• 151
• 6
• 91

Cash and cash equivalents at beginning of period 92 231 86 180 Change in cash and cash equivalents

• 7
• 151
• 6
• 91

Currency effects cash and cash equivalents

• 4

6 1

• 3

Cash and cash equivalents at the end of the period 81 81 86 86 81 81 86 86 * Investment by category Replacement Investments 182 189 370 346 Expansion investments1 31 24 213 416

1 Alternative performance measure, see Appendix for definition

Balance sheet

3 2 Amounts in NOK million 31.12.2019 30.9.2019 31.12.2018 Assets: Intangible assets 93 90 100 Property, plant and equipment 4 232 4 164 3 623 Other assets 251 226 230 Investment in joint venture 99 96 100 Non-current assets 4 675 4 576 4 053 Inventories 931 955 856 Receivables 991 1 051 956 Cash and cash deposits 147 127 86 Current assets 2 069 2 133 1 898 Total assets 6 744 6 709 5 951 Equity and liabilities: Group equity 3 306 3 145 3 123 Non-controlling interests 158 178 198 Equity 3 464 3 323 3 321 Provisions and other liabilities 294 308 271 Interest-bearing liabilities 1 399 1 554 1 115 Non-current liabilities 1 693 1 862 1 386 Interest-bearing liabilities 628 548 272 Other current liabilities 959 976 972 Current liabilities 1 587 1 524 1 244 Equity and liabilities 6 744 6 709 5 951 Equity ratio1 (%): 51,4 % 49,5 % 55,8 %

1 Alternative performance measure, see Appendix for definition

Net financial items & net interest-bearing debt1

3 3

1 Alternative performance measure, see Appendix for definition

Amounts in NOK million Net financial items Q4-2019 Q4-2018 YTD-2019 YTD-2018 Net interest expenses

• 19
• 12
• 69
• 32

Currency gain/loss

• 3
• 12
• 3

Other financial items, net

• 9

3

• 10

21 Net financial items

• 31
• 9
• 9
• 91
• 14

Amounts in NOK million Net interest-bearing debt 1 (NIBD) 31.12.2019 30.9.2019 31.12.2018 Non-current interest-bearing liabilities 1 399 1 554 1 115 Current interest-bearing liabilities including overdraft of cashpool 628 548 272 Non-current interest-bearing receivables (included in "Other Assets")

• 4
• 4
• 4

Cash and cash deposits

• 147
• 127
• 86

Net interest-bearing debt 1 (NIBD) 1 876 1 971 1 297 Impact of IFRS 16 Leases 387 395 Net interest-bearing debt 1 excluding impact of IFRS 16 Leases 1 489 1 576

Currency hedging strategy

3 4 USD million USD rate EUR million EUR rate Q1-2020 36 8.36 24 9.56 Q2-2020 35 8.36 23 9.85 Q3-2020 35 8.20 23 9.83 Q4-2020 35 8.25 23 10.06 2020 141 8.29 93 9.82 2021 142 8.38 94 10.17 2022 100 8.77 64 10.47 2023 8 9.26 5 10.81 NOK million Q4-19 Q4-18 YTD-19 YTD-18 Performance Chemicals

• 8
• 1
• 19

1 Speciality Cellulose

• 16
• 1
• 38
• 3

Other Businesses

• 8

1

• 19
• 9

Bor

• rregaard
• 32

32

• 1
• 76

76

• 11

11

Purpose is to delay effects of currency fluctuations and secure competitiveness

• Hedging based on expected EBITA adj. impact1
• Base

Base he hedge: 75%/50% on a rolling basis for 6/9 months for major currencies

• Ex

Extended he hedge: 75%/50% of the next 24/36 months if USD and EUR are above defined levels EUR; effective rate above 8.50 USD; gradually at effective rates between 7.50 and 8.50

• Contracts2: 100% hedged
• Balance sheet exposure hedged 100%
• Net investments in subsidiaries hedged up to 90% of book value in major currencies

Con

• ntracted FX

X he hedg dges wi with th EB EBITA adj.

• j. imp

mpact (as as of 04 04.02.20) He Hedgin ing effects ts by by se segment

1 Hedging done mainly in the Norwegian company 2 Strict definition of contracts applied for 100% hedging (mutually binding agreement in which price, currency, volume and time are defined)

Credit facilities, solidity and debt

• Lon

Long-term cr credit faci cili litie ies

• 1,500 mNOK revolving credit facilities, maturity 2021
• 400 mNOK 5-year bond issue, maturity 2023
• 40 mEUR 10-year loan, maturity 2024
• 60 mUSD term loan for LT Florida,

tenor 8.5 years from completion

• Short-term cr

cred edit it facil cilit ities es

• 225 mNOK overdraft facilities
• 400 mNOK commercial paper
• Soli
• lidity (c

(covenants)

• Equity ratio1 51.4% (> 25%)
• Leverage ratio1 LTM 1.59 (< 3.25)

3 148 1 085 485 81 1 659 250 500 750 1 000 1 250 1 500 1 750 2 000 2 250 2 500 2 750 3 000 3 250 3 500 Long-term debt Other NIBD Cash & cash equivalents Undrawn facilities Total available

Debt and undrawn facilities

31.12.2019

NIBD1 1,489 mNOK 3 5

1 Alternative performance measure, see Appendix for definition

Alternative performance measures

In the discussion of the reported operating results, financial position and cash flows, Borregaard refers to certain measures which are not defined by generally accepted accounting principles (GAAP) such as IFRS. Borregaard management makes regular use of these non-GAAP measures and is

• f the opinion that this information, along with comparable GAAP measures, is useful to investors who wish to evaluate the company’s operating

performance, ability to repay debt and capability to pursue new business opportunities. Such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

• Cas

Cash flo low from

• m op
• perations:

: Cash flow from operating activities (IFRS) + tax paid +/- net financial items +/- dividend (share of profit) from JV.

• EBI

EBITA adj adjusted (EBI EBITA adj adj.): ): Operating profit before amortisation and other income and expenses.

• EBI

EBITA adj

• adj. mar

argin: EBITA adj. divided by operating revenues

• EBI

EBITDA adj adjusted (EB EBITDA adj adj.): ): Operating profit before depreciation, amortisation and other income and expenses.

• Equi

quity y rati tio: : Equity (including non-controlling interests) divided by equity and liabilities.

• Ex

Expansion in investm tments: Investments made in order to expand production capacity, produce new products or to improve the performance of existing products. Such investments include business acquisitions, pilot plants, capitalised R&D costs and new distribution set-ups.

• Othe

ther inc ncome an and exp xpenses: Non-recurring items or items related to other periods or to a discontinued business or activity. These items are not viewed as reliable indicators of future earnings based on the business areas’ normal operations. These items will be included in the Group's

• perating profit.
• Leverage rati

tio: : Net interest-bearing debt divided by last twelve months’ (LTM) EBITDA adj., excluding the impact on EBITDA of IFRS 16 Leases.

• Ne

Net t interest-beari ring deb debt (NIB NIBD): Interest-bearing liabilities, excluding the impact of IFRS 16 Leases, minus interest-bearing assets (see slide 26).

• Retu

turn on

• n capital em

employed (ROCE): ): Last twelve months’ (LTM) EBITA adj., excluding the impact of IFRS 16 Leases, divided by average capital employed based on the ending balance of the last five quarters. Capital employed is defined by Borregaard as the total of net working capital, intangible assets, property, plant and equipment (excluding the impact of IFRS 16 Leases) and investment in joint venture minus net pension liabilities.

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Important notice

This presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (’relevant persons’). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Borregaard Group. The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions. This presentation includes and is based, inter alia, on forward-looking information and contains statements regarding the future in connection with the Borregaard Group’s growth initiatives, profit figures, outlook, strategies and objectives. All forward-looking information and statements in this presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for the Borregaard Group and its lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as “expects”, “believes”, “estimates” or similar expressions. Important factors may lead to actual profits, results and developments deviating substantially from what has been expressed or implied in such

• statements. Although Borregaard believes that its expectations and the presentation are based upon reasonable assumptions, it can give no

assurance that those expectations will be achieved or that the actual results will be as set out in the presentation. Borregaard is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither Borregaard nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use. This presentation was prepared for the interim results presentation for the fourth quarter of 2019, held on 5 February 2020. Information contained herein will not be updated. The slides should also be read and considered in connection with the information given orally during the presentation.

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