S E B IN V EST ME NT G RADE S E MIN AR OSLO, 2 4 AUGUST 2 0 1 7 - - PowerPoint PPT Presentation

P e r B j a r n e L y n g s t a d , C F O

S E B – IN V EST ME NT G RADE S E MIN AR OSLO, 2 4 AUGUST 2 0 1 7

Borregaard is a global leader in biochemicals

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High value added through full raw materials utilisation Borregaard’s biochemicals are sustainable and environmentally friendly substitutes for petrochemicals

Business model & strategy

Operates the world’s most advanced biorefinery

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Integration models: Own integrated Partner integrated Independent

L I G N I N

Concrete additives Animal feed Agrochemicals Batteries Briquetting Soil conditioner

VA N I L L I N

Food Perfumes Pharmaceuticals

B I O E T H A N O L

Biofuel Car care products Household chemicals Solvents Food Personal care Pharma

End markets 2016 Integrated production system serving diverse markets

38% 15% 19% 28%

Chemical/Others Food & Pharma Agriculture Construction

Business model & strategy

S P E C I A L I T Y C E L L U L O S E

Construction materials Filters Inks and coatings Casings Food/Pharma/ Personal care Textiles

C E L L U L O S E F I B R I L S

Adhesives Coatings Agricultural chemicals Personal care Home care Construction

The specialisation strategy

• Specialisation in

in glo lobal nic iches

• Markets with high barriers to entry
• Leading market positions through application knowledge and proximity to markets
• Diversified market strategy and global market positions secure maximum flexibility
• Str

trong in innovation efforts and continuous im improvement

• Business driven innovation model that involves the entire organisation
• Continuous productivity improvement through more efficient organisation,

competence development and smart use of technology

• Competence is

is th the main competitive advantage

• Competence differentiates Borregaard from the competitors
• Combination of competences in sales & marketing, R&D and production

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Business model & strategy

Europe 46 % RoW 2 % Americas 26 % Asia 26 %

Sales distribution (2016)

Global niche player with a market driven organisation

5 Technology leader and largest supplier of lignin-based products with global market access Leading global speciality cellulose supplier, significant producer of 2nd generation bioethanol Only producer of wood-based vanillin; largest producer of C3 aminodiols for X-ray contrast media, pioneer in cellulose fibrils

Other Businesses

(16%¹)

Speciality Cellulose

(36%¹)

Performance Chemicals

(48%¹)

Mar Market dri driven or

• rgan

anis isatio ion

• ~100 FTEs strong sales/technical service organisation
• Dedicated sales force for each business unit
• ~90% of sales handled through own organisation

1) Segment revenue as a % of total revenue 2016 2) USA/Canada: 20%, rest of Americas 6%

2)

Business model & strategy

Key figures 2013 – 2017 (LTM)¹⁾

6 3886 3939 4164 4492 4604 1 000 2 000 3 000 4 000 5 000 2013 2014 2015 2016 2017 LTM

mNOK

Operating revenues

489 486 497 747 819

12,6 12,3 11,9 16,6 17,8 4 8 12 16

200 400 600 800 2013 2014 2015 2016 2017 LTM

% mNOK

EBITA adj. & EBITA adj. %

• Revenues CAGR 5% since 2013
• All-time high EBITA adj. and ROCE LTM
• Progress in all business areas, particularly Speciality Cellulose
• Increased prices and improved product mix in Speciality Cellulose, growth

for key products in Fine Chemicals and increased sales of Specialities for Performance Chemicals

• EPS at NOK 6.09 LTM, up from 2016

16,9 16,5 15,6 21,7 22,5 3,35 3,34 3,86 5,55 6,09

2 4 6 8 10

5 10 15 20 25 2013 2014 2015 2016 2017 LTM

NOK

%

ROCE and earnings per share (EPS)

ROCE % EPS

Finan Financial ob

• bjec

jectives: s:

• ROCE >15% pre-tax over a business cycle
• IRR >15% pre-tax for expansion capex
• Average net working capital at 20% of operating revenues
• Replacement capex at depreciation level
• Maintain an investment grade rating
• Leverage ratio2) targeted between

1.0 and 2.0 over time

Financials

1) Last twelve months as per June 2017 2) Net interest-bearing debt divided by last twelve months’ EBITDA adj.

Borregaard portfolio - strategic priorities

• Growth and specialisation within Performance Chemicals
• Increased sales of high-value lignin products
• Establish new lignin raw material sources
• Develop BALI as a strategic lignin raw material option
• Develop the unique biorefinery assets in Sarpsborg
• Leverage high value raw material base in Performance Chemicals
• Continue specialisation of Speciality Cellulose, Bioethanol and Ingredients
• Strong focus on innovation and productivity efforts
• Establish Cellulose Fibrils as a new business area
• Based on core competence within wood chemistry and fine chemistry
• Increased specialisation through high value added

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Business model & strategy

New lignin operation in North America

• Borregaard and Rayonier Advanced Materials (RYAM) are

building a new lignin plant

• Located at RYAM’s Fernandina Beach sulphite pulp mill in Florida
• Borregaard (55%) and RYAM (45%) ownership
• Borregaard’s know-how and technology
• The investment will be made in two phases
• Phase one: 110 mUSD, 100,000 mtds capacity
• Ground work and foundation completed in

June 2017, start-up mid-2018

• Phase two: 25 mUSD, 50,000 mtds lignin capacity addition
• External financing for LignoTech Florida
• A USD 60 million loan is in place
• A working capital facility will be established

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Performance Chemicals - LignoTech Florida

Upgrade and increased specialisation of lignin operation

• Comprehensive investment programme
• New drying capacity
• Tanks for storage of liquid materials
• Improved solutions for logistics, infrastructure and energy
• Several benefits
• Further specialisation on the unique raw material base
• Reduced exposure to cyclical market segments
• Optimisation of production campaigns and logistics
• Reduced energy costs
• Substantial environmental and safety benefits
• Main project data
• 500 mNOK investment
• Partly expansion, partly maintenance investment
• Total programme meets return requirement for expansion investments
• Completion end 2019

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Performance Chemicals - Sarpsborg biorefinery investments

Ice Bear

• Main

in ele element in in th the e str trategy for in increa eased ed specia ecialis isation and fle flexib ibil ilit ity

• Targeting “niches within the niches” (acetate plastics, LCD, tire cord, food and pharma)
• Improved offering to existing markets
• Ca

Capacity exp xpansion decid cided

• NOK 115 million investment to be completed second half 2018
• Will double capacity to 60,000 mt
• Ramp-up of
• f Ice

Ice Be Bear production will ill be e based ed on

• n market dem

emand

• Potential estimated to be around 20-30,000 mt/year by end 2018

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Speciality Cellulose

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Exilva - investment in commercial scale production

1) This 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.

• EU support for Exilva commercialisation of Exilva
• EUR 25 million granted on 22 April 2016
• Will cover 60% of Borregaard’s costs in a three-year period

from 1 May 2016

• Provides opportunity to increase the efforts in market

introduction phase

• Support reduced if the project is profitable in the period
• Funding is granted under the Horizon 2020 BBI Programme¹⁾
• Borregaard is the coordinator in a six-party consortium
• First commercial size plant for wood-based MFC
• New production facility at the Sarpsborg site
• Capex 225 mNOK
• Initial capacity 1000 tonnes
• Production started up in Q3-16
• Prepared for future capacity expansion

Other Businesses - Cellulose Fibrils

Investments and cash flow

200 400 600 800 1 000 1 200 2016 2017 2018

Total investments - forecast

Actual Low Uncertainty CF b/investments (LTM)

• Significant investments in 2017-2018
• Currently strong cash flow from
• perations
• Cash flow risk factors/uncertainties
• Macroeconomics, including FX
• Demand, competition, raw material prices

and supply, operational factors

• Additional expansion investments
• Change in net working capital
• Capital structure will depend on future

cash flows, investments and dividend payments/repurchase of shares

1 2 1) Cash flow from operating activities -/+ net paid (ordinary) to/from shareholders +/- other capital transactions (IFRS cash flow statement)

Financials

Cash flow before investments1) (LTM)

Capital structure

• Solid capital structure as per 30.06.17
• Leverage ratio1) 0.72
• Equity ratio 56.3%
• Target: Maintain investment grade rating
• Leverage ratio targeted between 1.0 and 2.0 over time
• Borregaard has financial capacity for expansion
• Revolving credit facilities (RFC),

1,500 mNOK, maturity 2021

• Term loan for LT Florida, 60mUSD,

tenor 8.5 years from completion of project phase 1

• Bond issue,

200 mNOK, maturity 2019

• Nordic Investment Bank (NIB) loan,

40 mEUR, maturity 2024

250 500 750 1 000 1 250 1 500 1 750 2 000 2 250 2 500 2 750 2016 June 2017 2018 2019 2020 2021

mNOK

Leverage ratio and loan capacity

NIB Bond LTF RFC NIBD

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2.0 * EBITDA 1.0 * EBITDA

1) Net interest-bearing debt (NIBD) divided by last twelve months EBITDA adj.

Financials

Q&A

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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. 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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