S E B – IN V EST ME NT G RADE S E MIN AR OSLO, 2 4 AUGUST 2 0 1 7 P e r B j a r n e L y n g s t a d , C F O
Business model & strategy Borregaard is a global leader in biochemicals High value added through full raw materials utilisation Borregaard’s biochemicals are sustainable and environmentally friendly substitutes for petrochemicals 2
Business model & strategy Operates the world’s most advanced biorefinery Integration models: Integrated production system serving diverse markets Own integrated Partner integrated Independent End markets 2016 28% 38% C E L L U L O S E S P E C I A L I T Y C E L L U L O S E VA N I L L I N F I B R I L S L I G N I N B I O E T H A N O L 19% Construction Adhesives Concrete additives Food Biofuel 15% Coatings materials Perfumes Car care products Animal feed Agricultural chemicals Pharmaceuticals Household chemicals Filters Agrochemicals Personal care Solvents Inks and coatings Chemical/Others Food & Pharma Batteries Home care Food Casings Briquetting Construction Agriculture Construction Personal care Food/Pharma/ Soil conditioner Pharma Personal care Textiles 3
Business model & strategy 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 4
Business model & strategy Global niche player with a market driven organisation Performance Chemicals Speciality Cellulose Other Businesses (48%¹) (36%¹) (16%¹) Leading global speciality cellulose Only producer of wood-based vanillin; Technology leader and largest supplier, significant producer of 2 nd supplier of lignin-based products with largest producer of C 3 aminodiols for X-ray global market access generation bioethanol contrast media, pioneer in cellulose fibrils Sales distribution (2016) Asia Mar Market dri driven or organ anis isatio ion 26 % • ~100 FTEs strong sales/technical service organisation Europe 46 % • Dedicated sales force for each business unit Americas 2) • ~90% of sales handled through own organisation 26 % RoW 2 % 1) Segment revenue as a % of total revenue 2016 5 2) USA/Canada: 20%, rest of Americas 6%
Financials Key figures 2013 – 2017 (LTM)¹⁾ EBITA adj. & EBITA adj. % Operating revenues ROCE and earnings per share (EPS) mNOK mNOK % % NOK 17,8 16,6 25 10 5 000 22,5 21,7 800 16 819 4604 4492 20 8 4 000 12,6 12,3 747 4164 11,9 16,9 16,5 3939 3886 15,6 600 12 3 000 15 6 6,09 497 489 486 5,55 400 8 2 000 10 4 3,86 3,35 3,34 ROCE % 200 4 1 000 5 2 EPS 0 0 0 0 0 2013 2014 2015 2016 2017 LTM 2013 2014 2015 2016 2017 LTM 2013 2014 2015 2016 2017 LTM • Revenues CAGR 5% since 2013 Finan Financial ob objec jectives: s: • ROCE >15% pre-tax over a business cycle • All-time high EBITA adj. and ROCE LTM • IRR >15% pre-tax for expansion capex • Progress in all business areas, particularly Speciality Cellulose • Average net working capital at 20% of operating revenues • Increased prices and improved product mix in Speciality Cellulose, growth • Replacement capex at depreciation level for key products in Fine Chemicals and increased sales of Specialities for • Maintain an investment grade rating Performance Chemicals • Leverage ratio 2) targeted between • EPS at NOK 6.09 LTM, up from 2016 1.0 and 2.0 over time 1) Last twelve months as per June 2017 6 2) Net interest- bearing debt divided by last twelve months’ EBITDA adj.
Business model & strategy 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 7
Performance Chemicals - LignoTech Florida 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 8
Performance Chemicals - Sarpsborg biorefinery investments 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 9
Speciality Cellulose 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 of Ice Ice Be Bear production will ill be e based ed on on market dem emand • Potential estimated to be around 20-30,000 mt/year by end 2018 1 0
Other Businesses - Cellulose Fibrils Exilva - investment in commercial scale production • EU support for Exilva commercialisation of Exilva • First commercial size plant for wood-based MFC • EUR 25 million granted on 22 April 2016 • New production facility at the Sarpsborg site • Will cover 60% of Borregaard’s costs in a three -year period from 1 May 2016 • Capex 225 mNOK • Provides opportunity to increase the efforts in market • Initial capacity 1000 tonnes introduction phase • Production started up in Q3-16 • Support reduced if the project is profitable in the period • • Funding is granted under the Horizon 2020 BBI Programme¹ ⁾ Prepared for future capacity expansion • Borregaard is the coordinator in a six-party consortium 1) This project has received funding from the Bio- Based Industries Joint Undertaking (BBI) under the European Union’s 1 1 Horizon 2020 research and innovation programme under grant agreement No 709746.
Financials Investments and cash flow • Significant investments in 2017-2018 Total investments - forecast • Currently strong cash flow from 1 200 operations 1 000 • Cash flow risk factors/uncertainties Cash flow before investments 1) (LTM) • Macroeconomics, including FX 800 • Demand, competition, raw material prices 600 and supply, operational factors • Additional expansion investments 400 • Change in net working capital 200 • Capital structure will depend on future cash flows, investments and dividend 0 2016 2017 2018 payments/repurchase of shares Actual Low Uncertainty CF b/investments (LTM) 1) Cash flow from operating activities -/+ net paid (ordinary) to/from shareholders +/- other capital transactions (IFRS cash flow statement) 1 2
Financials Capital structure Leverage ratio and loan capacity mNOK • Solid capital structure as per 30.06.17 2 750 • Leverage ratio 1) 0.72 2 500 • Equity ratio 56.3% 2.0 * EBITDA 2 250 • Target: Maintain investment grade rating 2 000 • Leverage ratio targeted between 1.0 and 2.0 over time 1 750 • Borregaard has financial capacity for expansion 1 500 • Revolving credit facilities (RFC), 1 250 1,500 mNOK, maturity 2021 1 000 • Term loan for LT Florida, 60mUSD, 1.0 * EBITDA 750 tenor 8.5 years from completion of project phase 1 500 • Bond issue, 250 200 mNOK, maturity 2019 0 • Nordic Investment Bank (NIB) loan, 2016 June 2017 2018 2019 2020 2021 40 mEUR, maturity 2024 NIB Bond LTF RFC NIBD 1) Net interest-bearing debt (NIBD) divided by last twelve months EBITDA adj. 1 3
Q&A 1 4
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