Capital Markets Day - presentations

S a r p s b o r g 2 0 S e p t e m b e r 2 0 1 6

W E L C O M E T O B O R R E G A A R D ’ S C A P I TA L M A R K E T S D AY

Agenda

10:0010:0010:0010:00----11:50 11:50 11:50 11:50 • Welcome and opening

• Strategy update

• Financial update

• Performance Chemicals

• Speciality Cellulose

11:50 Lunch 11:50 Lunch 11:50 Lunch 11:50 Lunch

12:3512:3512:3512:35----13:3513:3513:3513:35• Sustainability

• Exilva

• Sarpsborg site

13:3513:3513:3513:35----15:0015:0015:0015:00• Visit to Exilva plant and demonstration

of Borregaard products

2

P e r A . S ø r l i eP r e s i d e n t & C E O

S T R AT E G Y U P D AT E

Borregaard is a global leader in biochemicals

4

High value added through full raw materials utilisation

Borregaard’s biochemicals are sustainable and environmentally

friendly substitutes for petrochemicals

The specialisation strategy

• Specialisation in global nichesSpecialisation in global nichesSpecialisation in global nichesSpecialisation in global niches

• 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

• Strong innovation efforts and continuous improvementStrong innovation efforts and continuous improvementStrong innovation efforts and continuous improvementStrong innovation efforts and continuous 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 our main competitive advantageCompetence is our main competitive advantageCompetence is our main competitive advantageCompetence is our main competitive advantage

• Our competence differentiates us from our competitors

• Combination of competences in sales & marketing, R&D and production

5

Borregaard’s corporate culture

MarketMarketMarketMarket----oriented oriented oriented oriented • Good understanding of the business model and customer needs throughout the organisation

• Knowledge of the value-in-use of our products

• A high share of our employees work in sales & marketing and technical customer service

InnovativeInnovativeInnovativeInnovative• Innovation is market-driven and involves collaboration between different parts of the

organisation

• We use a significant share of our revenues on innovation

• We regularly measure our innovation rate

ChangeChangeChangeChange----orientedorientedorientedoriented• Continuous improvement through technology, skills development and a flexible organisation

• Ability to implement changes through good collaboration and strong involvement from employees

• We value commitment and initiative from all our employees

• We regard the organisation’s diversity as a strength

6

Borregaard’s core values

Sustainability Sustainability Sustainability Sustainability • Green chemicals that substitute petrochemicals

• Sustainability demonstrated through life-cycle analysis

• Focus on EHS across the organisation

• Profitability is key to sustainability

LongLongLongLong----termtermtermterm perspectiveperspectiveperspectiveperspective• Consistent strategy over time

• Long-term perspective on innovation, market development and investments

• Competence development through training programmes, organisational development and use of technology

Integrity Integrity Integrity Integrity • High credibility through transparency, honesty and predictability

• Act responsibly in relation to our stakeholders and exercise corporate responsibility

• Demonstrate respect for individuals and different cultures while maintaining our integrity and adhering to the company's code of conduct

7

Strategic priorities – Capital Markets Day March 2014

• Growth and specialisationGrowth and specialisationGrowth and specialisationGrowth 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

• DevelopDevelopDevelopDevelop the unique biorefinery assets in Sarpsborg• Leverage high value raw material base in Performance Chemicals• Continue specialisation of Speciality Cellulose, Bioethanol, Ingredients & Fine Chemicals• Strong focus on innovation and productivity efforts

• EstablishEstablishEstablishEstablish Exilva as a new business area• Leverage core competence within wood chemistry and fine chemistry • Increased specialisation through high value added

8

Update on strategic priorities

Growth within Performance ChemicalsGrowth within Performance ChemicalsGrowth within Performance ChemicalsGrowth within Performance Chemicals• Acquisition of Flambeau’s lignin business (40,000 mtds1) in Q4-15) • Capacity expansion in LignoTech South Africa (20,000 mtds from mid 2017)• Lignin project in Florida (100,0002) mtds from 2018)• Bali remains a long term strategic lignin raw material option

Develop Develop Develop Develop the unique biorefinery assets in Sarpsborgthe unique biorefinery assets in Sarpsborgthe unique biorefinery assets in Sarpsborgthe unique biorefinery assets in Sarpsborg• The Ice Bear project – speciality cellulose with ultra high purity (from mid 2016)• Capacity expansion for high-end bioethanol (from late 2017)• Energy conservation projects implemented

Establish Establish Establish Establish Exilva as a new business areaExilva as a new business areaExilva as a new business areaExilva as a new business area• New commercial scale production facility in Sarpsborg (from Q3-16)• SenseFi (food ingredient) in pilot testing phase in WI, USA

91) Metric tonne dry solid

2) First step in a two-phased investment to reach 150,000 mtds

Strategic priorities – next steps

• Execution of strategic investment projects in Performance ChemicalsExecution of strategic investment projects in Performance ChemicalsExecution of strategic investment projects in Performance ChemicalsExecution of strategic investment projects in Performance Chemicals

• Completion of capacity expansions in USA and South Africa

• Successful market introduction of new volumes

• Increased specialisation through market introduction of new productsIncreased specialisation through market introduction of new productsIncreased specialisation through market introduction of new productsIncreased specialisation through market introduction of new products

• New Ice Bear product range in Speciality Cellulose

• Exilva and SenseFi microfibrillar cellulose products

• Commercialisation of R&D portfolio in Performance Chemicals

• Pursue further valuePursue further valuePursue further valuePursue further value----creation opportunities at the Sarpsborg sitecreation opportunities at the Sarpsborg sitecreation opportunities at the Sarpsborg sitecreation opportunities at the Sarpsborg site

• Completion of high-end bioethanol expansion

• Initiate capacity expansion in fine chemicals (C3 aminodiols for X-ray contrast media)

• Explore other specialisation and capacity expansion opportunities

1 0

Financial objectives and dividend policy at IPO (2012)

1 1

19,5 %16,9 % 16,5 % 15,6 %

0%

5%

10%

15%

20%

25%

2012 2013 2014 2015

ROCE1)

ROCE pre-tax Target

Financial objectives:Financial objectives:Financial objectives:Financial objectives:

• Sustainable profitability that supports the strategy and dividend policy

• ROCE at 14-15% pre-tax over a business cycle

1,00 1,101,25

1,50

36%33%

37% 39%

0%

10%

20%

30%

40%

50%

0,00

0,50

1,00

1,50

2,00

2,50

2012 2013 2014 2015

NOK Dividend and payout ratio2)

Dividend Payout ratio

Dividend policy:Dividend policy:Dividend policy: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 for the preceding fiscal year

1) Return on capital employed pre-tax

2) Dividend per share divided by earnings per share

Financial objectives and dividend policy

1 2

Financial objectivesFinancial objectivesFinancial objectivesFinancial objectives

• 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 ratio1) targeted between 1.0 and 2.0 over time

Borregaard’s dividend policy Borregaard’s dividend policy Borregaard’s dividend policy Borregaard’s dividend policy

• To pay regular and progressive dividends reflecting Borregaard’s expected long term earnings, free cash flows and expansion capex

• Annual dividend is targeted between 30% and 50% of net profit for the preceding fiscal year

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

P e r B j a r n e L y n g s t a dC F O

F I N A N C I A L U P D AT E

Key figures 2012 – 2016 (LTM)1)

1 4

3 838 3 886 3 9394 164

4 383

0

1 000

2 000

3 000

4 000

5 000

2012 2013 2014 2015 2016 LTM

mNOK Operating revenues

539489 486 497

632

14,0

12,6 12,3 11,9

14,4

0

4

8

12

16

0

200

400

600

800

2012 2013 2014 2015 2016 LTM

%mNOK EBITA adj. & EBITA % adj.

• Key figures for the Group have been relatively stable in 2012-2015

• A significant shift in profitability between business areas

• Product mix, prices and market conditions have changed, together with impact of FX and lower oil price

• Improvement in all areas year-to-date 2016

• Mainly FX driven

19,5

16,9 16,515,6

18,8

3,172,76

3,343,86

4,95

0

2

4

6

8

10

0

5

10

15

20

25

2012 2013 2014 2015 2016 LTM

NOK% ROCE and earnings per share (EPS)

ROCE %EPS

Profitability target:

• Sustainable profitability that supports the

strategy and dividend policy

• ROCE > 15% pre-tax over a business cycle

1) Last twelve months as per June 2016

Key figures 2012 – 2016 (LTM)1)

1 5

248296

388447

48715,6

18,021,3 22,3 22,9

0

5

10

15

20

25

0

100

200

300

400

500

600

2012 2013 2014 2015 2016 LTM

%mNOK

299244

163104

199

18,5

15,3

11,2

7,2

13,2

0

5

10

15

20

0

100

200

300

400

2012 2013 2014 2015 2016 LTM

%mNOK

• Top-line CAGR +9%

• Specialisation and improved product mix, price increases

• Reduced raw material supply 2012-15

• Lower demand and increased competition in the construction and oil sectors from 2015, but favourable FX impact from late 2014

-8

-51

-65-54 -54

-80

-60

-40

-20

0

2012 2013 2014 2015 2016 LTM

mNOK

• Top-line CAGR -4%

• Overcapacity and price pressure from 2012, also affecting product mix

• Improved market balance from mid 2015

• Reduction in key cost elements (wood, energy)

• Favourable FX impact from late 2014

• Top-line CAGR +3%

• Ingredients: Challenging market situation from late 2011

• Fine Chemicals: Volume growth for key products from 2015

• Exilva project: Increasing costs, softened by EU grant from May 2016

• Favourable FX impact from late 2014

Perf

orm

ance

C

he

mic

als

Spe

cial

ity

Ce

llulo

seO

the

r B

usi

ne

sse

s

EBITA adj. & EBITA % adj.


Sensitivity on EBITA adj.

0 5 10 15 20 25 30

Other expenses

Payroll expenses

Distribution costs

Other cost of materials

Energy cost

Wood cost

FX incl hedging

FX ex hedging

Lignin price

Cellulose price

MNOK

Sensitivity of 1% change • Global presence, diversified product portfolio and GDP-driven demand reduce market risk

• Oil price affects demand and competition in certain markets, cost/pricing of substitutes and raw materials, but main effect is on FX because of correlation between NOK and oil price

• Significant FX exposure, softened by FX hedging1) in the medium term

• No major single component in other cost of materials

• Distribution cost: Most products sold “delivered customer”

• Other expenses are repair and maintenance, external services, rental/leasing etc.

1 6

1) Hedging based on expected net cash flow (EBITDA)

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

• Extended hedge Extended hedge Extended hedge Extended hedge - 75%/50% of the next 24/36 months if USD and EUR are above predefined levels

Cash flow, net working capital (NWC) and investments

1 7

683 715 759 696

1011

0

200

400

600

800

1 000

2012 2013 2014 2015 2016 LTM

mNOK Cash flow from operations1)

Cash flow from operations EBITDA adj.

725769 752

878921

19,2 % 19,8 %18,8 %

19,9 % 20,2 %

0%

5%

10%

15%

20%

0

200

400

600

800

1 000

2012 2013 2014 2015 2016 LTM

%mNOK Average NWC

Average NWC % of OpRev ex hedging

• Strong cash flow from operations; close to EBITDA over time

• Average NWC level increased in 2015, mainly due to FX

• Significant temporary fluctuations will occur

• NWC ratio relatively stable at target

• Expansion investments increasing from 2015

• Exilva, SenseFi, Ice Bear, Flambeau business, R&D activities

322

226 228 246 274

63

62 85

184210

0

100

200

300

400

500

2012 2013 2014 2015 2016 LTM

mNOK Investments

Replacement Expansion Depreciation

Cash flow targets:

• Average net working capital at 20% of

operating revenues

• Replacement investments at depreciation level

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

Investment forecast 2016 to 2018

1 8

350-380280-320

250-290

0

100

200

300

400

500

2016 2017 2018

mNOK Replacement investments - forecast1)

Low Uncertainty Depreciation (LTM)

• Replacement investmentsReplacement investmentsReplacement investmentsReplacement investments• Targeted at depreciation level

• Wood seasoning silos funded by property damage insurance, but will be booked as replacement investment (IFRS)

• Expansion investmentsExpansion investmentsExpansion investmentsExpansion investments• New plant LignoTech Florida phase 1: USD 110 mill (100%) ≈

NOK 900 mill (late 2016 to mid 2018)

• New plant Exilva: NOK 225 mill (mid 2014 to 2016)

• Ice Bear project: NOK 100 mill (early 2014 to 2017)

• Other planned projects (bioethanol plant upgrade, lignin specialities, fine chemicals capacity, R&D activities)

• New expansion projects may lead to additional New expansion projects may lead to additional New expansion projects may lead to additional New expansion projects may lead to additional investmentsinvestmentsinvestmentsinvestments

270-310

560-620

200-300

0

200

400

600

800

2016 2017 2018

mNOK Expansion investments - forecast1)

Low Uncertainty High

1) Forecast is best estimate as of today. Uncertainty is related to final investment decisions, timing of investment payments,

execution time and risk and unexpected events e.g.

Investments and cash flow

0

100

200

300

400

500

600

700

800

900

1000

2016 2017 2018

Total investments - forecast

Low Uncertainty

• Significant investments planned in 2016-18

• Currently strong cash flow from operations

• 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 flow, investments and dividend payments/repurchase of shares

1 9

Cash flow before

investments1) (LTM)2)

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


Capital structure

• Solid capital structure as per end June 2016Solid capital structure as per end June 2016Solid capital structure as per end June 2016Solid capital structure as per end June 2016• Leverage ratio1) 0.68

• Equity ratio 54.2

• Target to maintain investment grade ratingTarget to maintain investment grade ratingTarget to maintain investment grade ratingTarget to maintain investment grade rating• Leverage ratio targeted between 1.0 and 2.0 over time

• Borregaard Borregaard Borregaard Borregaard has has has has financial financial financial financial capacity for capacity for capacity for capacity for expansionexpansionexpansionexpansion• Revolving credit facilities (RFC),

1,500 mNOK, maturity 2021

• Bond issue, 400 mNOK, maturity 2019

• Nordic Investment Bank (NIB) loan, 40 mEUR, maturity 2024

0

250

500

750

1 000

1 250

1 500

1 750

2 000

2 250

2 500

2014 2015 June

2016

2017 2018 2019 2020 2021

mNOK Leverage ratio and loan capacity

NIB RFC Bond NIBD

2 0

2.0 * EBITDA

1.0 * EBITDA

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

M o r t e n H a r l e m E x e c u t i v e V i c e P r e s i d e n t - B o r r e g a a r d L i g n o Te c h

P E R F O R M A N C E C H E M I C A L S – P R E PA R E D F O R G R O W T H

Looking back

• Strategic focus since IPO in 2012Strategic focus since IPO in 2012Strategic focus since IPO in 2012Strategic focus since IPO in 2012

• A market place short of supply

• Optimise value of available volumes

• Drive for short term sourcing opportunities

• Establish long-term sustainable supply

• Development of alternative technology

2 2

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

1,8

2000 2001 2002 // 2013 2014 2015

mill

ion

mtd

s1)

Shrinking lignin market due to reduced raw material supply during last 15 years

Reduced supply


Lignin – the supply side

2 3Borregaard manufacturing facilities Others

New application based reporting of business portfolio

• SpecialitiesSpecialitiesSpecialitiesSpecialities

• Batteries, agro, agchem, oil, dyestuff, etc.

• ConstructionConstructionConstructionConstruction

• Concrete admixtures, ceramics, gypsum board, etc.

• MiscellaneousMiscellaneousMiscellaneousMiscellaneous

• Mainly binding applications such as dust suppression, briquetting, feed, etc.

2 4

2009 2010 2011 2012 2013 2014 2015

Specialities 13% 14% 14% 14% 17% 18% 19%

Construction 56% 52% 54% 56% 56% 53% 52%

Miscellaneous 31% 34% 32% 30% 27% 29% 29%

Volume (‘000 mtds) 420 453 473 501 462 446 410

Total world market(1) and Borregaard’s positions

In total ~ 1.1 million mtds2)

1) Company estimates


41414141

59595959

Borregaard Others

34343434

18181818

48484848

Americas APAC EMEA

19191919

52525252

29292929

Specialities Construction Miscellaneous

Borregaard sales volume by

region 2015 (%)

Borregaard sales volume by

application 2015 (%)

Borregaard market share by volume

2016 (%)

World market by application,

volume 2016 (%)

2 5

10101010

54545454

36363636

Specialities Construction Miscellaneous

Update – LignoTech Ibérica

• Sniace pulp operation expected to re-start during Q4-16

• Expect a gradual ramp-up through 2017

• Lignin market launch plan in place

2 6

Volume growth - LignoTech South Africa

• 20,000 mtds additional capacity from mid 2017

• Proven and well established products

• Target markets as for current operation

2 7

Volume growth - LignoTech Florida

2 8

• Two steps to 150,000 mtds capacity

• Applying Borregaard technology on a new raw material source

• Softwood grades that match our current products for targeted applications

• Ideal location to serve markets with substantial growth potential

• Gradual ramp-up

• Permitting process on track, planned final decision second half 2016

Bali remains a long-term strategic option

2 9

• Lignin technology developed and proven on a wide range of raw materials

• Increasing the value of the sugar stream is the main priority in the further project work

End market growth forecast, indicative annual rates to 2019

ConstructionConstructionConstructionConstruction AgroAgroAgroAgro ////agchemagchemagchemagchem FeedFeedFeedFeed AutomotiveAutomotiveAutomotiveAutomotive IndustrialIndustrialIndustrialIndustrial

EMEA 0 - 3% 0 - 3% 2 - 4% 2 - 4% 1 - 4%

Americas 2 - 5% 0 - 3% 2 - 4% 0 - 2% 1 - 4%

Asia/Pac 0 - 3% 2 - 5% 3 - 7% 3 - 5% 1 - 4%

Sources: IMF, BNP Paribas, LafargeHolcim, Heidelberg Cement, Portland Cement Association, Phillips McDougall, Agropages, Dow,

Syngenta, Bayer, Johnson Controls, Alltech, OECD-FAO, Borregaard analysis

2.5% annual GDP growth assumed

3 0

Well positioned to facilitate and capture market growth

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

‘000 mtds Growth potential

Existing supply LignoTech Ibérica Borregaard expansion

GDP growth Conversion opportunities

• Short term a challenging market

• Generally, if lignin is available it gets sold

• To be regarded as a sustainable alternative, lignin must demonstrate stable quality, cost efficiency, predictability and long-term supply

• The construction sector - undersupplied for years –has a preference for lignin and represents a growth potential

• Significant growth opportunities in binding applications if lignin is available (partly non-use at present)

• Green niches within agchem are growing

• Borregaard has geographical and application flexibility to phase in increased volumes

3 1

There are no other known sulphite lignin capacity movements at present

Value growth – some initiatives

3 2

Penetrating new battery niches

New packaging line for liquid specialities in small volumes, Norway

Investments in Norway and USA for improved agchem and agro manufacturing capabilities

Performance Chemicals - strategy

• VolumeVolumeVolumeVolume• Bring capacity projects to market on time, quality and cost• Re-engage in known volume applications, convert from synthetics and identify new volume outlets• Strengthen geographical reach and establish presence locally in new markets• Expand distribution capabilities to support wider geographical reach

• ValueValueValueValue• Continue to build value growth, in particular within Specialties• Bring current innovation projects to market• Refill innovation pipeline with projects that meet the market’s future needs

• BaliBaliBaliBali• The long-term option for sustainable lignin supply• Increase the value of sugar stream to secure the overall competitiveness

3 3

To m E r i k F o s s - J a c o b s e nE x e c u t i v e V i c e P r e s i d e n t - B o r r e g a a r d C h e m C e l l

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

Speciality cellulose customer requirements

What customers typically do What customers typically do What customers typically do What customers typically do with our speciality cellulose:with our speciality cellulose:with our speciality cellulose:with our speciality cellulose:

• The main raw material for our customers’ products

• Used in various niche applications as a building block for certain cellulose derivatives

• Customers’ products like e.g. cellulose acetate and cellulose ethers are typically made through a chemical modification of our cellulose

Speciality cellulose product Speciality cellulose product Speciality cellulose product Speciality cellulose product characteristics and differentiators:characteristics and differentiators:characteristics and differentiators:characteristics and differentiators:

• Borregaard offers a broad range of high-quality, tailor-made speciality cellulose products within and across a number of application areas

• Key product parameters are viscosity viscosity viscosity viscosity (ethers), purity purity purity purity (acetate), brightness, density, reactivity and product stability

3 5

Key product properties

• Viscosity � thickening and water retention

• Purity � colour and clarity

3 6

Speciality cellulose market

3 7Source: Celco market reports, RISI and Borregaard estimates

1) Metric tonne

Speciality cellulosedemand 2015 (1.6 million mt1))

Acetate37 %

Ethers27 %

Speciality paper6 %

Tire cord3 %

NC9 %

MCC9 %

Cellophane5 %

Casings3 %

Sponges 1 %

SegmentsSegmentsSegmentsSegments ApplicationsApplicationsApplicationsApplications Market size Market size Market size Market size ‘000 mt ‘000 mt ‘000 mt ‘000 mt (2015)(2015)(2015)(2015)

Annual Annual Annual Annual growth growth growth growth

2015201520152015----2020202020202020

Hig

hly

sp

eci

alis

edH

igh

ly s

pe

cial

ised

Hig

hly

sp

eci

alis

edH

igh

ly s

pe

cial

ised

Acetate Cigarette filters, plastics, LCD, yarn

590 0-1%

Ethers Construction, coatings,food, pharma, personal care

430 3-4%

Speciality paper Automotive filtration, bank notes

95 -2%

Tire cord High-performance tirecords

50 2-3%

Oth

er s

pec

ialit

ies

Oth

er s

pec

ialit

ies

Oth

er s

pec

ialit

ies

Oth

er s

pec

ialit

ies

Nitrocellulose (NC)

Coatings, printing inks, nail varnish, energetic grades

140 1%

Microcrystalline cellulose (MCC)

Food, pharma 135 4%

Cellophane Food packaging 80 1%

Casings Sausage casings 50 3-4%

Sponges Sponge cloths 15 2-3%

Ice Bear status

• Part of our specialisation strategy to increase flexibility in the marketPart of our specialisation strategy to increase flexibility in the marketPart of our specialisation strategy to increase flexibility in the marketPart of our specialisation strategy to increase flexibility in the market

• Targeting “niches within the niches” as well as improved offering to existing markets

• Acetate plastics, LCD, tire cord, food and pharma

• Technology in place for large scale production and commercial deliveriesTechnology in place for large scale production and commercial deliveriesTechnology in place for large scale production and commercial deliveriesTechnology in place for large scale production and commercial deliveries

• Technology is scalable

• RampRampRampRamp----up of Ice Bear production will be based on market demandup of Ice Bear production will be based on market demandup of Ice Bear production will be based on market demandup of Ice Bear production will be based on market demand

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

3 8

Speciality cellulose suppliers

3 9

• 13 players supplying 1.6 million mt speciality cellulose

• Top 5 players (Rayonier Advanced Materials, Tembec, GP Buckeye, Bracell and Borregaard) have 90%1) market share

• Capacity reduced by 190,000 mt due to Rayonier Advanced Materials’ Jesup conversion in 2015

• Top 5 players use textile and fluff markets as capacity filler

• Limited volumes from viscose pulp producers into speciality segments due to barriers to entry

AM

AM

1) Borregaard estimates

2nd generation bioethanol

• Bioethanol contributes to the overall value creation in theBioethanol contributes to the overall value creation in theBioethanol contributes to the overall value creation in theBioethanol contributes to the overall value creation in the biorefinerybiorefinerybiorefinerybiorefinery

• 20 million litres capacity, delivered as 96% or 100% bioethanol

• Life cycle analysis shows favourable environmental footprint compared with petrochemical substitutes

• Main applications Main applications Main applications Main applications

• Biofuel, car care products, household chemicals, solvents, food, personal care and pharma

• Increasing demand for 2nd generation 100% bioethanol as biofuel

• Expansion project Expansion project Expansion project Expansion project ---- new dehydration plantnew dehydration plantnew dehydration plantnew dehydration plant

• 63 mNOK investment1), expected start-up late 2017

• Full flexibility between 96% and 100% bioethanol

• 30% grant from Enova2)

4 01) Includes facility to capture and store biogas

2) State enterprise owned by the Ministry of Petroleum and Energy

Speciality Cellulose - strategy

• Secure and further develop our solid positionsSecure and further develop our solid positionsSecure and further develop our solid positionsSecure and further develop our solid positions

• Leading supplier to cellulose ethers

• Key supplier to cellulose acetate

• Strong presence in other speciality segments

• SpecialisationSpecialisationSpecialisationSpecialisation and innovationand innovationand innovationand innovation

• ”Niches within the niches”

• Continuous improvement of productivity and Continuous improvement of productivity and Continuous improvement of productivity and Continuous improvement of productivity and product qualityproduct qualityproduct qualityproduct quality

4 1

Agenda


• Strategy update





12:3512:3512:3512:35----13:3513:3513:3513:35• Sustainability

• Exilva

• Sarpsborg site



4 2

T u v a B a r n h o l t S e n i o r V i c e P r e s i d e n t - S t r a t e g i c S o u r c i n g

S U S TA I N A B I L I T Y – A N I N T E G R AT E D PA R T O F B O R R E G A A R D ’ S B U S I N E S S M O D E L

Sustainability and corporate responsibility

• Borregaard has defined five main areas in our annual Sustainability Report

• Main focus in this presentation will be on sustainability in a climate perspective

4 4

Borregaard’s business modelBorregaard’s business modelBorregaard’s business modelBorregaard’s business model

• Renewable raw materials

• High raw material utilisation

• Environmentally friendly substitutes for petrochemicals

4 5

P R O C E S S E S P R O D U C T SR AW M AT E R I A L S

Natural, renewable, sustainable

Investments in reduced emissions and greener energy sources

Biochemicals replace petrochemicals

Life cycle analysis1) confirms a sustainable biorefinery

• Life cycle assessmentLife cycle assessmentLife cycle assessmentLife cycle assessment• Carried out for all products in Sarpsborg • Cradle to gate results are compared with petrochemical products based on typical industry data• Climate impact from use of products and end of life cycle effects are not included in the assessment,

would have improved the relative GHG2) footprint further

4 61) Third party analysis based on ISO 14044/48, updated 2015

2) Greenhouse gases

The main raw material is renewable

• Wood sourcing for Sarpsborg siteWood sourcing for Sarpsborg siteWood sourcing for Sarpsborg siteWood sourcing for Sarpsborg site• Sourcing area mainly Norway

• PEFC1) certified

• Renewable

• Sustainable

• Annual growth 2x the harvest in Norway

• Lignin raw material sourcingLignin raw material sourcingLignin raw material sourcingLignin raw material sourcing• Sourced from adjacent pulp mills

• These suppliers purchase their wood from FSC2) certified sources

4 71) Programme for the Endorsement of Forest Certification

2) Forest Stewardship Council

Continuous reduction of GHG emissions

• Paris agreementParis agreementParis agreementParis agreement• Action plan to combat global warming

• Borregaard’s climate impact Borregaard’s climate impact Borregaard’s climate impact Borregaard’s climate impact • Mainly from energy production (direct) and

purchased energy (indirect)

• Ambition Ambition Ambition Ambition ---- 2.1% annual reduction of GHG2.1% annual reduction of GHG2.1% annual reduction of GHG2.1% annual reduction of GHG• Science based target recommended by CDP1)

• Reduce energy consumption

• Increase use of natural gas/biogas

• Remove fossil component in municipal waste

• EU ETSEU ETSEU ETSEU ETS2222)))) gives flexibilitygives flexibilitygives flexibilitygives flexibility• Sarpsborg site covered by ETS

• Annual allowances, cap and trade system

• Norwegian CO2 compensation for electricity

4 8

1) Not-for-profit global disclosure system for investors and other stakeholders

2) The EU Emissions Trading System

3) Carbon dioxide equivalent

0

50

100

150

200

250

300

350

400

2010 2015 2020 2025 2030 2035 2040 2045 2050

‘000 tonnes CO2e3) Steam purchased SarpsborgElectricity abroadElectricity SarpsborgHeavy fuel oil abroadLNG abroadLNG SarpsborgWaste SarpsborgLimestone SarpsborgWaste oil SarpsborgHeavy fuel oil SarpsborgReduction target 2.1% p.a.

Direct and indirect GHG emissions Borregaard Group Actual and scenario 2010-2050

Environmentally friendly substitutes for petrochemicals

4 91) GHG emissions “cradle to gate” for concrete additive and vanillin. Use phase included for bioethanol/diesel. Third party analysis based on ISO 14044/48

• Lignin vs synthetic plasticisers in concrete admixtures

• Lignin in water based agchem solutions vs solvent base

• Cellulosic ethers vs synthetic thickeners

• Exilva MFC vs advanced acrylates as rheology modifiers

• 2nd generation bioethanol vs petroleum-based diesel

• Wood-based vanillin vs synthetic vanillin

7.6x7.6x7.6x7.6x

Borregaard lignin Synthetic alternative

GH

G e

mis

sio

ns1

) Concrete additives

6.8x6.8x6.8x6.8x

Borregaard 2G bioethanol Petroleum-based diesel

GH

G e

mis

sio

ns1

) Fuel – production and use

29x29x29x29x

Borregaard vanillin Synthetic alternative

GH

G e

mis

sio

ns1

) Vanillin aroma

Recognition for sustainability

• “The Paris Agreement could further enhance growth in the bio-based chemicals market”

• “Borregaard offers wood-based chemicals and is well positioned to thrive in this market combining focused R&D experience with economies of scale in production.”

Borregaard among 10 international companies listed for taking unique steps to address climate change in Sustainalytics’ “10 for 2016” report

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P å l R o m b e r g E x e c u t i v e V i c e P r e s i d e n t - E x i l v a

E X I LVA - S TAT U S A N D O P P O R T U N I T I E S

• Microfibrillar cellulose (MFC) is cellulose fibers defibrillated into millions of tiny fibrils (100,000 times thinner than hair)

• Exilva is Borregaard’s brand name for microfibrillarcellulose used in industrial applications

• Exilva is a sustainable biobased material with multifunctional properties

• Improves flow, stability, flexibility and strength in industrial formulations and materials

• Enables customers to develop new and improved products

5 2

Microfibrillar cellulose attracts considerable attention1)

“A tiny fiber with huge applications” (ScienceDirect)

“The world’s hottest new supermaterial” (Gizmodo)

“The properties of nanocellulose (e.g. mechanical properties, film-forming properties, viscosity etc.) make it an interesting material for many applications and the potential for a multibillion-dollar industry” (Wikipedia)

• More than 20 different applications listed in the article

1) MFC and nanocellulose are used interchangeably. A common terminology is not yet established.5 3

A dynamic field with a lot of activity

• In weeks 30-32/16 alone there were 36 new patents/ patent applications announced within this field

• 18 (50%) came from commercial companies

• Examples:

• Toyota, Japan - patent application on cathode material for secondary batteries comprising MFC

• Georgia-Pacific, US - patent application on the use of MFC in ply-bonding adhesives

• Hangzhou Special Paper Industry, China - patent application on a diesel filter paper containing cellulose nanofiber

5 4

Exilva - a long-term perspective on innovation

• Innovation takes time…..

• 2005: Project established

• 2011: Technology selected

• 2012: Pilot plant operational

• 2014: Investment decision

• 2016: Commercial operation

• Leveraging Borregaard’s strengths

• Speciality cellulose and fine chemical competence and technology

• Know-how in sales and marketing of performance chemicals

• Innovation resources

5 5

Exilva – a broad range of opportunities

Other areas testing Other areas testing Other areas testing Other areas testing ExilvaExilvaExilvaExilva• Packaging, oil field, composites, filters & barriers, batteries, ink

5 6

Focus areasFocus areasFocus areasFocus areas

Dispersion and stability

Reference with HEC1) Exilva

Paint with high particle load

Liquid detergentWith Exilva MFC

Liquid detergentwithout MFC

Ecobeads2) notnotnotnotsuspended

Ecobeadssuspended

5 71) Hydroxyethyl cellulose

2) Microspheres (glass bubbles) used for testing anti-settling effects in formulations

Exterior flat paint - mud crack resistance

Reference with HEC1)

Cracking > 0.36 mmWith Exilva

No cracking, up to 1.52 mm

5 81) Hydroxyethyl cellulose

Exilva in adhesives - video

5 9

Customer acceptance time depends on the situation

• “Solving a problem” 6-12 months

• Offering internal benefits(robustness, cost, handling) 12-24 months

• Enables customer to launch a“new product” (eg. greener, improved performance) 24-36 months

• Need for new registration ≥ 12 months

• Need for equipment ≥ 12 months

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One or more of the above mentioned situations may be relevant when we introduce Exilva to potential customers

EU support for commercialisation of Exilva

This project has received funding from the Bio Based Industries Joint Undertaking

under the European Union’s Horizon 2020 research and innovation programme under grant agreement No 709746

• EUR 25 million granted on 22 April 2016

• Will cover 60% of Borregaard’s costs in a three-year period starting 1 May 2016

• Support reduced if the project is profitable in the period

• Funding is granted under the Horizon 2020 Flagship programme for research and innovation• Provides opportunity to increase our efforts in market introduction phase

• Borregaard is the coordinator in a six-party consortium

6 1

Status Exilva

• MarketMarketMarketMarket• Some commercial sales established

• Large number of prospects testing

• High positive feedback rate

• Long development time

• High degree of secrecy

• Strengthening commercial organisation

• Investment projectInvestment projectInvestment projectInvestment project• Completion on time and cost

• Equipment in place and tested

• Optimisation work during Q4-16

6 2

Status SenseFi

• Advanced texture system for food

• Enables formulation of food products with reduced fat content without compromising mouthfeel, texture or taste

• Still in demonstration phase

• Customer base growing steadily

• Decision on commercial operations expected in 2017

6 3

Mayonnaise & dressings Ice cream & frozen yoghurt Emulsified meat (sausages)

Follow us on www.exilva.com

6 4

O l e G u n n a r J a k o b s e n P l a n t D i r e c t o r - S a r p s b o r g S i t e

S A R P S B O R G S I T E

Operational excellence

Achievement of world class operations Achievement of world class operations Achievement of world class operations Achievement of world class operations through through through through • Competence building

• Organisational development

• Advanced technology

6 6

Pacesetter¹⁾ Industryaverage

Borregaardaverage

Console 1 Console 2 Console 3 Console 4

• From 15 decentralised control rooms to one central control room – reorganised management system

• Competence development and new organisation

• Upgraded human machine interface and standardisation

• Top level control systems based on integrated sensors, automation, analyses and visualisation of big data

2008

¹⁾ Best known operator practice

Source: www.mycontrolroom.com (User Centered Design Services)

Approaching world class operations 2016

6 7

Exploring digitalisation – next steps

SMART operationsSMART operationsSMART operationsSMART operations• Utilise sensor technology - make big data available

• Understand and optimise processes through advanced process digitalisation and big data

• Develop new working methods and tools for operator support

• Personal digital platforms for receiving and giving information swiftly and precise

� Leading to more efficient work processes and increased availability

6 8

Agenda


• Strategy update





12:3512:3512:3512:35----13:3513:3513:3513:35• Sustainability

• Exilva

• Sarpsborg site



6 9

Site visit and safety information

• Follow instructions from tour guides wearing yellow helmet Follow instructions from tour guides wearing yellow helmet Follow instructions from tour guides wearing yellow helmet Follow instructions from tour guides wearing yellow helmet and visibility and visibility and visibility and visibility jacketjacketjacketjacket

• Photos Photos Photos Photos are not allowed (without permission) during the are not allowed (without permission) during the are not allowed (without permission) during the are not allowed (without permission) during the visitvisitvisitvisit

• ExilvaExilvaExilvaExilva plantplantplantplant

• Safety equipment in this area: safety goggles

• Emergency meeting point: outside the building, where you left the bus

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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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