Borregaard — Earnings Release 2014

Feb 4, 2015

4th quarter 2014Oslo, 4 February 2015

Agenda

Per A Sørlie, President & CEO

• •Highlights
• •Proposed dividend
• •Business areas
• •Outlook

Per Bjarne Lyngstad, CFO

•Financial performance

Highlights – ⁴th quarter 2014

• • Improved results for Performance Chemicals and Other Businesses
• • Lower production in Sarpsborg had a negative impact in all business areas
• •Weaker result for Specialty Cellulose
• •Positive FX impact, partly delayed by hedging
• •Strong cash flow

Highlights – Full year 2014

• • Fourth consecutive year above ROCE target
• ROCE 16.5% (16.9%)
• EBITA 486 mNOK (489 mNOK)
• •All-time high result in Performance Chemicals
• • Weaker results in Specialty Cellulose and Other Businesses
• •Decreased production output in Sarpsborg
• •Favourable FX impact, partly delayed by hedging

Dividend proposal for 2014

• • Borregaard's dividend policy
• To pay regular and progressive dividends reflecting the expected long-term earnings and cash flow of the Group
• Annual dividend is targeted between 30% and 50% of net profit in the preceding fiscal year
• A dividend of NOK 1.25 per share is proposed by the Board of Directors
• 14% increase from NOK 1.10 in 2013
• 37% of net earnings
• Total dividend payment of 124 mNOK

Performance Chemicals – Q4 market development

• • Market conditions generally positive
• −Continued strong demand in major applications
• −Higher prices and an improved product mix vs Q4-13
• • Sales volume 4% lower than Q4- Q4-13
• −Lower production at the Sarpsborg site vs Q4-13
• •Favourable FX impact Favourable

¹⁾ Gross average prices have been adjusted to correct an inconsistency identified in previously reported figures. Average sales price and sales volume reflect 100% of sales and volume from the J/V in South Africa. Average sales price is calculated using actual FX rates, excluding hedging impact.

Performance Chemicals– FY 2014 market development

• • Market conditions generally positive with continued strong demand in major applications
• −Improved product mix and higher sales prices
• −Value growth from new speciality line in Sarpsborg and several long-term initiatives
• • 3% decline in sales volume from 2013
• −Inventory reduction in 2013 and lower production at the Sarpsborg site in 2014
• −New sources in Europe compensated for lost supply in Spain
• •Favourable FX impact Favourable impact

2) Historical %-share of volume has been adjusted in order to reflect reclassification of some minor sub-categories.Average sales volume include 100% of sales and volume from the J/V in South Africa.

¹⁾ Gross average prices have been adjusted to correct an inconsistency identified in previously reported figures. Average sales price is calculated usingactual FX rates, excluding hedging impact. Average sales price and sales volume reflect 100% of sales and volume from the J/V in South Africa.

Specialty Cellulose – Q4 market development

• •Reduced prices in sales currency vs Q4- Reduced prices sales Q4-13
• •Favourable FX development Favourable FX
• •Lower sales volume due to lower production

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

Specialty Cellulose – FY 2014 market development

• • Lower average sales price
• Challenging market situation, especially in acetate
• Reduced sales prices and weaker product mix
• Favourable FX development
• •Lower sales volume due to decreased production

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

Ingredients & Fine Chemicals – Market conditions

Ingredients

• •Unchanged market conditions
• •Lower sales volume than Q4-13
• •Favourable FX impact

Fine Chemicals

45

0

20

40

60

80

mNOK

56

Fine Chemicals –

•Improved product mix

56

40

Q1 Q2 Q3 Q4

44

Fine sales revenues ²⁰¹³

42

48

47

2014

•Favourable FX impact

Status for the Exilva and BALI projects

• Investment project in Norway progressing according to plan
• Stepping up market introduction efforts for Exilva MFC and SenseFi

•BALI

Internal and external activities continue

• BALI project costs will be reported as part of Performance Chemicals (previously reported as part of Other Businesses)
• The Exilva project will be reported as part of Other Businesses (previously reported as part of Specialty Cellulose)

Outlook

•Performance Chemicals

• Continued strong demand in major applications
• Sales volume in 2015 expected to be in line with 2014
• Sales volume and mix in Q1-15 will be affected by normal seasonality

•Specialty Cellulose

• Average cellulose prices in sales currency expected to be approx. 7% below 2014 level
• Product mix in 2015 forecast to be marginally weaker than in 2014
• In Q1-15, sales volume expected to be in line with Q1-14

•Other Businesses

• No major changes expected in market conditions for Ingredients and Fine Chemicals
• Exilva project costs expected to increase
• Other corporate costs will remain at largely the same level as in 2014

•Currency impact

• If maintained, the recent weakening of the NOK will contribute positively in all business areas –
• The full impact will be delayed due to currency hedging

FINANCIAL PERFORMANCE Q4-14

Borregaard – Q4 key figures

• •Revenues slightly down from Q4-13 (-2%)
• • Improved EBITA for Performance Chemicals and Other Businesses, decline in Specialty Cellulose −
• FX impact compensated for lower sales and production volumes
• • EPS at 3.34, close to 2013 level −
• Provision for closure of Opsund landfill (Other expenses) partly off-set by lower tax expense
• •Future expected effective tax rate reduced to 25-28%

Key figures – Full year 2014

• •Revenues +1% vs 2013
• • EBITA and EBITA margin in line with 2013
• Strong improvement and all-time high level in Performance Chemicals
• Reduced prices and volumes in Specialty Cellulose
• Favourable FX development, impact delayed by hedgin g
• •ROCE well above long-term target

Performance Chemicals – Q4 key figures

Q1 Q2 Q3 Q4

• •Top line growth 5% vs Q4-13
• •Continued strong demand in all major applications
• Full year top line growth 11%
• • Positive FX effects, higher sales prices and a more favourable product mix
• •4% sales volume reduction

•

Full year EBITA 419 mNOK (314 mNOK)

0

Specialty Cellulose – Q4 key figures

• •Top line down by 10% vs Q4-13
• •Lower sales volume and sales prices
• Full year top line down by 8%
• •Lower production and sales volume
• Reduced cellulose sales prices in sales currency
• •Increased Exilva project activities
• •Improved FX situation

•

•

•

• Full year EBITA 129 mNOK (224 mNOK)
• •Margin below 2013 level
• •Full year EBITA margin 8.8% (14.0%)

Other Businesses – Q4 key figures

• •Top line equal to Q4-13
• •Lower sales volume for Ingredients
• • Lower sales volume, but improved product mix for Fine Chemicals

• •Full year top line growth of 3%

• •Ingredients: Lower sales volume and slightly weaker result

• •Fine Chemicals: Improved product mix
• •Favourable currency impact for both areas
• • Lower corporate costs in Q4 partly off-set by higher BALI project costs
• •Full year EBITA -62 mNOK (-49 mNOK)

Currency hedging strategy and actual hedges

Purpose is to delay effects of currency fluctuations and secure competitiveness

• • Hedging based on expected net cash flow (EBITDA) 1)
• Base Hedge Hedge 75%/50% on a rolling basis for 6/9 months for major currencies
• Extended Hedge Extended 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 (levels recently revised by BoD)
• Contracts Contracts 100% hedged
• •Balance sheet exposure hedged 100%
• •Net investments in subsidiaries hedged up to 90% of book value in major currencies

F X h f l h d g c a s o w e e s • f 3 2 2 0 1 5 a s o :		S U D i l l i m o n	U S D t r a e	E U R i l l i m o n	E U R t r a e
	2 0 1 5	1 4 4	6. 6 8	6 6	8. 5 1
	2 0 1 6	5 2	7. 4 2	7 1	8. 5 5
	2 0 1 7	3 8	7. 3 3	5 0	8. 6 9
	L t a e r	9	6. 6 3	-

Currency impact

• • Full impact from weaker NOK delayed due to currency hedging
• Net impact positive vs Q4-13
• • Significant full year FX impact in spite of hedging losses
• Hedging losses of 51 mNOK in 2014 vs gains of 10 mNOK in 2013

1) Currency basket based on Borregaard's net exposure in 2013 (=100)

−USD 68% (approximately 265 mUSD)

−EUR 33% (approximately 96 mEUR)

−Other -1% (GBP, BRL, JPY, SEK, ZAR)

Cash flow, capex and NIBD

• •Strong cash flow from operations, mainly due to reduction in net working capital
• • Capex increased as expected in Q4
• Replacement capex for 2014 slightly below depreciation level
• Expansion capex related to high purity cellulose, BALI and Exilva

• •NIBD reduced by 49 mNOK in Q4, mainly due reduction in net working capital and low tax payments

• •Per A Sørlie, President & CEO

• •Per Bjarne Lyngstad, CFO

APPENDIX

Borregaard – Key figures

O A i N K i l l i t m o u n s n m o n	Q 4- 2 0 1 4	Q 4- 2 0 1 3	h C a n g e	Y T D- 2 0 1 4	Y T D- 2 0 1 3	h C a n g e
O i t p e r a n g r e v e n u e s	9 5 1	9 6 8	-2 %	3 9 3 9	3 8 8 6	1 %
E B I T D A ( d j d ) t a u s e	1 5 7	1 4 4	9 %	7 3 0	7 1 0	3 %
( j ) E B I T A d d t a u s e	9 2	8 6	% 7	8 6 4	8 9 4	% -1
A i i i i b l t t t m o r s a o n n a n g e s	0	-1		0	-2
O h i d t e r n c o m e a n e x p e n s e s	-3 0	0		-3 0	1 4
E B I T	6 2	8 5	% -2 7	4 5 6	5 0 1	% -9
F i i l i t t n a n c a e m s, n e	-3	-6		-2 6	-4 1
P f i / l b f t t r o o s s e o r e a x e s	5 9	7 9	-2 5 %	4 3 0	4 6 0	-7 %
T a e s x	8	-1 9		-9 8	-1 2 9
f i / f i P l h d t t r o o s s o r e p e r o	6 7	6 0	1 2 %	3 3 2	3 3 1	0 %
P f i / l i b b l l l i i t t t t t t t t r o o s s a r u a e o n o n- c o n r o n g n e r e s s	-1	-2		-2	-4
P f i / l i b b l f h t t t t t t t r o o s s a r u a e o o w n e r s o e p a r e n	6 8	6 2		3 3 4	3 3 5
C f f h l i i i i t t t a s o w r o m o p e r a n g a c v e s	2 4 5	1 3 2		6 0 0	5 2 6
E i h ( N O K ) a r n n g s p e r s a r e	0, 6 8	0, 6 2	1 0 %	3, 3 4	3, 3 5	0 %
A d j d E B I T D A i t s e m a r g n u	6, % 1 5	9 % 1 4,		8, % 1 5	8, 3 % 1
A d j d E B I T A i t u s e m a r g n	9, % 7	8, 9 %		1 2, 3 %	1 2, 6 %

2013 figures are restated due to implementationof IFRS 11 Joint Arrangements

Operating revenues and EBITA per segment

l l i i i A N O K t m o u n s n m o n			l l i i i A N O K t m o u n s n m o n
O i t p e r a n g r e v e n u e s	Q 4- 2 0 1 4	Q 4- 2 0 1 3	h C a n g e	f O i i I A E B T t t - p e r a n g p r o	Q 4- 2 0 1 4	Q 4- 2 0 1 3	h C a n
d B o r r e g a a r	9 5 1	9 6 8	% 2 -	d B o r r e g a a r	9 2	8 6	7
f h l P C i e r o r m a n c e e m c a s	4 4 1	4 2 0	% 5	f h l P C i e r o r m a n c e e m c a s	9 0	7 5	2 0
l l l l i S C t p e c a y e u o s e	3 4 1	3 8 1	% -1 0	l l l l i S C t p e c a y e u o s e	1 9	3 5	-4 6
h O i B t e r s n e s s e s u	1 8 6	1 8 6	0 %	h O i B t e r s n e s s e s u	-1 7	2 4 -	-
l E i i i t m n a o n s	-1 7	-1 9

	i A t m o n s u	l l l l i i i i i N O K A N O K t n m o n m o n s n m u			o	n
O i t p e r a n g r e v e n u e s	Q 4- 2 0 1 4	Q 4- 2 0 1 3	h C a n g e	f O i i E B I T A t t - p e r a n g p r o	Q 4- 2 0 1 4	Q 4- 2 0 1 3	h C a n g e
d B o r r e g a a r	9 5 1	9 6 8	% 2 -	d B o r r e g a a r	9 2	8 6	% 7
f h l i P C e r o r m a n c e e m c a s	4 4 1	4 2 0	% 5	f h l i P C e r o r m a n c e e m c a s	9 0	7 5	% 2 0
l l l l S i C t p e c a e o s e y u	3 4 1	3 8 1	0 % -1	l l l l S i C t p e c a e o s e y u	9 1	3 5	6 % -4
h O B i t e r u s n e s s e s	1 8 6	1 8 6	0 %	h O B i t e r u s n e s s e s	-1 7	2 4 -	-

	i A t m o u n s	l l i i N O K n m	o n		i A t m o u n s	l l i i N O K n m o	n
i O t p e r a n g r e e n e s v u	Y T D- 2 0 1 4	Y T D- 2 0 1 3	h C a n g e	f i i O E B I T A t t - p e r a n g p r o	Y T D- 2 0 1 4	Y T D- 2 0 1 3	h C a n g e
d B o r r e g a a r	3 9 3 9	3 8 8 6	1 %	d B o r r e g a a r	4 8 6	4 8 9	1 % -
f h l P C i e r o r m a n c e e m c a s	1 8 2 2	1 6 4 5	% 1 1	f h l P C i e r o r m a n c e e m c a s	4 1 9	3 1 4	% 3 3
l l l l i S C t p e c a y e u o s e	1 4 6 3	1 5 9 7	% 8 -	l l l l i S C t p e c a y e u o s e	1 2 9	2 2 4	% -4 2
h O i B t e r s n e s s e s u	2 3 7	0 3 7	3 %	h O i B t e r s n e s s e s u	6 2 -	9 -4	2 % 7 -
l i i i E t m n a o n s	6 9 -	9 -5

	A i t m o u n s	l l N O K i i n m	o n
			%

Cash flow

Amounts in NOK million

	Q 4- 2 0 1 4	Q 4- 2 0 1 3	Y T D- 2 0 1 4	Y T D- 2 0 1 3
in i l l io Am N O K m ts ou n n
f be fo Pr i t ta o re xe s	5 9	7 9	4 3 0	4 6 0
de d ha Am isa io ia io im irm t t t t c or n, p re c n a n p a en rg es	6 5	5 9	2 4 4	2 3 1
C ha in k in i l, t w ta tc ng e ne or g ca p e	3 6 1	0 1 7	9 5	-1 7
( f p f ) fro iv i de d ha i D J V t n s re o ro m	-2	-3	6	9 -1
d Ta i xe s p a	-1 3	-1 1 0	-1 3 9	-1 2 9
h f low fro Ca in iv i ie t t t s m op er a g ac s	2 4 5	1 3 2	6 0 0	5 2 6
lan d e d b le Inv ip in i tm ts ty t a t a ta ts es en p ro p er p n q u m en n ng as se ,	-1 5 1	-1 0 6	-3 1 3	-2 8 8
he l O i io t ta tra t r c ap ns ac ns	0	-5	2	2
h f low fro Ca in iv i ie Inv t t t s m es g ac s	-1 5 1	-1 1 1	-3 1 1	-2 8 6
de ds D iv i n	0	0	-1 0 9	-1 0 0
ds fro f s ha Pr ise io t oc ee m ex er c o re o p ns	4	0	4 8	0
ba k o f ha Bu tre y- c as ur y s re s	-1 4	-1 1	-7 6	-3 3
/ ( lo ) he dg fo bs d Ga in inv in i iar ie t tm ts ss on es r n e es en su s	-6 8	0	-7 2	0
/ d fro ha ho l de Ne i t p to a m s re rs	8 -7	-1 1	-2 0 9	-1 3 3
ha in in be in l ia b i l i ie C te t- t ng e re s ar g s	3 3	-1 1 1	6	-2 1 8
ha be b le C in in in iva te t- ng e re s ar g re ce s	1	1	-3	-1
ha in in be in l ia b l i ie C t te t- t ng e ne re s ar g s	3 4	-1 1 0	3	-2 1 9
h f low fro f Ca in in iv i ie t t s m an c g ac s	-4 4	-1 2 1	-2 0 6	-3 5 2
ha h a d c h e le C in iva ts ng e ca s n as q u n	5 0	-1 0 0	8 3	-1 1 2
h a d c h e le f be f p d Ca iva in in io ts s n as q u n as o g n g o er	7 9	1 3 6	3 9	1 3 4
ha h a d c h e le C in iva ts ng e ca s n as q u n	5 0	-1 0 0	8 3	-1 1 2
f fe h a d c h e le Cu iva ts ts rre nc y e c ca s n as q u n	3 9	3	4 6	1 7
h a h e le he lo f he Ca d c iva io d ts t t t s n as q u n a c se o p er	6 8 1	3 9	6 8 1	3 9

2013 figures are restated due to implementationof IFRS 11 Joint Arrangements

Balance sheet

Amounts in NOK million

	3 0. 2. 2 0 1 1 4	3 0. 0 9. 2 0 1 4	3 2. 2 0 3 1. 1 1
As ts se :
i b le In ta ts ng as se	7 7	6 9	5 7
lan d e Pr ip ty t a t op er p n q u m en ,	2 0 0 4	1 9 1 1	1 9 4 1
he O t ts r a ss e	7 6	7 8	5 1
in j in Inv tm ts t v tu es en o en re	0 6 1	9 1	0 1 1
No t a ts n- cu rre n ss e	2 2 6 3	2 1 4 9	2 1 5 0
Inv ie to en r s	6 1 0	5 4 8	5 4 5
b le Re iva ce s	7 0 7	7 1 3	6 9 3
h a d c h de i Ca ts s n as p os	6 8 1	9 7	3 9
Cu t a ts rre n ss e	1 4 8 5	1 3 4 0	1 2 7 7
l a To ta ts ss e	3 7 4 8	3 4 8 9	3 4 2 7
d de b Eq i ty t: u an
i Gr Eq ty ou p u	1 9 4 1	2 0 2 8	1 8 4 7
l l No in in tro te ts n- co n g re s	8	7	9
Eq i ty u	1 9 4 9	2 0 3 5	1 8 5 6
d o he l b l is io ia i i ie Pr t t t ov ns an r n on -c ur re n s	1 9 6	1 4 3	1 4 1
be in l ia b i l i ie In te t- t re s ar g s	7 8 4	7 4 6	7 7 4
l ia b i l i ie No t t n- rre n s cu	9 8 0	8 8 9	9 1 5
be l b l In in ia i i ie te t- t re s ar g s	8	7	6
he l b l O ia i i ie t t r s	8 1 1	5 5 8	6 5 0
l b l Cu ia i i ie t t rre n s	8 9 1	6 5 5	6 6 5
i d l ia b i l i ie Eq ty t u an s	3 7 4 8	3 4 8 9	3 4 2 7
i io ( ) Eq % ty t u ra :	5 2, 0 %	5 8, 3 %	5 4, 2 %

2013 figures are restated due to implementationof IFRS 11 Joint Arrangements

l l i O i i A N K t m o u n s n m o n
f l i i i N t t e n a n c a e m s	Q 2 0 4- 1 4	Q 2 0 3 4- 1	2 0 Y T D 1 4 -	2 0 3 Y T D 1 -
i N t t t e n e r e s e x p e n s e s	6 -	8 -	2 8 -	3 5 -
/ l C i u r r e n c y g a n o s s	3	3	4	5 -
h f l i i i O t t t e r n a n c a e m s, n e	0	1 -	2 -	1 -
f l i i i N t t e n a n c a e m s	3 -	6 -	2 6 -	1 4 -

Amounts in NOK million

b d b N i i t t t- t e n e r e s e a r n g e	3 1. 1 2. 2 0 1 4	3 0. 0 9. 2 0 1 4	3 1. 1 2. 2 0 1 3
b l b l N i i i i i i t t t- t o n- c u r r e n n e r e s e a r n g a e s	7 8 4	7 4 6	7 7 4
b l b l C i i i i i i t t t- t r r e n n e r e s e a r n a e s u g	8	7	6
b b l i i i N t t t- o n- c u r r e n n e r e s e a r n g r e c e v a e s	6 1 -	1 7 -	3 1 -
h d h d C i t a s a n c a s e p o s s	1 6 8 -	7 9 -	3 9 -
i b i d b N t t t- t e n e r e s e a r n g e	6 0 8	6 5 7	7 2 8

Debt, credit facilities and solidity

•	D b d d f f i l i i t t t e a n o v e r r a a c e s
	f L d i i l i i t t t g o n e r m c r e a c e s – -
	1 5 0 0 N O K 5 l i g m -y e a r r e v o v n • , f 2 0 1 9 d i i l i i i t t t t c r e a c e s m a r u y ,
	4 0 0 N O K 5 b d i m -y e a r o n s s u e • , 2 0 1 9 i t t m a r u y
	4 0 1 0 E U R l m e a r o a n • -y , i 2 0 2 4 t t m a u r y
	1 9 O f f 5 N K i d i l i i t t m n o e r r a a c e s v –
•	S l i d i ( ) t t o c o e n a n s y v
	E i i 5 2 0 % ( 2 5 % ) t t > q u y r a o –
	0 8 3 3 2 L i L T M ( 5 ) t g < e e r a e r a o v –

Debt and undrawn facilities 31.12.2014

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.
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• • 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.
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• • This presentation was prepared for the interim results presentation for the fourth quarter of 2014, held on 4 February 2015. 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.