Borregaard

Earnings Release • Oct 21, 2020

3 rd Quarter 2020

Sarpsborg, 21 October 2020

Agenda

Per A Sørlie, President & CEO

• Highlights
• Business segments
• Outlook

Veronica Skevik Frey, VP Finance

Financial performance

Highlights – 3 rd quarter 2020

• EBITDA¹ NOK 266 million (NOK 286 million)
• Negative Covid-19 effects on demand in BioSolutions and BioMaterials
• Reduced lignin raw material supply affected sales to concrete admixtures and low-value industrial applications in BioSolutions
• Effect of reduced sales volume offset by lower wood and energy costs in BioMaterials
• Higher sales volume and prices for bioethanol in Fine Chemicals
• Slightly negative net currency impact on EBITDA¹

BioSolutions markets – Q3

Sales price and sales volume include lignin-based biopolymers and biovanillin

Sales volume 17% lower compared with Q3-19

• Discontinued raw material supply partly offset by increased sales volume from Florida and inventory reduction
• Concrete admixtures and low-value industrial applications mainly affected by reduced raw material supply
• Lower sales to oil field chemicals and slightly reduced demand for products to the automotive industry in the US market

Average price in sales currency 10% above Q3-19 due to improved product mix

Reduced sales to concrete admixtures and low-value industrial applications

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

4

BioMaterials markets – Q3

Sales price and sales volume include speciality cellulose and cellulose fibrils

Reduced sales volume mainly related to Covid-19 effects

• Lower sales of less specialised grades
• Reduced demand growth for cellulose ethers to construction due to coronavirus situation
• Sales to food and pharma applications continued to show strong growth

Average price in sales currency 1% above Q3-19

Increased sales of cellulose fibrils, but still at a low level

Fine Chemicals markets – Q3

Sales revenues include pharma intermediates and bioethanol

Higher sales volume and sales prices for bioethanol

Deliveries mainly to the biofuel segment

Pharma intermediates in line with Q3-19

Outlook

BioSolutions

• Total sales volume in Q4-20 expected to be 10-20% lower than in Q4-19
  • Mainly impacting sales to concrete admixtures and low-value industrial applications
  • Positive effect on product mix and average price in sales currency
• In total, demand is expected to be higher than supply in the 4th quarter
• However, reduced demand in certain speciality applications, particularly oil field chemicals and automotive, expected to continue
• Market conditions for biovanillin expected to be unchanged from the 3rd quarter.

BioMaterials

• Average price in sales currency for the full year is expected to be 0-1% above 2019
• Coronavirus effect on economic activity will continue to negatively influence demand for certain speciality cellulose grades
• Cellulose fibrils sales volume expected to continue to grow
• Wood costs in Q4-20 forecast to be 10-15 mNOK lower vs Q4-19

Fine Chemicals

No major changes expected in the market conditions for pharma intermediates and bioethanol

Covid-19 pandemic

• Possible further consequences of the coronavirus situation will affect Borregaard's business
• Continued focus on maintaining sufficient financial capacity and mitigating potential effects

Financial performance Q3-20

Borregaard key figures – Q3

Revenues 2% above Q3-19

EBITDA¹266 mNOK for the Group

• Improved results in Fine Chemicals
• Negative Covid-19 effects in BioMaterials and BioSolutions
• Slightly negative net FX effect on EBITDA¹

EPS at NOK 1.12 (NOK 1.31)

BioSolutions key figures – Q3

• Revenues 2% above Q3-19
• Average price in sales currency 10% above Q3-19 due to improved product mix
• Reduced raw material supply and 17% lower sales volume
• Covid-19 effects on demand in the US market
• Higher distribution costs related to transatlantic shipments
• Cost reductions from upgrade in Norway and restructuring in Germany
• Negative net FX impact

• EBITDA margin¹ below Q3-19

BioMaterials key figures – Q3

• Reduced sales volume mainly related to the coronavirus situation

• Average price in sales currency 1% higher vs Q3-19
• Higher cellulose fibrils sales did not fully compensate for reduced

Fine Chemicals key figures – Q3

• Revenues 36% above Q3-19

• Higher prices and sales volume for bioethanol

• Bioethanol result improved vs Q3-19

• Pharma intermediates in line with Q3-19
• Insignificant net FX effects

• EBITDA margin¹ below Q3-19

Currency impact

Net FX EBITDA¹ impact ≈-5 mNOK vs Q3-19

• Includes change in hedging effects and based on estimated FX exposure
• Net FX EBITDA¹ impact YTD ≈35 mNOK

Net FX EBITDA¹ impact in 2020 estimated to be ≈35 mNOK vs 2019

• Assuming rates as of 20 October (USD 9.29 and EUR 10.97) on expected FX exposure
• Net FX EBITDA¹ impact in Q4 estimated to be ≈0 mNOK vs Q4-19

Significant FX exposure, but delayed impact of FX rate fluctuations due to hedging policy

1) Alternative performance measure, see Appendix for definition.

2) See Appendix for currency hedging strategy, future hedges and hedging effects by segment.

3) Currency basket based on Borregaard's net exposure on EBITDA¹ in 2019 (=100): USD 65% (approx. 203 mUSD), EUR 35% (approx. 98 mEUR), Other 0% (GBP, BRL, JPY, SEK, ZAR).

13

Cash flow, investments and NIBD

Weaker cash flow from operating activities compared with Q3-19

Increase in net working capital, negative cash effect from a decline in EBITDA¹ and higher tax payments in Norway

Investments in line with Q3-19

NIBD¹ decreased by 40 mNOK in Q3

Leverage ratio¹ 2.01 vs 1.86 at year-end

Equity ratio¹ 47.5% vs 51.4% at year-end

Questions?

For questions, please contact Borregaard's Investor Relations by phone or email

See: https://www.borregaard.com/Investor-Relations

Borregaard – key figures

Amounts in NOK million	Q3-2020	Q3-2019	Change	YTD-2020	YTD-2019	Change
Operating revenues	1 260	1 239	2 %	3 990	3 829	4 %
EBITDA1	266	286	-7 %	869	824	5 %
Depreciation property, plant and equipment	-112	-106		-333	-308
Amortisation intangible assets	- 1	- 1		- 3	- 3
Other income and expenses1	0	0		-96	-16
Operating profit	153	179	-15 %	437	497	-12 %
Financial items, net	-20	-23		-60	-60
Profit before taxes	133	156	-15 %	377	437	-14 %
Income tax expenses	-34	-38		-109	-104
Profit for the period	9 9	118	-16 %	268	333	-20 %
Profit attributable to non-controlling interests	-13	-13		-47	-46
Profit attributable to owners of the parent	112	131		315	379
Cash flow from operating activities (IFRS)	153	232		470	409
Earnings per share	1,12	1,31	-15 %	3,15	3,79	-17 %
EBITDA margin1	21,1 %	23,1 %		21,8 %	21,5 %

1) Alternative performance measure, see Appendix for definition

Operating revenues and EBITDA¹ per segment

	Amounts in NOK million				Amounts in NOK million
Operating revenues	Q3-2020	Q3-2019	Change	EBITDA1	Q3-2020	Q3-2019	Change
Borregaard	1 260	1 239	2 %	Borregaard	266	286	-7 %
BioSolutions	733	720	2 %	BioSolutions	132	156	-15 %
BioMaterials	403	430	-6 %	BioMaterials	9 1	9 4	-3 %
Fine Chemicals	131	9 6	36 %	Fine Chemicals	4 3	3 6	19 %
Eliminations	- 7	- 7

	Amounts in NOK million
EBITDA2		Q3-2020 Q3-2019	Change
Borregaard	266	286	-7 %
BioSolutions	132	156	-15 %
BioMaterials	91	94	-3 %
Fine Chemicals	43	36	19 %

Amounts in NOK million Amounts in NOK million Operating revenues YTD-2020 YTD-2019 Change EBITDA¹ Eliminations -23 -25

Operating revenues	YTD-2020	YTD-2019	Change	EBITDA1	YTD-2020	YTD-2019	Change
Borregaard	3 990	3 829	4 %	Borregaard	869	824	5 %
BioSolutions	2349	2256	4 %	BioSolutions	495	516	-4 %
BioMaterials	1274	1296	-2 %	BioMaterials	238	203	17 %
Fine Chemicals	390	302	29 %	Fine Chemicals	136	105	30 %
Eliminations	-23	-25

Cash flow

Amounts in NOK million	Q3-2020	Q3-2019	YTD-2020	YTD-2019	FY-2019
Amounts in NOK million
Profit before taxes	133	156	377	437	467
Amortisation, depreciation and impairment charges	113	107	336	311	432
Change in net working capital, etc	-57	-37	-221	-256	-85
Dividend (share of profit) from JV	-	3	6 3	3	5
Taxes paid	-36	3	-85	-86	-122
Cash flow from operating activities	153	232	470	409	697
Investments property, plant and equipment and intangible assets *	-99	-101	-312	-370	-583
Other capital transactions	- 3	1 0	2	2 1	2 9
Cash flow from Investing activities	-102	-91	-310	-349	-554
Dividends	-	-	-229	-224	-224
Proceeds from exercise of options/shares to employees	5	4	3 4	3 4	3 5
Buy-back of shares	-11	- 8	-61	-56	-60
Gain/(loss) on hedges for net investments in subsidiaries	- 2	-40	-49	-31	-26
Net paid to/from shareholders	- 8	-44	-305	-277	-275
Proceeds from interest-bearing liabilities	400	351	1 350	1 698	2 100
Repayment from interest-bearing liabilities	-516	-425	-1 446	-1 478	-1 971
Change in interest-bearing receivables/other liabilities	4	5	3 0	- 2	- 3
Change in net interest-bearing liablities	-112	-69	-66	218	126
Cash flow from financing activities	-120	-113	-371	-59	-149
Change in cash and cash equivalents	-69	2 8	-211	1	- 6
Cash and cash equivalents at beginning of period	-59	5 9	8 1	8 6	8 6
Change in cash and cash equivalents	-69	2 8	-211	1	- 6
Currency effects cash and cash equivalents	1	5	3	5	1
Cash and cash equivalents at the end of the period	-127	9 2	-127	9 2	8 1
* Investment by category
Replacement Investments	5 2	5 8	191	188	370
Expansion investments1	4 7	4 3	121	182	213

19 1) Alternative performance measure, see Appendix for definition

Balance sheet

Amounts in NOK million	30.09.2020	30.06.2020	31.12.2019
Assets:
Intangible assets	9 0	9 4	9 3
Property, plant and equipment	3 962	3 975	3 852
Right-of-use assets	374	374	380
Other assets	249	284	251
Investment in joint venture	2 6	2 6	9 9
Non-current assets	4 701	4 753	4 675
Inventories	1 001	1 003	931
Receivables	1 055	1 120	991
Cash and cash deposits	5 0	6 7	147
Current assets	2 106	2 190	2 069
Total assets	6 807	6 943	6 744
Equity and liabilities:
Group equity	3 112	2 926	3 306
Non-controlling interests	124	141	158
Equity	3 236	3 067	3 464
Provisions and other liabilities	373	444	294
Interest-bearing liabilities	1 480	1 530	1 419
Non-current liabilities	1 853	1 974	1 713
Interest-bearing liabilities	687	694	608
Other current liabilities	1 031	1 208	959
Current liabilities	1 718	1 902	1 567
Equity and liabilities	6 807	6 943	6 744
Equity ratio1 (%):	47,5 %	44,2 %	51,4 %

1) Alternative performance measure, see Appendix for definition

Net financial items & net interest-bearing debt¹

Amounts in NOK million
Net financial items	Q3-2020	Q3-2019	YTD-2020	YTD-2019
Net interest expenses	-18	-18	-59	-49
Currency gain/loss	- 1	- 4	1	- 9
Other financial items, net	- 1	- 1	- 2	- 1
Net financial items	-20	-23	-60	-60

Amounts in NOK million

1 Net interest-bearing debt (NIBD)	30.09.2020	30.06.2020	31.12.2019
Non-current interest-bearing liabilities	1 480	1 530	1 419
Current interest-bearing liabilities including overdraft facilities	687	694	608
Non-current interest-bearing receivables (included in "Other Assets")	- 3	- 3	- 4
Cash and cash deposits	-50	-67	-147
1 Net interest-bearing debt (NIBD)	2 114	2 154	1 876
- of which impact from IFRS 16 leases	386	385	387

Currency hedging strategy

Purpose is to delay effects of currency fluctuations and secure competitiveness

Hedging based on expected EBITDA¹ impact²

• Base hedge: 75%/50% on a rolling basis for 6/9 months for major currencies
• 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
• Contracts³ : 100% hedged

Balance sheet exposure hedged 100%

Net investments in subsidiaries hedged up to 90% of book value in major currencies

	USD million	USD rate	EUR million	EUR rate
Q4-2020	35	8.29	24	10.07
2021	143	8.39	98	10.19
2022	127	8.95	95	10.65
2023	74	9.55	56	11.13

Contracted FX hedges with EBITDA impact (as of 20.10.20) Hedging effects by segment

NOK million	Q3-20	Q3-19	YTD-20	YTD-19
BioSolutions	-21	-9	-85	-19
BioMaterials	-25	-11	-94	-21
Fine Chemicals	-5	-3	-18	-4
Borregaard	-51	-23	-197	-44

1) Alternative performance measure, see Appendix for definition

2) Hedging done mainly in the Norwegian company

3) 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

Long-term credit facilities

• 1,500 mNOK revolving credit facilities, maturity 2021 Facilities refinanced in July, maturity 2023 and 2025
• 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 credit facilities

• 225 mNOK overdraft facilities
• 15 mUSD overdraft facility in LignoTech Florida
• 400 mNOK commercial paper

Solidity

• Equity ratio¹ 47.5% (> 25%)
• Leverage ratio¹ LTM 2.01 (< 3.25² ) (covenant)

Debt and undrawn facilities

1) Alternative performance measure, see Appendix for definition

2) Leverage ratio covenant is pre IFRS 16 Leases, and the actual leverage ratio¹ is restated to pre IFRS 16 for compliance calculations

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 Alternative performance measures and is of 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 Alternative performance measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

• EBITDA: Operating profit before depreciation, amortisation and other income and expenses.
• EBITDA margin: EBITDA divided by operating revenues
• Equity ratio: Equity (including non-controlling interests) divided by equity and liabilities.
• Expansion investments: 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.
• Other income and expenses: 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 operating profit.
• Leverage ratio: Net interest-bearing debt divided by last twelve months' (LTM) EBITDA.
• Net interest-bearing debt (NIBD): Interest-bearing liabilities minus interest-bearing assets (see slides 23 and 26).
• Return on capital employed (ROCE): Last twelve months' (LTM) capital contribution (operating profit before amortisation and other income and expenses) 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, right-of-use assets and investment in joint venture minus net pension liabilities.

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 third quarter of 2020, held on 21 October 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.