Borregaard — Interim / Quarterly Report 2017

Jul 18, 2017

CONTENTS

• 03 2ND QUARTER IN BRIEF
• 04 THE GROUP
• 06 THE BUSINESS AREAS
• 06 PERFORMANCE CHEMICALS
• 07 SPECIALITY CELLULOSE
• 08 OTHER BUSINESSES
• 09 FOREIGN EXCHANGE AND HEDGING
• 09 CASH FLOW AND FINANCIAL SITUATION
• 10 SHARE INFORMATION
• 10 OTHER MATTERS AND SUBSEQUENT EVENTS
• 11 OUTLOOK
• 12 STATEMENT BY THE BOARD OF DIRECTORS
• 13 THE GROUP'S CONDENSED INCOME STATEMENT
• 13 EARNINGS PER SHARE
• 13 THE GROUP'S CONDENSED COMPREHENSIVE INCOME STATEMENT
• 14 THE GROUP'S CONDENSED BALANCE SHEET
• 14 CHANGES IN EQUITY
• 15 THE GROUP'S CONDENSED CASH FLOW STATEMENT
• 16 NOTES
• 21NON-GAAP MEASURES

Q2 2017

2^N D QUARTER IN BRIEF

• All-time high EBITA adj.1 for the Group
• Favourable product mix in Performance Chemicals
• Increased prices, high sales volume and improved product mix in Speciality Cellulose
• Strong quarter for Fine Chemicals
• Increased energy, raw material and chemicals costs
• Cash flow from operations1 affected by increased net working capital

THE GROUP

			1. 4 - 3 0. 6		1. 1 - 3 0. 6	1 .1 31 .1 2 -
Am s i NO ill io K nt ou n m n	NO TE	20 17	20 16	20 17	20 16	20 16
O ing rat pe re ve nu es	2	1, 25 6	1, 16 7	2, 39 2	2, 28 0	4, 49 2
dj .1 EB IT DA a		31 8	26 9	59 2	50 5	1, 02 1
dj EB ITA .1 a	2	24 3	20 0	44 3	1 37	74 7
ofi los s b efo t/ Pr tax re es		24 1	20 7	43 6	36 8	72 4
sh Ea ing (N O K) rn s p er ar e		1. 81	1. 54	3. 29	2. 75	5. 55
be d eb t1 Ne t i ing nte st- re ar	10	79 5	61 0	79 5	61 0	30 0
1 ( Eq uit io % ) rat y		56 .3	54 .2	56 .3	54 .2	58 .1
Le io 1 rat ve rag e		0. 72	0. 68	0. 72	0. 68	0. 29
pit al pl ed 1 ( ) Re % tu rn o n ca em oy		22 .5	18 .8	22 .5	18 .8	21 .7

OPERATING REVENUES

EBITA ADJ.1

EBITA ADJ. MARGIN1

EARNINGS PER SHARE CUMULATIVE

SECOND QUARTER

Borregaard's operating revenues reached NOK 1,256 million (NOK 1,167 million)2 in the 2nd quarter of 2017. EBITA adj.1 increased to NOK 243 million (NOK 200 million), an all-time high quarterly result. Compared with the 2nd quarter of 2016, all business areas improved their EBITA adj.1. Final insurance settlement for business interruption related to the seasoning silos had a positive impact on EBITA adj.1 in the quarter. Net currency impact, including hedging effects, was slightly positive. Energy, raw material and chemicals costs increased compared with the corresponding quarter of 2016. Depreciation increased mainly as a result of recent expansion investments.

Performance Chemicals achieved an all-time high quarterly EBITA adj.1 as positive reallocation effects and favourable mix within Specialities offset the effect of cost increases and a 3% reduction in sales volume. The improved result in Speciality Cellulose was due to increased sales prices, high sales volume and improved product mix. The increased EBITA adj.1 in Other Businesses was primarily due to a strong quarter for Fine Chemicals.

Other income and expenses1 were NOK 0 million (NOK 13 million). Net fi nancial items were NOK -1 million (NOK -5 million). The change from last year was due to lower interest expense and an improvement in foreign exchange effects. Group profi t before tax was NOK 241 million (NOK 207 million). Tax expense was NOK -60 million (NOK -53 million), giving a tax rate of 25% (26%).

Earnings per share were NOK 1.81 (NOK 1.54).

FIRST HALF

In the 1st half of 2017, Borregaard's operating revenues increased to NOK 2,392 million (NOK 2,280 million). EBITA adj.1 reached NOK 443 million (NOK 371 million). Results improved in Speciality Cellulose and Other Businesses, whereas Performance Chemicals was in line with last year. Net currency impact was negligible. Energy, raw material and chemicals costs increased compared with the corresponding period of 2016. Depreciation increased mainly as a result of recent expansion investments.

Other income and expenses1 were NOK 0 million (NOK 13 million). Net fi nancial items amounted to NOK -5 million (NOK -14 million). Profi t before tax increased to NOK 436 million (NOK 368 million). Tax expense was NOK -108 million (NOK -94 million), giving a tax rate of 25% (26%).

Earnings per share were NOK 3.29 (NOK 2.75).

Cash fl ow from operations1 was NOK 319 million (NOK 478 million). The reduced cash fl ow was mainly due to increased net working capital.

CASH FLOW FROM OPERATIONS1

² Figures in parentheses are for the corresponding period in the previous year.

THE BUSINESS AREAS

PERFORMANCE CHEMICALS

		1. 4 - 3 0. 6		1. 1 - 3 0. 6
ill Am s i NO K io nt ou n m n	20 17	20 16	20 17	20 16	20 16
O ing rat pe re ve nu es	58 2	58 4	1, 13 2	1, 13 4	2, 16 1
dj EB ITA .1 a	14 1	14 0	27 3	27 8	51 7
ITA dj gi n1 (% ) EB a . m ar	24 .2	24 .0	24 .1	24 .5	23 .9

SECOND QUARTER

Performance Chemicals had 2nd quarter operating revenues of NOK 582 million (NOK 584 million). EBITA adj.1 was NOK 141 million (NOK 140 million), an all-time high result for a single quarter. Total sales volume decreased by 3%. There was a decline in sales to the construction sector, where market conditions continue to be challenging in certain regions. Inventories were stable due to reallocation efforts supported by fl exibility in raw material supply from external sources. Sales volume of specialities were in line with the 2nd quarter of 2016, but with a favourable product mix. Raw material and energy costs were stable, while other operating expenses increased compared with the 2nd quarter of 2016 due to resumed activity in Spain and increased manning in USA related to the Florida project. Currency impact was negligible in the 2nd quarter.

FIRST HALF

In the 1st half of 2017, Performance Chemicals had operating revenues of NOK 1,132 million (NOK 1,134 million). EBITA adj.1 was NOK 273 million (NOK 278 million). Total sales volume decreased by 2% due to challenging market conditions for Construction in certain regions. Lower prices in these areas and a slightly negative currency impact were largely compensated by volume reallocation and improved product mix. In total, costs were slightly higher than in the corresponding period of 2016.

SALES VOLUME

1 Non-GAAP measure, see page 21 for defi nition.

3 Metric tonne dry solid.

SPECIALITY CELLULOSE

		1. 4 - 3 0. 6		1. 1 - 3 0. 6
ill Am s i NO K io nt ou n m n	20 17	20 16	20 17	20 16	20 16
O ing rat pe re ve nu es	46 8	38 5	88 0	76 8	1, 59 0
dj .1 EB ITA a	10 3	68	19 2	12 1	25 0
dj EB ITA gi n1 (% ) a . m ar	22 .0	17 .7	21 .8	15 .8	15 .7

SECOND QUARTER

Speciality Cellulose 2nd quarter operating revenues increased to NOK 468 million (NOK 385 million). EBITA adj.1 reached NOK 103 million (NOK 68 million). The result improvement was primarily due to increased invoiced sales prices, high sales volume and improved product mix. Energy, raw material and and chemicals costs increased compared with the corresponding quarter of 2016. Currency impact was slightly positive. In the 2nd quarter, there were high deliveries of acetate cellulose and continued strong demand for ether grades. Market prices for textile cellulose declined during the quarter, but this did not affect Borregaard's 2nd quarter sales prices to this segment. Contribution from bioethanol increased slightly.

FIRST HALF

Operating revenues in the 1st half of 2017 were NOK 880 million (NOK 768 million). EBITA adj.1 increased to NOK 192 million (NOK 121 million). Higher sales prices, increased sales volume and improved product mix were the main contributors to the improved result, while energy, raw material and chemicals costs increased. Currency effects were slightly positive.

GROSS AVERAGE SALES PRICE

SALES VOLUME

1 Non-GAAP measure, see page 21 for defi nition.

4 Metric tonne.

OTHER BUSINESSES

		1. 4 - 3 0. 6		1. 1 - 3 0. 6
ill Am s i NO K io nt ou n m n	20 17	20 16	20 17	20 16	20 16
O ing rat pe re ve nu es	21 3	20 6	39 6	39 6	77 6
ITA dj .1 EB a	-1	-8	-2 2	-2 8	-2 0
dj n1 EB ITA gi (% ) a . m ar	-0 .5	-3 .9	-5 .6	-7 .1	-2 .6

SECOND QUARTER

Other Businesses had total operating revenues of NOK 213 million (NOK 206 million) and an EBITA adj.1 of NOK -1 million (NOK -8 million) in the 2nd quarter of 2017. The improvement was primarily due to high deliveries of key products in Fine Chemicals. The result in Ingredients declined slightly due to lower sales volume and increased costs. For Cellulose Fibrils, the result and net costs (including EU grant) were in line with the corresponding quarter of 2016. Currency impact was slightly positive.

FIRST HALF

Operating revenues in Other Businesses were NOK 396 million (NOK 396 million) in the 1st half of 2017. EBITA adj.1 was NOK -22 million (NOK -28 million). Higher sales volume in Fine Chemicals and slightly lower net costs (full effect of EU grant) in 2017 in Cellulose Fibrils more than offset the impact of a lower result in Ingredients. Currency effects were slightly positive in both Ingredients and Fine Chemicals.

INGREDIENTS – SALES REVENUES

FINE CHEMICALS – SALES REVENUES

FOREIGN EXCHANGE AND HEDGING

Borregaard has a signifi cant currency exposure which is hedged according to the company's hedging strategy. Compared with the 2nd quarter of 2016, the net positive impact of foreign exchange on EBITA adj.1, including hedging effects, was approximately NOK 5 million. Hedging effects were NOK -35 million (NOK -24 million) in the 2nd quarter.

impact of foreign exchange on EBITA adj.1, including hedging effects, was approximately NOK 0 million. Hedging effects were NOK -57 million (NOK -67 million) in the 1st half. Assuming FX rates as of 17 July 2017 (USD 8.16 and EUR 9.36) and based on currency exposure forecasts, Borregaard expects the net positive impact of foreign exchange on EBITA adj.1 to be approximately NOK 0 million in the 3rd quarter of 2017 and NOK 15 million for the full year of 2017.

Compared with the 1st half of 2016, the net positive

CASH FLOW AND FINANCIAL SITUATION

Cash fl ow from operating activities in the 2nd quarter of 2017 was NOK 158 million (NOK 433 million). The decrease was mainly due to an increase in net working capital from a low level at the end of the 1st quarter of 2017. The increase was mainly related to strong sales and increased accounts receivable towards the end of the 2nd quarter. In the 2nd quarter of 2016, cash fl ow from operations1 was positively impacted by an up-front payment of an EU grant to the Exilva project.

In the 1st half of 2017, cash fl ow from operating activities was NOK 240 million (NOK 364 million). The decline was mainly due to an increase in net working capital partly offset by improved results. Investments in the 1st half of 2017 amounted to NOK 374 million (NOK 213 million). Replacement

investments were in line with the 1st half of 2016, while expansion investments1 increased mainly due to the Florida project. Dividend of NOK 349 million (NOK 149 million) was paid out in the 2nd quarter. Realised effect of hedging of net investments in subsidiaries was NOK 13 million in the 1st half of 2017 (NOK 29 million). The Group has sold and repurchased treasury shares in the 1st half of 2017 with a net payment of NOK 18 million (NOK 6 million).

On 30 June 2017, the Group had net interest-bearing debt1 totalling NOK 795 million (NOK 610 million), an increase of NOK 411 million from the 1st quarter and NOK 495 million from year-end 2016. The Group was well capitalised with an equity ratio1 of 56.3% and a leverage ratio1 of 0.72.

SHARE INFORMATION

Total number of shares outstanding on 30 June 2017 was 100 million, including 484,065 treasury shares. Total number of shareholders was 8,708. Borregaard ASA's share price was NOK 103.00 at the end of the

2nd quarter, compared with NOK 96.25 at the end of the 1st quarter of 2017 and NOK 84.50 at the end of 2016. The share was traded ex dividend on 21 April 2017. Dividend was paid out on 3 May 2017.

OTHER MATTERS AND SUBSEQUENT EVENTS

LOAN AGREEMENT FOR LIGNOTECH FLORIDA

LignoTech Florida has entered into a USD 60 million loan agreement with Skandinaviska Enskilda Banken (SEB). The loan facility is guaranteed 70% by the Norwegian Export Credit Guarantee Agency (GIEK) and has a tenor of eight and a half years from project completion. The owners, Borregaard (55%) and Rayonier Advanced Materials (45%), will guarantee the loan facility on a pro rata basis until 12 months after project completion. See stock exchange notice of 12 June 2017.

INSURANCE SETTLEMENT FOR SEASONING SILOS COMPLETED

The insurance payment related to property damage and business interruption after the silo fi re incident in October 2015 has now been settled. The property damage compensation has been recognised as other income and expenses1. No such income has been recognised in the 2nd quarter of 2017.

Business interruption losses have been covered by insurance and recognised on an on-going basis. No further business interruption compensation will be recognised as the insurance claim has been fi nally settled.

OUTLOOK

Sales of lignin products to the construction sector will be affected by strong competition with increasing price pressure in certain regions in the 2nd half of 2017. Reallocation efforts will continue. Total sales volume in 2017 is forecast to be in the 450-470,000 mtds range. Sales volume in the 3rd quarter is expected to be higher than in the 3rd quarter of 2016. Flexibility in raw material supply from external sources will contribute to market optimisation and stable inventory levels.

Average cellulose price in 2017 in sales currency is expected to be 3-5% above the level in 2016. Product mix in 2017 is forecast to improve from 2016. In the 3rd quarter, textile cellulose prices will be lower than

in the 2nd quarter of 2017. Total sales volume and sales of highly specialised grades are expected to be lower than in the preceding quarter.

Market conditions for Ingredients are still affected by general overcapacity, but a slightly positive development is seen following recent price increases from Chinese producers. In the 3rd quarter, deliveries of key products within Fine Chemicals are forecast to be lower than in the preceding quarter, but higher than in the 3rd quarter of 2016. For Cellulose Fibrils, no major changes in net costs are expected in the 2nd half of 2017 compared with the 1st half of 2017.

STATEMENT BY THE BOARD OF DIRECTORS

We confi rm that, to the best of our knowledge, the unaudited interim condensed fi nancial statements for the period 1 January to 30 June 2017, have been prepared in accordance with IAS 34 Interim Financial Reporting, and that the information in the fi nancial statements gives a true and fair view of the business of the Group and the Group's assets, liabilities, fi nancial position and overall results, and that

the half year report provides a fair overview of the information set out in the Norwegian Securities Trading Act section 5-6, fourth paragraph.

Sarpsborg, 17 July 2017 The Board of Directors of Borregaard ASA

JAN ANDERS OKSUM Chair

TERJE ANDERSEN

JON ERIK REINHARDSEN

KRISTINE RYSSDAL

MARTHA KOLD BAKKEVIG

ÅSMUND DYBEDAHL

RAGNHILD ANKER EIDE

PER A. SØRLIEPresident and CEO

THE GROUP´S CONDENSED INCOME STATEMENT

INTERIM CONDENSED INCOME STATEMENT

			1. 4 - 3 0. 6		1. 1 - 3 0. 6	1. 1 - 3 1. 12
ill Am s i NO io K nt ou n m n	NO TE	20 17	20 16	20 17	20 16	20 16
O PE RA TI NG R EV EN UE S	2	1,2 56	1, 16 7	2, 39 2	2, 28 0	4, 49 2
O ing rat pe e xp en se s		-9 38	-8 98	-1 ,8 00	-1 ,7 75	-3 ,4 71
lan nd De iat io ip ty, t a t pr ec n pr op er p e qu m en		-7 5	-6 9	-1 49	-1 34	-2 74
bl Am tis io int gi at ts or n an e a sse		-1	-1	-2	-2	-4
th nd s1 O in er co m e a e xp en se	3	-	13	-	13	13
O PE RA TI NG P RO FIT		24 2	21 2	44 1	38 2	75 6
l it Fin cia t an em s, ne		-1	-5	-5	-1 4	-3 2
OF FO S PR IT BE RE TA XE		24 1	20 7	43 6	36 8	72 4
Inc e t om ax e xp en se	4	-6 0	-5 3	-1 08	-9 4	-1 71
PR OF IT FO R T HE P ER IO D		18 1	15 4	32 8	27 4	55 3
ofi rib ab le lli in Pr t att ut to tro te sts n on -c on ng re		-	-	-1	-1	-2
ofi rib ab le of th Pr t att ut to nt o ne rs e pa re w		18 1	15 4	32 9	27 5	55 5
dj .1 EB IT DA a		31 8	26 9	59 2	50 5	1 02 1
EB ITA A DJ .1	2	24 3	20 0	44 3	37 1	74 7

EARNINGS PER SHARE

INTERIM EARNINGS PER SHARE

			1. 4 - 3 0. 6		1. 1 - 3 0. 6	1. 1 - 3 1. 12
ill Am s i NO K io nt ou n m n	NO TE	20 17	20 16	20 17	20 16	20 16
sh ill ha Ea ing (1 00 s) rn s p er ar e m . s re	5	1. 81	1. 54	3. 29	2. 75	5. 55
lut ed sh Di ni e ar ng s p er ar e	5	1. 81	1. 54	3. 29	2. 75	5. 55

THE GROUP'S CONDENSED COMPREHENSIVE INCOME STATEMENT

INTERIM CONDENSED COMPREHENSIVE INCOME STATEMENT

			1. 4 - 3 0. 6		1. 1 - 3 0. 6	1. 1 - 3 1. 12
ill Am s i NO K io nt ou n m n	NO TE	20 17	20 16	20 17	20 16	20 16
O O O PR FIT F R TH E PE RI D		18 1	15 4	32 8	27 4	3 55
ITE M S NO T T O BE R EC LA SS IFI ED T O P& L
ial nd lo aft Ac ai s ( x) tu ta ar g ns a sse er		-	-	-	-	7
TO TA L		-	-	-	-	7
ITE M S T O BE R EC LA SS IFI ED T O P& L
Ch h ed fte h fl in gi (c ) r t an ge ng -re se rve a ax as o w	7	26	-1	40	21 1	22 7
Ch h ed fte in gi r t an ge ng -re se rve a ax bs id (n inv t i iar ies ) et tm es en n su	7	4	-4	4	21	14
sla ffe Tr tio cts an n e		-8	11	-2	-2 8	-3
TO TA L		22	6	42	20 4	23 8
TH E G RO UP 'S CO M PR EH EN SIV E I NC OM E		20 3	16 0	37 0	47 8	79 8
eh lli Co siv inc in nt te sts m pr en e om e no n- co ro ng re		-	-2	-	-2	-2
Co eh siv inc of th nt m pr en e om e o w ne rs e pa re		20 3	16 2	37 0	48 0	80 0

THE GROUP´S CONDENSED BALANCE SHEET

INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION

ill Am s i NO K io nt ou n m n	NO TE	30 .6 .2 01 7	31 .1 2. 20 16
bl Int gi ts an e a sse	12	11 8	12 5
lan nd Pr ip ty, t a t op er p e qu m en	12	2, 69 2	2, 47 1
th O ts er a sse	8	97	11 5
Inv in jo int tm ts tu es en v en re		12 7	12 1
NO CU AS SE TS N- RR EN T		3, 03 4	2, 83 2
Inv rie to en s		66 1	62 6
bl Re iva ce es	8	1, 06 6	94 8
Ca sh nd h de sit a c as po s	10	75	26 5
CU RR EN T AS SE TS		1,8 02	1, 83 9
TO TA L A SS ET S		4, 83 6	4, 67 1
Gr uit ou p eq y	9	2, 64 2	2, 67 9
lli No in nt te sts n- co ro ng re		81	34
EQ UI TY		2, 72 3	2, 71 3
nd th li ab ilit Pr isi ies ov on s a o er		28 8	29 9
t-b lia bi lit Int rin ies er es ea g	8, 10	76 5	52 5
NO N- CU RR EN T LIA BI LIT IE S		1,0 53	82 4
t-b lia bi lit Int rin ies er es ea g	8, 10	10 6	61
O th lia bi lit ies nt er c ur re	8	95 4	1, 07 3
CU RR EN T LIA BI LIT IE S		1,0 60	1, 13 4
EQ UI TY A ND L IA BI LIT ES		4, 83 6	4, 67 1
1 Eq uit io rat y		56 .3%	58 .1%

CHANGES IN EQUITY

INTERIM CONDENSED CHANGE IN EQUITY

			- 3 0. 6. 1. 1 17
ill Am s i NO K io nt ou n m n	No te	lli Co nt ro ng in te st re s	No n lli nt co ro ng in te st re s	l To ta ui ty eq	lli Co nt ro ng in te st re s	No n lli nt co ro ng in te st re s	l To ta ui ty eq
Eq uit 1 J y an ua ry		2, 67 9	34	2, 71 3	2, 05 6	5	2, 06 1
PR O FIT /L OS S FO R TH E PE RI O D		32 9	-1	32 8	55 5	-2	55 3
eh Ite s i Co siv Inc m n m pr en e om e	6	41	1	42	24 5	-	24 5
G RO 'S CO SIV CO TH E UP M PR EH EN E IN M E	6	37 0	-	37 0	80 0	-2	79 8
id di de nd Pa vi		-3 49	-	-3 49	-1 49	-	-1 49
ba ck f t sh Bu y- o re as ur y ar es		-2 9	-	-2 9	-1 0	-	-1 0
f s ha Ex cis tio er e o re op ns		-	-	-	9	-	9
Sh pl to ar es e m oy ee s		15	-	15	-	-	-
O io /sh ba d pt sts ts n co ar e se pa ym en		3	-	3	4	-	4
ith lli Tr io in ct tro te sts an sa ns w n on -c on ng re		-4 7	47	-	1 -3	31	-
EQ UI TY A T TH E EN D O F T HE P ER IO D		2, 64 2	81	2, 72 3	2, 67 9	34	2, 71 3

THE GROUP'S CONDENSED CASH FLOW STATEMENT

INTERIM CONDENSED CASH FLOW STATEMENT

			1. 4 - 3 0. 6		1. 1 - 3 0. 6	1. 1 - 3 1. 12
ill Am s i NO K io nt ou n m n	NO TE	20 17	20 16	20 17	20 16	20 16
ofi be fo Pr t tax re es		24 1	20 7	43 6	36 8	72 4
de d ha Am tis io iat io im irm at t c or n, pr ec n an pa en rge s		76	69	15 1	13 5	27 8
Ch kin l, e s i ita t w tc an ge n ne or g c ap		-1 17	20 4	-2 73	-3 9	17 0
de nd ha of fi t ) f Di vi (s JV re p ro ro m		-1	-1 6	-3	-3 8	-1
aid Ta xe s p		-4 1	-3 1	-7 1	-6 2	-9 0
CA SH F LO W F RO M O PE RA TI NG A CT IV IT IE S		15 8	43 3	24 0	36 4	1,0 81
lan nd Inv ip tm ts ty, t a t es en pr op er p e qu m en d bl int gi ts* an an e a sse		-2 15	-1 42	-3 74	-2 13	-6 22
th l t O ita tio er c ap ra ns ac ns		5	1	7	2	5
CA SH F LO W F RO M IN VE ST IN G AC TIV ITI ES		-2 10	-1 41	-3 67	-2 11	-6 17
Di vi de nd s		-3 49	-1 49	-3 49	-1 49	-1 49
ds fr f o /sh pl Pr ise io pt to oc ee om e xe rc o ns ar es e m oy ee s	9	-	2	11	3	7
ba ck f s ha Bu y- o re s	6	-	-9	-2 9	-9	-1 0
(lo he dg fo bs id Ga in/ ss) inv in iar ies et tm ts o n es r n es en su		-1 1	18	-2	29	13
O/ OM S HO S NE T PA ID T FR HA RE LD ER		-3 60	-1 38	-3 69	-1 26	-1 39
ds fr be li ab ilit Pr in ing ies te st- oc ee om re ar	10	25 8	10 0	26 3	10 0	10 6
t f t-b lia bi lit Re int rin ies pa ym en ro m er es ea g	10	-2	-1 02	-2 9	-1 04	-3 09
Ch be bl th li ab ilit in in ing iva /o ies te st- an ge re ar re ce es er	10	15	-6	38	-1 5	-2 3
CH AN GE IN N ET IN TE RE ST -B EA RIN G LIA BIL ITI ES		27 1	-8	27 2	-1 9	-2 26
CA SH F LO W F RO M F IN AN CI NG A CT IV IT IE S		-8 9	-1 46	-9 7	-1 45	-3 65
CH AN GE IN C AS H AN D CA SH E QU IVA LE NT S		-1 41	14 6	-2 24	8	99
sh nd h e len be f p iod Ca iva gi ing ts at a c as qu nn o er		18 2	18	26 5	16 9	16 9
Ch h d sh len in iva ts an ge c as an ca e qu		-1 41	14 6	-2 24	8	99
ffe Cu h d sh iva len cts ts rre nc y e c as an ca e qu		2	-1	2	-1 4	-3
CA SH A ND C AS H EQ UI VA LE NT S AT T HE E ND O F T HE P ER IO D	10	43	16 3	43	16 3	26 5
t b * I tm teg nv es en y ca or y
pl Re t i tm ts ac em en nv es en		46	95	12 4	12 9	35 8
io inv ts1 Ex tm pa ns n es en		16 9	47	25 0	84	26 4

NOTES

NOTE 01 Organisation and basis for preparation

GENERAL INFORMATION

Borregaard ASA is incorporated and domiciled in Norway. The address of its registered offi ce is Hjalmar Wessels vei 6, Sarpsborg.

Borregaard ASA was listed on the Oslo Stock Exchange on 18 October 2012 and was incorporated as a public limited liability company on 22 August 2012.

Basis for preparation

These unaudited Interim Condensed Consolidated Financial Statements are prepared in accordance with IAS 34 Interim Financial Reporting. Borregaard ASA is the parent company of the Borregaard Group presented in these Interim Condensed Consolidated Financial Statements.

The same accounting principles and methods of calculation have been applied as in the Consolidated Financial Statements for 2016 for the Borregaard Group.

Use of estimates

The same use of estimates has been applied as in the Consolidated Financial Statements for 2016.

NOTE 02 Segments

OPERATING REVENUES

		1. 4 - 3 0. 6		1. 1 - 3 0. 6	1. 1 - 3 1. 12
ill Am s i NO K io nt ou n m n	20 17	20 16	20 17	20 16	20 16
BO EG RR AA RD	1,2 56	16 1, 7	2, 39 2	2, 28 0	49 2 4,
rfo C he ica ls Pe rm an ce m	58 2	58 4	1, 13 2	1 13 4	2, 16 1
ial el lu los Sp ity C ec e	46 8	38 5	88 0	76 8	1, 59 0
th O B ine er us sse s	21 3	20 6	39 6	39 6	77 6
Eli ina tio m ns	-7	-8	-1 6	-1 8	-3 5

EBITA ADJ.1

	1. 4 - 3 0. 6			1. 1 - 3 0. 6
ill Am s i NO K io nt ou n m n	20 17	20 16	20 17	20 16	20 16
BO RR EG AA RD	24 3	20 0	44 3	37 1	74 7
rfo he ls Pe C ica rm an ce m	14 1	14 0	27 3	27 8	51 7
ial el lu los Sp ity C ec e	10 3	68	19 2	12 1	25 0
th O B ine er us sse s	-1	-8	-2 2	-2 8	-2 0
CO NC IO AG NS O NG RO RE ILI AT N AI T PE RA TI P FIT & PR O FIT B EF O RE T AX
.1 EB ITA A DJ	24 3	20 0	3 44	37 1	74 7
bl Am tis io int gi at ts or n an e a sse	-1	-1	-2	-2	-4
th nd s1 O in er co m e a e xp en se	-	13	-	13	13
O PE RA TI NG P RO FIT	24 2	21 2	44 1	38 2	75 6
Fin cia l it t an em s, ne	-1	-5	-5	-1 4	-3 2
O O ES PR FIT B EF RE T AX	24 1	20 7	43 6	36 8	72 4

There are limited intercompany sales between the different segments and eliminations consist essentially of allocations from the corporate headquarter.

NOTE 03 Other income and expenses ¹

There are no Other income and expenses1 in the 2nd quarter of 2017.

NOTE 04 Income tax expense

The tax rate of 24.8% (25.5%) for the fi rst six months of 2017 is a compilation of the tax rates in the various countries in which Borregaard operates and has taxable income. The tax rate in Norway is reduced from 25% to 24% from 1 January 2017. Borregaard's normal tax rate is expected to be in the range 23-26%.

As the profi t after tax from the joint venture is accounted for as part of operating profi t (due to IFRS 11), this does not impact the Group's tax expense and thus reduces the Group's tax rate.

NOTE 05 Earnings per share (EPS)

The share capital consists of 100 million shares. The company holds 484,065 treasury shares. As of 30 June 2017, there are 100,078,313 diluted shares (100,076,679 as of 31 December 2016). Earnings per diluted share were NOK 1.81 in the 2nd quarter of 2017 (NOK 1.54 in the 2nd quarter of 2016).

NOTE 06 Stock options

The Group Executive Management and other key employees hold a total of 1,344,000 stock options in three different share option programmes in Borregaard.

The fi rst option programme, comprising 480,000 stock options granted in October 2014, has a strike price of NOK 43.00 adjusted for dividends in 2015, 2016 and 2017, NOK 6.25. The second option programme, comprising 500,000 stock options granted in October

2015, has a strike price of NOK 46.49 adjusted for dividends in 2016 and 2017, NOK 5.00. The third option programme, comprising 364,000 stock options granted in February 2017, has a strike price of NOK 100.61 adjusted for dividend of NOK 3.50 in 2017. The share options in the three different programmes will expire after fi ve years, the vesting period is three years and the options can be exercised during the last two years.

NOTE 07 Statement of comprehensive income

The statement of comprehensive income shows changes in the value of hedging instruments, both cash fl ow hedges and hedges of net investments in subsidiaries (hedging reserve). These fi gures are presented after tax. The tax effect for the fi rst six months of 2017 relating to the hedging reserves amounts to NOK -22 million for

cash fl ow hedges (NOK -44 million) and NOK -38 million for hedges of net investments in subsidiaries (NOK -34 million). Total hedging reserve included in equity as of 30 June 2017 (after tax) amounts to NOK -77 million and NOK -94 million respectively (NOK -133 million and NOK -92 million).

NOTE 08 Fair value hierarchy

For fi nancial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation at the end of each reporting period.

The following measurement levels are used for determining the fair value of fi nancial instruments:

• Level 1 Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities
• Level 2 Valuation techniques (for which the lowest level input that is signifi cant to the fair value measurement is directly or indirectly observable)

• Level 3 — Valuation techniques (for which the lowest level input that is signifi cant to the fair value measurement is unobservable)

There were no transfers from one level to another in the measurement hierarchy from 2016 to the 2nd quarter of 2017. Borregaard has no items defi ned as level 1. The bond is determined as measurement level 3. The fair value of the bond is deemed to equal its book value.

Set out below is a comparison of the carrying amount and the fair value of fi nancial instruments as of 30 June 2017:

		30 .6	.2 01 7	31 .1 2. 20 16
ill Am s i NO K io nt ou n m n	LE VE L	CA RR YI NG O AM UN T	FA IR V AL UE	CA RR YI NG O AM UN T	FA IR V AL UE
fi n l r ab les No cia eiv nt n- cu rre an ec	2	41	41	65	65
de No riv ive nt at n- cu rre s	2	35	35	29	29
de Cu riv ive nt at rre s	2	34	34	9	9
TO TA L FIN AN CI AL A SS ET S		11 0	11 0	10 3	10 3
FIN AN CI AL L IA BI LIT IE S
fi n l l iab ilit No cia ies nt n- cu rre an	2, 3	77 5	77 5	53 5	53 5
de No riv ive nt at n- cu rre s	2	57	57	72	72
fi n l l iab ilit Cu cia ies nt rre an	2	73	73	61	61
de Cu riv ive nt at rre s	2	10 1	10 1	11 8	11 8
TO TA L FIN AN CI AL L IA BI LIT IE S		1,0 06	1, 00 6	78 6	78 6

FINANCIAL ASSETS

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

ill Am s i NO K io nt ou n m n			LE VE L 1	LE VE L 2	LE VE L 3
FIN AN CI AL IN ST RU M EN TS	30 .6 .2 01 7	-8 96	-	-6 96	-2 00
FIN AN CI AL IN ST RU M EN TS	31 .1 2. 20 16	-6 83	-	-4 83	-2 00

The fi nancial instruments are measured based on observable spot exchange rates, the yield curves of the respective currencies as well as the currency basis spreads between the respective currencies.

NOTE 09 Compilation of Equity

ill Am s i NO K io nt ou n m n	30 .6 .2 01 7	31 .1 2. 20 16
Sh l ita ar e c ap	10 0	10 0
sh Tr ea su ry ar es	-	-
Sh iu ar e pr em m	1,3 46	1, 34 6
th aid l O -in ita er p c ap	41 5	39 7
sla ffe Tr tio cts an n e	83	86
dg fte He ing (a ) r t re se rve ax	-1 71	-2 15
Ac ial ai /lo tu ar g ns sse s	-1 6	-1 6
ine d ing Re ta ea rn s	88 5	98 1
(C S) G RO UP E Q UI TY O NT RO LL IN G IN TE RE ST	2, 64 2	2, 67 9

As of 30 June 2017, the company held 484,065 treasury shares at an average cost of NOK 82.17.

NOTE 10 Net interest-bearing debt ¹

The various elements of net interest-bearing debt1 are shown in the following table:

ill Am s i NO K io nt ou n m n	30 .6 .2 01 7	31 .1 2. 20 16
t-b lia bi lit No int rin ies nt n- cu rre er es ea g	76 5	52 5
t-b lia bi lit cl ud rd raf f c hp l Cu int rin ies in ing nt t o rre er es ea g o ve as oo	10 6	61
t-b bl lud ed th No int rin iva (i in "O A ts" ) nt n- cu rre er es ea g re ce es nc er sse	-1	-2 1
sh nd h de Ca sit a c as po s	-7 5	-2 65
T1 NE T IN TE RE ST -B EA RI NG D EB	79 5	30 0

NOTE 11 Related parties

The members of the Group Executive Management of Borregaard held a total of 765,000 stock options in the Company as of 30 June 2017.

NOTE 12 Assessments relating to impairment

No impairment indicators have been identifi ed in the Borregaard Group's property, plant and equipment or intangible assets in the 2nd quarter of 2017.

NOTE 13 Other matters and subsequent events

LOAN AGREEMENT FOR LIGNOTECH FLORIDA

LignoTech Florida has entered into a USD 60 million loan agreement with Skandinaviska Enskilda Banken (SEB). The loan facility is guaranteed 70% by the Norwegian Export Credit Guarantee Agency (GIEK) and has a tenor of eight and a half years from project completion. The owners, Borregaard (55%) and Rayonier Advanced Materials (45%), will guarantee the loan facility on a pro rata basis until 12 months after project completion. See stock exchange notice of 12 June 2017.

INSURANCE SETTLEMENT FOR SEASONING SILOS COMPLETED

The insurance payment related to property damage and business interruption after the silo fi re incident in October 2015 has now been settled. The property damage compensation has been recognised as other income and expenses1. No such income has been recognised in the 2nd quarter of 2017.

Business interruption losses have been covered by insurance and recognised on an on-going basis. No further business interruption compensation will be recognised as the insurance claim has been fi nally settled.

OTHER MATTERS

There have been no events after the balance sheet date that would have had a material impact on the fi nancial statements or the assessments carried out.

NON-GAAP MEASURES

In the discussion of the reported operating results, fi nancial position and cash fl ows, Borregaard refers to certain measures which are not defi ned by generally accepted accounting principles (GAAP) such as IFRS. Borregaard management makes regular use of these non-GAAP 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 non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

CASH FLOW FROM OPERATIONS

Cash fl ow from operations is defi ned by Borregaard as:

Cash fl ow from operating activities (IFRS)

• • Tax paid
• +/- Net fi nancial items
• +/- Dividend (share of profi t) from JV
• = Cash fl ow from operations

EBITA ADJUSTED (EBITA ADJ.)

EBITA adj. is defi ned by Borregaard as operating profi t before amortisation and other income and expenses.

EBITA ADJ. MARGIN

EBITA adj. margin is defi ned by Borregaard as EBITA adj. divided by operating revenues.

EBITDA ADJUSTED (EBITDA ADJ.)

EBITDA adj. is defi ned by Borregaard as operating profi t before depreciation, amortisation and other income and expenses.

EQUITY RATIO

Equity ratio is defi ned by Borregaard as equity (including non-controlling interests) divided by equity and liabilities.

EXPANSION INVESTMENTS

Expansion investments is defi ned by Borregaard as 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 research and development costs and new distribution set-ups.

OTHER INCOME AND EXPENSES

Other income and expenses is defi ned by Borregaard as 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 profi t.

LEVERAGE RATIO

Leverage ratio is defi ned by Borregaard as net interestbearing debt (see note 10) divided by last twelve months' (LTM) EBITDA adj.

NET INTEREST-BEARING DEBT

Net interest-bearing debt is defi ned by Borregaard as interest-bearing liabilities minus interest-bearing assets (see Note 10).

CAPITAL EMPLOYED

Capital employed is defi ned by Borregaard as the total of net working capital, intangible assets, property, plant and equipment and investment in joint venture minus net pension liabilities and deferred tax excess value.

RETURN ON CAPITAL EMPLOYED (ROCE)

Return on capital employed (ROCE) is defi ned by Borregaard as last twelve months' (LTM) EBITA adj. divided by average capital employed based on the ending balance of the last fi ve quarters.

	1.	1 - 3 0. 6	1. 1 - 3 1. 12
al pl ed nd f Ca pit em oy e o	20 17	20 16	20 16
Q 01 2, 2 5		3, 23 5
Q 01 3, 2 5		3, 28 3
Q 2 01 5 4,		3, 27 9	3, 27 9
Q 1, 2 01 6		3, 52 4	3, 52 4
Q 2, 2 01 6	3, 48 1	3, 48 1	3, 48 1
Q 3, 2 01 6	3, 41 3		3, 41 3
Q 4, 2 01 6	3, 50 8		3, 50 8
Q 1, 2 01 7	3, 75 4
Q 2, 2 01 7	4, 00 3
AG AV ER E	3, 63 2	3, 36 0	3, 44 1
. ( ) EB ITA A DJ LT M	81 9	63 2	74 7
(% ) RO CE	22 .5	18 .8	21 .7

NOTES

NOTES

Borregaard ASA P.O. Box 162, NO-1701 Sarpsborg, Norway Telephone: (+47) 69 11 80 00 Fax: (+47) 69 11 87 70 E-mail: borregaard@borregaard.com www.borregaard.com