Borregaard — Investor Presentation 2014

Apr 29, 2014

1 st quarter 2014 Oslo, 29 April 2014

Agenda

Per A Sørlie, President & CEO

• Highlights
• Business Areas
• Outlook

Per Bjarne Lyngstad, CFO

• Financial performance

Highlights – 1 st quarter 2014

• Significant progress for Performance Chemicals
• Lower prices and weaker product mix for Specialty Cellulose
• Other Businesses in line with Q1-13
• Positive currency impact

Performance Chemicals – Q1 market development

• Generally positive market situation
• − Strong demand in Asia
• − Improved product mix, higher invoiced prices and favourable currency impact
• Sales volume slightly above Q1-13
• − Increased raw material supply from new and existing sources compensated for the shortfall in Spain

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

4

Performance Chemicals Specialty products capacity expansion

• New production unit started up in Sarpsborg late 2013
• 10-30% capacity increase for specialised products for batteries, oil well drilling and agricultural chemicals
• Basis for introduction of new technology improving performance of existing products

• Effects started to materialise in Q1-14

• Increased sales of specialties, in particular in Asia
• Before the expansion, sales was limited by production capacity
• Higher sales prices, partly due to improved product performance

Specialty Cellulose – Q1 market development

• Sales price development in line with expectations

• − Lower invoiced prices
• − Impact softened by weaker NOK

• Weaker product mix compared with Q1-13

• − Product mix improved slightly from Q4-13
• − Sales volume higher than Q1-13

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

Fine Chemicals & Ingredients – Market conditions

Ingredients

• A slightly higher sales volume compared with Q1-13
• Continues to suffer from a challenging market situation

Fine Chemicals

• Higher sales both for X-ray contrast media intermediates and other fine chemicals

Outlook

• Performance Chemicals

• Continued strong demand in major applications, especially in the Asian markets
• Increased lignin raw material supply from new and existing sources is expected largely to compensate for sales from inventories in 2013 and the assumed lack of supply in Spain
• Sales volume in Q2-14 will be positively affected by normal seasonality within construction markets

• Specialty Cellulose

• Cellulose prices in sales currency for 2014 are still expected to be on average 7-8% lower than 2013
• Furthermore, product mix in 2014 is projected to be marginally weaker than in 2013
• Actual mix will be determined by demand development, especially within the construction end-market
• In Q2-14, Specialty Cellulose expects a product mix similar to both Q1-14 and Q2-13

• Other Businesses

• The challenging market situation for vanillin products is expected to continue
• The Fine Chemicals business is likely to remain relatively stable
• FX exposure
• Significant FX exposure
• Impact from exchange rate fluctuations delayed due to currency hedging policy

FINANCIAL PERFORMANCE Q1-14

Borregaard – Q1 key figures

• Revenues increased nearly 4% vs Q1-13
• Significant EBITA progress for Performance Chemicals, but decline in Specialty Cellulose
• Reduced wood cost and a weaker NOK contributed positively
• EPS in line with Q1-13

Performance Chemicals – Q1 key figures

Q1 Q2 Q3 Q4

• Top line growth 13% vs Q1-13
• Market situation generally positive, strong demand in Asia

• Raw material supply from new and existing sources compensated for the shortfall in Spain

• All-time high EBITA for a single quarter

• Improved product mix, higher invoiced prices and favourable currency impact

• EBITA margin above 20%

Specialty Cellulose– Q1 key figures

• • Top line down by 7% vs Q1-13
• Lower invoiced prices

• Product mix improved from Q4-13, but weakened compared with Q1-13

• Lower prices, weaker product mix and lower production

• Positive FX contribution, lower wood costs and a slightly higher sales volume

• Margin impacted by lower prices and weaker mix

Other Businesses– Q1 key figures

-24

• Fine Chemicals recorded higher sales and improved EBITA
• Corporate costs were higher than in Q1-13, partly due to the BALI project

-21

-30

-20

-21

Q1 Q2 Q3 Q4

Currency impact

• Overall a positive FX impact on EBITA
• 10% exchange rate improvement for Borregaard vs Q1-13
• Hedging impact negative by 41 mNOK vs Q1-13
• Currency hedging strategy will delay impact from exchange rate fluctuations

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

• Satisfactory cash flow from operations in Q1
• Large scheduled tax payment in Q1 (61 mNOK)
• − Going forward, most tax payments in Norway will be made in Q1 and Q2
• Capex at a low level in Q1
• NIBD reduced by 20 mNOK in Q1

1) Cash Flow operating activities according to IFRS adjusted for financial items and taxes paid

• Per A Sørlie, President & CEO
• Per Bjarne Lyngstad, CFO

APPENDIX

Borregaard – Key figures

Amounts in NOK million	Q1-2014	Q1-2013	Change
Operating revenues	992	950	4 %
EBITDA (adjusted)	158	162	-2 %
EBITA (adjusted)	99	109	-9 %
Amortisation intangibles	0	0
Other income and expenses	0	0
EBIT	99	109	-9 %
Financial items, net	- 7	-14
Profit/loss before taxes	92	95	-3 %
Taxes	-27	-29
Profit/loss for the period	65	66	-2 %
Profit/loss attributable to non-controlling interests	0	1
Profit/loss attributable to owners of the parent	65	65
Cash flow from operating activities	59	92
Earnings per share (NOK)	0,65	0,65	0 %
Adjusted EBITDA margin	15,9 %	17,1 %
Adjusted EBITA margin	10,0 %	11,5 %

2013 figures are restated due to implementation of IFRS 11 Joint Arrangements

Amounts in NOK million				Amounts in NOK million
Operating revenues	Q1-2014	Q1-2013	Change	Operating profit - EBITA	Q1-2014	Q1-2013	Change
Borregaard	992	950	4 %	Borregaard	99	109	-9 %
Performance Chemicals	442	391	13 %	Performance Chemicals	93	64	45 %
Specialty Cellulose	379	407	-7 %	Specialty Cellulose	27	66	-59 %
Other Businesses	185	164	13 %	Other Businesses	-21	-21	0 %
Eliminations	-14	-12	-17 %

Amounts in NOK million		Amounts in NOK million

Cash flow

Amounts in NOK million

	Q1-2014	Q1-2013	FY-2013
Amounts in NOK million
Profit before taxes	92	95	460
Amortisation, depreciation and impairment charges	59	53	231
Change in net working capital, etc	-29	-52	-17
Share of profit (dividend) from JV	-2	-1	-19
Taxes paid	-61	-3	-129
Cash flow from operating activities	59	92	527
Investments property, plant anf equipment and intangible assets 1)	-51	-59	-288
Other capital transactions	3	2	2
Cash flow from Investing activities	-48	-57	-286
Dividends/Group contributions	0	0	-100
Change in treasury shares	11	0	-33
Net paid to/from shareholders	11	0	-133
Change in interest-bearing liabilities	-20	-60	-218
Change in interest-bearing receivables	-4	-5	-1
Change in net interest-bearing liablities	-24	-65	-219
Cash flow from financing activities	-13	-65	-352
Change in cash and cash equivalents	-2	-30	-112
Cash and cash equivalents as of beginning of period	39	134	134
Change in cash and cash equivalents	-2	-30	-112
Currency effects cash and cash equivalents	-2	4	17
Cash and cash equivalents at the close of the period	35	108	39

Balance sheet

Amounts in NOK million

	31.03.2014	31.12.2013
Assets:
Intangible assets	54	57
Property, plant and equipment	1 934	1 941
Investments in joint venture	101	101
Other assets	64	51
Non-current assets	2 153	2 150
Inventories	533	545
Receivables	773	693
Cash and cash equivalents	35	39
Current assets	1 341	1 277
Total assets	3 494	3 427
Equity and debt:
Group Equity	1 963	1 847
Non-controlling interests	8	9
Equity	1 971	1 856
Provisions and other non-current liabilities	146	141
Interest-bearing liabilities	755	774
Non-current liabilities	901	915
Interest-bearing liabilities	5	6
Other liabilities	617	650
Current liabilities	622	656
Equity and liabilities	3 494	3 427
Equity ratio (%):	56,4 %	54,2 %

2013 figures are restated due to implementation of IFRS 11 Joint Arrangements

Net financial items & net interest-bearing debt

Amounts in NOK million
Net financial items	Q1-2014	Q1-2013
Net interest expenses	- 7	- 9
Currency gain/loss	0	- 4
Other financial items, net	0	- 1
Net financial items	- 7	-14

Amounts in NOK million

Net interest-bearing debt	31.03.2014	31.12.2013
Non-current interest-bearing liabilities	755	774
Current interest-bearing liabilities	5	6
Non-current interest-bearing recievables	-17	-13
Cash and cash equivalents	-35	-39
Net interest-bearing debt	708	728

Debt, credit facilities and solidity

• Debt and overdraft facilities

• Long-term debt
• 1,200 mNOK 5-year revolving credit facilities, maturity 2017
• 600 mNOK 3-year revolving credit facilities, maturity 2015
• 400 mNOK 5-year bond issue, maturity 2019
• 40 mEUR 10-year loan, maturity 2024
• Refinancing process on-going
• 195 mNOK overdraft facilities

• Solidity (covenants)

• Equity ratio 56.4% (> 25%)
• Leverage ratio 1.00 (< 3.25 / 3.00)

Debt and undrawn facilities 31.03.2014

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.
• 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 first quarter of 2014, held on 29 April 2014. 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.