Borregaard — Investor Presentation 2014

Feb 5, 2014

4 th quarter 2013 Oslo, 5 February 2014

Agenda

Per A Sørlie, President & CEO

• Highlights
• Proposed dividend
• Business Areas
• Outlook

Per Bjarne Lyngstad, CFO

• Financial performance

Highlights – 4 th quarter 2013

• Q4-13 EBITA in line with Q4-12
• Strong improvement in Performance Chemicals
• Weaker results in Specialty Cellulose and Ingredients
• Positive effects of weaker NOK delayed by currency hedging strategy

Highlights – Full year 2013

• Third good year in a row
• EBITA 501 mNOK (546 mNOK)
• ROCE 17.3% (19.7%)
• All-time high result in Performance Chemicals
• Weaker results in Specialty Cellulose and Other Businesses
• Lower wood cost, favourable currency impact and record production at the Sarpsborg site

Dividend proposal for 2013

• A dividend of NOK 1.10 per share is proposed by the Board of Directors
• 10% increase from NOK 1.00 in 2012
• 33% of net earnings
• Total dividend payment of 109 mNOK
• Borregaard's 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

Performance Chemicals – Q4 market development

• Generally positive market situation
• − Strong demand in Asia
• − A notable improvement in product mix with increased volume to high-value applications
• − Higher prices and favourable FX development
• 9% lower sales volume compared with Q4-12
• − Reduced raw material supply in Spain and the Czech Republic, partly off-set by spot purchases

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.

Performance Chemicals– FY 2013 market development

• Favourable market conditions with strong demand in all major applications
• − Improved product mix, price increases and beneficial currency impact
• − Double digit volume growth in 2013 for high-value products
• 8 % decline in sales volume from 2012
• − Reduced raw material supply in Spain and the Czech Republic partly compensated by sales from inventories and additional spot volume purchases

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.

7

Specialty Cellulose – Q4 market development

• Higher sales volume for both speciality cellulose and bioethanol
• − Product mix similar to Q4-12
• Lower prices in sales currency compared with Q4-12
• − Mainly for speciality grades competing with cotton linter pulp

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

Specialty Cellulose – FY 2013 market development

• High overall sales volume
• − Driven by all-time high production output at the Sarpsborg Site
• Lower average sales price
• − Weaker product mix and lower share of highly specialised products in 2013 vs 2012
• − Prices reduced mainly in segments impacted by declining cotton linter pulp prices

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

Fine Chemicals & Ingredients – Market conditions

Fine Chemicals

• Increased revenues vs Q4-12 due to higher deliveries of X-ray contrast media intermediates

Ingredients

• Ingredients still suffer from overcapacity of petrochemical-based vanillin
• Growth in sales volume and revenues compared with Q4-12, but lower prices

Q1 Q2 Q3 Q4

Ingredients – sales revenues (mNOK) 2012

Outlook

• Performance Chemicals

• Continued strong demand in major applications
• Sales volume in 2014 expected to be 0-5% below 2013 level
• Increased supply from existing sources and new contracted suppliers is expected largely to compensate for sales from inventories in 2013 and the assumed lack of supply in Spain
• Sales volume in Q1-14 will be negatively affected by normal seasonality

• Specialty Cellulose

• In 2014, cellulose prices in sales currency are expected to be on average 7-8% lower than 2013
• In addition, product mix in 2014 is expected to be marginally weaker than 2013
• Actual mix will be determined by demand development, especially within the construction end-market
• Compared with Q4-13, Specialty Cellulose expects a certain improvement in product mix in Q1-14, although weaker than in Q1-13

• Other Businesses

• The challenging market situation for vanillin products is expected to continue
• The Fine Chemicals business is likely to remain relatively stable

• Currency impact

• If maintained, the recent weakening of the NOK will contribute positively in all business areas
• The impact will gradually take effect towards mid-year 2014

FINANCIAL PERFORMANCE Q4-13

Borregaard – Q4 key figures

• Revenues increased nearly 8% vs Q4-12
• Strong EBITA in Performance Chemicals
• Weaker results in Specialty Cellulose and Other Businesses
• EPS significantly above last year
• − NOK 0.62 in Q4 (NOK 0.42)

Key figures – Full Year 2013

• Revenues +1% vs last year
• Both EBITA and EBITA margin down compared with last year
• − Strong improvement in Performance Chemicals
• ROCE coming down, but still well above long-term target
• Significant increase in EPS
• Figures will be restated in 2014 due to implementation of new IFRS related to JV

Performance Chemicals – Q4 key figures

Q1 Q2 Q3 Q4

17,8 17,6

Q1 Q2 Q3 Q4

20,5 20,0

14,9

17,6

2013

13,0

16,0

• Market situation generally positive, strong demand in Asia
• 8% increase in Q4 in spite of a 9% sales volume reduction

• Full year growth 4%

• Notable improvement in product mix

• Higher prices and favourable currency impact
• Raw material and operating expenses above Q4-12

• Full year EBITA 326 mNOK (269 mNOK)

• EBITA margin established at a higher level

• Full year EBITA margin 18.6% (15.9%)

Specialty Cellulose– Q4 key figures

Q1 Q2 Q3 Q4

9,2

• Higher sales volumes, sales 2% up in Q4
• Lower prices in sales currency for speciality grades competing with cotton linter pulp
• Full year slightly below last year (-1%)
• Product mix similar to Q4-12
• Lower sales prices partly off-set by high production volume and lower raw material costs
• Negligible currency impact vs Q4-12

• Full year 226 mNOK (281 mNOK)

• Margin impacted mainly by lower prices

• Full year EBITA margin 14.0% (17.4%)

Other Businesses– Q4 key figures

• Operating revenues increased 18%
• Higher sales volume both in Ingredients and Fine Chemicals compared with Q4-12

• Full year reduction in revenues (2%)

• Higher sales volume in Ingredients was more than off-set by lower prices

• Fine Chemicals had a moderate increase in EBITA due to higher sales of intermediates to X-ray contrast media
• Increased grants for business development projects reduced net costs for corporate functions
• Full year EBITA -49 mNOK (-4 mNOK)

Currency impact

• Positive impact of a weaker NOK delayed due to currency hedging strategy
• Net impact slightly positive vs Q4-12
• Hedging gains reduced from 54 mNOK in 2012 to 10 mNOK in 2013
• 2014 net hedges at year-end 2013:
• 118 mUSD at 6.03
• 65 mEUR at 8.19 (113 mEUR at 8,52 for 2015 & 2016)

1) Currency basket based on Borregaard's net exposure in 2012 (=100)

−USD 70% (approximately 265 mUSD) −EUR 36% (approximately 105 mEUR) −Other -6% (GBP, BRL, JPY, SEK, ZAR)

Cash Flow, Capex and NIBD

• Strong cash flow in Q4, driven by significant net working capital reduction
• − Cash flow from operations close to EBITDA for the year (0.99)
• Replacement capex for the full year in line with depreciation
• Expansion capex (62 mNOK for 2013) related to BALI, Exilva and new lignin plant
• NIBD reduced by 14 mNOK in Q4

• − For the full year NIBD was reduced by 133 mNOK

• Per A Sørlie, President & CEO

• Per Bjarne Lyngstad, CFO

APPENDIX

Borregaard – Key figures

Amounts in NOK million	Q4-2013	Q4-2012	Change	FY-2013	FY-2012	Change
Operating revenues	997	925	8 %	3 997	3 941	1 %
EBITDA (adjusted)	150	148	1 %	730	764	-4 %
EBITA (adjusted)	90	91	-1 %	501	546	-8 %
Amortisation intangibles	- 1	0		- 2	- 3
Other income and expenses	0	- 9		14	-71
EBIT	89	82		513	472
Financial items, net	- 5	- 9		-39	-52
Profit/loss before taxes	84	73		474	420
Taxes	-24	-29		-143	-142
Profit/loss for the period	60	44		331	278
Profit/loss attributable to non-controlling interests	- 2	2		- 4	2
Profit/loss attributable to owners of the parent	62	42		335	276
Cash flow from operating activities	133	176		540	551
Net earnings per share (NOK)	0,62	0,42		3,35	2,76
Adjusted EBITDA margin	15,0 %	16,0 %		18,3 %	19,4 %
Adjusted EBITA margin	9,0 %	9,8 %		12,5 %	13,9 %

Operating revenues and EBITA per segment

Eliminations	-19	-22	14 %

	Amounts in NOK million				Amounts in NOK million
Operating revenues	Q4-2013	Q4-2012	Change	Operating profit - EBITA	Q4-2013	Q4-2012	Change
Borregaard	997	925	8 %	Borregaard	90	91	-1 %
Performance Chemicals	449	416	8 %	Performance Chemicals	79	62	27 %
Specialty Cellulose	381	374	2 %	Specialty Cellulose	35	48	-27 %
Other Businesses	186	157	18 %	Other Businesses	-24	-19	-26 %

Amounts in NOK million					Amounts in NOK million
Operating revenues	FY-2013	FY-2012	Change	Operating profit - EBITA	FY-2013	FY-2012	Change
Borregaard	3 997	3 941	1 %	Borregaard	501	546	-8 %
Performance Chemicals	1 756	1 689	4 %	Performance Chemicals	326	269	21 %
Specialty Cellulose	1 597	1 616	-1 %	Specialty Cellulose	224	281	-20 %
Other Businesses	703	715	-2 %	Other Businesses	-49	- 4
Eliminations	-59	-79	25 %

Amounts in NOK million	Amounts in NOK million

Cash flow

Amounts in NOK million

	Q4-2013	Q4-2012	FY-2013	FY-2012
Amounts in NOK million
Profit before taxes	84	73	474	420
Amortisation, depreciation and impairment charges	60	57	239	265
Change in net working capital, etc	107	71	-29	-38
Taxes paid	-118	-25	-144	-96
Cash flow from operating activities	133	176	540	551
Investments property, plant and equipment and intangible assets	-107	-117	-292	-388
Other capital transactions	-5	4	2	2
Cash flow from investing activities	-112	-113	-290	-386
Dividends/Group contributions	0	24	-100	-690
Paid-in equity	0	0	0	1 000
Repurchase of treasury shares	-11	0	-33	0
Net paid to/from shareholders	-11	24	-133	310
Change in interest-bearing liabilities	-111	-1 348	-226	-806
Change in interest-bearing receivables	1	5	-3	5
Change in net interest-bearing liablities	-110	-1 343	-229	-801
Cash flow from financing activities	-121	-1 319	-362	-491
Change in cash and cash equivalents	-100	-1 256	-112	-326
Cash and cash equivalents as of 1 January	155	1 411	155	496
Change in cash and cash equivalents	-100	-1 256	-112	-326
Currency effects cash and cash equivalents	3	0	15	-15
Cash and cash equivalents at the close of the period	58	155	58	155

Balance sheet

Amounts in NOK million

	31.12.2013	30.09.2013	31.12.2012
Assets:
Intangible assets	57	41	39
Property, plant and equipment	1 991	1 961	1 954
Other assets	53	85	30
Non-current assets	2 101	2 087	2 023
Inventories	554	569	589
Receivables	731	791	727
Cash and cash equivalents	58	155	155
Current assets	1 343	1 515	1 471
Total assets	3 444	3 602	3 494
Equity and debt:
Group Equity	1 847	1 803	1 691
Non-controlling interests	9	10	11
Equity	1 856	1 813	1 702
Provisions and other non-current liabilities	172	204	179
Interest-bearing liabilities	774	890	990
Non-current liabilities	946	1 094	1 169
Interest-bearing liabilities	6	1	16
Other liabilities	636	694	607
Current liabilities	642	695	623
Equity and liabilities	3 444	3 602	3 494
Equity ratio (%):	53,9 %	50,3 %	48,7 %

Amounts in NOK million
Net financial items	Q4-2013	Q4-2012	FY-2013	FY-2012
Net interest expenses	- 8	-10	-34	-60
Currency gain/loss	3	0	- 3	7
Other financial items, net	0	1	- 2	1
Net financial items	- 5	- 9	-39	-52

Amounts in NOK million
Net interest-bearing debt	31.12.2013	30.09.2013	31.12.2012
Non-current interest-bearing liabilities	774	890	990
Current interest-bearing liabilities	6	1	16
Non-current interest-bearing recievables	-15	-15	-11
Cash and cash equivalents	-58	-155	-155
Net interest-bearing debt	707	721	840

Debt, credit facilities and solidity

• Debt

• Bank facilities of 1,800 mNOK in aggregate from three banks
• 600 mNOK as 3-year revolving credit facilities, maturity 2015
• 1,200 mNOK as 5-year revolving credit facilities, maturity 2017
• 195 mNOK overdraft facilities

• Solidity

• Equity ratio 53.9 %
• NIBD/EBITDA 0.97

Debt and undrawn facilities 31.12.2013

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 fourth quarter of 2013, held on 5 February 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.