Borregaard — Investor Presentation 2015

Jul 15, 2015

2nd quarter 2015 Oslo, 15 July 2015

Agenda

Per A Sørlie, President & CEO

• •Highlights
• •Business areas
• •Strategic priorities
• •Outlook

Per Bjarne Lyngstad, CFO

•Financial performance

Highlights – 2nd quarter 2015

• •EBITA in line with Q2-14
• • All-time high result for Performance Chemicals despite lower raw material supply
• • Lower prices and weaker product mix in Specialty Cellulose
• •Higher activity level in the Exilva project
• •Positive FX impact in all business areas

Performance Chemicals – Q2 market development

• • Market conditions generally positive in most applications
• −Higher sales prices and good product mix
• −Reduced demand in the oil sector impacted high-value sales volume
• Normal Q2 seasonality affected average sales price vs Q1-15
• • 8% reduction in sales volume vs Q2-14
• −Primarily due to reduced raw material supply from external sources
• Russian exports continue to affect certain segments
• •Positive FX impact

Specialty Cellulose – Q2 market development

• • Lower sales prices and weaker product mix
• Sales prices in line with expectations
• Product mix affected by lower sales to the cellulose acetate market
• • High sales volume
• Increased deliveries of textile cellulose
• •Positive FX impact

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

Ingredients & Fine Chemicals – Q2 market development

56 40 42 46 47 55 020406080Q1 Q2 Q3 Q4 mNOK Fine Chemicals – sales revenues 20142015

Ingredients

• •Market conditions remain challenging
• •Lower sales volume and stable sales prices
• •Positive FX impact

Fine Chemicals

• • Increased sales of x-ray contrast media intermediates
• •Positive FX impact

Strategic priorities Preparing for volume growth in Performance Chemicals

•Borregaard and Rayonier Advanced Materials (RYAM) intend to invest in a new lignin operation

• Located at RYAM's Fernandina Beach pulp mill in Florida (raw material source)
• 55% Borregaard/45% RYAM ownership
• Borregaard's know-how and technology
• 150,000 mtds production capacity
• USD 110 million capex
• Two step investment, start-up in 2017
• Final agreements, permitting and detailed investment plan next steps

•Borregaard's BALI concept

• The new lignin operation will benefit from BALI development work
• This investment takes priority over a first BALI plant
• BALI remains a long-term strategic lignin raw material option

7

Strategic priorities Lignin capacity expansion in South Africa

• • Borregaard and Sappi announce 20,000 tonnes capacity expansion
• LignoTech South Africa is a joint venture between Borregaard (50%) and Sappi (50%)
• Established in 1997 in Umkomaas, KwaZulu-Natal province
• ZAR 105 million investment (approx. NOK 70 million)
• 180,000 mtds production capacity after the expansion
• Completion in 2017

Strategic priorities Good progress in all areas

• • Growth and specialisation within Performance Chemicals
• Increased sales of high-value lignin products
• Establish new lignin raw material sources
• Develop BALI as a strategic lignin raw material option
• • Develop the unique biorefinery assets in Sarpsborg
• Leverage high value raw material base in Performance Chemicals
• Continue specialisation of Specialty Cellulose, Bioethanol, Ingredients & Fine Chemicals
• Strong focus on innovation and productivity efforts

•Establish Exilva as a new business area

• Leverage core competence within wood chemistry and fine chemistry
• Increased specialisation through high value added

Outlook

•Performance Chemicals

• Continued good demand in major applications and market regions
• Visibility is somewhat lower due to increased uncertainty in the world economy
• Sales volume in the 2nd half of 2015 is expected to be in line with 2nd half of 2014

•Specialty Cellulose

• Cellulose prices in sales currency forecast to be approx. 7% below 2014 level
• Product mix in 2015 expected to be weaker than in 2014, primarily due to lower demand in the cellulose acetate market
• In Q3-15, sales volume is expected to be lower than in Q2-15, but with highly specialised volume remaining on the same level

•Other Businesses

• The challenging market situation for vanillin products is expected to continue throughout 2015
• Fine Chemicals will remain relatively stable
• Corporate costs will remain at largely the same level as in 2014
• Exilva project costs will continue at a higher level due to increased business development activities

•Currency impact

Currency, including hedging impact, is expected to contribute positively in all business areas compared with 2nd half of 2014

FINANCIAL PERFORMANCE Q2-15

Borregaard – Q2 key figures

• •Revenues increased by 6% vs Q2-14
• •Improved EBITA for Performance Chemicals, decline in Specialty Cellulose and Other Businesses
• •Positive FX impact in all business areas despite negative hedging effects
• •EPS at NOK 0.92 (NOK 0.91)

Performance Chemicals – Q2 key figures

• •Top line growth 9% vs Q2-14
• •Generally positive market conditions in most applications

• Positive FX impact

• •Higher prices, good product mix and positive FX situation

• • Partly off-set by an 8% sales volume reduction primarily due to lower raw material supply
• •Stable costs in local currencies

2014 figures for Performance Chemicals are restated, including costs for the BALI project

Specialty Cellulose – Q2 key figures

• •Top line growth 2% vs Q2-14
• • High sales volume, mainly due to high deliveries of textile cellulose
• •Positive FX impact
• Reduced sales prices and weaker product mix
• Lower contribution from bioethanol
• Stable raw material, energy and other costs
• Hedging effects of -29 mNOK in Q2-15

Weaker margin in Q2-15

2014 figures for Specialty Cellulose are restated, excluding costs for the Exilva project

Other Businesses – Q2 key figures

• •Top line growth 7% vs Q2-14
• •Lower sales volume in Ingredients
• • Increased sales of x-ray contrast media intermediates from Fine Chemicals

• •Positive FX contribution

• • Ingredients: Lower sales volume more than off-set by positive currency effects

• • Fine Chemicals: Increased sales and positive currency effects
• Exilva project costs increased due to a higher level of business development activities. YTD EBITA impact close to full year figure for 2014 (34 mNOK)

•

Currency impact

• • Net FX EBITA impact approx. 50 mNOK vs Q2-14
• Includes change in hedging effects and based on estimated Q2-15 currency exposure
• • Net FX EBITA impact RoY estimated to be +140 mNOK vs same period last year
• Assuming rates as of 14 July (USD 8.15 and EUR 8.99) and based on expected currency exposure
• 1) Currency basket based on Borregaard's net exposure in 2014 (=100)
• USD 69% (approximately 250 mUSD)
• EUR 32% (approximately 89 mEUR)
• Other -1% (GBP, BRL, JPY, SEK, ZAR)

Cash flow, capex and NIBD

• •Improved cash flow from operations vs Q2-14
• • Capex at a higher level
• Expansion capex mainly related to the Exilva and Ice Bear projects

• •NIBD increased by 57 mNOK in Q2, mainly due to dividend payment

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

Operating revenues and EBITA per segment

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

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

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

i n	l l N O K i i m o	n		A i t m o u n s n	l l N O K i i m	o n
2 0 6 1	9 8 1 5	% 4	d B o r r e g a a r	2 3 6	2 2 9	3 %
0 1 8	9 1 4	1 1 %	f h l P C i e r o r m a n c e e m c a s	2 3 8	1 8 8	2 7 %
						%
		%	h i O B t e r u s n e s s e s	2 8 ‐	3 0 ‐	% 7

Cash flow

Amounts inNOK million

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

Balance sheet

Amounts inNOK million

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

Net financial items & net interest-bearing debt

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

Amounts inNOK million

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

Currency hedging strategy

Purpose is to delay effects of currency fluctuations and secure competitiveness

• • Hedging based on expected EBITA impact1)
• –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
• –Contracts 2) - 100% hedged
• •Balance sheet exposure hedged 100%
• •Net investments in subsidiaries hedged up to 90% of book value in major currencies

	S U D i l l i m o n	S U D t r a e	E U R i l l i m o n	E U R t r a e
nd 2 h l f 2 0 1 5 a	7 5	7. 0 2	3 4	8. 5 3
2 0 1 6	1 0 3	2 7. 7	2 7	8. 6 5
2 0 1 7	8 5	0 7. 7	6 2	8. 4 7
L t a e r	4 3	7. 6 2	3 0	9. 0 5

FX EBITA impact hedges Hedging effects by segment

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

1) Hedging done mainly in the Norwegian company

2) Strict definitions for contracts applied for 100% hedging (mutually binding agreement in which price, currency, volume and time are defined)

Debt, credit facilities and solidity

f f D b d d i l i i t t t e a n o e r r a a c e s • v
L d i f 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
O f f d i l i i t t e r r a a c e s v –
2 9 O 5 N K m •
S l i d i ( ) t t o c o e n a n s • y v
3 2 E i i 5 7 % ( 5 % ) t t > q r a o u y –
L i L T M 1 1 0 ( 3 2 5 ) t g < e v e r a e r a o –

Debt and undrawn facilities 30.06.2015

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 second quarter of 2015, held on 15 July 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.