Borregaard — Investor Presentation 2015

Apr 28, 2015

1st quarter 2015 Oslo, 28 April 2015

Agenda

Per A Sørlie, President & CEO

• •Highlights
• •Business areas
• •Outlook

Per Bjarne Lyngstad, CFO

•Financial performance

Highlights – 1st quarter 2015

• • Significant progress for Performance Chemicals
• • Lower prices and weaker product mix for Specialty Cellulose
• •Improvement for Other Businesses
• • Positive net currency impact in all areas despite negative hedging effects
• • Negative cash flow due to temporary fluctuations in net working capital

Performance Chemicals – Q1 market development

• • Market conditions generally positive
• −Improved product mix and higher sales prices
• −Increased sales volume for high-value products
• • 9% reduction in sales volume vs Q1-14
• −Increased lignin exports from Russia, mainly to the construction sector in Asia
• −Lower lignin raw material supply from external sources
• Higher seasonal adjustment of inventories, mainly due to low stock at year-end
• •Favourable FX impact

Specialty Cellulose – Q1 market development

• • Lower invoiced sales prices and weaker product mix
• Sales prices in line with expectations
• Product mix affected by lower sales to the cellulose acetate market
• •Positive FX impact

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

Ingredients & Fine Chemicals – Q1 market development

Ingredients

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

Fine Chemicals

• •Lower sales volume vs Q1-14
• •Favourable FX impact

Status strategic projects

• • BALI
• Internal and external activities continue
• • Exilva
• Construction of new plant in Norway progressing according to plan
• Market development efforts on-going for Exilva MFC and SenseFi

•"Ice Bear"

• Development of speciality cellulose grades with ultra high purity
• Targeting «niches within the niches» as well as improved offering to existing markets
• Plant trials have verified technical concept, customer testing ongoing
• Regular commercial volumes available from mid 2016
• Total capex expected to be 100 mNOK (2014-2016)

Outlook

•Performance Chemicals

• Strong demand continues in major applications
• Sales volume in 2015 forecast to be similar to 2014
• Sales volume in Q2-15 expected to be in line with Q2-14, but with a weaker product mix than in Q1-15 due to normal seasonality

•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 Q2-15, total sales volume is expected to be higher than in Q1-15, but with a more unfavourable product mix

•Other Businesses

• The challenging market situation for vanillin products is expected to continue throughout 2015
• Fine Chemicals will remain relatively stable in 2015
• Corporate costs will remain at largely the same level as in 2014, while costs related to the Exilva project will increase

•Currency impact

• If maintained at present level, currency rates will contribute positively in all business areas in 2015
• The positive impact will gradually take effect due to currency hedging

FINANCIAL PERFORMANCE Q1-15

Borregaard – Q1 key figures

• •Revenues +2% from Q1-14
• •Improved EBITA for Performance Chemicals and Other Businesses, decline in Specialty Cellulose
• •Favourable FX impact in all business areas despite negative hedging effects
• •EPS at NOK 0.74, improvement from Q1-14

Performance Chemicals – Q1 key figures

•

• •Top line growth 14% vs Q1-14

• Positive market conditions for major applications

• • Improved product mix, higher prices and favourable FX situation vs Q1-14

• •Partly off-set by a 9% sales volume reduction
• •Stable raw material, energy and other costs

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

Specialty Cellulose – Q1 key figures

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

Other Businesses – Q1 key figures

-14

Q1 Q2 Q3 Q4

-21

• • Fine Chemicals: Lower sales volume and EBITA, FX contributed positively
• • Net corporate costs were lower than in Q1-14, whereas Exilva costs increased

2014 figures for Other Businesses are restated, including costs for the Exilva project and excluding costs for the BALI project

EBITA

-19

-30

-20

-10

-14

Currency impact

• • Net FX EBITA impact approx. 45 mNOK vs Q1-14
• Includes change in hedging effects and based on estimated Q1-15 currency exposure
• • Net FX EBITA impact RoY estimated to be +167 mNOK vs same period last year
• Assuming rates as of 27.4.15 (USD 7.79 and EUR 8.43) 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)

14

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

Cash flow, capex and NIBD

• • Negative cash flow from operations due to temporary fluctuations in net working capital
• NWC increase mainly due to higher AR, but also increased inventories and reduced AP
• • Capex at a low level in Q1 and similar to Q1-14
• Expansion capex mainly related to Exilva and SenseFi

• •NIBD increased by 160 mNOK in Q1, mainly due to the increase in NWC

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

Cash flow

Amounts inNOK million

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

Balance sheet

Amounts inNOK million

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

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 0 1‐ 1 5	Q 2 0 1‐ 1 4
i N t t t e n e r e s e x p e n s e s	6 ‐	7 ‐
/ l C i u r r e n c y g a n o s s	2	0
h f l i i i O t t t e r n a n c a e m s, n e	1 ‐	0
f i i l i N t t e n a n c a e m s	5 ‐	7 ‐

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

Currency hedging strategy

Purpose is to delay effects of currency fluctuations and secure competitiveness

• • Hedging based on expected net cash flow (EBITDA) 1)
• –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

FX cash flow hedges as of 31.3.2015 Hedging effects by segment

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

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

1) Net cash flow hedging mainly in the Norwegian company

2) ²³Strict 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
f L d i 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 • ,
i 2 0 1 9 t t m a u r 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
1 9 5 N O K i d f f i l i i t t m n o v e r r a a c e s –
S l i d i ( ) t t o y c o v e n a n s •
3 % 2 % E i i 5 5 ( 5 ) t t > q r a o u y –
1 0 4 3 2 L i L T M ( 5 ) t g < e e r a e r a o v –

Debt and undrawn facilities 31.03.2015

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 first quarter of 2015, held on 28 April 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.