Borregaard — Investor Presentation 2016

Feb 3, 2016

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Agenda

• • Per A Sørlie, President & CEO
• •Highlights
• •Proposed dividend
• •Business areas
• •Strategic update
• •Outlook
• • Per Bjarne Lyngstad, CFO
• •Financial performance

Highlights – ⁴th quarter 2015

• •Strong result in Performance Chemicals
• • Progress on strategic initiatives to expand the lignin business in North America
• • Positive development in Fine Chemicals and Ingredients
• •Favourable FX effects in all business areas
• •Strong cash flow from operations

Highlights – full year 2015

• • Fifth consecutive year above ROCE target
• •ROCE 15.6% (16.5%)
• •EBITA 497 mNOK (486 mNOK)
• •Good progress on strategic priorities
• • All time high result in Performance Chemicals
• •Weaker result for Specialty Cellulose
• • Improvement in Fine Chemicals and Ingredients
• • Positive FX impact, partly delayed by hedging

Dividend proposal for 2015

• • Borregaard's dividend policy
• • To pay regular and progressive dividends reflecting the expected long-term earnings and cash flow of the Group
• • Annual dividend is targeted between 30% and 50% of net profit
• • A dividend of NOK 1.50 per share is proposed by the Board of Directors
• •20% increase from 2014 (NOK 1.25)
• •39% of net earnings
• •Total dividend payment of 149 mNOK

Performance Chemicals markets - Q4

• • Challenging market conditions in several regions and applications
• Reduced demand, primarily in Asia, Middle East and Brazil
• •Stronger price competition, especially within construction
• 4% lower sales volume in spite of added Flambeau volume from late October
• • Product mix and average sales price negatively affected by Flambeau volume
• Slight improvement in mix and invoiced price vs Q4-14 adjusted for Flambeau
• Continued low volume to the oil sector
• •Positive FX impact

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

Performance Chemicals markets - full year

• •Weaker demand from the construction (medium value) and oil sectors (high value)
• • 8% decline in sales volume from 2014
• Reduced raw material supply in H1 and weaker demand in H2
• •Positive impact from the added Flambeau volume from late October
• • Positive FX impact
• •Average sales price increased by approx. 4% in 2015 excluding FX impact and Flambeau volume

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

Specialty Cellulose markets - Q4

• • Reduced prices in sales currency and weaker product mix vs Q4-14
• •Product mix affected by lower sales to the cellulose acetate market
• Prices in sales currency in line with previous quarters in 2015
• •Sales volume at the same level as Q4-14
• •Positive FX impact

Specialty Cellulose markets - full year

• Average price reduction of approx. 6% in sales currency vs 2014
• Favourable FX development more than compensated for price reduction
• Weaker product mix due to lower sales to the cellulose acetate market
• •Higher sales volume vs 2014

Ingredients and Fine Chemicals markets - Q4

• Ingredients
• •Challenging market conditions
• •Positive FX impact

• • Sales revenues up 7% in 2015, mainly driven by FX development

• Fine Chemicals

• •Volume growth and better product mix
• •Positive FX impact
• • Sales revenues up 17% in 2015, due to increased volume, improved product mix and positive FX development

Borregaard portfolio - strategic priorities

• • 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 and Ingredients
• Strong focus on innovation and productivity efforts
• • Establish Exilva as a new business area
• •Based on core competence within wood chemistry and fine chemistry
• •Increased specialisation through high value added

Update on strategic priorities

Growth within Performance Chemicals

• • Acquisition of the lignin book of business from Flambeau River Papers and entry into raw material supply agreement (40,000 mtds)
• • Capacity expansion in Borregaard/Sappi JV in South Africa(20,000 mtds in 2017)
• Borregaard (55%) and Rayonier Advanced Materials (45%) plan to build a new lignin plant in Florida (150,000* mtds in 2018)
• •Bali remains a long term strategic lignin raw material option

Develop the unique biorefinery assets in Sarpsborg

• • The ICE Bear project in Specialty Cellulose
• •Development of specialty cellulose with ultra high purity
• •Regular commercial volumes available from mid 2016

Establish Exilva as a new business area

• •Investment in commercial scale production at the Sarpsborg Site
• •Production expected to start in Q3-16

Outlook

• • Market conditions
• •The weak business climate in some important markets expected to continue
• •Strong competition within certain product groups
• •Currency, including hedging impact, is expected to contribute positively in 2016
• • Performance Chemicals
• •Sales volume in 2016 expected to increase by full-year impact of the Flambeau volume
• •Reallocation efforts will continue
• •Average sales price and product mix will be negatively affected by the Flambeau volume
• •Q1-16 sales volume and product mix will reflect seasonality in delivery patterns
• • Specialty Cellulose
• •Average cellulose prices in sales currency expected to be approx. 3% below 2015 level
• •Price uncertainty is mainly related to textile cellulose
• •Product mix forecast to be similar to 2015
• •In Q1-16, total sales volume and product mix are expected to be in line with Q1-15
• • Other Businesses
• • No major changes are expected in the market conditions for Ingredients and Fine Chemicals
• •Exilva project costs are expected to increase in 2016
• •Other corporate costs will remain at largely the same level as in 2015

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Borregaard key figures - Q4

• •Revenues increased by 9% vs Q4-14
• • Improved EBITA for Performance Chemicals and Other Businesses, decline in Specialty Cellulose
• •Positive FX impact in all business areas despite negative hedging effects
• EPS at NOK 1.08 in Q4-15 (NOK 0.68)

Borregaard key figures - full year

• •Revenues up 6% vs 2014
• • EBITA improved while ROCE and EBITA margin declined slightly vs 2014
• Improvement for Performance Chemicals and Other Businesses
• Reduced prices and weaker mix in Specialty Cellulose
• Favourable FX development, impact delayed by hedging
• •Negative impact from lower oil price and weaker business climate in important markets
• •Excluding hedging impact the underlying EBITA was 738 mNOK in 2015
• •EPS at NOK 3.86 for 2016

Performance Chemicals key figures - Q4

• •Top line growth 14% vs Q4-14

• •Positive FX impact

• •Weaker demand in construction and oil sectors

• •4% volume reduction in spite of Flambeau volume
• •Price and product mix improvement

• •Positive FX situation

• • EBITA margin maintained at a high level, slightly above Q4-14

• •Improvement of 1% point to 22.3% for the full year

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

Specialty Cellulose key figures - Q4

• •Top line growth 2% vs Q4-14
• •Reduced sales prices and weaker product mix

• •Positive FX impact

• •Reduced sales prices and weaker product mix

• •Lower variable costs
• •Production slightly lower as a result of silo fire
• •EBITA ex hedging impact was 54 mNOK (50 mNOK)

• Adjusted for hedging, EBITA margin was 14.3% in Q4-15 and 14.9% for the full year

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

Other Businesses key figures - Q4

•Top line 11% above Q4-14

• • Increased sales and improved product mix in Fine Chemicals

• •Positive FX contribution

• • Ingredients: Improved result, mainly due to positive FX effects

• • Fine Chemicals: Volume growth, FX impact and a Chemicals: positive product mix led to improved EBITA
• • Exilva project costs increased further in Q4-15 due to added marketing and business development activities
• • In 2015 EBITA ended at -54 mNOK vs -65 mNOK in 2014

2014 figures for Other Businesses are restated, including costs for the Exilva project and excluding costs for the BALI project2014 operating revenues are restated due to minor changes in the treatment of internal transactions

Currency impact

• • Net FX EBITA impact approx. 60 mNOK vs Q4-14,
• •Includes change in hedging effects and based on estimated Q4-15 currency exposure
• Net FX EBITA impact approx. 225 mNOK for 2015 vs 2014
• • Net FX EBITA impact in Q1-16 estimated to be 90 mNOK vs Q1-15
• •Assuming rates as of 2 February (USD 8.72 and EUR 9.52) and expected currency exposure
• Net FX EBITA impact in 2016 estimated to be 255 mNOK vs 2015

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)

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

Cash flow, capex and NIBD

• • Strong cash flow from operations in Q4 due to improved result and larger reduction in net working capital vs Q4-14 (excluding impact from one-offs)
• • High expansion capex in Q4-15, mainly related to the Exilva project and the acquired Flambeau book-of-business

• NIBD reduced by 92 mNOK in Q4

• •Per A Sørlie, President & CEO

• •Per Bjarne Lyngstad, CFO

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Borregaard – Key figures

					ha C
					ng e
1 0 3 4	9 5 1	9 %	4 1 6 4	3 9 3 9	6 %
					% 4
1 0 1	9 2	1 0 %	4 9 7	4 8 6	2 %
-1	0		-1	0
3 7	-3 0		3 7	-3 0
1 3 7	6 2	1 2 1 %	5 3 3	4 5 6	1 7 %
-7	-3		-2 7	-2 6
1 3 0	5 9	1 2 0 %	5 0 6	4 3 0	1 8 %
-2 2	8		2 2 -1	-9 8
1 0 8	6 7	6 1 %	3 8 4	3 3 2	1 6 %
0	-1		-2	-2
1 0 8	6 8		3 8 6	3 3 4
3 0 1	2 4 5		5 6 3	6 0 0
1, 0 8	0, 6 8	5 9 %	3, 8 6	3, 3 4	1 6 %
1 6, 2 %	1 6, 5 %		1 8, 2 %	1 8, 5 %
9, 8 %	9, 7 %		1 1, 9 %	1 2, 3 %
	Q 4- 2 0 1 5 1 6 8	Q 4- 2 0 1 4 1 5 7	ha C ng e % 7	Y T D- 2 0 1 5 7 5 8	Y T D- 2 0 1 4 7 3 0

1) Operating profit before depreciation, amortization and other income and expenses

2) Operating profit before amortization and other income and expenses

Operating revenues and EBITA per segment

	Am in t ou n s	l l N O K i io m	n		Am in t ou n s	l l N O K i io m	n
O i t p e r a n g r e e nu e s v	Q 4- 2 0 1 5	Q 4- 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 4- 2 0 1 5	Q 4- 2 0 1 4	h C a n g
d B o r r e a a r g	1 0 3 4	9 5 1	9 %	d B o r r e a a r g	1 0 1	9 2	1 0
fo he ls Pe C ic r rm a nc e m a	5 0 2	4 4 1	1 4 %	fo he ls Pe C ic r rm a nc e m a	9 8	8 3	1 8
l l lu lo S ia C ty p e e s e c	3 4 6	3 3 8	2 %	l l lu lo S ia C ty p e e s e c	2 2	3 0	-2 7
he O Bu in t r s e s s e s	1 9 7	1 7 8	1 1 %	he O Bu in t r s e s s e s	-1 9	-2 1	1 0
l E im in io t a ns	-7	-6

	in Am t ou n s	i l l io N O K m	in i l l io Am N O K t ou n s m n
i O t p e r a n g r e v e nu e s	Q 4- 2 0 1 5	Q 4- 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 4- 2 0 1 5	Q 4- 2 0 1 4	h C a n g e
d B o r r e g a a r	1 0 3 4	9 5 1	9 %	d B o r r e g a a r	1 0 1	9 2	1 0 %
fo he ls Pe C ic r rm a nc e m a	5 0 2	4 4 1	1 4 %	fo he ls Pe C ic r rm a nc e m a	9 8	8 3	1 8 %
l l lu lo S ia C ty p e c e s e	3 4 6	3 3 8	2 %	l l lu lo S ia C ty p e c e s e	2 2	3 0	-2 7 %
he O Bu in t r s e s s e s	1 9 7	1 7 8	1 1 %	he O Bu in t r s e s s e s	-1 9	-2 1	1 0 %

l l Am in N O K i io t ou n s m n				l l Am in N O K i io t ou n s m n
O i t p e r a n g r e v e nu e s	2 0 Y T D- 1 5	2 0 Y T D- 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	2 0 Y T D- 1 5	2 0 Y T D- 1 4	h C a n g e
d B o r r e g a a r	1 6 4 4	3 9 3 9	6 %	d B o r r e g a a r	9 4 7	8 6 4	2 %
fo he ls ic Pe C r rm a nc e m a	2 0 0 8	1 8 2 2	% 1 0	fo he ls ic Pe C r rm a nc e m a	4 4 7	3 8 8	% 1 5
l l lu lo S ia C ty p e c e s e	3 6 1 4	9 1 4 5	-2 %	l l lu lo S ia C ty p e c e s e	0 1 4	6 3 1	-3 6 %
he O in Bu t r s e s s e s	7 5 5	6 8 2	1 1 %	he O in Bu t r s e s s e s	-5 4	-6 5	1 % 7
l im in io E t a ns	-3 5	-2 4

l l Am in N O K i io t ou n s m n
			%

Cash flow

Amounts in NOK million

	Q 4- 2 0 1 5	Q 4- 2 0 1 4	Y T D- 2 0 1 5	Y T D- 2 0 1 4
in O i l l ion Am N K m nts ou
f be fo Pro it tax re es	1 3 0	5 9	5 0 6	4 3 0
de d ha Am isa ion iat ion im irm ort t t c p rec an p a en rg es ,	7 5	6 5	2 6 9	2 4 4
ha in k ing ita l, C t w et ng e ne or ca p c	1 2 2	1 3 6	-1 0 6	5 9
de d ( ha f p f ) fro D iv i it J V n s re o ro m	-1 2	-2	-1 4	6
d Ta i xe s p a	-1 4	-1 3	-9 2	-1 3 9
h f low fro ing iv it ies Ca at t s m op er ac	3 0 1	2 4 5	5 6 3	6 0 0
lan d e d b le Inv ip int i tm ts ert t a nt ts es en p ro p y, p n q u me an an g as se	-2 0 0	-1 5 1	-4 3 0	-3 1 3
he l tr Ot ita ion ct r c ap an sa s	0	0	5	2
h f low fro ing iv it ies Ca Inv t t s m es ac	-2 0 0	-1 5 1	-4 2 5	-3 1 1
de ds D iv i n	0	0	-1 2 4	-1 0 9
fro f s ds ise ha ion Pro t ce e m ex er c o re op s	1 1	4	1 1	4 8
ba k o f t ha Bu y- c rea su ry s res	-5	-1 4	-5	-7 6
/ ( los ) he dg fo bs d Ga in inv in i iar ies et tm ts s on es r n es en su	-2 6	-6 8	-7 6	-7 2
/ i d t fro ha ho l de Ne t p a o m s re rs	-2 0	8 -7	9 -1 4	-2 0 9
ha be l b l C in int ing ia i it ies t- ng e er es ar	-4 9	3 3	1 4	6
ha be b les C in int ing iva t- ng e er es ar re ce	0	1	-2	-3
ha in int be ing l ia b l it ies C t t- ng e ne er es ar	9 -4	3 4	2 1	3
h f low fro f Ca ina ing iv it ies t s m nc ac	-6 9	-4 4	-1 8 2	-2 0 6
ha h a d c h e len C in iva ts ng e ca s n as q u	3 2	5 0	-4 4	8 3
h a d c h e len f be f p d Ca iva inn ing io ts s n as q u as o g o er	1 2 5	7 9	1 6 8	3 9
ha h a d c h e len C in iva ts ng e ca s n as q u	3 2	5 0	-4 4	8 3
f fe h a d c h e len Cu iva cts ts rre nc y e ca s n as q u	1 2	3 9	4 5	4 6
h a d c h e len he los f t he d Ca iva io ts at t s n as q u c e o p er	1 6 9	1 6 8	1 6 9	1 6 8

Balance sheet

Amounts in NOK million

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

Net financial items & net interest-bearing debt

l l A i N O K i i t m o u n s n m o n
f i i l i N t t e n a n a e m s c	Q 4- 2 0 1 5	Q 4- 2 0 1 4	Y T D- 2 0 1 5	Y T D- 2 0 1 4
N i t t t e n e r e s e x p e n s e s	-5	-6	-2 2	-2 8
/ l i C r r e n c g a n o s s u y	-1	3	-2	4
h f l O i i i t t t e r n a n c a e m s, n e	-1	0	-3	-2
f i i l i N t t e n a n c a e m s	7 -	3 -	2 7 -	2 6 -

Amounts in NOK million

i b i d b N t t t- t e n e r e s e a r n g e	3 1. 1 2. 2 0 1 5	3 0. 0 9. 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- c u r r e n n e r e s e a r n g a e s	8 0 2	8 5 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	9	9	8
b b l i i i N 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	-1 6 9	-1 2 5	-1 6 8
b d b i i N t t t- t e n e r e s e a r n g e	6 2 4	7 1 6	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 monthBase s for major currencies
• • Extended hedge: 75%/50% of the next 24/36 months if hedge: USD and EUR are above defined levels EUR; effective rate above 8.50USD; gradually at effective rates between 7.50 and 8.50
• •Contracts2): 100% hedged
• •Balance sheet exposure hedged 100%
• •Net investments in subsidiaries hedged up to 90% of book value in major currencies

	U S D l l i ion m	U S D te ra	E U R l l i ion m	E U R te ra	l l N O K m i ion	Q 4- 1 5	Q 4- 1 4	Y T D- 1 5	Y T D- 1 4
Q 1- 2 0 1 6	3 7	7. 9 7	1 7	8. 5 3	fo Pe r rm an ce	-1 9	-9	-7 6	-1 2
Q 2- 2 0 1 6	4 0	8. 0 0	1 8	8. 5 2	he ls C ica m
Q 3- 2 0 1 6	3 9	7. 9 9	1 9	8. 5 3	l Sp ia ty ec l lu los Ce e	-3 2	-2 0	-1 2 9	-3 2
Q 4- 2 0 1 6	3 5	7. 9 4	1 8	8. 6 4	he O t r ine Bu s ss es	-1 1	-4	-3 6	-7
2 0 1 6	1 5 1	7. 9 8	7 2	8. 5 6
2 0 1 7	1 4 6	8. 0 3	7 0	8. 8 4	d Bo rre g aa r	-6 2 -	-3 3	-2 4 1	-5 1
2 0 1 8	1 0 0	8. 0 9	5 0	9. 2 9

Contracted FX hedges with EBITA impact

hedges with EBITA Hedging Hedging effects effects by segment by

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

•	b D t e a n	d d o e r v	f f t r a	l i i i t a c e s
---	----------------------------	----------------------------	-----------------------	-------------------------------------------

• Long-term credit facilities
• • 1,500 mNOK revolving credit facilities, maturity 2020
• 400 mNOK 5-year bond issue, maturity 2019
• • 40 mEUR 10-year loan, maturity 2024
• • Overdraft facilities
• •255 mNOK
• • Solidity (covenants)
• Equity ratio 49.4% (> 25%)
• •Leverage ratio LTM 0.82 (< 3.25)

Debt and undrawn facilities

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 2015, held on 3 February 2016. 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.