Borregaard

Investor Presentation • May 3, 2019

1 S T Q U A R T E R 2 0 1 9

O s l o , 3 M a y 2 0 1 9

Agenda

• Per A Sørlie, President & CEO
• Highlights
• Business areas
• Outlook
• Per Bjarne Lyngstad, CFO
• Financial performance
• IFRS 16 implementation

Highlights – 1 st quarter 2019

• EBITA adj.¹ 157 mNOK (177 mNOK)
• 7% volume growth for Performance Chemicals
• Florida ramp-up according to plan
• Higher wood costs and lower deliveries in Speciality Cellulose
• Strong improvement in Other Businesses
• Positive net currency impact

Performance Chemicals markets – Q1

• Average price in sales currency 3% lower vs Q1-18
• Weaker product mix in Specialities
• Slightly lower prices to concrete admixture

• Increased volumes going into medium and low value applications

• Sales volume increased 7% vs Q1-18

• Strong volume growth in Industrial
• Specialities and Construction volumes in line with Q1-18
• Florida ramp-up according to plan

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

Performance Chemicals

Driving specialisation and diversification

Industrial and Specialities targeted to represent 70% of total sales volume by end 2021

Diversification - Industrial Performance Chemicals

• Strong volume growth year over year
• Coal gasification (rheology control/dispersant for coal slurry)
• Industrial dust control
• Pelleting
• Paper sizing
• Other industrial dispersants
• Growth in all major regions, particularly in Asia

Performance Chemicals

Update on Sarpsborg lignin investment programme

• 450 mNOK estimated capex, 10% below budget
• 70% expansion/30% replacement
• Additional dryer with packaging capacity
• Tanks for storage of liquid materials
• Improved solutions for logistics, infrastructure and energy
• In operation from June/July 2019
• Annual cost savings >40 mNOK
• Optimisation of production campaigns, internal and outbound logistics
• Gradual realisation through 2020
• Full impact from 2021
• Several additional benefits
• Further specialisation on a unique raw material base
• Reduced exposure to cyclical market segments
• Substantial environmental and safety benefits

New lignin warehouse at the Port of Borg Performance Chemicals

• New, modern warehouse for dried lignin

• 19,000 square metres/43,000 pallet positions
• Will replace several rented warehouses
• Located inside the port area at Øra, Fredrikstad
• Built, owned and operated by the Port of Borg
• Will be treated in accordance with IFRS 16
• In operation from June 2019
• Several benefits
• Optimise product flow and improve logistics
• Reduce CO₂ emissions from road transport
• Reduce local heavy transport

Speciality Cellulose markets – Q1

• Low deliveries in the quarter
• Average price in sales currency increased slightly due to improved product mix
• Improved product mix for Bioethanol
• Positive FX impact

Ingredients & Fine Chemicals markets – Q1

• Ingredients
• Increased sales prices and favourable product mix vs Q1-18

• Positive market trend for bio-based vanillin continued

• Fine Chemicals

• High sales revenues in Q1

Ingredients

Positive trend for bio-based vanillin

Outlook

• Performance Chemicals
• 2019 sales volume forecast to increase by ≈10%, mainly due to Florida ramp-up
• Continued strong competition and further price pressure for lignin products to concrete admixtures expected to be partly compensated by diversification and specialisation
• Fixed costs and depreciation for the Florida plant expected to be ≈40 mNOK above 2018
• Higher sales volume and weaker product mix in Q2 vs Q1 due to normal seasonality
• Speciality Cellulose
• Average cellulose price in sales currency expected to be in line with 2018 level
• Improved product mix will compensate for weaker prices for acetate and textile cellulose
• Wood costs in H1-19 will increase by ≈50 mNOK vs H1-18
• Q2 sales volume forecast to be in line with Q2-18, while the product mix is expected to improve
• Other Businesses
• Ingredients' result expected to increase in 2019, driven by positive market trend for bio-based vanillin
• No major changes expected in market conditions for Fine Chemicals
• Sales will gradually increase for Cellulose Fibrils, but long lead-times for conversion of sales prospects. Remaining grant from EU Horizon 2020¹ will cover a smaller share of costs than in previous years

¹ The Exilva project has received funding from the Bio-Based Industries Joint Undertaking (BBI) under the European Union's Horizon 2020 research and innovation programme under grant agreement No 709746.

F I N A N C I A L P E R F O R M A N C E Q 1 - 1 9

Borregaard key figures – Q1

• Revenues 3% above Q1-18
• EBITA adj.¹ 157 mNOK for the Group
• Strong improvement in Other Businesses, both in Ingredients and Fine Chemicals
• Higher costs and depreciation, but increasing volume in Performance Chemicals
• Higher wood costs and low deliveries in Speciality Cellulose
• Positive FX effects in all segments
• Marginal NOK 1 million positive EBITA adj.¹ impact from implementation of IFRS 16 Leases

164

145

94

2019

• EPS at NOK 1.26 (NOK 1.37)

Performance Chemicals key figures – Q1

2019

• Revenues 8% above Q1-18
• 7% higher sales volume
• Positive net FX impact
• Higher fixed costs and depreciation for the Florida plant
• Higher sales volume, largely off-set by lower average price in sales currency
• Distribution costs normalised vs the higher levels in H2-18
• Positive net FX impact

• EBITA adj. margin¹ decreased vs Q1-18

¹ Alternative performance measure, see Appendix for definition

1

Speciality Cellulose key figures – Q1

• Revenues 10% lower than in Q1-18
• Low deliveries

• Increased wood costs

• Low deliveries, improved product mix
• Improved Bioethanol result vs Q1-18 from better product mix
• Positive net FX impact

• EBITA adj. margin¹ declined vs Q1-18

Other Businesses key figures – Q1

• Revenues 15% above Q1-18

• Higher sales in both Ingredients and Fine Chemicals

• Ingredients: Strong result from higher prices for bio-based vanillin and a favourable product mix

• Fine Chemicals: Higher sales revenues vs Q1-18
• Cellulose Fibrils and corporate costs were in line with Q1-18
• Positive net FX effects for Other Businesses

Currency impact

• Net FX EBITA adj.¹ impact +30 mNOK vs Q1-18
• Includes change in hedging effects and based on estimated FX exposure
• Net FX EBITA adj.¹ impact in 2019 estimated to be +85 mNOK vs 2018
• Assuming rates as of 2 May (USD 8.69 and EUR 9.75) on expected FX exposure
• Net FX EBITA adj.¹ impact in Q2 estimated to be +30 mNOK vs Q2-18
• Significant FX exposure, but delayed impact of FX rate fluctuations due to hedging policy

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

³Currency basket based on Borregaard's net exposure in 2018 (=100): USD 68% (approx. 190 mUSD), EUR 32% (approx. 84 mEUR), Other 0% (GBP, BRL, JPY, SEK, ZAR).

¹Alternative performance measure, see Appendix for definition.

Cash flow, investments and NIBD

• Cash flow from operations¹ slightly above Q1-18
• Slightly more favourable development in net working capital
• Investments lower than Q1-18
• Expansion investments mainly related to the upgrade and specialisation of the lignin operation in Norway
• NIBD¹ increased by 82 mNOK in Q1

Effects of IFRS 16 implementation in Q1-19

INCOME STATEMENT (mNOK)		OTHER KEY FIGURES AND RATIOS
EBITDA adj.1	240	255	15	EBITDA adj. margin1
Depreciation	-84	-98	-14	EBITA adj. margin1
EBITA adj.1	156	157	1
Operating profit	155	156	1	Capital empolyed1
Net financial items	-13	-15	- 2	Return on capital employed1
Profit before tax	142	141	- 1
Earnings per share	1.27	1.26	-0.01	Net interest-bearing debt1
				Leverage ratio1
BALANCE SHEET (mNOK)
Total assets	6 201	6 421	220	Equity ratio1
Equity	3 485	3 484	- 1

IAS 17	IFRS 16	Change		IAS 17	IFRS 16	Change
240	255	15	EBITDA adj. margin1	19.3%	20.4%	1.1%-p
				12.5%	12.6%	0.1%-p
156	157	1
				4 773	5 004	231
				11.7%	11.3%	-0.4%-p
				1 379	1 600	221
			Leverage ratio1	1.55	1.68	0.13
				56.2%	54.3%	-1.9%-p

IAS 17: Operating leases off-balance sheet as a single expense. Finance leases on balance sheet

IFRS 16: Operating leases recognise assets and liabilities on balance sheet. Operating leases to report depreciation and interest separately.

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

A P P E N D I X

Borregaard – key figures

Amounts in NOK million	Q1-2019	Q1-2018	Change
Operating revenues	1 250	1 217	3 %
1 EBITDA adj.	255	252	1 %
1 EBITA adj.	157	177	-11 %
Amortisation intangible assets	- 1	- 1
Other income and expenses1	0	0
Operating profit	156	176	-11 %
Financial items, net	-15	- 7
Profit before taxes	141	169	-17 %
Income tax expenses	-33	-37
Profit for the period	108	132	-18 %
Profit attributable to non-controlling interests	-18	- 5
Profit attributable to owners of the parent	126	137
Cash flow from operating activities (IFRS)	4 4	3 1
Earnings per share	1,26	1,37	-8 %
1 EBITDA adj. Margin	20,4 %	20,7 %
1 EBITA adj. Margin	12,6 %	14,5 %

Operating revenues and EBITA adj.¹ per segment

Amounts in NOK million					Amounts in NOK million
Operating revenues	Q1-2019	Q1-2018	Change	1 EBITA adj.	Q1-2019	Q1-2018	Change
Borregaard	1 250	1 217	3 %	Borregaard	157	177	-11 %
Performance Chemicals	600	555	8 %	Performance Chemicals	8 7	115	-24 %
Speciality Cellulose	392	434	-10 %	Speciality Cellulose	3 5	6 4	-45 %
Other Businesses	274	239	15 %	Other Businesses	3 5	- 2
Eliminations	-16	-11

Amounts in NOK million			Amounts in NOK million
				Q1-2019	Q1-2018	Change
1 250	1 217	3 %	Borregaard	157	177	-11 %

Cash flow

Amounts in NOK million	Q1-2019	Q1-2018	FY-2018
Amounts in NOK million
Profit before taxes	141	169	562
Amortisation, depreciation and impairment charges	9 9	7 6	327
Change in net working capital, etc	-128	-142	-194
Dividend (share of profit) from JV	0	0	6
Taxes paid	-68	-72	-143
Cash flow from operating activities	4 4	3 1	558
Investments property, plant and equipment and intangible assets *	-123	-177	-762
Other capital transactions	9	4	1 3
Cash flow from Investing activities	-114	-173	-749
Dividends	0	0	-199
Proceeds from exercise of options/shares to employees	1 9	1 7	2 3
Buy-back of shares	-27	-22	-32
Gain/(loss) on hedges for net investments in subsidiaries	4	4 0	-22
Net paid to/from shareholders	-4	3 5	-230
Proceeds from interest-bearing liabilities	347	233	1 292
Repayment from interest-bearing liabilities	-216	-202	-960
Change in interest-bearing receivables/other liabilities	-8	-7	-2
Change in net interest-bearing liablities	123	2 4	330
Cash flow from financing activities	119	5 9	100
Change in cash and cash equivalents	4 9	-83	-91
Cash and cash equivalents at beginning of period	8 6	180	180
Change in cash and cash equivalents	4 9	-83	-91
Currency effects cash and cash equivalents	-1	-5	-3
Cash and cash equivalents at the end of the period	134	9 2	8 6
* Investment by category
Replacement Investments	7 6	3 2	346
Expansion investments1	4 7	145	416

Balance sheet

Amounts in NOK million	31.3.2019	31.12.2018
Assets:
Intangible assets	9 5	100
Property, plant and equipment	3 875	3 623
Other assets	230	230
Investment in joint venture	9 8	100
Non-current assets	4 298	4 053
Inventories	908	856
Receivables	1 081	956
Cash and cash deposits	134	8 6
Current assets	2 123	1 898
Total assets	6 421	5 951
Equity and liabilities:
Group equity	3 296	3 123
Non-controlling interests	188	198
Equity	3 484	3 321
Provisions and other liabilities	241	271
Interest-bearing liabilities	1 323	1 115
Non-current liabilities	1 564	1 386
Interest-bearing liabilities	415	272
Other current liabilities	958	972
Current liabilities	1 373	1 244
Equity and liabilities	6 421	5 951

(%): 54,3 % 55,8 %

¹ Alternative performance measure, see Appendix for definition

Equity ratio¹

Net financial items & net interest-bearing debt¹

Amounts in NOK million
Net financial items	Q1-2019	Q1-2018
Net interest expenses	-13	- 4
Currency gain/loss	- 2	- 2
Other financial items, net	0	- 1
Net financial items	-15	- 7

	Amounts in NOK million
--	------------------------	--	--	--	--

1 Net interest-bearing debt (NIBD)	31.3.2019	31.12.2018
Non-current interest-bearing liabilities	1 323	1 115
Current interest-bearing liabilities including overdraft of cashpool	415	272
Non-current interest-bearing receivables (included in "Other Assets")	- 4	- 4
Cash and cash deposits	-134	-86
1 Net interest-bearing debt (NIBD)	1 600	1 297
Impact of IFRS 16 Leases	221
1 Net interest-bearing debt excluding impact of IFRS 16 Leases	1 379	1 297

Currency hedging strategy

Purpose is to delay effects of currency fluctuations and secure competitiveness

• Hedging based on expected EBITA adj. 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
• Contracts² : 100% hedged
• Balance sheet exposure hedged 100%
• Net investments in subsidiaries hedged up to 90% of book value in major currencies

	USD million	USD rate	EUR million	EUR rate
Q2-2019	38	8.30	23	9.63
Q3-2019	36	8.29	24	9.62
Q4-2019	36	8.40	24	9.63
2019	110	8.33	71	9.63
2020	134	8.22	91	9.82
2021	107	8.18	69	10.10
2022	30	8.39	19	10.22

Contracted FX hedges with EBITA adj. impact (as of 02.05.19) Hedging effects by segment

Performance Chemicals -2 ² Speciality Cellulose -4 2 Other Businesses -2 -1 Borregaard -8 3

¹ Hedging done mainly in the Norwegian company

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

Credit facilities, solidity and debt

• Long-term credit facilities

• 1,500 mNOK revolving credit facilities, maturity 2021
• 400 mNOK 5-year bond issue, maturity 2023
• 40 mEUR 10-year loan, maturity 2024
• 60 mUSD term loan for LT Florida, tenor 8.5 years from completion

• Short-term credit facilities

• 225 mNOK overdraft facilities
• 300 mNOK commercial paper

• Solidity (covenants)

• Equity ratio¹ 54.3% (> 25%)
• Leverage ratio¹ LTM 1.55 (< 3.25)

Debt and undrawn facilities

Alternative performance measures

In the discussion of the reported operating results, financial position and cash flows, Borregaard refers to certain measures which are not defined by generally accepted accounting principles (GAAP) such as IFRS. Borregaard management makes regular use of these non-GAAP measures and is of the opinion that this information, along with comparable GAAP measures, is useful to investors who wish to evaluate the company's operating performance, ability to repay debt and capability to pursue new business opportunities. Such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

• Cash flow from operations: Cash flow from operating activities (IFRS) + tax paid +/- net financial items +/- dividend (share of profit) from JV.
• EBITA adjusted (EBITA adj.): Operating profit before amortisation and other income and expenses.
• EBITA adj. margin: EBITA adj. divided by operating revenues
• EBITDA adjusted (EBITDA adj.): Operating profit before depreciation, amortisation and other income and expenses.
• Equity ratio: Equity (including non-controlling interests) divided by equity and liabilities.
• Expansion investments: Investments made in order to expand production capacity, produce new products or to improve the performance of existing products. Such investments include business acquisitions, pilot plants, capitalised R&D costs and new distribution set-ups.
• Other income and expenses: Non-recurring items or items related to other periods or to a discontinued business or activity. These items are not viewed as reliable indicators of future earnings based on the business areas' normal operations. These items will be included in the Group's operating profit.
• Leverage ratio: Net interest-bearing debt divided by last twelve months' (LTM) EBITDA adj., excluding the impact on EBITDA of IFRS 16 Leases.
• Net interest-bearing debt (NIBD): Interest-bearing liabilities, excluding the impact of IFRS 16 Leases, minus interest-bearing assets (see slide 26).
• Return on capital employed (ROCE): Last twelve months' (LTM) EBITA adj., excluding the impact of IFRS 16 Leases, divided by average capital employed based on the ending balance of the last five quarters. Capital employed is defined by Borregaard as the total of net working capital, intangible assets, property, plant and equipment (excluding the impact of IFRS 16 Leases) and investment in joint venture minus net pension liabilities.

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 2019, held on 3 May 2019. 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.