Borregaard — Investor Presentation 2021

Oct 21, 2021

3 rd Quarter 2021

Oslo, 21 October 2021

Agenda

Per A Sørlie, President & CEO

• Highlights
• Business segments
• Investment in Alginor
• Outlook

Per Bjarne Lyngstad, CFO

Financial performance

Highlights – 3 rd quarter 2021

• EBITDA¹ NOK 391 million (NOK 266 million)
• Continued strong performance in BioSolutions
• Higher deliveries and improved product mix in BioMaterials
• High sales volume and increased sales price for bioethanol
• High spot energy prices, lower wood costs
• Strong cash flow
• Investment in Alginor ASA

BioSolutions markets – Q3

Sales price and sales volume include lignin-based biopolymers and biovanillin

Average price in sales currency 19% above Q3-20

Price increases, reduced sales volume to low-value applications and favourable product mix

Sales volume 7% lower vs Q3-20 due to reduced raw material base

• Reduced raw material base partly compensated by increased volume from Florida
• Volume reduction mainly in low-value Construction applications

BioMaterials markets – Q3

Sales price and sales volume include speciality cellulose and cellulose fibrils

Higher deliveries of speciality cellulose

Reduced sales prices largely offset by improved product mix

Average price in sales currency 3% lower than Q3-20

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

Fine Chemicals markets – Q3

Sales revenues include fine chemical intermediates and bioethanol

High sales volume and increased price for bioethanol Slightly lower sales volume for fine chemical intermediates

Investment in Alginor – a «blue» biorefinery concept

Alginor

• Marine biotech company in development phase based in Haugesund, Norway
• Core technology: Sustainable harvesting and biorefining of kelp
• High-value ingredients to global markets for pharmaceutical and nutraceutical applications

Similarities between Borregaard's business model and Alginor's biorefinery concept

• Strategy built on full utilisation of sustainable raw materials for high-value products
• Borregaard has relevant experience from development, scale-up, manufacturing and sales of products according to cGMP principles and food-grade quality

Borregaard's engagement in Alginor

• Borregaard will acquire shares corresponding to 35% until end of April 2024
  • Total investment approx. NOK 270 million in four transactions
  • A break fee of NOK 6 mill will apply if the last tranche is not fully subscribed
• Borregaard has board representation
• Alginor uses Borregaard's biorefinery demonstration plant for process development

Outlook

BioSolutions

• Sales volume in Q4-21 expected to be between 85,000 and 90,000 tonnes
• The new biovanillin capacity will be gradually phased into the market

BioMaterials

• Average price in sales currency expected to be 2-3% below the 2020 level for the full year
• Sales volume in Q4-21 will be significantly lower than in Q4-20

Fine Chemicals

Weaker sales mix vs Q3-21 for fine chemical intermediates

Production output and energy costs

• Extended annual maintenance stop at the Sarpsborg site will result in lower production output in Q4-21
  • Partly due to installation of new equipment
• In Q4, high spot prices for liquefied natural gas and electricity will further increase energy costs in all business areas vs Q3-21

Financial performance Q3-21

Borregaard key figures – Q3

Revenues 13% above Q3-20

EBITDA¹ 391 mNOK for the Group

• Significant improvement in BioSolutions, increased result in Fine Chemicals and BioMaterials in line with Q3-20
• Increased energy costs from high spot prices for liquefied natural gas and electricity in all business areas
• Slightly positive net FX effect on EBITDA¹

Earnings per share (EPS) NOK 2.12 (NOK 1.12)

BioSolutions key figures – Q3

• Revenues 14% above Q3-20²
• Price increases and a favourable product mix

• Lower sales volume due to reduced raw material base

• Significant improvement vs Q3-20

• Price increases and a favourable product mix
• Increased energy costs
• Slightly positive net FX effects

• Strong EBITDA margin¹ also in Q3

¹ Alternative performance measure, see Appendix for definition

² Reduced sales from South African operation had marginal impact on top-line due to JV accounting (equity method)

BioMaterials key figures – Q3

• Revenues increased by 16% vs Q3-20

• Higher deliveries of speciality cellulose

• Higher deliveries and improved product mix

• 3% lower average price in sales currency
• Lower wood costs
• Increased energy costs
• Slightly positive net FX impact

• EBITDA margin¹ ≈3%-p below Q3-20

1) Alternative performance measure, see Appendix for definition

Fine Chemicals key figures – Q3

20,3 51,1 32,8 30,1 36,7 27,1 37,1 0 10 20 30 40 50 Q1 Q2 Q3 Q4 % 2020 2021 EBITDA magin 1

• Revenues in line with Q3-20

• High sales volume and increased sales price for bioethanol
• The bioethanol production volume continued at a high level with improved yield and lower costs
• Fine chemical intermediates result in line with Q3-20
• Insignificant net FX effects

• EBITDA margin¹ ≈4%-p above Q3-20

Currency impact

• Net FX EBITDA¹ impact ≈+5 mNOK vs Q3-20
  • Includes change in hedging effects and based on estimated FX exposure
  • Net FX EBITDA¹impact YTD ≈-65 mNOK
• Net FX EBITDA¹ impact in 2021 estimated to be ≈-65 mNOK vs 2020
  • Assuming rates as of 20 October (USD 8.38 and EUR 9.74) on expected FX exposure
  • Net FX EBITDA¹ impact in Q4 estimated to be ≈0 mNOK vs Q4-20
• Significant FX exposure, but delayed impact of FX rate fluctuations due to hedging policy

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

¹ Alternative performance measure, see Appendix for definition.

³ Currency basket based on Borregaard's net exposure on EBITDA¹ in 2020 (=100): USD 58% (approx. 177 mUSD), EUR 41% (approx. 112 mEUR), Other 1% (GBP, BRL, JPY, SEK, ZAR).

Cash flow, investments and NIBD

Strong cash flow in Q3

Cash effect from increased EBITDA¹ and low tax payments

Expansion investments mainly related to the investment in Alginor ASA NIBD¹ decreased by 128 mNOK in Q3

Leverage ratio¹ 1.08 (2.01)

Equity ratio¹ 58.1% (47.5%)

Questions?

Per A Sørlie, President & CEO

Per Bjarne Lyngstad, CFO

Appendix

Borregaard – key figures

Amounts in NOK million	Q3-21	Q3-20	Change	YTD-21	YTD-20	Change
Operating revenues	1 429	1 260	13 %	4 359	3 990	9 %
EBITDA1	391	266	47 %	1 109	869	28 %
Depreciation property, plant and equipment	-103	-112		-310	-333
Amortisation intangible assets	- 1	- 1		- 3	- 3
Other income and expenses1	0	0		0	-96
Operating profit	287	153	88 %	796	437	82 %
Financial items, net	-18	-20		-55	-60
Profit before taxes	269	133	102 %	741	377	97 %
Income tax expenses	-64	-34		-174	-109
Profit for the period	205	9 9	107 %	567	268	112 %
Profit attributable to non-controlling interests	- 6	-13		-23	-47
Profit attributable to owners of the parent	211	112		590	315
Cash flow from operating activities (IFRS)	378	153		1 075	470
Earnings per share	2,12	1,12	89 %	5,93	3,15	88 %
EBITDA margin1	27,4 %	21,1 %		25,4 %	21,8 %

Operating revenues and EBITDA¹ per segment

Amounts in NOK million				Amounts in NOK million
Operating revenues	Q3-21	Q3-20	Change	EBITDA1	Q3-21	Q3-20	Change
Borregaard	1 429	1 260	13 %	Borregaard	391	266	47 %
BioSolutions	838	733	14 %	BioSolutions	251	132	90 %
BioMaterials	468	403	16 %	BioMaterials	9 1	9 1	0 %
Fine Chemicals	132	131	1 %	Fine Chemicals	4 9	4 3	14 %
Eliminations	- 9	- 7

Amounts in NOK million				Amounts in NOK million
Borregaard	1 429	1 260	13 %	Borregaard	391	266	47 %
BioSolutions	838	733	14 %	BioSolutions	251	132	90 %
BioMaterials	468	403	16 %	BioMaterials	9 1	9 1	0 %
Fine Chemicals	132	131	1 %	Fine Chemicals	4 9	4 3	14 %
Eliminations	- 9	- 7

Operating revenues	YTD-21	YTD-20	Change	EBITDA1
Eliminations	-26	-23

Amounts in NOK million			Amounts in NOK million
Operating revenues	YTD-21	YTD-20	Change	EBITDA1	YTD-21	YTD-20	Change
Borregaard	4 359	3 990	9 %	Borregaard	1109	869	28 %
BioSolutions	2 535	2 349	8 %	BioSolutions	728	495	47 %
BioMaterials	1 473	1 274	16 %	BioMaterials	257	238	8 %
Fine Chemicals	377	390	-3 %	Fine Chemicals	124	136	-9 %

Cash flow

Amounts in NOK million	Q3-21	Q3-20	YTD-21	YTD-20	FY-2020
Amounts in NOK million
Profit before taxes	269	133	741	377	496
Amortisation, depreciation and impairment charges	104	113	313	336	449
Change in net working capital, etc	8	-57	8 2	-221	-21
Dividend (share of profit) from JV	-	-	-	6 3	5 1
Taxes paid	- 3	-36	-61	-85	-89
Cash flow from operating activities	378	153	1 075	470	886
Investments property, plant and equipment and intangible assets *	-219	-99	-439	-312	-503
Other capital transactions	2	- 3	5	2	1 4
Cash flow from Investing activities	-217	-102	-434	-310	-489
Dividends	-	-	-249	-229	-229
Proceeds from exercise of options/shares to employees	9	5	5 5	3 4	3 5
Buy-back of shares	-23	-11	-111	-61	-62
Gain/(loss) on hedges for net investments in subsidiaries	- 6	- 2	1 1	-49	1 0
Net paid to/from shareholders	-20	- 8	-294	-305	-246
Proceeds from interest-bearing liabilities	-	400	300	1 350	1 550
Repayment from interest-bearing liabilities	-212	-516	-668	-1 446	-1 703
Change in interest-bearing receivables/other liabilities	1	4	- 5	3 0	1 8
Change in net interest-bearing liablities	-211	-112	-373	-66	-135
Cash flow from financing activities	-231	-120	-667	-371	-381
Change in cash and cash equivalents	-70	-69	-26	-211	1 6
Cash and cash equivalents at beginning of period	143	-59	9 6	8 1	8 1
Change in cash and cash equivalents	-70	-69	-26	-211	1 6
Currency effects cash and cash equivalents	3	1	6	3	- 1
Cash and cash equivalents at the end of the period	7 6	-127	7 6	-127	9 6
* Investment by category
Replacement Investments	5 6	5 2	208	191	344
Expansion investments1	163	4 7	231	121	159

20 ¹Alternative performance measure, see Appendix for definition

Balance sheet

Amounts in NOK million	30.09.2021	30.06.2021	31.12.2020
Assets:
Intangible assets	9 0	9 3	8 6
Property, plant and equipment	4 052	4 009	3 973
Right-of-use assets	358	369	381
Other assets	277	272	380
Investment in joint venture and associate company	147	3 9	3 8
Non-current assets	4 924	4 782	4 858
Inventories	799	769	887
Receivables	1 180	1 273	1 051
Cash and cash deposits	184	246	207
Current assets	2 163	2 288	2 145
Total assets	7 087	7 070	7 003
Equity and liabilities:
Group equity	4 023	3 875	3 668
Non-controlling interests	9 2	9 6	110
Equity	4 115	3 971	3 778
Provisions and other liabilities	305	321	291
Interest-bearing liabilities	1 351	1 346	1 381
Non-current liabilities	1 656	1 667	1 672
Interest-bearing liabilities	313	508	623
Other current liabilities	1 003	924	930
Current liabilities	1 316	1 432	1 553
Equity and liabilities	7 087	7 070	7 003
Equity ratio1 (%):	58,1 %	56,2 %	53,9 %

21 ¹Alternative performance measure, see Appendix for definition

Net financial items & net interest-bearing debt¹

Amounts in NOK million
Net financial items	Q3-21	Q3-20	YTD-21	YTD-20
Net interest expenses	-15	-18	-46	-59
Currency gain/loss	- 2	- 1	- 1	1
Share of profit/-loss from an associate	0	0	0	0
Other financial items, net	- 1	- 1	- 8	- 2
Net financial items	-18	-20	-55	-60

Amounts in NOK million

1 Net interest-bearing debt (NIBD)	30.09.2021	30.06.2021	31.12.2020
Non-current interest-bearing liabilities	1 351	1 346	1 381
Current interest-bearing liabilities including overdraft of cashpool	313	508	623
Non-current interest-bearing receivables (included in "Other Assets")	- 3	- 3	- 3
Cash and cash deposits	-184	-246	-207
1 Net interest-bearing debt (NIBD)	1 477	1 605	1 794
- of which impact from IFRS 16 leases	377	386	396

Currency hedging strategy

Purpose is to delay effects of currency fluctuations and secure competitiveness

Hedging based on expected EBITDA¹ impact²

• 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; gradually increased at effective rates from 9.25 to 9.75 USD; gradually increased at effective rates from 8.00 to 8.50
• Contracts³ : 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
Q4-2021	37	8.59	24	10.36
2022	139	8.93	101	10.65
2023	125	9.22	97	10.89
2024	74	8.70	57	10.63

Contracted FX hedges with EBITDA impact (as of 20.10.21) Hedging effects by segment

NOK million	Q3-21	Q3-20	YTD-21	YTD-20
BioSolutions	-6	-21	-12	-85
BioMaterials	-8	-25	-19	-94
Fine Chemicals	-2	-5	-4	-18
Borregaard	-16	-51	-35	-197

¹ Alternative performance measure, see Appendix for definition

² Hedging done mainly in the Norwegian company

³ 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 2024 and 2026, margin linked to sustainability targets
• 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
• 15 mUSD overdraft facility in LignoTech Florida
• 100 mNOK commercial paper

Solidity

• Equity ratio¹ 58.1%
• Leverage ratio¹ LTM 1.08 (covenant < 3.50)

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 Alternative performance 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 Alternative performance measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

• EBITDA: Operating profit before depreciation, amortisation and other income and expenses.
• EBITDA margin: EBITDA divided by operating revenues
• 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.
• Net interest-bearing debt (NIBD): Interest-bearing liabilities minus interest-bearing assets.
• Return on capital employed (ROCE): Last twelve months' (LTM) capital contribution (operating profit before amortisation and other income and expenses) 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, right-of-use assets 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 third quarter of 2021, held on 20 October 2021. 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.