Borregaard — Investor Presentation 2023

Oct 24, 2023

3 rd Quarter 2023

Oslo, 24 October 2023

Agenda

Per A Sørlie, President & CEO

• Highlights
• Business segments
• Outlook

Per Bjarne Lyngstad, CFO

Financial performance

Highlights – 3 rd quarter 2023

• EBITDA¹ NOK 482 million (NOK 434 million)
• Increased sales prices in all business areas
• Reduced energy costs, partly offset by increased wood and labour costs
• Lower sales volumes within certain applications
• Positive net currency effects
• Strong cash flow

BioSolutions markets – Q3

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

Average price in sales currency 3% above Q3-22

• Higher sales prices
• Diversified market strategy contributed to a solid EBITDA¹ margin

Sales volume 10% lower vs Q3-22

Lower deliveries to construction and certain industrial and speciality applications

Positive FX effects

4

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

² Alternative performance measure, see Appendix for definition

BioMaterials markets – Q3

Sales price and sales volume include speciality cellulose and cellulose fibrils

Average price in sales currency 4% below Q3-22

• Higher prices in sales currency vs Q3-22
• Average price reduced due to weaker product mix, mainly as a result of lower sales to the construction market for cellulose ethers

Sales volume in line with Q3-22

Reduced volume to the construction market for cellulose ethers compensated by sales to other applications

Positive FX impact

Closure announcement for Georgia-Pacific's Foley plant The speciality cellulose industry

The speciality cellulose market is ≈1.6 million tonnes1)

• Top 5 producers have ≈80% market share
  • Sales from Georgia-Pacific's Foley plant estimated at 150,000 tonnes
• Kraft or sulphite pulping process
• Hardwood and softwood raw material
• Some cotton linter pulp (CLP) producers

Limited volumes from textile cellulose producers

• High barriers to entry
• Mainly targeting acetate, nitrocellulose and casings

Borregaard production capacity is ≈160,000 tonnes

• Softwood and sulphite process
• Strong market positions in high-end niches in Europe and Asia

Top 5 speciality producers by wood species and pulping process,

	Hardwood/ kraft	Softwood/ kraft	Hardwood/ sulphite	Softwood/ sulphite
RYAM	✓	✓		✓
Georgia-Pacific		✓
Bracell	✓
Sappi			✓
Borregaard				✓

Fine Chemicals markets – Q3

Sales revenues include fine chemical intermediates and bioethanol

• Increased sales prices for bioethanol
• Weaker product mix and lower deliveries for fine chemical intermediates
• Positive FX impact

Outlook

BioSolutions

• The diversified market strategy expected to mitigate effects of slowdown in certain markets
• Sales volume in Q4 expected to be in the range of 70-75,000 tonnes

BioMaterials

• Sales volume in Q4 expected to be in line with Q4-22
• Sales volume of highly specialised grades is expected to be slightly higher vs Q3-23

Fine Chemicals

• Sales prices for advanced bioethanol in Q4 expected to remain at the same level as in Q3-23
• Higher deliveries and an improved product mix for fine chemical intermediates expected in Q4 vs Q3-23

Costs, maintenance stop and seasonality

• Energy prices and energy related raw material prices expected to seasonally increase in Q4 vs Q3-23
• Q4 is normally Borregaard's weakest quarter due to the annual maintenance stop at the Sarpsborg site, higher energy consumption and labour costs
• Cost inflation, interest rates and uncertainty in the global economy may impact Borregaard's markets

Financial performance Q3-23

Borregaard key figures – Q3

Revenues 2% below Q3-22

EBITDA¹ 482 mNOK for the Group

• Result improvements in BioMaterials and Fine Chemicals, decrease in BioSolutions
• Higher sales prices, FX and lower energy costs partly offset by increased wood and labour costs and lower sales volume
• Proposed reduction in the Norwegian CO² compensation scheme reflected in Q3 result

Earnings per share (EPS) NOK 2.38 (NOK 2.40)

BioSolutions key figures – Q3

• Revenues 5% below Q3-22
• Reduced sales volume

• Positive FX impact

• Higher sales prices

• Lower sales volume
• Reduced energy costs partly offset by cost inflation
• Lower contribution from traded vanillin products
• Positive net FX impact

• Solid EBITDA margin¹

11

BioMaterials key figures – Q3

• Revenues increased 2% vs Q3-22
• Higher sales prices

• Positive FX impact

• Increased sales prices

• Lower energy costs, partly offset by higher wood costs and cost inflation
• Weaker product mix
• Positive net FX impact

• EBITDA margin¹ significantly above Q3-22

12

Fine Chemicals key figures – Q3

• Revenues in line with Q3-22

• Increased sales prices for bioethanol
• Lower result for fine chemical intermediates due to weaker product mix and lower deliveries, partly offset by reduced raw material costs
• Positive net FX impact

• Strong EBITDA margin¹

Currency impact

Net FX EBITDA¹ impact ≈40 mNOK vs Q3-22

• Includes change in hedging effects and based on estimated FX exposure
• Net FX EBITDA¹ impact in 2023 estimated to be ≈230 mNOK vs 2022
  • Assuming rates as of 23 October (USD 11.13 and EUR 11.80) on expected FX exposure
  • Net FX EBITDA¹ impact in Q4 estimated to be ≈35 mNOK vs Q4-22
• Significant FX exposure, but delayed impact of FX rate fluctuations due to hedging policy

¹ Alternative performance measure, see Appendix for definition

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

³ Currency basket based on Borregaard's net exposure on EBITDA¹ in 2022 (=100): USD 53% (≈197 mUSD), EUR 42% (≈147 mEUR), Other 5% (GBP, BRL, JPY, SEK)

Cash flow, investments and NIBD

Strong cash flow in Q3

Decrease in net working capital and higher EBITDA¹ partly offset by increased interest expenses

Total investments 130 mNOK

• Largest expenditures related to reduction of CO² emissions, improved energy flexibility and efficiency and specialisation within BioSolutions NIBD¹ decreased 339 mNOK in Q3
  • Leverage ratio¹ 1.03 (1.29)
• Equity ratio¹ 51% (50%)

Questions?

Per A Sørlie, President & CEO

Per Bjarne Lyngstad, CFO

Please note that you can submit questions online during the webcast

Appendix

Borregaard – key figures

Amounts in NOK million	Q3-23	Q3-22	Change	YTD-23	YTD-22	Change
Operating revenues	1 714	1 752	-2 %	5 527	5 111	8 %
EBITDA1	482	434	11 %	1 454	1 279	14 %
Depreciation property, plant and equipment	-121	-112		-351	-330
Amortisation intangible assets	- 1	- 1		- 4	- 3
Other income and expenses1	0	0		0	1 2
Operating profit	360	321	12 %	1 099	958	15 %
Financial items, net	-42	-12		-110	-50
Profit before taxes	318	309	3 %	989	908	9 %
Income tax expenses	-76	-74		-238	-220
Profit for the period	242	235	3 %	751	688	9 %
Profit attributable to non-controlling interests	5	- 4		0	-20
Profit attributable to owners of the parent	237	239		751	708
Cash flow from operating activities (IFRS)	526	312		1 048	422
Earnings per share	2,38	2,40	-1 %	7,54	7,11	6 %
EBITDA margin1	28,1 %	24,8 %		26,3 %	25,0 %

Operating revenues and EBITDA¹ per segment

Amounts in NOK million				Amounts in NOK million
Operating revenues	Q3-23	Q3-22	Change	EBITDA1	Q3-23	Q3-22	Change
Borregaard	1 714	1 752	-2 %	Borregaard	482	434	11 %
BioSolutions	956	1007	-5 %	BioSolutions	235	261	-10 %
BioMaterials	568	558	2 %	BioMaterials	161	101	59 %
Fine Chemicals	199	200	-1 %	Fine Chemicals	8 6	7 2	19 %
Eliminations	- 9	-13

Amounts in NOK million				Amounts in NOK million
Borregaard	1 714	1 752	-2 %	Borregaard	482	434	11 %
BioSolutions	956	1007	-5 %	BioSolutions	235	261	-10 %
BioMaterials	568	558	2 %	BioMaterials	161	101	59 %
Fine Chemicals	199	200	-1 %	Fine Chemicals	8 6	7 2	19 %
Eliminations	- 9	-13

Amounts in NOK million Amounts in NOK million Operating revenues YTD-23 YTD-22 Change EBITDA¹ Eliminations -30 -34

Operating revenues	YTD-23	YTD-22	Change	EBITDA1	YTD-23	YTD-22	Change
Borregaard	5 527	5 111	8 %	Borregaard	1454	1279	14 %
BioSolutions	3 038	3 053	0 %	BioSolutions	743	827	-10 %
BioMaterials	1 913	1 630	17 %	BioMaterials	431	289	49 %
Fine Chemicals	606	462	31 %	Fine Chemicals	280	163	72 %
Eliminations	-30	-34

Balance sheet

Amounts in NOK million	30.9.2023	30.06.2023	31.12.2022
Assets:
Intangible assets	8 4	8 0	8 2
Property, plant and equipment	4 513	4 502	4 371
Right-of-use assets	457	403	345
Other assets	234	226	254
Investments in joint venture/associate company	257	258	142
Non-current assets	5 545	5 469	5 194
Inventories	1 393	1 318	1 299
Receivables	1 400	1 576	1 387
Cash and cash deposits	707	365	234
Current assets	3 500	3 259	2 920
Total assets	9 045	8 728	8 114
Equity and liabilities:
Group equity	4 520	4 083	4 394
Non-controlling interests	5 5	5 1	5 1
Equity	4 575	4 134	4 445
Provisions and other liabilities	362	479	295
Interest-bearing liabilities	2 008	2 038	1 370
Non-current liabilities	2 370	2 517	1 665
Interest-bearing liabilities	580	547	702
Other current liabilities	1 520	1 530	1 302
Current liabilities	2 100	2 077	2 004
Equity and liabilities	9 045	8 728	8 114
Equity ratio1 (%):	50,6 %	47,4 %	54,8 %

(%): 50,6 % 47,4 % 54,8 %

¹ Alternative performance measure, see Appendix for definition

	Amounts in NOK million	Q3-23	Q3-22	YTD-23	YTD-22	FY-2022
Cash flow	Amounts in NOK million
	Profit before taxes	318	309	989	908	1 118
	Amortisation, depreciation and impairment charges	122	113	355	333	449
	Change in net working capital, etc	8 7	-111	-87	-713	-658
	Dividend/share of profit from JV & associate company	1	-	9	3 1	3 4
	Taxes paid	- 2	1	-218	-137	-208
	Cash flow from operating activities	526	312	1 048	422	735
	Investments property, plant and equipment and intangible assets *	-130	-84	-374	-252	-464
	Investment in associate company	-	-	-124	-	-
	Other capital transactions	2	- 1	7	5	9
	Cash flow from Investing activities	-128	-85	-491	-247	-455
	Dividends	-	-	-324	-499	-499
	Proceeds from exercise of options/shares to employees	-	-	4 5	3 4	4 1
	Buy-back of treasury shares	-	-	-49	-23	-68
	Gain/(loss) on hedges for net investments in subsidiaries	1 2	-76	-76	-156	-79
	Net paid to/from shareholders	1 2	-76	-404	-644	-605
	Proceeds from interest-bearing liabilities	-	-	800	837	837
	Repayment from interest-bearing liabilities	-28	-116	-488	-469	-512
	Change in interest-bearing receivables/other liabilities	- 9	5 1	5 1	119	7 8
	Change in net interest-bearing liablities	-37	-65	363	487	403
	Cash flow from financing activities	-25	-141	-41	-157	-202
	Change in cash and cash equivalents	373	8 6	516	1 8	7 8
	Cash and cash equivalents at beginning of period	278	-38	111	5	5
	Change in cash and cash equivalents	373	8 6	516	1 8	7 8
	Currency effects cash and cash equivalents	- 6	2 8	1 8	5 3	2 8
	Cash and cash equivalents at the close of the period	645	7 6	645	7 6	111
	* Investment by category
	Replacement Investments	110	5 9	300	187	359
	Expansion investments1 including investment in associate company	2 0	2 5	198	6 5	105
	Total investments including investment in associate company	130	8 4	498	252	464

21 ¹ Alternative performance measure, see Appendix for definition

Net financial items & net interest-bearing debt¹

Amounts in NOK million
Net financial items	Q3-23	Q3-22	YTD-23	YTD-22
Net interest expenses	-37	-21	-101	-50
Currency gain/loss	- 4	2	1	- 4
Share of profit/-loss from an associate	- 2	- 2	- 5	- 3
Other financial items, net	1	9	- 5	7
Net financial items	-42	-12	-110	-50

Amounts in NOK million
1 Net interest-bearing debt (NIBD)	30.9.2023	30.06.2023	31.12.2022
Non-current interest-bearing liabilities	2 008	2 038	1 370
Current interest-bearing liabilities including overdraft of cashpool	580	547	702
Non-current interest-bearing receivables (included in "Other Assets")	- 2	- 2	- 2
Cash and cash deposits	-707	-365	-234
1 Net interest-bearing debt (NIBD)	1 879	2 218	1 836
- of which impact from IFRS 16 leases	490	434	371

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 10.00 to 10.50 USD; gradually increased at effective rates from 9.00 to 9.50
• 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
Q4-2023	43	9.32	35	10.71
2024	142	9.05	124	10.57
2025	133	9.81	120	10.86
2026	82	10.36	70	11.62

Contracted FX hedges with EBITDA impact (as of 23.10.23) Hedging effects by segment

NOK million	YTD-23	YTD-22	Q3-23	Q3-22
BioSolutions	-85	-21	-31	-19
BioMaterials	-67	2	-22	-4
Fine Chemicals	-23	3	-9	0
Borregaard	-175	-16	-62	-23

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 2025 and 2027, margin linked to sustainability targets
• 500 mNOK 5-year green bonds, maturity 2028 (issued June 2023)
• 40 mEUR 10-year loan, maturity 2024
• 50 mUSD 10-year loan, maturity 2032
• 60 mUSD term loan for LT Florida, maturity 2027

Short-term credit facilities

• 225 mNOK overdraft facilities
• 15 mUSD overdraft facility in LignoTech Florida
• 300 mNOK commercial paper (maturity October 2023)

Solidity

• Equity ratio¹ 51%
• Leverage ratio¹ LTM 1.03 (covenant < 3.50)

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 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 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 2023, held on 24 October 2023. 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.