Quarterly Report • May 3, 2019
Quarterly Report
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1 Alternative performance measure, see page 21 for definition.
2 Figures in parentheses are for the corresponding period in the previous year.
| 1,219 1,217 350 1,199 171 1,200 |
334 | 1.1 - 31.3 171 |
1.1 - 31.12 350 |
|
|---|---|---|---|---|
| 175 21 1,150 160 1,137 1,136 Amounts in NOK million 300 1,089 1,100 |
175 Note |
2019 | 160 2018 |
2018 300 |
| 150 18 131 250 Operating revenues 1,000 125 |
150 199 2 188 125 |
131 1,250 |
1,217 | 250 4,785 |
| 15 200 105 101 EBITDA adj.1 900 100 12 |
100 | 105 255 |
101 252 |
200 903 |
| 150 EBITA adj.1 75 800 100 9 |
2 75 |
157 | 177 | 150 580 100 |
| Profit/loss before taxes 50 700 50 6 |
50 | 141 | 169 | 562 50 |
| Earnings per share (NOK) 0 25 600 3 |
25 | 1.26 | 1.37 | 4.76 0 |
| -50 Net interest-bearing debt1 0 500 0 |
-7 10 0 |
1,379 | 944 | -50 1,297 |
| Q1 Q3 Q4 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 15.4% 15.0% Equity ratio1 (%) |
Q2'15 Q4 Q3'15 Q4'15 Q1'16 |
Q2'16 Q1 Q2 54.3 |
Q3 Q4 59.5 |
55.8 |
| 2018 2016 2017 2015 12.4% Leverage ratio1 10.4% 9.8% |
Cash flow operations EBITDA |
2015 1.55 |
2016 0.91 |
1.44 |
| Return on capital employed1 (%) |
11.7 | 17.7 | 12.7 |
EBITA ADJ. MARGIN1 CASH FLOW OPERATIONS EBITA ADJ.1
1 Alternative performance measure, see page 21 for definition.
Borregaard's operating revenues increased to NOK 1,250 million (NOK 1,217 million)2 in the 1st quarter of 2019. EBITA adj.1 was NOK 157 million (NOK 177 million). Other Businesses' result improved significantly compared with the corresponding quarter in 2018, whereas Performance Chemicals and Speciality Cellulose had a decline. The implementation of IFRS 16 Leases had a marginal positive impact of NOK 1 million on EBITA adj.1 . EBITA ADJ.1 Cash flow operations EBITDA Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
Performance Chemicals had a 7% increase in total sales volume, primarily as a result of the Florida plant ramp-up. EBITA adj.1 decreased, mainly due to higher fixed costs and depreciation from the Florida start-up. Higher wood costs and low deliveries affected Speciality Cellulose negatively. Other Businesses improved as a result of higher sales prices and a favourable product mix in Ingredients as well as high sales revenues in Fine Chemicals. The net currency impact was positive. 109 177 164 50 100 200
Net financial items were NOK -15 million (NOK -7 million). Net interest expenses increased by NOK 9 million due to higher net interest-bearing debt and a NOK 2 million impact from the implementation of IFRS 16 Leases. Profit before tax was NOK 141 million (NOK 169 million). Tax expense was NOK -33 million (NOK -37 million), giving a tax rate of 23% (22%) in the quarter.
Earnings per share were NOK 1.26 (NOK 1.37).
Cash flow from operations1 was NOK 127 million (NOK 110 million). The increase was mainly a result of a slightly more favourable development in net working capital compared with the 1st quarter of 2018.
1 Alternative performance measure, see page 21 for definition.
2 Figures in parentheses are for the corresponding period in the previous year.
| 1.1 - 31.3 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | 2019 | 2018 | 2018 | |
| Operating revenues | 600 | 555 | 2,237 | |
| EBITA adj.1 | 87 | 115 | 314 | |
| EBITA adj. margin1 (%) |
14.5 | 20.7 | 14.0 |
Operating revenues in Performance Chemicals reached NOK 600 million (NOK 555 million) in the 1st quarter. EBITA adj.1 was NOK 87 million (NOK 115 million). The lower EBITA adj.1 was mainly due to higher fixed costs and depreciation for the Florida plant. Distribution costs were normalised compared with the higher levels in the the 2nd half of 2018. Net currency effects were positive.
Total sales volume was 7% higher than in the 1st quarter of 2018. The increase was mainly due to higher sales from LignoTech Florida, which is in accordance with the planned ramp-up.
Industrial products experienced strong growth in the 1st quarter, while Specialities and Construction had volumes in line with the 1st quarter last year.
The average price in sales currency was about 3% lower than in the 1st quarter of 2018. The average price was negatively affected by a weaker product mix in Specialities, slightly lower prices to concrete admixtures as well as the impact from increased volumes going into medium and low value applications.
1 Alternative performance measure, see page 21 for definition.
3 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. 4 Metric tonne dry solid.
| 1.1 - 31.3 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | 2019 | 2018 | 2018 | |
| Operating revenues | 392 | 434 | 1,669 | |
| EBITA adj.1 | 35 | 64 | 257 | |
| EBITA adj. margin1 (%) |
8.9 | 14.7 | 15.4 |
Operating revenues for Speciality Cellulose were NOK 392 million (NOK 434 million) in the 1st quarter. EBITA adj.1 was NOK 35 million (NOK 64 million). The lower EBITA adj.1 was due to increased wood costs and low deliveries. The average price in sales currency increased slightly as a result of improved product mix. Net currency effects were positive.
Bioethanol's result improved, mainly due to improved product mix.
1 Alternative performance measure, see page 21 for definition.
5 Average sales price is calculated using actual FX rates, excluding hedging impact.
6 Metric tonne.
| 1.1 - 31.3 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | 2019 | 2018 | 2018 | |
| Operating revenues | 274 | 239 | 927 | |
| EBITA adj.1 | 35 | -2 | 9 | |
| EBITA adj. margin1 (%) |
12.8 | -0.8 | 1.0 |
Other Businesses' operating revenues reached NOK 274 million (NOK 239 million) in the 1st quarter. EBITA adj.1 increased to NOK 35 million (NOK -2 million) due to strong results in both Ingredients and Fine Chemicals.
Higher sales prices for bio-based vanillin and a favourable product mix were the main reasons for the improved result in Ingredients.
The result in Fine Chemicals improved due to high sales revenues. Cellulose Fibrils and net corporate costs were in line with the corresponding quarter of 2018.
The net currency impact in Other Businesses was positive.
Borregaard has a significant currency exposure which is hedged according to the company's hedging strategy. The impact of currency rate fluctuations will be delayed as a result of the currency hedging strategy. Compared with the 1st quarter of 2018, the net impact of foreign exchange on EBITA adj.1 , including hedging effects, was NOK 30 million. Hedging effects were NOK -8 million (NOK 3 million) in the 1st quarter.
Assuming currency rates as of 2 May 2019 (USD 8.69 and EUR 9.75) and based on currency exposure forecasts, Borregaard expects a net impact of foreign exchange on EBITA adj.1 of approximately NOK 30 million in the 2nd quarter of 2019 and NOK 85 million for the full year of 2019.
Cash flow from operating activities in the 1st quarter was NOK 44 million (NOK 31 million). The increase was mainly a result of a slightly more favourable development in net working capital compared with the 1st quarter of 2018.
Investments amounted to NOK 123 million (NOK 177 million). Replacement investments were NOK 76 million (NOK 32 million). Expansion investments1 , totalling NOK 47 million, were mainly related to the upgrade and specialisation of the lignin operation in Norway. Realised effect of hedging of net investments in subsidiaries was NOK 4 million (NOK 40 million). The
Group has sold and repurchased treasury shares with a net payment of NOK 8 million (NOK 5 million).
On 31 March 2019, the Group had net interest-bearing debt1 totalling NOK 1,379 million (NOK 944 million), an increase of NOK 82 million from year-end 2018.
At the end of the 1st quarter, the Group was well capitalised with an equity ratio1 of 54.3% and a leverage ratio1 of 1.55. The implementation of IFRS 16 Leases had a marginal negative impact on the equity ratio1 of 1.9%-points.
In February, 400,000 share options at a strike price of NOK 82.35 were granted under the long-term incentive programme. The options will expire after five years, the vesting period is three years and the options may be exercised during the last two years. For more details, see notification to Oslo Stock Exchange on 6 February 2019.
As part of the employee share programme, Borregaard sold a total of 297,756 shares to employees in February 2019. The net price was NOK 57.64 per share after deduction of a 25% discount. For more details, see notifications to Oslo Stock Exchange on 4 and 11 February and 1 March 2019.
1 Alternative performance measure, see page 21 for definition.
During the 1st quarter of 2019, Borregaard repurchased a total of 318,537 treasury shares at an average price of NOK 83.68. See notifications to Oslo Stock Exchange on 31 January and from 1 to 29 March 2019.
During the 1st quarter of 2019, 35,000 share options were exercised at a strike price of NOK 41.00 per share. Total number of shares outstanding on 31 March 2019 was 100 million, including 435,996 treasury shares. Total number of shareholders was 6,830. Borregaard ASA's share price was NOK 85.50 at the end of the 1st quarter (NOK 74.80 at the end of 2018).
Borregaard ASA held its General Meeting on 11 April 2019. The financial statements of Borregaard ASA and the Group, including the proposal to pay an ordinary dividend of NOK 2.25 per share were approved.
The General Meeting re-elected the chair of the Board of Directors, Jan Oksum. Terje Andersen, Tove Andersen, Margrethe Hauge and Helge Aasen were re-elected as members of the Board.
Total lignin sales volume in 2019 is forecast to increase by about 10%, mainly due to the ramp-up in Florida. Continued strong competition and further price pressure for lignin products to the concrete admixture market is expected to be partly compensated by diversification and specialisation. Fixed costs and depreciation for the Florida plant is expected to be approximately NOK 40 million higher in 2019 compared with 2018. Sales volume and average sales price in the 2nd quarter will be affected by normal seasonality in delivery patterns, with higher sales volume and a weaker product mix compared with the 1st quarter.
The average cellulose price in sales currency is expected to be in line with the 2018 level. Improved product mix will compensate for weaker prices for acetate and textile cellulose. Borregaard's wood costs in the first half of 2019 will increase by about NOK 50 million compared
with the first half of 2018. In the 2nd quarter of 2019, total sales volume is forecast to be in line with the corresponding quarter of 2018, while the product mix is expected to improve.
Ingredients is expected to increase its result in 2019, driven by the positive market trend for bio-based vanillin. No major changes are expected in the market conditions for Fine Chemicals. Sales will gradually increase for Cellulose Fibrils, but lead-times for conversion of sales prospects are long. The remaining grant from EU Horizon 20207 will cover a smaller share of costs than in previous years. Corporate costs will remain at the same level as in 2018.
Sarpsborg, 2 May 2019 The Board of Directors of Borregaard ASA
Union's Horizon 2020 research and innovation programme under grant agreement No 709746
| 1.1 - 31.3 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | NOTE | 2019 | 2018 | 2018 |
| OPERATING REVENUES | 2 | 1,250 | 1,217 | 4,785 |
| Operating expenses | -995 | -965 | -3,882 | |
| Depreciation property, plant and equipment | -98 | -75 | -323 | |
| Amortisation intangible assets | -1 | -1 | -4 | |
| Other income and expenses1 | 3 | - | - | - |
| OPERATING PROFIT | 156 | 176 | 576 | |
| Financial items, net | -15 | -7 | -14 | |
| PROFIT BEFORE TAXES | 141 | 169 | 562 | |
| Income tax expense | 4 | -33 | -37 | -137 |
| PROFIT FOR THE PERIOD | 108 | 132 | 425 | |
| Profit attributable to non-controlling interests | -18 | -5 | -51 | |
| Profit attributable to owners of the parent | 126 | 137 | 476 | |
| EBITDA adj1 | 255 | 252 | 903 | |
| EBITA adj1 | 2 | 157 | 177 | 580 |
| 1.1 - 31.3 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK | 2019 | 2018 | 2018 | |
| Earnings per share (100 mill shares) | 5 | 1.26 | 1.37 | 4.76 |
| Diluted earnings per share | 5 | 1.26 | 1.37 | 4.76 |
| 1.1 - 31.3 | 1.1 - 31.12 | |||
|---|---|---|---|---|
| Amounts in NOK million | NOTE | 2019 | 2018 | 2018 |
| PROFIT FOR THE PERIOD | 108 | 132 | 425 | |
| ITEMS NOT TO BE RECLASSIFIED TO P&L | ||||
| Actuarial gains and losses (after tax) | - | - | 5 | |
| TOTAL | - | - | 5 | |
| ITEMS TO BE RECLASSIFIED TO P&L | ||||
| Change in hedging-reserve after tax (cash flow) | 7 | 60 | 105 | -103 |
| Change in hedging-reserve after tax | ||||
| (net investment in subsidiaries) | 7 | 4 | 17 | -25 |
| Translation effects | -16 | -36 | 20 | |
| TOTAL | 48 | 86 | -108 | |
| THE GROUP'S COMPREHENSIVE INCOME | 156 | 218 | 322 | |
| Comprehensive income non-controlling interests | -20 | -11 | -42 | |
| Comprehensive income owners of the parent | 176 | 229 | 364 |
1 Alternative performance measure, see page 21 for definition.
| Amounts in NOK million | NOTE | 31.3.2019 | 31.12.2018 |
|---|---|---|---|
| Intangible assets | 12 | 95 | 100 |
| Property, plant and equipment | 12 | 3,875 | 3,623 |
| Other assets | 8 | 230 | 230 |
| Investments in joint venture | 98 | 100 | |
| NON-CURRENT ASSETS | 4,298 | 4,053 | |
| Inventories | 908 | 856 | |
| Receivables | 8 | 1,081 | 956 |
| Cash and cash deposits | 10 | 134 | 86 |
| CURRENT ASSETS | 2,123 | 1,898 | |
| TOTAL ASSETS | 6,421 | 5,951 | |
| Group equity | 9 | 3,296 | 3,123 |
| Non-controlling interests | 188 | 198 | |
| EQUITY | 3,484 | 3,321 | |
| Provisions and other liabilities | 241 | 271 | |
| Interest-bearing liabilities | 8,10 | 1,323 | 1,115 |
| NON-CURRENT LIABILITIES | 1,564 | 1,386 | |
| Interest-bearing liabilities | 8,10 | 415 | 272 |
| Other current liabilities | 8 | 958 | 972 |
| CURRENT LIABILITIES | 1,373 | 1,244 | |
| EQUITY AND LIABILITES | 6,421 | 5,951 | |
| Equity ratio1 | 54.3% | 55.8% |
| 1.1 - 31.3.2019 | 1.1 - 31.12.2018 | ||||||
|---|---|---|---|---|---|---|---|
| Amounts in NOK million | NOTE | Controlling interests |
Non controlling interests |
Total equity |
Controlling interests |
Non controlling interests |
Total equity |
| Equity 1 January | 3,123 | 198 | 3,321 | 2,889 | 107 | 2,996 | |
| PROFIT/LOSS FOR THE PERIOD | 126 | -18 | 108 | 476 | -51 | 425 | |
| Items in Comprehensive Income | 6 | 50 | -2 | 48 | -112 | 9 | -103 |
| THE GROUP'S COMPREHENSIVE INCOME | 6 | 176 | -20 | 156 | 364 | -42 | 322 |
| Paid dividend | - | - | - | -199 | - | -199 | |
| Buy-back of treasury shares | -27 | - | -27 | -32 | - | -32 | |
| Exercise of share options | 2 | - | 2 | 6 | - | 6 | |
| Shares to employees | 23 | - | 23 | 23 | - | 23 | |
| Option costs (share based payment) | 2 | - | 2 | 6 | - | 6 | |
| Transaction with non-controlling interest | -3 | 10 | 7 | 66 | 133 | 199 | |
| EQUITY AT THE END OF THE PERIOD | 3,296 | 188 | 3,484 | 3,123 | 198 | 3,321 |
| 1.1 - 31.3 | 1.1 - 31.12 | ||
|---|---|---|---|
| Amounts in NOK million NOTE |
2019 | 2018 | 2018 |
| Profit before taxes | 141 | 169 | 562 |
| Amortisation, depreciation and impairment charges | 99 | 76 | 327 |
| Changes in net working capital, etc. | -128 | -142 | -194 |
| Dividend (share of profit) from JV | - | - | 6 |
| Taxes paid | -68 | -72 | -143 |
| CASH FLOW FROM OPERATING ACTIVITIES | 44 | 31 | 558 |
| Investments property, plant and equipment and intangible assets * |
-123 | -177 | -762 |
| Other capital transactions | 9 | 4 | 13 |
| CASH FLOW FROM INVESTING ACTIVITIES | -114 | -173 | -749 |
| Dividends | - | - | -199 |
| Proceeds from exercise of options/shares to employees 9 |
19 | 17 | 23 |
| Buy-back of shares 6 |
-27 | -22 | -32 |
| Gain/(loss) on hedges for net investments in subsidiaries | 4 | 40 | -22 |
| NET PAID TO/FROM SHAREHOLDERS | -4 | 35 | -230 |
| Proceeds from interest-bearing liabilities 10 |
347 | 233 | 1,292 |
| Repayment from interest-bearing liabilities 10 |
-216 | -202 | -960 |
| Change in interest-bearing receivables/other liabilities 10 |
-8 | -7 | -2 |
| CHANGE IN NET INTEREST-BEARING LIABILITIES | 123 | 24 | 330 |
| CASH FLOW FROM FINANCING ACTIVITIES | 119 | 59 | 100 |
| CHANGE IN CASH AND CASH EQUIVALENTS | 49 | -83 | -91 |
| Cash and cash equivalents at beginning of period | 86 | 180 | 180 |
| Change in cash and cash equivalents | 49 | -83 | -91 |
| Currency effects cash and cash equivalents | -1 | -5 | -3 |
| CASH AND CASH EQUIVALENTS 10 AT THE END OF THE PERIOD |
134 | 92 | 86 |
| *Investment by category | |||
| Replacement investments | 76 | 32 | 346 |
| Expansion investments1 | 47 | 145 | 416 |
Borregaard ASA is incorporated and domiciled in Norway. The address of its registered office is Hjalmar Wessels vei 6, Sarpsborg.
Borregaard ASA was listed on the Oslo Stock Exchange on 18 October 2012 and was incorporated as a public limited liability company on 22 August 2012.
These unaudited Interim Condensed Consolidated Financial Statements are prepared in accordance with IAS 34 Interim Financial Reporting. Borregaard ASA is the parent company of the Borregaard Group presented in these Interim Condensed Consolidated Financial Statements.
The same accounting principles and methods of calculation have been applied as in the Consolidated Financial Statements for 2018 for the Borregaard Group, except for the implementation of IFRS 16 Leases.
IFRS 16 Leases was implemented from 1 January 2019 according to "the modified retrospective method". See note 14 for impact on the Groups Financial Statements.
The same use of estimates has been applied as in the Consolidated Financial Statements for 2018.
| 1.1 - 31.3 | 1.1 - 31.12 | ||
|---|---|---|---|
| Amounts in NOK million | 2019 | 2018 | 2018 |
| BORREGAARD | 1,250 | 1,217 | 4,785 |
| Performance Chemicals | 600 | 555 | 2,237 |
| Speciality Cellulose | 392 | 434 | 1,669 |
| Other Businesses | 274 | 239 | 927 |
| Eliminations | -16 | -11 | -48 |
There is limited intercompany sales between the different segments and eliminations consist essentially of allocations from the corporate headquarter.
cont. next page
| 1.1 - 31.3 | 1.1 - 31.12 | ||
|---|---|---|---|
| Amounts in NOK million | 2019 | 2018 | 2018 |
| BORREGAARD | 157 | 177 | 580 |
| Performance Chemicals | 87 | 115 | 314 |
| Speciality Cellulose | 35 | 64 | 257 |
| Other Businesses | 35 | -2 | 9 |
| RECONCILIATION AGAINST OPERATING PROFIT & PROFIT BEFORE TAX |
|||
| EBITA ADJ.1 | 157 | 177 | 580 |
| Amortisation intangible assets | -1 | -1 | -4 |
| Other income and expenses1 | - | - | - |
| OPERATING PROFIT | 156 | 176 | 576 |
| Financial items, net | -15 | -7 | -14 |
| PROFIT BEFORE TAXES | 141 | 169 | 562 |
| 1.1 - 31.3 | 1.1 - 31.12 | ||
|---|---|---|---|
| Amounts in NOK million | 2019 | 2018 | 2018 |
| BORREGAARD | 1,222 | 1,195 | 4,705 |
| Performance Chemicals | 576 | 542 | 2,183 |
| Cellulose | 364 | 406 | 1 548 |
| Bioethanol | 27 | 28 | 120 |
| Fine Chemicals | 80 | 73 | 247 |
| Ingredients | 139 | 116 | 471 |
| Other | 36 | 30 | 136 |
Operating revenues consist of sales revenues and other revenues such as commissions, revenues from waste received for incineration etc.
There are no other income and expenses1 in the 1st quarter of 2019.
The tax rate of 23.4% (21.9%) for the first three months of 2019 is a compilation of the tax rates in the various countries in which Borregaard operates and has taxable income. The corporate income tax rate in Norway was reduced from 23% to 22% from 1 January 2019. Borregaard's normal tax rate is expected to be in the range 21-24%
In addition to the compilation of the tax rates in the various countries in which Borregaard operates and has taxable income, the income tax rate for the Group is also impacted by the following: LignoTech Florida is a limited
liability company (LLC) which is taxed on the owners' hand. Profit before tax is 100% consolidated in the Borregaard Group, whereas the tax expense is calculated based on Borregaard's 55% ownership. Consequently, profit attributable to non-controlling interests for LignoTech Florida (45%) is calculated on profit before tax. Share of profit after tax from the joint venture, LignoTech South Africa, is accounted for as part of operating profit and profit before tax (due to IFRS 11). There are carry forward losses in the Group which will not be recognised as deferred tax assets, and hence increase the Group's tax rate.
The share capital consists of 100 million shares. The company holds 435,996 treasury shares. As of 31 March 2019, there are 99,956,397 diluted shares (99,901,117 as of 31 December 2018). Earnings per diluted share were NOK 1.26 in the 1st quarter (NOK 1.37 in the 1st quarter of 2018).
During the 1st quarter of 2019, 400,000 stock options were granted at a strike price of NOK 82.35 per share. See Note 11.
During the 1st quarter of 2019, 35,000 share options were exercised at a strike of NOK 41.00.
The Group Executive Management and other key employees hold a total of 1,942,000 stock options in five different share option programmes in Borregaard.
The first option programme, comprising 330,000 stock options granted in October 2014, has a strike price of NOK 38.75 adjusted for dividends in 2015-2019, NOK 10.50. The second option programme, comprising 460,000 stock options granted in October 2015, has a strike price of NOK 42.24 adjusted for dividends in 2016-2019, NOK 9.25. The third option programme, comprising 352,000 stock options granted in February
2017, has a strike price of NOK 96.36 adjusted for dividends in 2017-2019 of NOK 7.75. The fourth option programme, comprising 400,000 stock options granted in February 2018, has a strike price of NOK 75.75 adjusted for dividend in 2018 and 2019 of NOK 4.25. The fifth option programme, comprising 400,000 stock options granted in February 2019, has a strike price of NOK 80.10 adjusted for dividend in 2019 of NOK 2.25. The share options in the five different programmes will expire after five years, the vesting period is three years and the options can be exercised during the last two years.
As part of the employee share programme, Borregaard has sold a total of 297,756 shares to employees in February 2019. The share price was NOK 57.64 per share after deduction of a 25% discount. Costs in 2019, including administration costs, related to the share purchase programme amount to approximately NOK 6.5 million.
The statement of comprehensive income shows changes in the value of hedging instruments, both cash flow
hedges and hedges of net investments in subsidiaries (hedging reserve). These figures are presented after tax.
| 31.3.2019 | 31.3.2018 | |||
|---|---|---|---|---|
| Amounts in NOK million | Cash flow hedges |
Hedges of net investments in subsidiares |
Cash flow hedges |
Hedges of net investments in subsidiares |
| Tax effect year-to-date | -22 | -39 | 22 | -28 |
| Hedging reserve after tax | -78 | -106 | 70 | -68 |
For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation at the end of each reporting period.
The following measurement levels are used for determining the fair value of financial instruments:
• Level 3 — Valuation techniques (for which the lowest level input that is significant to the fair value measurement is unobservable)
There were no transfers from one level to another in the measurement hierarchy from 2018 to the 1st quarter of 2019. Borregaard has no items defined as level 1. The bond is determined as measurement level 3. The fair value of the bond is deemed to equal its book value.
Set out below is a comparison of the carrying amount and the fair value of financial instruments as of 31 March 2019:
| 31.3.2019 | 31.12.2018 | ||||
|---|---|---|---|---|---|
| Amounts in NOK million | LEVEL | Carrying amount |
Fair value | Carrying amount |
Fair value |
| Non-current financial receivables | 2 | 218 | 218 | 225 | 225 |
| Non-current derivatives | 2 | 8 | 8 | 3 | 3 |
| Current derivatives | 2 | 14 | 14 | 16 | 16 |
| TOTAL FINANCIAL ASSETS | 240 | 240 | 244 | 244 | |
| FINANCIAL LIABILITIES | |||||
| Non-current financial liabilities | 2,3 | 1,152 | 1,152 | 1,116 | 1,116 |
| Non-current derivatives | 2 | 66 | 66 | 116 | 116 |
| Current financial liabilities | 2 | 366 | 366 | 272 | 272 |
| Current derivatives | 2 | 55 | 55 | 79 | 79 |
| TOTAL FINANCIAL LIABILITIES | 1,639 | 1,639 | 1,583 | 1,583 |
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
| Amounts in NOK million | LEVEL 1 | LEVEL 2 | LEVEL 3 | |
|---|---|---|---|---|
| FINANCIAL INSTRUMENTS 31.3.2019 | -1,399 | - | -999 | -400 |
| FINANCIAL INSTRUMENTS 31.12.2018 | -1,339 | - | -739 | -600 |
The financial instruments are measured based on observable spot exchange rates, the yield curves of the respective currencies as well as the currency basis spreads between the respective currencies.
| Amounts in NOK million | 31.3.2019 | 31.12.2018 |
|---|---|---|
| Share capital | 100 | 100 |
| Treasury shares | - | - |
| Share premium | 1,346 | 1,346 |
| Other paid-in capital | 672 | 645 |
| Translation effects | 79 | 93 |
| Hedging reserve (after tax) | -184 | -248 |
| Actuarial gains/losses | -17 | -17 |
| Retained earnings | 1,300 | 1,204 |
| GROUP EQUITY (CONTROLLING INTERESTS) | 3,296 | 3,123 |
As of 31 March 2019, the company held 435.996 treasury shares at an average cost of NOK 84,07.
| Amounts in NOK million | 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 |
| NET INTEREST-BEARING DEBT1 | 1,600 | 1,297 |
| IMPACT OF IFRS 16 LEASES | 221 | - |
| NET INTEREST-BEARING DEBT1 EXCLUDING IMPACT OF IFRS 16 LEASES | 1,379 | 1,297 |
The members of the Group Executive Management of Borregaard held a total of 1,100,000, stock options in the Company as of 31 March 2019.
No impairment indicators have been identified in the Borregaard Group's property, plant and equipment or intangible assets in the 1st quarter of 2019.
Borregaard ASA held its General Meeting on 11 April 2019. The financial statements of Borregaard ASA and the Group, including the proposal to pay an ordinary dividend of NOK 2.25 per share were approved.
The General Meeting re-elected the chair of the Board of Directors, Jan Oksum. Terje Andersen, Tove Andersen, Margrethe Hauge and Helge Aasen were re-elected as members of the Board.
There have been no events after the balance sheet date that would have had a material impact on the financial statements or the assessments carried out.
The effects of the implementation of IFRS 16 on the Consolidated Financial Statements for Borregaard are shown in the table below.
| IFRS 16 EFFECTS | ||||||
|---|---|---|---|---|---|---|
| Amounts in NOK million |
Borregaard (IAS 17) 1.1-31.3.2019 |
Performance Chemicals |
Speciality Cellulose |
Other Businesses |
Borregaard total |
Borregaard (IFRS 16) 1.1-31.3.2019 |
| EBITDA adj1 | 240 | 10 | - | 5 | 15 | 255 |
| Depreciation | -84 | -9 | - | -5 | -14 | -98 |
| EBITA adj1 | 156 | 1 | - | - | 1 | 157 |
| Operating profit | 155 | 1 | - | - | 1 | 156 |
| Net financial items | -13 | -2 | -15 | |||
| Profit before tax | 142 | -1 | 141 | |||
| Earnings per share | 1.27 | -0.01 | 1.26 |
| Amounts in NOK million |
AS OF 31 DECEMBER 2018 (IAS 17) |
IFRS 16 EFFECTS |
AS OF 1 JANUARY 2019 (IFRS 16) |
AS OF 31 MARCH 2019 (IAS 17) |
IFRS 16 EFFECTS |
AS OF 31 MARCH 2019 (IFRS 16) |
|---|---|---|---|---|---|---|
| Total assets | 5,951 | 233 | 6,184 | 6,201 | 220 | 6,421 |
| Equity | 3,321 | - | 3,321 | 3,485 | -1 | 3,484 |
| Equity ratio % | 55.8 | -2.1 | 53.7 | 56.2 | -1.9 | 54.3 |
Machinery, vehicles and equipment: Incremental borrowing rate.
Buildings: Implicit interest rate if available The incremental borrowing rate is based on interbank interest rate (NIBOR, EURIBOR or LIBOR) plus margin plus country risk mark-up.
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.
Cash flow from operations is defined by Borregaard as:
EBITA adj. is defined by Borregaard as operating profit before amortisation and other income and expenses.
EBITA adj. margin is defined by Borregaard as EBITA adj. divided by operating revenues.
EBITDA adj. is defined by Borregaard as operating profit before depreciation, amortisation and other income and expenses.
Equity ratio is defined by Borregaard as equity (including non-controlling interests) divided by equity and liabilities.
Expansion investments is defined by Borregaard as 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 research and development costs and new distribution set-ups.
Other income and expenses is defined by Borregaard as 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 is defined by Borregaard as net interest bearing debt (see note 10) divided by last twelve months' (LTM) EBITDA adj., excluding the impact on EBITDA adj. of IFRS 16 Leases.
Net interest-bearing debt is defined by Borregaard as interest-bearing liabilities, excluding the impact of IFRS 16 Leases, minus interest-bearing assets (see Note 10).
Capital employed is defined by Borregaard as the total of net working capital, intangible assets, property, plant and equipment and investment in joint venture minus net pension liabilities and deferred tax excess value. The impact of IFRS 16 Leases on assets has been excluded.
Return on capital employed (ROCE) is defined by Borregaard as 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.
| 1.1 - 31.3 | 1.1 - 31.12 | ||
|---|---|---|---|
| Capital employed end of | 2019 | 2018 | 2018 |
| Q1, 2017 | 3,754 | ||
| Q2, 2017 | 4,003 | ||
| Q3, 2017 | 4,044 | ||
| Q4, 2017 | 4,256 | 4,256 | |
| Q1, 2018 | 4,454 | 4,454 | 4,454 |
| Q2, 2018 | 4,578 | 4,578 | |
| Q3, 2018 | 4,620 | 4,620 | |
| Q4, 2018 | 4,937 | 4,937 | |
| Q1, 2019 | 5,278 | ||
| AVERAGE | 4,773 | 4,102 | 4,569 |
| EBITA ADJ. (LTM) | 559 | 726 | 580 |
| ROCE (%) | 11.7 | 17.7 | 12.7 |
| 22 | Q1 2019 |
|---|---|
| NOTES | |
Borregaard ASA P.O. Box 162, NO-1701 Sarpsborg, Norway Telephone: (+47) 69 11 80 00 Fax: (+47) 69 11 87 70 E-mail: [email protected] www.borregaard.com
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