Borregaard

Quarterly Report • Feb 2, 2023

4 th Quarter 2022

Oslo, 2 February 2023

Agenda

Per A Sørlie, President & CEO

• Highlights
• Proposed dividend
• Business segments
• Environmental investment
• Outlook

Per Bjarne Lyngstad, CFO

Financial performance

Highlights – 4 th quarter 2022

• EBITDA¹ NOK 364 million (NOK 263 million)
• Significant improvement in BioMaterials and Fine Chemicals
• Reduced margin on traded vanillin products in BioSolutions
• Increased sales prices offset cost increases
• Positive net FX effects

Highlights – full year 2022

• All-time high EBITDA¹ 1,643 mNOK (1,372 mNOK)
• Higher sales prices and improved product mix in BioSolutions and BioMaterials
• Increased sales prices and higher bioethanol sales volume in Fine Chemicals
• Substantial cost increases affected all business areas
• Positive net FX impact
• Cash flow affected by increase in net working capital
• ROCE¹ 18.1% pre-tax (16.1%)

Dividend proposal for 2022

Borregaard's dividend policy

• To pay regular and progressive dividends reflecting expected long-term earnings and cash flows
• Dividend targeted between 30% and 50% of net profit

A dividend proposal of NOK 3.25 per share proposed by the Board of Directors

• NOK 0.50 increase in ordinary dividend
• 36% of net earnings
• Dividend yield of 2.1% (share price at year-end)
• Total dividend payment of 324 mNOK

BioSolutions markets – Q4

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

Average price in sales currency 7% above Q4-21

• Positive development for applications within oilfield chemicals and construction
• In Q4-21, average price positively influenced by extraordinarily high deliveries of wood-based vanillin

Sales volume 6% lower vs Q4-21

• In line with outlook for Q4
• Lower raw material supply affected deliveries to low-value markets

Increased global supply and significant price decline for synthetic vanillin and ethyl vanillin

• Borregaard's sales volume and trading margins for these products negatively affected
• Strong deliveries of wood-based vanillin in the quarter

BioSolutions markets – full year

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

Average price in sales currency 20% above 2021

• Price increases and optimisation of product mix main drivers
• Market introduction of new biovanillin capacity on track

Sales volume 9% lower vs 2021

• Lower raw material supply in 2022 and sales from inventories in 2021
• Demand for lignin-based biopolymers generally strong
• Volumes optimised based on value within all market segments

Borregaard's trading of vanillin products peaked during H1-22 with higher sales prices and margins

Market normalised late 2022

Significant specialisation and value growth over time BioSolutions

• Gross sales doubled in Industrial and nearly trebled in Specialities from 2012
• Reduced exposure to low-value applications, less cyclicality
• New supply situation in 2020 focus on value and portfolio optimisation

8

BioMaterials markets – Q4

Sales price and sales volume include speciality cellulose and cellulose fibrils

Average price in sales currency 39% higher than Q4-21

• Price increases and surcharges for speciality cellulose
• Favourable product mix in Speciality cellulose, increased sales volume and sales prices for Cellulose fibrils

Higher deliveries of speciality cellulose

• In total, strong demand in the quarter
• Slight slowdown in orders from the construction market for cellulose ethers

BioMaterials markets – full year

Sales price and sales volume include speciality cellulose and cellulose fibrils

Average price in sales currency 28% above 2021

• Price increases, surcharges and improved product mix
• Sales of highly specialised grades increased to 85% (79%)

Significantly lower deliveries of speciality cellulose

• Inventories increased from a low level in 2021
• Strong demand for speciality cellulose, slight slowdown in orders from the construction market for cellulose ethers in Q4-22

Sales volume and sales prices increased for cellulose fibrils

Fine Chemicals markets – Q4 & full year

Sales revenues include fine chemical intermediates and bioethanol Sales revenues include fine chemical intermediates and bioethanol

• Higher sales volume and sales prices for bioethanol
• Increased sales prices for fine chemical intermediates

• Increased sales prices and higher sales volume for bioethanol, bioethanol sales mainly to biofuels
• Increased sales prices for fine chemical intermediates
• Positive net FX impact

Climate change and the environment – targets and ratings Sustainability

Science Based Targets for GHG emissions approved by SBTi

• Targeted reductions in GHG emissions (scope 1 and 2):
  • 42% absolute reduction by 2030 (base year = 2020)
  • Net-zero target, 90% absolute reduction by 2050
• Targets in line with 1.5°C goal in Paris Agreement and Norwegian Climate Law

Highlighted as a global leader in corporate climate action by CDP

• Borregaard among top 20 out of 15,000 reporting companies
  • A score within Climate Change (5 years in a row) and Forests
  • A- score within Water security

Platinum status in EcoVadis Supply Chain

• Top 1% of 90,000 reporting companies

Continuous reduction of emissions and effluents Financials From CMD 2022

2030 environmental targets

• 42% reduction in CO² emissions from 2020
  • Electrification, energy conservation, innovative heat recovery
• 30-50% reduction in effluents to water (COD) from 2020
  • Process improvements and wastewater incineration technology

Financial consequences and strategic considerations

• Preliminary investment estimate 650-850 mNOK for 2023 to 2025
• Supporting specialisation and value growth investments
• Increased flexibility between energy sources
• Improved environmental footprint
• Increased barriers to entry and strengthened competitive position

Sustainability offering new opportunities Environmental investments will improve competitive position

Environmental investment of 230 mNOK at the biorefinery in Norway

Improved environmental footprint

• Removing absolute dependency on LNG
• 30,000 tonnes annual reduction of CO² emissions
• Part of investment plan announced at CMD

Increased energy flexibility and efficiency

• Significant cost reduction potential
• Introducing more options to switch between alternative energy sources
• Improved energy efficiency

Completion in H1-24

Outlook

BioSolutions

• Total sales volume forecast to be approx. 350,000 tonnes, depending on raw material supply and global economic development
• Sales volume in Q1-23 expected to be in line with Q4-22
• Portfolio optimisation within biopolymer applications will continue
• Market for synthetic vanillin and ethyl vanillin expected to remain normalised in 2023

BioMaterials

• Total sales volume forecast to be higher than production output
• Sales volume of highly specialised grades expected to increase
• In Q1-23, the average price in sales currency expected to be largely in line with Q4-22
• Construction market for cellulose ethers the main uncertainty, other applications expected to largely compensate for a potential slowdown
• Sales growth will continue for cellulose fibrils

Fine Chemicals

• Sales volume and product mix for fine chemical intermediates expected to improve
• Favourable market conditions for advanced biofuels in several European countries, sales prices for bioethanol expected to increase vs 2022

Energy and raw material costs

• Wood costs will increase 10-15% in H1-23 vs H2-22
• In Q1-23, energy and other raw material costs expected to be slightly below Q4-22, energy spot prices represent the largest uncertainty
• Borregaard will benefit from its ability to switch between electricity, LNG and light oil to minimise energy costs

Cost inflation and consequences of the war in Ukraine may impact the global economy and Borregaard's markets

Financial performance Q4-22

Borregaard key figures – Q4

Revenues 22% above Q4-21

EBITDA¹ 364 mNOK for the Group

• Significant improvement in BioMaterials and Fine Chemicals, decrease in BioSolutions
• Increased sales prices, higher volume and positive net FX effect more than offset cost increases and reduced margin on traded vanillin products
• EBITDA¹ margin above Q4-21

Earnings per share (EPS) NOK 1.85 (NOK 1.02)

Other income and expenses -20 mNOK accrual for precautionary measures related to ground conditions at the site in Norway

Borregaard key figures – full year

Revenues increased by 19% vs 2021

• All-time high EBITDA¹ of 1,643 mNOK for the Group
• All business areas improved

Price increases and positive net FX effects more than compensated for substantial cost increases

Earnings per share (EPS) NOK 8.95 (NOK 6.95)

ROCE¹ 18.1% pre-tax (16.1%), well above target level

BioSolutions key figures – Q4

• Revenues 7% above Q4-21
• Increased sales prices and positive FX impact
• Lower sales volume

• Full year growth 17%

• Reduced margin and volume for traded vanillin products

• Increased sales prices and positive net FX effects offset cost increases for lignin-based biopolymers

• Full year EBITDA¹ 986 mNOK (942 mNOK)

• Lower EBITDA margin¹ vs Q4-21

• Full year EBITDA¹ margin 24.3 (27.2)

¹ Alternative performance measure, see Appendix for definition

BioMaterials key figures – Q4

• Revenues increased 53% vs Q4-21
• Increased sales prices for speciality cellulose
• Higher deliveries
• Positive FX impact
• Full year growth 20%
• Increased sales prices and surcharges, positive net FX impact, higher sales volume and favourable product mix
• Higher production output, shorter annual maintenance stop and lower maintenance costs
• Increased raw material and energy costs

• Full year EBITDA¹ 427 mNOK (284 mNOK)

• EBITDA margin¹significantly above Q4-21

• Full year EBITDA¹ margin 19.0 (15.1)

Fine Chemicals key figures – Q4

• Revenues increased 49% vs Q4-21
• Increased sales prices and higher bioethanol deliveries

• Full year increase 29%

• Increased sales prices and high production output for fine chemical intermediates, partly offset by increased costs

• Higher sales prices and sales volume for bioethanol, partly offset by increased costs

• Full year EBITDA¹ 230 mNOK (146 mNOK)

• EBITDA margin¹ significantly above Q4-21

• Full year EBITDA¹ margin 36.4 (29.7)

Currency impact

• Net FX EBITDA¹ impact ≈55 mNOK vs Q4-21
  • Includes change in hedging effects and based on estimated FX exposure
  • Net FX EBITDA¹impact YTD ≈195 mNOK
• Net FX EBITDA¹ impact in 2023 estimated to be ≈135 mNOK vs 2022
  • Assuming rates as of 1 February (USD 9.97 and EUR 10.86) on expected FX exposure
  • Net FX EBITDA¹ impact in Q1 estimated to be ≈50 mNOK vs Q1-22
• 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 2021 (=100): USD 53% (≈198 mUSD), EUR 44% (≈139 mEUR), Other 3% (GBP, BRL, JPY, SEK)

Cash flow, investments and NIBD

Cash flow in Q4 positively affected by strong EBITDA and reduction in net working capital High investments in Q4, mainly related to equipment installed during the annual maintenance stop in October NIBD¹ decreased 158 mNOK in Q4

Leverage ratio¹ 1.12 (1.03)

Equity ratio¹ 55% (60%)

Questions?

Per A Sørlie, President & CEO

Per Bjarne Lyngstad, CFO

Please note that you can submit questions through the webcast solution

Appendix

Borregaard – key figures

Amounts in NOK million	Q4-22	Q4-21	Change	FY-22	FY-21	Change
Operating revenues	1 770	1 446	22 %	6 881	5 805	19 %
EBITDA1	364	263	38 %	1 643	1 372	20 %
Depreciation property, plant and equipment	-114	-106		-444	-416
Amortisation intangible assets	- 2	- 1		- 5	- 4
Other income and expenses1	-20	0		- 8	0
Operating profit	228	156	46 %	1 186	952	25 %
Financial items, net	-18	-24		-68	-79
Profit before taxes	210	132	59 %	1 118	873	28 %
Income tax expenses	-47	-39		-267	-213
Profit for the period	163	9 3	75 %	851	660	29 %
Profit attributable to non-controlling interests	-21	- 9		-41	-32
Profit attributable to owners of the parent	184	102		892	692
Cash flow from operating activities (IFRS)	313	356		735	1 431
Earnings per share	1,85	1,02	81 %	8,95	6,95	29 %
EBITDA margin1	20,6 %	18,2 %		23,9 %	23,6 %

Operating revenues and EBITDA¹ per segment

	Amounts in NOK million				Amounts in NOK million
Operating revenues	Q4-22	Q4-21	Change	EBITDA1	Q4-22	Q4-21	Change
Borregaard	1 770	1 446	22 %	Borregaard	364	263	38 %
BioSolutions	997	934	7 %	BioSolutions	159	214	-26 %
BioMaterials	620	405	53 %	BioMaterials	138	2 7	411 %
Fine Chemicals	170	114	49 %	Fine Chemicals	6 7	2 2	205 %
Eliminations	-17	- 7

Amounts in NOK million			Amounts in NOK million
Borregaard	1 770	1 446	22 %	Borregaard	364	263	38 %
BioSolutions	997	934	7 %	BioSolutions	159	214	-26 %
BioMaterials	620	405	53 %	BioMaterials	138	2 7	411 %
Fine Chemicals	170	114	49 %	Fine Chemicals	6 7	2 2	205 %
Eliminations	-17	- 7

Amounts in NOK million Amounts in NOK million Operating revenues FY-22 FY-21 Change EBITDA¹ Eliminations -51 -33

FY-22	FY-21	Change	EBITDA1	FY-22	FY-21	Change
6 881	5 805	19 %	Borregaard	1643	1372	20 %
4 050	3 469	17 %	BioSolutions	986	942	5 %
2 250	1 878	20 %	BioMaterials	427	284	50 %
632	491	29 %	Fine Chemicals	230	146	58 %
-51	-33

Cash flow

Amounts in NOK million	Q4-22	Q4-21	FY-22	FY-21
Amounts in NOK million
Profit before taxes	210	132	1 118	873
Amortisation, depreciation and impairment charges	116	107	449	420
Change in net working capital, etc	5 5	174	-658	256
Dividend/share of profit from JV & associate company	3	6	3 4	6
Taxes paid	-71	-63	-208	-124
Cash flow from operating activities	313	356	735	1 431
Investments property, plant and equipment and intangible assets *	-212	-227	-464	-556
Investment in associate company	-	-35	-	-145
Other capital transactions	4	4	9	9
Cash flow from Investing activities	-208	-258	-455	-692
Dividends	-	-	-499	-249
Proceeds from exercise of options/shares to employees	7	4	4 1	5 9
Buy-back of shares	-45	- 7	-68	-118
Gain/(loss) on hedges for net investments in subsidiaries	7 7	-25	-79	-14
Net paid to/from shareholders	3 9	-28	-605	-322
Proceeds from interest-bearing liabilities	-	-	837	300
Repayment from interest-bearing liabilities	-43	-146	-512	-814
Change in interest-bearing receivables/other liabilities	-41	4	7 8	- 1
Change in net interest-bearing liablities	-84	-142	403	-515
Cash flow from financing activities	-45	-170	-202	-837
Change in cash and cash equivalents	6 0	-72	7 8	-98
Cash and cash equivalents at beginning of period	7 6	7 6	5	9 6
Change in cash and cash equivalents	6 0	-72	7 8	-98
Currency effects cash and cash equivalents	-25	1	2 8	7
Cash and cash equivalents at the end of the period	111	5	111	5
* Investment by category
Replacement Investments	172	190	359	398
Expansion investments1 including investment in associate company	4 0	7 2	105	303
Total investments including investment in associate company	212	262	464	701

28 ¹ Alternative performance measure, see Appendix for definition

Balance sheet

Amounts in NOK million	31.12.2022	30.09.2022	31.12.2021
Assets:
Intangible assets	8 2	8 4	8 9
Property, plant and equipment	4 371	4 339	4 191
Right-of-use assets	345	342	351
Other assets	254	240	339
Investments in joint venture/associate company	142	143	173
Non-current assets	5 194	5 148	5 143
Inventories	1 299	1 230	792
Receivables	1 387	1 495	1 107
Cash and cash deposits	234	167	124
Current assets	2 920	2 892	2 023
Total assets	8 114	8 040	7 166
Equity and liabilities:
Group equity	4 394	3 929	4 222
Non-controlling interests	5 1	7 9	8 4
Equity	4 445	4 008	4 306
Provisions and other liabilities	295	438	257
Interest-bearing liabilities	1 370	1 523	1 320
Non-current liabilities	1 665	1 961	1 577
Interest-bearing liabilities	702	641	224
Other current liabilities	1 302	1 430	1 059
Current liabilities	2 004	2 071	1 283
Equity and liabilities	8 114	8 040	7 166

(%): 54,8 % 49,9 % 60,1 %

¹ Alternative performance measure, see Appendix for definition

Equity ratio¹

Net financial items & net interest-bearing debt¹

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

Amounts in NOK million
Net financial items	Q4-22	Q4-21	FY-22	FY-21
Net interest expenses	-26	-13	-76	-59
Currency gain/loss	1 0	- 7	6	- 8
Share of profit/-loss from an associate	0	- 2	- 3	- 2
Other financial items, net	- 2	- 2	5	-10
Net financial items	-18	-24	-68	-79

Amounts in NOK million
1 Net interest-bearing debt (NIBD)	31.12.2022	30.09.2022	31.12.2021
Non-current interest-bearing liabilities	1 370	1 523	1 320
Current interest-bearing liabilities including overdraft of cashpool	702	641	224
Non-current interest-bearing receivables (included in "Other Assets")	- 2	- 3	- 3
Cash and cash deposits	-234	-167	-124
1 Net interest-bearing debt (NIBD)	1 836	1 994	1 417
- of which impact from IFRS 16 leases	371	367	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 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
Q1-2023	36	9.20	35	10.74
Q2-2023	35	9.53	36	10.81
Q3-2023	36	9.14	35	10.76
Q4-2023	36	8.96	35	10.71
2023	143	9.21	141	10.76
2024	141	9.03	122	10.57
2025	97	9.56	90	10.60
2026	8	9.56	7	10.78

Contracted FX hedges with EBITDA impact (as of 01.02.23) Hedging effects by segment

NOK million	FY-22	FY-21	Q4-22	Q4-21
BioSolutions	-44	-11	-23	1
BioMaterials	-7	-15	-9	4
Fine Chemicals	1	-3	-2	1
Borregaard	-50	-29	-34	6

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
• 50 mUSD 10-year loan, maturity 2032 (drawn in April 2022)
• 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

Solidity

• Equity ratio¹ 55%
• Leverage ratio¹ LTM 1.12 (covenant < 3.50)

Debt and undrawn facilities 31.12.2022

4 000

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 fourth quarter of 2022, held on 2 February 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.