Orkla ASA — Investor Presentation 2016

Nov 3, 2016

Innovative aluminium solutions

• Sapa Investor Briefing • Oslo, 3 November 2016

Today's presenters

Egil Hogna President & CEO Karl Eichinger CFO

John Thuestad Business Area President Extrusion Europe

Erika Ahlqvist EVP CSR & Communication

Today's agenda

Building the Sapa of today and the future CEO presentation

Leveraging the Sapa platform in practice

Business area Extrusion Europe presentation

Shifting focus from turnaround to profitable growth CFO presentation

The journey ahead

CEO concluding remarks

Q&A

Shaping a sustainable future through innovative aluminium solutions

• Egil Hogna • President & CEO

Unique position as world leading extrusion company

• Aluminium and Extrusion is an attractive market
• JV formation rationale proven with clear competitive advantages
• Business model with high value added, flexibility and low commodity price risk
• Clear strategy for growth and value creation
• Our journey is paying off consistent improvements since inception

Our purpose

Shaping a sustainable future through innovative aluminium solutions

Safety is our top priority

Copyright © 2016 Sapa Group

Sapa has driven consolidation in the extrusion industry

• Building on knowledge base and rightsizing portfolio in Europe
• Integrating and capitalizing on strong positions in North America
• Developing attractive positions in high-growth markets
• Flexibility and capability to meet challenging market conditions

Sapa – more than 50 years of consolidation

Significant steps taken since last year

Integration and restructuring	• Significant bottom line improvements, supported by Sapa delivering on synergy targets ahead of time
Increased quality and value-added	• Quality systems lifted to industry benchmark • Improved product mix and increased Net Added Value per kg by 12%*
Simplification and collaboration	• Corporate HQ streamlined, business area synergy setup strengthened
Asian footprint consolidated	• Strengthened platform for growth in Asia in attractive niches, expansions commencing in Precision Tubing

* Net Added Value defined as revenues less cost of materials and freight. Figure is LTM Q3 2016 over LTM Q3 2015 (NOK)

Sapa operates in four business areas

Extrusion Europe Extrusion North America Building Systems Precision Tubing

Business concentrated in Extrusion North America and Europe

Sales breakdown by business area (2015)

• Extrusion North America
• Building System
• Precision Tubing

Sales breakdown by geography (2015)

Global trends drive the demand for aluminium

Copyright © 2016 Sapa Group

Aluminium is durable, infinitely recyclable and provides more efficient solutions

Low weight high strength

Superior malleability

Corrosion resistance

Recyclable with low energy input

Well-positioned in downstream aluminium

Robust outlook for aluminium extrusion end markets

Extrusion Demand Volume CAGR 2015-2020 by Geography

We serve a broad range of end markets

Sapa's vision guides our strategy and how we do business

We are aluminium. Excelling in technology and innovation. Today and tomorrow. Sapa – Innovative aluminium solutions

Competitive advantage: Unmatched technology competence

"No other supplier comes close to Sapa in terms of application development"

• HVAC&R customer

• Unique R&D network close to customers

• Leading competence in value-add activities
• Expanding world wide Sapa Academy concept
• More engineers than most of our competitors have employees
• Collaboration bringing knowledge to customers wherever they are

Competitive advantage: Value chain width and depth

"Value added processing by the supplier reduces complexity for us and avoids the need to coordinate supply chain flows between different suppliers, which ultimately results in a loss of responsibility for defects or failures"

• Transportation customer

• Unmatched wide range of solutions

• Creating value with design, materials, and services
• Complete customer solutions

Competitive advantage: Global reach and local presence – plant-network

"Sapa has the widest network of manufacturing sites, and therefore the best capabilities in terms of supply security"

• Building and construction customer

• Number one globally

• Close to local customers
• Network of plants allows for flexibility and reliability
• Dies can be switched and moved swiftly and at low cost to adapt to specific customer needs
• Building Systems has a global offering with three main brands

Our strategy is to lead the aluminium extrusion industry by offering the best value in innovative aluminium solutions

• 1. Increase value-added to our customers
• 1. Simplify and collaborate

• Selective growth

Extrusion Europe – market leader with strong focus on value added products

• Be the European industry shaper
• Benefit from speed and proximity in building and construction
• Outperform competition in vertical integration and material substitution
• Grow exposure to high value add automotive, transport, and engineering end markets

Fast facts
9,400 people
	40 locations
	Revenues: NOK 19.8 bn
24%	Market share

Extrusion North America – uniquely positioned as the only coast-to-coast supplier

• Further develop strong position in transportation and distribution
• Increase position through superior "ease of doing business" model and unique new services and product offerings
• Lead in alloy development, application engineering support, and customer education academies
• Grow exposure to high value add automotive and building and construction end markets

	Fast facts
	6,300 people
23 locations
	Revenues: NOK 20.6 bn
27%	Market share

Building Systems – leading European player with well recognized multi-brand portfolio

• Become the market leader in Europe
• Grow business in Asia and enter North America
• Lead in product design and energy efficient solutions through strong R&D capabilities
• Reinforce three main brands to improve market positions and lower product development costs

	Fast facts
	2,800 people
Employees in 29 countries
	Revenues: NOK 7.2 bn
18%	Market share

Precision Tubing – technology leaders in selected niches

• Be in the forefront in precision aluminium solutions for heat transfer and industrial applications
• Lead the material substitution in the HVAC&R industry
• Focus extrusion business in South America and Asia on selected high added value market niches
• Create new aluminium solutions for fluid lines, cables and cooling lines for batteries

Fast facts
	3,100 people
	17 locations
	Revenues: NOK 6.3 bn
64%	Market share*

Key priorities for 2017

• Continuing improvements in safety and quality
• Value over volume increased share of valueadded products in all business areas
• Simplification and collaboration to further reduce costs and operate smarter
• Continued focus on capital efficiency and strong cash generation
• Continue to lay the foundation for strategic growth

Leveraging the Sapa platform in practice

Shaping a sustainable future through innovative aluminium solutions

• John Thuestad • BA President Extrusion Europe

What is extrusion?

…cut to lengths (billets) adjusted for the press operation…

Our journey since 2013

Setting the industry standard

Foundation for success

Extrusion Europe's journey is paying off Focus shift: Value over volume

• Value over volume selective on segments to develop
• Improved product mix
• Improving cost position through significant restructuring

From extrusions to solutions

Copyright © 2016 Sapa Group

How do we leverage the strengths of Sapa?

Scale Capability R&D/Applications

• 40 production locations in 20 countries with 24% market share
• 10,000 employees with knowledge & experience unparalleled in the market
• 20,000 customers (300-600 customers per plant)
• Low dependence on individual customers, markets or segments

2 Capability

Customized design and tailored solutions

• Light & strong structural parts
• Next generation crash management systems and alloys
• Smart and modular battery solutions for e-mobility

• Aesthetical and functional roof rails and trims

• Exceptional quality and lead times for large scale high end projects

• Direct connection with local metal builders driving high value in regional markets

• Internal synergies & service driving the value proposition of Sapa Building Systems

• Structural friction stir welded components and subassemblies

• Large structural extrusions to support light weight designs

• Alloy development to drive material efficiency

• Welded panels for structures below and above the waterline

• Fully fabricated components
• New alloy development, focusing on corrosion resistance

R&D and application development 3

• Sweden focusing on process and product development
• We have over 200 application engineers throughout Europe
• We have an unparalleled ability to partner with our customers for advanced solutions

When we combine these, there is nothing we can't do when it comes to aluminium

Copyright © 2016 Sapa Group

Taking a leadership position going forward

Crash management systems for safer trucks

• Joint development with major truck manufacturers
• Sapa in Tier 1 position, delivering 100% of the volume
• 45% weight reduction
• Value add based product including alloy development, bending, machining, welding, and assembly

Delivering solutions to marine and offshore market

• Working with Apply Leirvik, delivering parts to the housing quarters constructed with wide panels
• Weight reduction, corrosion resistance, and lowered maintenance costs
• Utilizing Sapa's competence and capabilities in Finspång, Sweden

Copyright © 2016 Sapa Group

Driving high end building and construction solutions

• Supply a façade system designed by Gartner
• Provides a one stop solution project management, extrusion, thermal break & surface treatment
• Uniquely positioned to provide profiles including big and wide shapes

Copyright © 2016 Sapa Group

Our strategic priorities going forward

• Increase solution development serving the high value markets
• Outperform competition in vertical integration and material substitution
• Shape the European aluminium extrusion Industry

From turnaround to profitable growth

Shaping a sustainable future through innovative aluminium solutions

• Karl Eichinger • CFO

Recap of financial priorities at JV formation

• Retain business High 1

• Improve margins

Copyright © 2016 Sapa Group

Integration targets achieved well ahead of plan

* Recurring EBITDA synergies

We went through 29 significant restructuring projects in the initial synergy programme

Bolzano	Sweden I
Haticon II	Sweden II
Autocar	Koefem I
Jiangyin	Koefem II
SCAP	Trzcianca
Guelph	Ziar
Hanover	X-Docks France
Miami	X-Docks DACH
Workington	Harderwijk
Pinon	Haticon I
Bedwas	Benelux cost reduction
Seneffe	Iberia cost reduction
Fossanova	Puget
Eural	Extrusion Americas 2nd round restructuring

Divestments (5) Full plant closure (10)

Part closure / restructuring / downsizing (14)

Sapa Group Cost position and portfolio mix improved

Highlights

• Value over volume selective on segments to develop
• Customer value focus reflected in the margins
• Company wide restructuring has strengthened the cost position and enable result improvements

LTM = Last Twelve Months; NAV = Net Added Value, calculated as operating revenues less cost of material, including freight costs out Corporate cost and other are included in Sapa group with 2016 Q3 LTM -200 MNOK, 2015 FY -194 MNOK, 2014 FY -458 MNOK

Extrusion Europe Focus shift: Value over volume

Highlights

• Value over volume selective on segments to develop
• Improved product mix
• Improving cost position through significant restructuring

49

Extrusion North America

Robust performance in a strong market

• Strong market growth Sapa selective on profitable segments
• Increasing value added
• Improving margins from already high capacity utilization and lean organization

Building Systems

Restructuring and stronger commercial offering improving results

• Improving results in weak market
• Increasing value added
• Significant restructuring has improved cost position

Precision Tubing Benefiting from restructuring and growing end-markets

• Underlying market improvement in automotive and HVAC&R
• Restructuring in 2014-16 in general extrusion
• Focus shift, niche strategy in emerging markets paying off

Steady trajectory of improving results LTM rolling underlying EBIT in NOK million, ROCE (pre-tax)

Last 12 months rolling working capital days Increased working capital efficiency

Copyright © 2016 Sapa Group Working capital days are calculated as average working capital during LTM divided by operating revenues during LTM

All business areas contribute to the development Working capital days

2015 LTM Q3 2016

Sustaining and safety Capex below depreciation Capex (NOK billion)

Meeting strong demand in automotive in China

Copyright © 2016 Sapa Group

Select investments within e-mobility

Continued focus on capital efficiency

• Continued tight working capital management
• Sustained and safety Capex below depreciation
• Selective capability and capacity investments to support move towards more value-added solutions

59

Net debt position development Quarterly (NOK million)

NIBD / Underlying EBITDA is calculated as net interest bearing debt divided by LTM underlying EBITDA

Copyright © 2016 Sapa Group

Sapa has low exposure to aluminum price volatility

Pricing components

• Spread: production, engineering, design -> value added
• Premium: premium above LME reflecting standard ingot and billet premiums
• London Metal Exchange (LME): price

Pricing methods

• Formula Pricing: LME and Premium passed to the customer at market
• Fixed Price Contract: LME and Premium hedged for certain period during which customer charged a flat rate
• Catalogue Pricing: Set price in effect until a change is communicated

Key takeaways

• ROCE: 13.7% (up from 0.4% as of Q1-2014)
• EBIT: NOK 2.0 billion LTM* (up from NOK 52 million as of Q1-2014)
• NIBD/EBITDA: 0.1x (down from 1.8x as of Q1-2014)
• Working capital days: 34.4 (down from 41.9 as of Q1-2014)
• Sustaining capex: below depreciation

The journey ahead

• Egil Hogna • President & CEO

Shaping a sustainable future through innovative aluminium solutions

Unique position as world leading extrusion company

• Aluminium and Extrusion is an attractive market
• JV formation rationale proven with clear competitive advantages
• Business model with high value added, flexibility and low commodity price risk
• Clear strategy for growth and value creation
• Our journey is paying off consistent improvements since inception

www.shapes.al

Appendix

Shaping a sustainable future through innovative aluminium solutions

Copyright © 2016 Sapa Group

Broad end-market exposure

Estimated share of revenues from each market segment in 2015.

*General Extrusion within the business area Precision Tubing is included in Extrusion

1 Industrial includes Machinery & Equipment, Electrical, Solar and Consumer Electronics. ² Distribution includes Distribution, Stockists, Traders.

The corporate management team

Egil Hogna President & CEO

EVP General Counsel

Katarina Nilsson EVP HR

CFO

Innovation

Erika Ahlqvist EVP Communication

Charlie Straface EVP Extrusion Americas

Salvador Biosca EVP Building Systems

John Thuestad EVP Extrusion Europe

Sergio Vendrasco EVP Precision Tubing

Key financials by business area NOK million

Extrusion Europe	2014	2015	LTM 2016
Volume (kmt)	613	563	574
Sales (NOKm)	17,877	20,031	19,774
Underlying EBITDA (NOKm)	763	1,016	1,223
Underlying EBIT (NOKm)	224	475	705

Building Systems	2014	2015	LTM 2016
Volume (kmt)	88	77	77
Sales (NOKm)	6,677	7,043	7,202
Underlying EBITDA (NOKm)	159	220	451
Underlying EBIT (NOKm)	(1)	71	297

Extrusion North America	2014	2015	LTM 2016
Volume (kmt)	577	598	590
Sales (NOKm)	16,437	21,694	20,641
Underlying EBITDA (NOKm)	1,013	1,295	1,329
Underlying EBIT (NOKm)	705	931	935

Precision Tubing	2014	2015	LTM 2016
Volume (kmt)	147	145	149
Sales (NOKm)	5,039	6,275	6,307
Underlying EBITDA (NOKm)	371	353	495
Underlying EBIT (NOKm)	181	124	255