B U S I N E S S M O D E L , B U S I N E S S E S & S T R AT E G Y

November 2018
Important notice
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This presentation includes and is based, inter alia, on forward-looking information and contains statements regarding the
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forward-looking information and statements in this presentation are based on current expectations, estimates and
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exclusive jurisdiction of Norwegian courts.

2
Business model & strategy

Borregaard is a global leader in biochemicals

High value added through full raw materials utilisation
Borregaard’s biochemicals are sustainable and environmentally
friendly substitutes for petrochemicals

3
Business model & strategy

Operates the world’s most advanced biorefinery

Integration models:
Integrated production system serving diverse markets Own integrated
Partner integrated
Independent

End markets 2017

28%
39%

SPECIALITY
CELLULOSE LIGNIN VAN IL L IN BIOETHANOL CELLULOSE FIBRILS 19%
Construction Concrete additives Food Biofuel Adhesives
Perfumes Car care products Coatings
14%
materials Animal feed
Filters Pharmaceuticals Household chemicals Agricultural chemicals
Agrochemicals
Solvents Personal care Chemical/Others Food & Pharma
Inks and coatings Batteries Food Home care
Casings Briquetting Personal care Construction Agriculture Construction
Food/Pharma/ Soil conditioner Pharma
Personal care
Textiles

4
 Business model & strategy

Global niche player with a market driven organisation

Performance Chemicals Speciality Cellulose Other Businesses

(47%¹) (37%¹) (16%¹)
Largest supplier and technology Leading global speciality cellulose Only producer of wood-based vanillin;
leader in lignin-based products with supplier, significant producer of 2nd largest producer of C3 aminodiols for X-ray
global market access generation bioethanol contrast media, pioneer in cellulose fibrils

Sales distribution (2017)

Asia
25 % Market driven organisation
Europe • ~110 FTEs strong sales/technical service organisation
46 %
Americas 2 • Dedicated sales force for each business unit
27 % • ~90% of sales handled through own organisation

RoW
2%
1) Segment revenue as a % of total revenue 2017
2) USA/Canada: 21%, rest of Americas 6% 5
Business model & strategy

The specialisation strategy

• Specialisation in global niches
• Markets with high barriers to entry
• Leading market positions through application knowledge and proximity
to markets
• Diversified market strategy and global market positions secure
maximum flexibility
• Strong innovation efforts and continuous improvement
• Business driven innovation model that involves the entire organisation
• Continuous productivity improvement through more efficient
organisation, competence development and smart use of technology
• Competence is the main competitive advantage
• Competence differentiates Borregaard from the competitors
• Combination of competences in sales & marketing, R&D and production

6
Business model & strategy

Borregaard portfolio - strategic priorities

• Growth and specialisation within Performance Chemicals
• Increased sales of high-value lignin products
• Establish new lignin raw material sources
• Develop BALI1) as a strategic lignin raw material option

• Develop the unique biorefinery assets in Sarpsborg

• Leverage high-value raw material base in Performance Chemicals
• Continue specialisation of Speciality Cellulose, Bioethanol and Ingredients
• Strong focus on innovation and productivity efforts

• Establish Cellulose Fibrils as a new business area

• Based on core competence within wood chemistry and fine chemistry
• Increased specialisation through high value added

1) Borregaard Advanced Lignin

7
Business model & strategy

Update on strategic projects

• Develop the unique biorefinery asset in Sarpsborg
• High-end bioethanol expansion started up in Q1-18
• Ice Bear capacity expansion on track
• Completion by end 2018
• Lignin operation upgrade/specialisation on schedule
• Completion 2019

• Growth and specialisation within Performance Chemicals

• Florida plant (1st phase) started up mid 2018
• Planned ramp-up over three years

• Establish Cellulose Fibrils as a new business area

• Exilva market introduction on-going
• Continued strong interest from potential customers
• Long lead-times for commercial sales
• Decision on SenseFi expansion pending

8
Performance Chemicals

Performance Chemicals
Lignin – a sustainable and
Product performance depends on the flexible raw material
pulping process and the raw material
Biochemicals
• Sulphite pulping process
• Versatile lignin used in a variety of Incineration
products/applications Bioenergy
• Quality depends on the chemicals base Lignin
• Water soluble Discharge 30 %
• Limited number of sulphite mills Fibres
45 %
• Softwood (pine/spruce) vs hardwood and straw
• Softwood lignin has superior
modification potential
Other/
sugars
• Kraft (sulfate) pulping process
25 %
• Lignin is normally incinerated to recover
energy and chemicals
• Raw material with limited potential for
lignin products
• Not water soluble

9
Performance Chemicals

Performance Chemicals
Market position Key attractions
• Largest supplier with a global • A sustainable and broad product
presence portfolio
• Unique technical and application • Large and diverse customer base
expertise
• High barriers to entry
Production
• Norway, USA, South Africa, Germany, Operating revenues 2,176 mNOK (2017)
Spain, Czech Republic, UK
Applications
• Concrete admixtures
• Gypsum board
• Ceramics
• Animal feed
• Agro chemicals
• Soil conditioner
• Oil field chemicals
• Batteries

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Performance Chemicals

Lignin – the supply side

By sales volume 2017

Others

Borregaard
Russian

Nippon
Burgo
Sappi Rayonier AM Domsjö

Total market (2017) ~ 1.1 million mtds2)

Borregaard manufacturing facilities Others

Source: Borregaard estimates 11
²⁾ Metric tonne dry solid
Performance Chemicals

600 products to around 2,800 customers (2017)

Revenues by end market and region

Top 10 and top 3 customers in % of revenues

50%

40%

30%
Top10
20% Top 3
10%

0%
2009 2010 2011 2012 2013 2014 2015 2016 2017

12
 Performance Chemicals

End markets growth forecast

Construction Feed Industry Agro /Agchem Automotive

EMEA 2 - 4% 2 - 4% 1 - 2% 3 - 5% 1 - 3%
Americas 0 - 3% 2 - 4% 1 - 3% 5 - 8% +/- 0
Asia/Pacific 2 - 4% 3 - 7% 5 - 7% 6 - 10% 2 - 4%

Indicative annual rates to 2021

based on 2.5% annual GDP growth rate

Sources: IMF, BNP Paribas, LafargeHolcim, Heidelberg Cement, Portland Cement Association, Phillips McDougall,
Agropages, DowDuPont, Syngenta, Bayer, Johnson Controls, Alltech, OECD-FAO, Borregaard estimates 13
 Performance Chemicals

Concrete admixture formulation preferences

Northern
Europe

Southern
North America Europe

Asia
Middle East

South America
• Admixture market diverse,
lignin competes with captive
Lignin
synthetic products Synthetics
• Regional and local
formulation preferences
• Climate influences
formulation

Sources: Global Cement Magazine, www.statista.com, www.polygongroup.com, Chemistry World,

www.grandviewresearch.com, Deutsche Bauchemie, Association of Building Chemistry Producers, European Federation of 14
Concrete Admixtures Associations, www.futuremarketinsights.com, Borregaard estimates
 Performance Chemicals

Industrial1) and Specialities

kmtds²⁾ Industrial sales volume
kmtds²⁾ Specialities sales volume
160
80
120
60
80 40
40 20
Industrial
0 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2009 2010 2011 2012 2013 2014 2015 2016 2017

Industrial (previously Miscellaneous) Specialities

• Significant global volume growth since 2015 • Volume growth based on capabilities in
across a wide range of applications innovation, application development and
• Demonstrates capabilities in innovation, sales
market development and sales • Lead acid batteries for automotive and
• Robust and growing customer and application industrial applications on a steady growth
base path
• Increasing use of green alternatives in
agrochemical applications

1) Segment renamed to Industrial, formerly reported as Miscellaneous

15
²⁾ Metric tonne dry solid (thousand)
 Driving specialisation and diversification
Industrial and Specialities targeted to represent 70% of total sales volume by end 2021

kmtds1) Volume split 2009-2017 kmtds1) Target

60% 600 ~550 kmtds

50% 500 20%

449 kmtds

40% 400 18%

30%
300 35% 50%

20%
200

10%
100 47%
30%
0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 0
Construction Industrial Specialities Contruction Industrial Specialities

1) Metric tonne dry solid (thousand)

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Performance Chemicals

Applications, functionality and substitutes

Value proposition:
Application Functionality Competing technologies
Green Cost / performance
alternative vs. synthetics

Batteries
Crystal growth control
Few  
Crop protection Dispersant Synthetic surfactants  
Metals and minerals Dispersants and binder Synthetic and organic surfactants  
Crop nutrition
Soil conditioner /
complexing agent
Humic acid, ethylenediaminetetraacetic
acid (EDTA)
 

Concrete admixtures Plasticiser

Superplasticizers: naphthalene, melamine
sulfonates and polycarboxylic acids
() 

Animal feed pellets

Binder Starch residues, bentonite and mechanical
compacting


17
Performance Chemicals

Agriculture
Crop nutrition ( Agro ) Crop protection ( Agchem )

Micro-nutrients Soil conditioners Macro-nutrients Pesticides/fungicides

( Zn, Fe, Cu, Mn) (+ source of C&Ca) (N, P, K, S) (used as dispersing agent)
Formulation/ Enhancers/ Basic Water based Solvent based
complexing agent bio-stimulants nutrients

  ×  ×
Granulation aid/binders for
pesticides, fungicides,
fertilisers, limestone, feed & gypsum

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 Performance Chemicals

Batteries
Automotive:

Start battery Start/stop battery Hybrid Electric vehicle

Lead acid Absorbant Glass Mat AGM as start battery Other technologies
(AGM)
Fuel for motion Fuel for motion Fuel/NiMH/lithium ion Lithium ion for motion
for motion
Other:

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Performance Chemicals

LignoTech Florida
• The venture
• Located at Rayonier Advanced Materials’ (RYAM)
Fernandina Beach softwood sulphite pulp mill
• Borregaard (55%) and RYAM (45%) ownership
• Borregaard’s know-how and technology

• Expansion project in two phases

• Phase one (2018) represents 100,000 mtds capacity,
investment USD 110 mill.
• Phase two will give additional 50,000 mtds, investment
USD 25 mill.

• New plant officially opened 26 June 2018

• Investment completed on time and cost
• Production commenced in June

• Commercialisation
• Diversified product and application portfolio established
• Sales volume developing according to plan

20
Performance Chemicals

Upgrade and specialisation of Sarpsborg operation

• 500 mNOK investment programme
• Partly expansion, partly replacement
• Additional dryer with packaging capacity
• Tanks for storage of liquid materials
• Improved solutions for logistics,
infrastructure and energy
• Completion investment programme Q3-19
• Several benefits
• Further specialisation on a unique raw material
base
• Reduced exposure to cyclical market segments
• Optimisation of production campaigns, internal
and outbound logistics
• Substantial environmental and safety benefits

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 Speciality Cellulose

Speciality Cellulose
Market position Focused applications
• Strong positions in Europe and Asia within high- • Ethers
end niches • Acetate
Production • Nitrocellulose
• Sarpsborg, Norway with capacity of 160,000 mt • Other cellulose specialities
Operating revenues 2017 Long term market growth1)
• NOK 1,698 million • Ethers: 3-4%
• Acetate: -2-0%
• Nitrocellulose: 1-2%

High quality speciality cellulose

with strong niche positions

1) Source: Celco market reports and Borregaard estimates

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 Speciality Cellulose

The speciality cellulose market

Total global cellulose
market

Speciality cellulose market ~1.6 million mt

Speciality
cellulose Casings 4% Sponges 1%
Dissolving ~5.4 million Cellophane 4%
pulp mt
Increasing specialisation

Viscose MCC
(textile) 11% Acetate
35%
NC 8%

Tire cord
4%
Speciality paper
Ethers 28 %
4%

Commodity pulp incl. captive use

(for paper/cardboard/fluff) Recent trends
~180 million mt • Total speciality cellulose market relatively
unchanged
• Viscose (textile) market growth 8.4%
annually last 5 years
• Supply side restructuring
Source: Borregaard estimates, www.celco.ch, 2017, RISI 2016
All figures in cellulose tonnes – wood pulp and cotton linter pulp/refined cotton. Dissolving pulp figures do not include fluff, and (modified) paper pulp 23
 Speciality Cellulose

Speciality cellulose suppliers

• 12 players supplying 1.6 million mt speciality cellulose
• Top 4 players (Rayonier Advanced Materials, G-P Cellulose, Bracell and Borregaard) have 90%¹⁾ market share
• Top 4 players use textile and fluff markets as capacity filler
• Limited volumes from viscose pulp producers into speciality segments due to barriers to entry

Domsjö
Borregaard

Rayonier A.M.
Neucel* Temiscaming
G-P Cellulose Southern Cell
Cosmo Chattanooga Rayonier A.M.
Memphis Tartas
Rayonier A.M. Nippon Paper
Jesup Misc Chinese
G-P Cellulose Rayonier A.M.
Foley cotton linter pulp
Fernandina

Bracell (RGE)

Sappi Saiccor

Kraft Sulphite Cotton linter pulp Owned by viscose fibre producers

1) Celco market report

* Currently not in operation 24
 Speciality Cellulose

Speciality cellulose industry

Speciality cellulose sales volume by producer Dissolving pulp segments by wood species and pulping process

Others
Bracell

Borregaard Rayonier
AM

Georgia
Pacific

Top 4 speciality cellulose producers

by wood species and pulping process
Hardwood/ Softwood/ Hardwood/ Softwood/
kraft kraft sulphite sulphite

Rayonier AM   

Georgia-Pacific 

Bracell 

Borregaard 

Source: Borregaard estimates, www.celco.ch

25
 Speciality Cellulose

Speciality cellulose market

Speciality cellulose Segments Applications Market Annual
size ‘000 growth
demand 2017 (1.6 million mt1)) mt (2017) 2018-2022
Acetate Cigarette filters, 550 -2-0%
plastics, LCD, yarn

Highly specialised
Sponges 1%
Ethers Construction, 435 3-4%
Casings 4% coatings, food,
Cellophane 4%
pharma, personal
care
Speciality paper Automotive filtration, 65 1-2%
MCC 11% bank notes
Acetate
35%
Tire cord High-performance 60 3-4%
NC 8%
tire cords
Tire cord 4% Nitrocellulose Coatings, printing 125 1-2%

Other specialities
(NC) inks, nail varnish,
Ethers energetic grades
Speciality paper 4% 28 %
Microcrystalline Food, pharma 175 3-4%
cellulose (MCC)
Cellophane Food packaging 65 0-1%
Casings Sausage casings 60 3-4%
Sponges Sponge cloths 20 1-2%

Source: Celco market reports, RISI and Borregaard estimates

1) Metric tonne 26
 Speciality Cellulose

Acetate industry status and outlook

Acetate tow capacity by producer • Top 5 acetate tow producers represent >90%
Other Other Chinese of global capacity
NCFC • Cigarette filter sales ~85% of total sales
Rhodia (China)
• In 2012-17, demand for acetate pulp
declined -2.6% annually, expected at -2-0%
Daicel going forward
• Slower cigarette consumption growth in China
Celanese Eastman • Low capacity utilisation in acetate tow (~80%),
rationalisation expected
• Cost focus among acetate tow producers,
Acetate sales by end-use looking for lower cost pulp options
Coatings, plastics & films
• ‘Heat-not-burn’ cigarettes (e.g. PMI IQOS)
Yarn
becoming popular, still small share
LCD
• Ice Bear strategically important
• Ability to offer higher purity products important
to defend existing and compete for
new/additional filter tow business
Cigarette
filters
• Potential for growth in other acetate segments

Source: Borregaard estimates, www.celco.ch, Celanese presentation June 2017

27
 Speciality Cellulose

Ether industry status and outlook

Cellulose ether capacity1) by producer

DowDuPont
Others
• Top 4 ether producers represent ~45% of global
capacity
Ashland
• 1/3 of global capacity is in China
Shin Etsu
• Construction & coatings account for ~60% of total
China
Lotte sales, sales to food, pharma and personal care ~20%
of total sales
Ether sales by end-use • In 2012-17, demand for ether pulp grew 4.3%
annually
Other
• Solid growth in construction and new cellulose ether capacity
under construction
Pharma/
Construction • Strong growth in food & pharma
personal
care • Annual growth estimated at 3-4% towards 2021

• Potential for further growth and specialisation

Food
Coatings

Source: Borregaard estimates, www.celco.ch

1) Cellulose ether capacity excl. technical grade CMC 28
 Speciality Cellulose

Ice Bear status

Dissolving pulp segments by wood species and pulp process
• Strategic initiative enabling further
specialisation and flexibility
• Higher purity products important to
defend existing and compete for
new/additional filter tow business
• Increasing interest from other
speciality segments – “niches within
the niches”
• Capacity expansion on time and cost
• 115 mNOK investment completion
Q4-18
• 60,000 mt total capacity
• Ramp-up based on market demand
• Estimated sales potential
20-30,000 mt in 2019

Source: Borregaard estimates, www.celco.ch

29
 Speciality Cellulose

Cellulose sales distribution 2017

Borregaard is positioned in high-end segments in Europe and Asia,
with strong and long lasting customer relationships

Volume split % Geographical split (sales revenues)

100 RoW
2%
90

80
Asia
70 44 %
Europe
60 54 %

50

40 Customer base and concentration

30 (sales revenues)
100
20
80
86%
10 60
40
0
20 40%
1)
Highly specialised Other 0
Top 3 Top 10

Source: Borregaard
1) Acetate, ether and tire cord grades 30
Speciality Cellulose

2nd generation bioethanol

• Bioethanol contributes to the overall value creation in

the biorefinery
• 20 million litres capacity, delivered as 96% or 100%
bioethanol
• Life cycle analysis shows favourable environmental
footprint compared with petrochemical substitutes
• Expansion project - new dehydration plant
• 63 mNOK investment1), started up Q1-18
• 30% investment grant from Enova2)
• Full flexibility between 96% and 100% bioethanol
• Political incentives drive specialisation and value
• Significant growth in biofuel, taking major part of volume
in 2018

1) Includes facility to capture and store biogas

2) Enova is a Norwegian government agency which promotes environmentally friendly restructuring of energy 31
end-use, renewable energy production and new energy and climate technology
 Other Businesses

Other Businesses
Ingredients Fine Chemicals
Market position Market position
• Leading supplier of vanillin products • Leading supplier of C3 aminodiols
• The only supplier of wood based vanillin for X-ray contrast media
Production Production
• Sarpsborg, Norway • Sarpsborg, Norway
Sales revenues 2017 Sales revenues 2017
• NOK 358 million • NOK 242 million
Products Products
• Vanillin • C3 aminodiols
• Ethyl vanillin • Intermediates for pharmaceutical
• Vanillin blends products
Applications Applications
• Chocolate • X-ray contrast media
• Bakery products • Medicines
• Confectionary Market growth1)
• Dairy products • 4-6%
• Perfume
Market growth1)
• 2-3%

1) Borregaard estimates
32
 Other Businesses

Positive trend for biobased vanillin

> 300 USD/kg Natural vanilla

25-100 USD/kg Biobased vanillin

< 20 USD/kg Oil-based vanillin

Natural raw material

Key selling Labelled as “natural”
Price Sustainability
points Unique taste profile
Taste profile

33
Other Businesses

Cellulose Fibrils

• Two product categories

• Exilva – additive for industrial
applications
• Commercial size plant in
Norway
• SenseFi – additive for food
applications
• Demonstration plant in the US

34
Other Businesses

Cellulose Fibrils
• Microfibrillar cellulose (MFC) is cellulose
fibers defibrillated into millions of tiny
fibrils (100,000 times thinner than hair)
• Exilva is Borregaard’s brand name for
microfibrillar cellulose used in industrial
applications
• Exilva is a sustainable biobased material
with multifunctional properties
• Improves flow, stability, flexibility and strength
in industrial formulations and materials
• Enables customers to develop new and
improved products

35
Other Businesses

Nanocellulose landscape
• Three main product categories
• NCC/CNC - nano cellulose crystals
NCC/CNC –
• NFC/MFC - nano/microfibrillated cellulose strength focus
• CNF - ionic cellulose nano fibrils
• Significant variations within each product group
• Few standards exist
• Typically more complementary than competing
in use, some overlaps
NFC/MFC –
• Crystals and ionic fibrils classified as nano by rheology focus
EU and USA (EPA), while NFC/MFC are not as
they form micro clusters
• One commercial size plant exists in each
category
• NCC/CNC - Celluforce, Canada
• NFC/MFC - Exilva, Norway CNF –
composites focus
• Several full-scale captive plants in pulp and paper
• CNF - Nippon Paper, Japan
• Many pilot plants with 5-30 mt capacity

36
 Other Businesses

Nanocellulose market still embryonic

• Market analysts estimate that the
nanocellulose market could grow
to
700-1,000 mUSD by 20241)
• NFC/MFC estimated to be 50%
• Awareness a possible limitation
• NFC/MFC market today
• Largest volumes in paper and
packaging (captive)

• The rheology modifiers market is

large (5 bnUSD), but complex and
fragmented
• Highest interest from Exilva
prospects

1) Markets Insider, Global Market Insight, Transparency Market Research

37
Other Businesses

Exilva pipeline status

• Active prospects
Active prospects (>1000)
• >20 applications
• Coatings, adhesives, personal care
Commercial and agchem constitute >60%
Plant/pilot
• Net increase ~50 prospects per
month
Lab • ~50% of prospects that provide
feedback move forward
• Time to market (from sampled)
• 3 years on average
• + 1-2 if regulatory or capex required
• Challenges
Sampled
• Secrecy limits feedback and support
• Handling, dosing, scheduling
• Crowded IP landscape

38
 Other Businesses

Horizon 2020 support1)

• 25 mEUR over a 3-year period

• Covers 60% of total costs, including depreciation
• Not covering costs outside EEA
• Support period ends 30 April 2019
• Application to extend project period with 12 months
• Decision pending

1) Exilva has received funding from the Bio-Based Industries Joint Undertaking (BBI) under the European
Union’s Horizon 2020 research and innovation programme under grant agreement No 709746. 39
Other Businesses

SenseFi

• Advanced texture system for food

• Enables formulation of food products with
reduced fat content without compromising
mouthfeel, texture or taste
• Status
• Pipeline >200 active prospects
• Still in demonstration phase
• Costs adjusted to activity level
• Decision on commercial scale-up pending

40
 Innovation Management

Research & development

~15%1) of Borregaard’s revenues
• Innovation Management Teams come from new products2)

• ~100 employees in R&D – of which 69 at the

research centre in Sarpsborg – 34 has a PhD
• R&D and innovation spending ~4.3% of revenues3)
• IP strategies for each BU and major innovation projects

Cellulose Fibrils: Exilva

Microfibrillar cellulose and «BALI»: Utilisation of Continuous specialisation and
SenseFi ® Advanced Texture various biomasses for lignin improved products
Systems products

1) Average last 5 years. 13% in 2017

2) Launched the last 5 years 41
3) Includes R&D centres, operation of BALI/Exilva pilots and market/application innovations
Innovation Management

Business driven innovation model

Ideas from sales, technical application, R&D, production, external partners

Idea database

IMT
• Chaired by head of
business unit Innovation Management
• Cross functional team of Teams (IMT)
line managers
• Gatekeepers at important
milestones Co-work with:
• Universities
Inter disciplinary • Research institutes
development work • Consultants when required

Co-work with:
• Customers when possible

Scale-up and
commercialisation

42
Sustainability
Key element of business mission

Borregaard shall provide

sustainable solutions based
on renewable raw materials
and unique competence
Sustainability

One of three core values

• Sustainability
• Green chemicals that substitute petrochemicals
• Sustainability demonstrated through life-cycle analysis
• Focus on EHS across the organisation
• Profitability is key to sustainability
• Long-term perspective
• Consistent strategy over time
• Long-term perspective on innovation, market development and investments
• Competence development through training programmes, organisational
development and use of technology
• Integrity
• High credibility through transparency, honesty and predictability
• Act responsibly in relation to stakeholders and exercise corporate
responsibility
• Demonstrate respect for individuals and different cultures while maintaining
integrity and adhering to the company's code of conduct

44
 Sustainability

Integral part of market offering

RAW MATERIALS PROCESSES PRODUCTS

Natural, renewable, Efficient and sustainable Sustainable

sustainable raw materials production and value chain biochemicals

Sustainable and certified wood Reduced emissions improve LCA2) Products add sustainable value to customers
• Documentation • Target based CO2-reductions • Climate: LCA2) shows favourable GHG footprint
• PEFC1) and FSC1) standards • Energy conservations • Biobased: Natural raw materials preferred
• Lignin raw materials from certified • New/Green energy sources • EHS3): Non-toxic, harmless products
forests • Reduced emissions to water and air
• “Greener” logistical solutions

45

1) PEFC: Programme for the Endorsement of Forest Certification, FSC: Forest Stewardship Council
2) Life Cycle Analysis 45
3) Environment, Health and Safety
 Sustainability
Favourable climate footprint Positive EHS impact in crop protection
Fuel – production and use
GHG emissions1)

7x

Borregaard 2G Gasoline
bioethanol
• Lignin products in crop protection have a
• 2nd generation bioethanol vs favourable environmental impact
petroleum-based fuel
• Water-based solutions as an alternative
• Increased demand in different countries to solvent-based formulations
due to incentives
• Good safety and health performance as
• Most of Borregaard’s products have favourable binders (less dust) in crop protection
GHG footprint compared with alternatives granules

1) GHG emissions “cradle to grave”, third party analysis based on ISO 14044/48
46
Sustainability

Alignment with UN’s Sustainable Development Goals

Contribution to market growth

Variety of green solutions

THE SIX PRIORITISED SUSTAINABLE DEVELOPMENT GOALS FOR BORREGAARD

Alignment with long-term

global goals

47
 Financial objectives
Financial objectives and dividend policy

Financial objectives
• ROCE >15% pre-tax over a business cycle
• IRR >15% pre-tax for expansion capex
• Average net working capital at 20% of operating revenues
• Replacement capex at depreciation level
• Maintain key financial ratios corresponding to an
investment grade rated company
• Leverage ratio1) targeted between 1.0 and 2.0 over time

Borregaard’s dividend policy

• To pay regular and progressive dividends reflecting
Borregaard’s expected long term earnings, free cash flows
and expansion capex
• Annual dividend is targeted between 30% and 50% of net
profit for the preceding fiscal year

1) Net interest-bearing debt divided by last twelve months’ EBITDA adj.

48
Financials

Value creation since IPO

mill NOK
10 000

8 000

6 000 CAGR
Share price, including
29,5%
4 000 reinvestment of dividend
Enterprise value =
20,8%
market cap + net debt
2 000

0
2012 2013 2014 2015 2016 2017 2018/8
(IPO)
Net debt Market capitalisation Accumulated dividend

49
 Financials

Key figures 2014 – 2018 (LTM)1)

Operating revenues EBITA adj. & EBITA adj. % ROCE and EPS
mNOK mNOK % % NOK
ROCE %
5 000 16,6 25 EPS 10
16,2
800 16 21,7
4618 4703
4492
4 000 747 749 20 19,1 8
4164 12,7
3939 12,3
11,9
16,5
600 12 15,6
595
3 000 15 13,6 6

486 497 5,66

5,55
400 8
4,86
2 000 10 4
3,86
3,34
200 4
1 000 5 2

0 0
0 0 0
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
LTM
LTM LTM

1) Last twelve months as per September 2018

50
 Financials

Key cost items 2013-2017

% of total cost
100%
10% 10% 10%  80%-90% sourced from Norway, the rest mainly from Sweden
11%

Wood
13%
 Annual price and volume contracts, mid-year adjustments occur
14% 12% 11% 12%  Includes inbound logistics, ~30% of wood cost
80% 15%
 Energy consumption: Heat energy 2/3, electricity 1/3
 Heat energy: Base load mainly covered by renewable energy

Energy
27% 28% 25%
60% 24% 25% sources, peak-load mainly covered by LNG and spot electricity
 Electricity: 12-year contract starting 2013
10% 10% 10% 11%  Chemicals1) and other raw materials like lignin raw material

Other CoM
9%
40%  Internal production of caustic soda
 Contract manufacturing of petrochemical-based vanillin
24% 24% 25% 26%
23%  Change in inventories
20%

Distribution
 Most products sold delivered customer

costs
16% 16% 17% 16% 16%  Logistical optimisation important, especially for Performance
0% Chemicals
2013 2014 2015 2016 2017
Other expenses Payroll expenses Distribution costs expenses
 Continuous productivity improvement, including de-
Payroll

Other CoM Energy Wood

manning and cost reduction activities

• Total costs in 2017 close to 3.6 billion NOK

 Repair and maintenance, external services, rental/leasing and
expenses

• 2.9% CAGR from 2013 to 2017

Other

other operating expenses

• Main cost components’ share of total costs
relatively stable over time

1) Main chemicals are caustic soda, salt, sulphur, epichlorohydrine and guethol
51
 Financials

Sensitivity on EBITA adj.1)

Sensitivity of 1% change
(based on 2018 LTM June) • Global presence, diversified product portfolio
Cellulose price and GDP-driven demand reduce market risk
Lignin price • Oil price affects demand and competition in
certain markets, but main effect historically
FX ex hedging
has been on NOK FX rate
FX incl hedging
• Significant FX exposure, softened by FX
Wood cost hedging2) in the medium term
Energy cost
• No major single component in other cost of
Other cost of
materials
materials
Distribution costs • Distribution costs: Most products sold
Payroll expenses
“delivered customer”

Other expenses • Other expenses are repair and maintenance,

external services, rental/leasing etc.
MNOK 0 5 10 15 20 25

1) Non-GAAP measure – see appendix

2) Hedging based on expected net cash flow (EBITDA)
- 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 predefined levels
52
 Financials

FX impact and policy

mNOK Hedging gain/losses on EBITA4)
Currency hedging strategy
0
Purpose is to delay effects of currency fluctuations and secure
competitiveness -20
-51
• Hedging based on expected net cash flow (EBITDA) 1) -100 -72
– Base hedge - 75%/50% on a rolling basis for 6/9 months -115
for major currencies
– Extended hedge - 75%/50% of the next 24/36 months if -200
USD and EUR are above defined levels
* EUR; effective rate above 8.50 -241
* USD; gradually at effective rates between 7.50 and 8.50 -300
2014 2015 2016 2017 2018 LTM
– Contracts 2) - 100% hedged
• Balance sheet exposure hedged 100%
Borregaard currency basket3)4)
• Net investments in subsidiaries hedged up to 90% of book
value in major currencies 110,0
101,2 100,0
FX exposure 98,9
100,0 97,1
• Borregaard’s revenues are primarily in USD or EUR,
while costs are primarily in NOK
90,0
• Net FX exposure in 2017
80,9
– USD: 69% (approximately 206 mUSD)
80,0
– EUR: 31% (approximately 84 mEUR)
– Other: 0% (GBP, BRL, JPY, SEK, ZAR)
70,0
2014 2015 2016 2017 2018 LTM
1) Net cash flow hedging mainly in the Norwegian company
2) Strict definitions for contracts applied for 100% hedging
(mutually binding agreement in which price, currency, volume and time are defined)
3) Currency basket based on Borregaard’s net exposure in 2017 (=100) 53
4) Last twelve months as per September 2018
 Financials

Key figures 2014 – 2018 (LTM)1)

mNOK % mNOK % mNOK
Performance Chemicals Speciality Cellulose Other Businesses
EBITA adj1. & EBITA % adj1 . EBITA adj1. & EBITA % adj1 . EBITA adj1. & EBITA adj.1
600 23,9 25 20,6 0
22,3 400 20
21,3
20,6
500 517 350 16,3
20 15,7 -20
350 -20
447 449 300 15 -27
400 15,8

388 15 250 274

11,2
348 250
300 -40
200 10
10 -50
7,2 -54
200 150 163

100 5 -60 -65

5 104
100
50

0 0 0 0 -80
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
LTM LTM LTM

1) Last twelve months as per September 2018

54
 Financials

Cash flow, NWC and investments 2014 – 2018 (LTM)2)

Cash flow from Average NWC Investments

mNOK mNOK mNOK
1 400 operations1) %
1000
1 000 19,9 %
18,8 % 19,0 %
1 200 18,4 % 20%
17,5 %
800
800 878 875 870
1 000
820
752 15%
624
800 600 587
600
264
600 1204 10%
400 400
960
896 184
400 759
696 85
5%
200 200 358
200 344 301
228 246
0 0 0% 0
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
LTM
LTM LTM

Cash flow from operations Replacement Expansion

Average NWC
EBITDA adj. % of OpRev ex hedging Depreciation

1) Cash flow from operating activities (IFRS) + tax paid +/- net financial items +/- dividend (share of profit) from JV
2) Last twelve months as per September 2018 55
 Financials

Investment forecast 2018 – 2020

Replacement investments mNOK Replacement investments - forecast1)
• Targeted at depreciation level 500
• Above target in 2017-2018 due to wood 360-400 300-375
400 344 310-350
seasoning silos (covered by insurance) and
part of lignin operation upgrade in Norway 300
• Expected at or below depreciation from 200
2019
100
Expansion investments
0
• Peak in 2017/2018 2017 2018 2019 2020
• LignoTech Florida plant (phase 1): 110 Actual Low Uncertainty Depreciation
mUSD (100%)
• Ice Bear II project: 115 mNOK Expansion investments - forecast1)
mNOK
• Lignin operation upgrade Norway: 500 800
mNOK, 70% expansion, completion of 624 510-590
investment programme expected Q3-19 600
• Other projects (bioethanol plant upgrade,
fine chemicals capacity, R&D activities) 400
150-250 100-250
• Expected to be at a lower level from 2019
200

New projects may lead to additional 0

investments 2017 2018 2019 2020
Actual Low Uncertainty

1) Uncertainty is related to final investment decisions, timing of investment payments, execution time, general risk and unexpected events
56
 Financials

Capital structure

• Target for capital structure mNOK

Leverage ratio and loan capacity
• Maintain key financial ratios corresponding to 3 000
an investment grade rated company
• Leverage ratio1) targeted between 1.0 and 2.0 2 500
over time
• Solid capital structure as per 30.09.18 2 000
2.0 * EBITDA

• Leverage ratio 1.20

• Equity ratio1) 55.8%
1 500
• Borregaard has financial capacity for expansion 1.0 * EBITDA
• Revolving credit facilities (RCF), 1 000
1,500 mNOK, maturity 2021
• 60mUSD term loan for LignoTech Florida (LTF),
tenor 8.5 years from completion of project 500
phase 1
• Bond issues,
200 mNOK, maturity February 2019 0
400 mNOK, maturity June 2023 2017 Sep'18 2019 2020 2021 2022
• Nordic Investment Bank (NIB) loan, NIB Bonds LTF RCF NIBD
40 mEUR, maturity 2024

1) Non-GAAP measures – see appendix

57
Management

Highly experienced and proven management team

CEO
Per A. Sørlie
• CEO since 1999
• Member of management team since 1990
• 28 years with Borregaard

Per Bjarne Lyngstad Gisle Løhre Johansen

• CFO • SVP Business Development/R&D

R&D
CFO

• 20 years in current position • 11 years in current position

• 30 years with Borregaard • 27 years with Borregaard

Morten Harlem Tuva Barnholt

Performance

Sourcing &
Chemicals

Logistics
• EVP • SVP Strategic Sourcing and Logistics
• 15 years in current position • 12 years in current position
• 20 years with Borregaard • 20 years with Borregaard

Tom Erik Foss-Jacobsen Dag Arthur Aasbø

Public Affairs
Cellulose
Speciality

• EVP • SVP HR & Comm./Public Affairs

HR &

• 11 years in current position • 10 years in current position

• 19 years with Borregaard • 25 years with Borregaard

Sveinung Heggen Ole Gunnar Jakobsen

Director

• General Counsel • Plant Director - Sarpsborg Site

Plant
GC

• 5 years in current position • 10 years in current position

• 5 years with Borregaard • 23 years with Borregaard

58