Professional Documents
Culture Documents
April 2018
Business model & strategy
2
Business model & strategy
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
3
Business model & strategy
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% 4
Business model & strategy
5
Business model & strategy
6
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
• Growth within Performance Chemicals
• Florida project on schedule for start-up mid 2018
• On time and cost, market introduction well prepared
7
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
(sulfate)
sulfate) pulping process
25 %
• Lignin is normally incinerated to recover
energy and chemicals
• Raw material with limited potential for
lignin products
• Not water soluble
8
Performance Chemicals
Performance Chemicals
Market position Key attractions
• Largest supplier with a global footprint • A sustainable and versatile product portfolio
• Unique technical and application expertise • High barriers to entry
Production • Large, diverse and stable customer base
• Norway, UK, Germany, Spain, Czech Republic, USA,
South Africa
Operating revenues 2017
• NOK 2,176 million
Applications
• Construction
• Gypsum board
• Ceramics
• Animal feed
• Agro chemicals
• Soil conditioner
• Batteries
9
Performance Chemicals
Volume (‘000 mtds) 2009 2010 2011 2012 2013 2014 2015 2016 2017
Specialities 55 61 64 68 77 78 76 79 82
Construction 234 238 256 280 257 238 213 214 210
Miscellaneous 131 154 153 153 128 130 121 150 157
Total volume 420 453 473 501 462 446 410 443 449
10
Performance Chemicals
Application Region
Properties Applications
Dispersing Construction
agent/ Agrochemicals
Rheology Dyestuffs
control Metals and minerals
Carbon black and pigments
Micronutrients
Crystal growth Battery expander Customer base and concentration (sales revenues)
control Retardation of cement hydration
Oil-well cementing
Total ~2,800 customers
30% 28,1 %
Functional Phenol replacement
additive UV-protection
Antioxidant 20% 14,1 %
SoftAcid
Soil-conditioner 10%
Complexing agent
0%
Top 3 Top 10
11
Performance Chemicals
Metals and minerals Dispersants and binder Synthetic and organic surfactants
12
Performance Chemicals
Agriculture
Crop nutrition ( Agro ) Crop protection ( Agchem )
× ×
Granulation aid/binders for
pesticides, fungicides,
fertilisers, limestone, feed & gypsum
13
Performance Chemicals
Batteries
Automotive:
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:
14
Performance Chemicals
EMEA 0 - 3% 2 - 4% 2 - 4% 2 - 4% 1 - 4%
Americas 2 - 4% 2 - 4% 2 - 4% 0 - 2% 1 - 4%
Asia/Pacific 0 - 3% 3 - 6% 3 - 7% 3 - 5% 1 - 4%
Sources: IMF, BNP Paribas, LafargeHolcim, Heidelberg Cement, Portland Cement Association, Phillips McDougall,
Agropages, Dow, Syngenta, Bayer, Johnson Controls, Alltech, OECD-FAO, Borregaard analysis 15
Performance Chemicals
16
Performance Chemicals
47
20
1) Company estimates
2) Metric tonne dry solid 17
Performance Chemicals
19
Performance Chemicals
Looking back
Shrinking lignin market due to reduced raw
material supply during last 17 years
• Strategic focus since IPO in 2012
1,8
• A market place short of supply
1,6
• Optimise value of available volumes
1,4
• Drive for short term sourcing
1,2 opportunities
million mtds1)
Reduced supply
1,0 • Establish long-term sustainable supply
0,8 • Development of alternative technology
0,6
0,4
0,2
0,0
2000 2001 2002 // 2014 2015 2016 2017
*⁾ LignoTech Ibérica has given notice of termination of the cooperation agreement with the Sniace Group.
This agreement governs supply of lignin raw material. 21
Speciality Cellulose
Speciality Cellulose
Market position High quality speciality cellulose
• Strong positions in Europe and Asia within high-end with strong niche positions
niches
Production
• Sarpsborg, Norway with capacity of 160,000 mt
Operating revenues 2017
• NOK 1,698 million
Focused applications
Inks and coatings
• Ethers
• Acetate
Construction materials
• Nitrocellulose
• Other cellulose specialities
Long term market growth1)
• Ethers: 3-4%
• Acetate: -2-0% Casings
Speciality Cellulose
Total global cellulose market
Speciality cellulose market ~1.6 million mt
Speciality
Other
Cellulose cellulose
Dissolving specialities Acetate
pulp Viscose ~5.4
Increasing specialisation
(Textile) million mt
Ethers
Barriers to entry
• Capex
• Technology
• Environment
• Competence
• Customer relationships
Commodity pulp incl. captive use
• Regulatory
(for paper/cardboard/fluff)
• Raw material
~180 million mt
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%
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
26
Speciality Cellulose
80
Asia
70 44 %
Europe
60 54 %
50
Customer base and concentration
40 (sales revenues)
30
100 86%
20 80
10 60 40%
40
0 20
Highly specialised 1) Other 0
Top 3 Top 10
Source: Borregaard
1) Acetate, ether and tire cord grades 27
Speciality Cellulose
Ice Bear
28
Speciality Cellulose
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
30
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
31
Other Businesses – Cellulose Fibrils
32
Other Businesses - Cellulose Fibrils
• First commercial size plant for wood- • EU support for Exilva commercialisation of
based MFC Exilva
• EUR 25 million granted on 22 April 2016
• New production facility at the • Will cover 60% of Borregaard’s costs in a three-year
period from 1 May 2016
Sarpsborg site • Provides opportunity to increase the efforts in market
• Capex 225 mNOK introduction phase
• Initial capacity 1000 tonnes • Support reduced if the project is profitable in the period
• Funding is granted under the Horizon 2020 BBI
• Production started up in Q3-16 Programme¹⁾
• Prepared for future capacity expansion • Borregaard is the coordinator in a six-party consortium
1) This project 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. 33
Other Businesses - Cellulose Fibrils
Status SenseFi
Mayonnaise & dressings Ice cream & frozen yoghurt Emulsified meat (sausages)
34
Innovation Management
Idea database
IMT
• Chaired by head of
business unit Innovation Management
• Cross functional team of Teams (IMT)
line managers
• Gatekeepers at important
milestones Co-
Co-work with:
• Universities
Inter disciplinary • Research institutes
development work • Consultants when required
Co-
Co-work with:
• Customers when possible
Scale-up and
commercialisation
36
Sarpsborg site
concrete admixtures
GHG
7.6x
Borregaard lignin Synthetic alternative
• Lignin in water based agchem solutions
vs solvent base
• Cellulosic ethers vs synthetic
Vanillin aroma
emissions1)
thickeners
GHG
29x
• Exilva MFC vs advanced acrylates as
Borregaard vanillin Synthetic alternative
rheology modifiers
• 2nd generation bioethanol vs
Fuel – production and use petroleum-based diesel
emissions1)
GHG
1) GHG emissions “cradle to gate” for concrete additive and vanillin. Use phase included for bioethanol/diesel. Third
party analysis based on ISO 14044/48 40
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 an investment grade rating
• Leverage ratio1) targeted between 1.0 and 2.0 over time
• Revenues CAGR 5.6% since 2014, helped by weakening NOK Profitability target:
• EBITA adj. and EPS at a higher level from 2016
• Sustainable profitability that supports
• Increased sales of specialities, but challenging markets in
Construction for Performance Chemicals the strategy and dividend policy
• Increased prices and improved product mix in Speciality Cellulose • ROCE > 15% pre-tax over a business
• Market introduction and production start-up costs for Exilva cycle
affecting Other Businesses
• Favourable FX development
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% 26% sources, peak-load mainly covered by LNG and spot electricity
• Electricity: 12-year contract starting 2013
9% 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
expenses
Other expenses Payroll expenses Distribution costs
• Continuous productivity improvement, including de-
Other CoM Energy Wood
Payroll manning and cost reduction activities
1) Main chemicals are caustic soda, salt, sulphur, epichlorohydrine and guethol
43
Financials
MNOK 0 5 10 15 20 25 30
500 20
Chemicals
517
400 447 449 15
• Specialisation and improved product mix
432
300 388
10 • Lower demand and increased competition in the
200
5 construction and oil sectors from 2015
100
0 0 • Favourable FX impact from late 2014
2014 2015 2016 2017 2018 LTM
mNOK %
400 20,6 24
18,9 • Top-line CAGR 5% since 2014
300 15,7 350 18
Speciality
Cellulose
11,2
325 • Increased prices and improved product mix from 2016
200 7,2 250 12 • Favourable cost development (wood, energy) 2014-2016,
100 163 6 increased costs for wood and caustic soda from late 2017
104
0 0 • Positive FX impact from late 2014
2014 2015 2016 2017 2018 LTM
-40 -54 -50 • Fine Chemicals: Volume growth for key products
-65
-60 • Increasing ramp-up costs for Cellulose Fibrils, impact
-80 softened by EU grant
2014 2015 2016 2017 2018 LTM • Favourable FX impact from late 2014
1) Last twelve months as per March 2018
46
Financials
1) Cash flow from operating activities (IFRS) + tax paid +/- net financial items +/- dividend (share of profit) from JV
47
Investment forecast 2018-2019
• Replacement investments mNOK Replacement investments - forecast1)
• Targeted at depreciation level 360-400
• Above in 2017-2019 due to wood 400 344 310-350
seasoning silos (2017, covered by
insurance) and part of lignin operation 300
upgrade in Norway 200
• Expansion investments 100
• New plant LignoTech Florida phase 1:
110 mUSD (100%) 0
(late 2016 to mid 2018) 2017 2018 2019
Actual Low Uncertainty Depreciation
• Ice Bear project: 115 mNOK (2017 to
2018) Expansion investments - forecast1)
mNOK
• Lignin operation upgrade in Norway:
500 mNOK, approx. 70% expansion 800
(mid 2017 to end 2019) 624 510-590
• Other projects (bioethanol plant 600
upgrade, fine chemicals capacity, R&D 400
activities) 150-250
200
• New projects may lead to additional 0
investments 2017 2018 2019
Actual Low Uncertainty
1) Uncertainty is related to final investment decisions, timing of investment payments, execution time and
risk and unexpected events e.g. 48
Financials
1) Cash flow from operating activities -/+ net paid (ordinary) to/from shareholders +/- other capital transactions (IFRS cash flow statement) 49
Financials
Capital structure
• Solid capital structure as per 31.03.18 mNOK Leverage ratio and loan capacity
• Leverage ratio1) 0.91 2 750
• Equity ratio 59.5% 2 500
expansion 1 000
• Revolving credit facilities (RFC), 750
1,500 mNOK, maturity 2021
500
• 60mUSD term loan for LT Florida,
tenor 8.5 years from completion of 250
project phase 1 0
• Bond issue, 2017 March'18 2019 2020 2021 2022
200 mNOK, maturity February 2019
• Nordic Investment Bank (NIB) loan, NIB Bond LTF RFC NIBD
40 mEUR, maturity 2024
1) Net interest-bearing debt (NIBD) divided by last twelve months EBITDA adj.
50
Management
R&D
• CFO
CFO
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
Public Affairs
Cellulose
Speciality
HR &
• 11 years in current position • 10 years in current position
• 19 years with Borregaard • 25 years with Borregaard
51
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
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• 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,
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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.
• 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.
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