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 2017
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

2
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 2016

28%
38%

SPECIALITY
CELLULOSE LIGNIN VAN IL L IN BIOETHANOL CELLULOSE FIBRILS 19%
Construction Concrete additives Food Biofuel Adhesives
15%
materials Animal feed Perfumes Car care products Coatings
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

Global niche player with a market driven organisation

Performance Chemicals Speciality Cellulose Other Businesses

(48%¹) (36%¹) (16%¹)
Technology leader and largest Leading global speciality cellulose Only producer of wood-based vanillin;
supplier of 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 (2016)

Asia
26 % Market driven organisation
Europe • ~100 FTEs strong sales/technical service organisation
46 %
2 • Dedicated sales force for each business unit
Americas
26 % • ~90% of sales handled through own organisation

RoW
2%
1) Segment revenue as a % of total revenue 2016
2) USA/Canada: 20%, rest of Americas 6% 4
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

5
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 BALI 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

6
Update on strategic priorities
• Growth within Performance Chemicals
• Florida project on schedule
• Recruitment both for sales and operations well underway
• Develop the unique biorefinery assets in Sarpsborg
• Lignin operation upgrade/specialisation in early phase
• Ice Bear capacity expansion on track
• High-end bioethanol expansion near completion
• Establish Cellulose Fibrils as a new business area
• Exilva market introduction on-going
• Strong interest, but long lead-times and limited sales so far
• Decision on SenseFi expansion most likely delayed until
2018

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 2016
• NOK 2,161 million
Applications
• Construction
• Gypsum board
• Ceramics
• Animal feed
• Agro chemicals
• Soil conditioner
• Batteries

9
Performance Chemicals

Business portfolio development

• Specialities
• Batteries, agro, agchem, oil, dyestuff, etc.
• Construction
• Concrete admixtures, ceramics, gypsum board, etc.
• Miscellaneous
• Mainly binding applications such as dust suppression, briquetting, feed, etc.

2009 2010 2011 2012 2013 2014 2015 2016

Specialities 13% 14% 14% 14% 17% 18% 19% 18%

Construction 56% 52% 54% 56% 56% 53% 52% 48%
Miscellaneous 31% 34% 32% 30% 27% 29% 29% 34%
Volume (‘000 mtds) 420 453 473 501 462 446 410 443

10
 Performance Chemicals

600 products to around 2,800 customers (2016)

Lignosulfonate properties Performance Chemicals end markets (sales revenues)

Application Region
Properties Applications

Binding agent Feed binder

Granulation aid
Ceramic tiles
Dust binder

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
Phenol replacement 40% 32,0 %
Functional
additive UV-protection 30%
Antioxidant
SoftAcid 20% 16,2 %
Soil-conditioner
Complexing agent 10%
0%
Top 3 Top 10

11
Performance Chemicals

Applications, functionality and substitutes

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

Crystal growth control

Batteries Few

Crop protection Dispersant Synthetic surfactants

Metals and minerals Dispersants and binder Synthetic and organic surfactants

Soil conditioner / Humic acid, ethylenediaminetetraacetic acid

Crop nutrition
complexing agent (EDTA)

Concrete admixtures Plasticiser

Superplasticizers: naphthalene, melamine
sulfonates and polycarboxylic acids ( )
Binder Starch residues, bentonite and mechanical
Animal feed pellets
compacting

12
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

13
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:

14
 Performance Chemicals

End market growth forecast

Construction Agro /agchem Feed Automotive Industrial

EMEA 0 - 3% 0 - 3% 2 - 4% 2 - 4% 1 - 4%

Americas 2 - 5% 0 - 3% 2 - 4% 0 - 2% 1 - 4%

Asia/Pacific 0 - 3% 2 - 5% 3 - 7% 3 - 5% 1 - 4%

Indicative annual rates to 2019

2.5% annual GDP growth assumed

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

Upgrade and increased specialisation of lignin operation

• Comprehensive investment programme
• New drying capacity
• Tanks for storage of liquid materials
• Improved solutions for logistics, infrastructure and
energy
• Several benefits
• Further specialisation on the unique raw material base
• Reduced exposure to cyclical market segments
• Optimisation of production campaigns and logistics
• Reduced energy costs
• Substantial environmental and safety benefits
• Main project data
• 500 mNOK investment
• Partly expansion, partly maintenance investment
• Total programme meets return requirement for
expansion investments
• Completion end 2019

16
 Performance Chemicals

Total world market1) and Borregaard’s positions

Borregaard market World market by 10
share by volume application,
41 36
2016 (%) volume 2016 (%)
59 54
In total ~ 1.1 million mtds2)

Borregaard Others Specialities Construction Miscellaneous

Borregaard sales Borregaard sales

volume by volume by 18
region 2016 (%) 44 37 application 2016 (%) 34

48
19

Americas APAC EMEA Specialities Construction Miscellaneous

1) Company estimates
2) Metric tonne dry solid 17
Performance Chemicals

Lignin – the supply side

Borregaard manufacturing facilities Others

18
Performance Chemicals – LignoTech Florida

New lignin operation in North America

• Borregaard and Rayonier Advanced Materials
(RYAM) are building a new lignin plant
• Located at RYAM’s Fernandina Beach sulphite
pulp mill in Florida
• Borregaard (55%) and RYAM (45%) ownership
• Borregaard’s know-how and technology

• The investment will be made in two phases

• Phase one: 110 mUSD, 100,000 mtds capacity
• Ground work and foundation completed in June
2017, start-up mid-2018
• Phase two: 25 mUSD, 50,000 mtds lignin
capacity addition

• External financing for LignoTech Florida

• A USD 60 million loan is in place
• A working capital facility will be established

19
 Performance Chemicals

Looking back
Shrinking lignin market due to reduced raw
material supply during last 16 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

1) Metric tonne dry solid

20
Performance Chemicals

Well positioned to facilitate and capture market growth

‘000 mtds Growth potential
1 800 • Short term a challenging market
1 600 • Generally, if lignin is available it gets sold
1 400 • To be regarded as a sustainable alternative, lignin
must demonstrate stable quality, cost efficiency,
1 200 predictability and long-term supply
1 000 • The construction sector - undersupplied for years –
has a preference for lignin and represents a growth
800 potential
600 • Significant growth opportunities in binding
applications if lignin is available (partly non-use at
400 present)
200 • Green niches within agchem are growing
0 • Borregaard has geographical and application
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 flexibility to phase in increased volumes
Existing supply LignoTech Ibérica*⁾
Borregaard expansion GDP growth
Conversion opportunities

There are no other known sulphite lignin capacity movements at present

*⁾ 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 2016
• NOK 1,590 million
Focused applications
Inks and coatings
• Ethers
• Acetate
Construction materials
• Nitrocellulose
• Other cellulose specialties
Long term market growth1)
• Ethers: 3-4%
• Acetate: 0-1% Casings

• Nitrocellulose: 1% Filters

1) Source: Celco market reports and company estimates

22
 Speciality Cellulose

Speciality Cellulose
Total global cellulose market
Speciality cellulose market ~1.6 million mt

Speciality
Other
Cellulose cellulose
Dissolving specialities Acetate
pulp Viscose ~5.3
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

Source: Company estimates, Celco market reports, RISI World Market Capacity Report – Excerpt 2013
All figures in cellulose tonnes – wood pulp and cotton linter pulp/refined cotton. Speciality cellulose 23
figures do not include fluff and paper grade pulp
 Speciality Cellulose

Speciality cellulose market

Speciality cellulose Segments Applications Market Annual
size ‘000 growth
demand 2016 (1.6 million mt1)) mt (2016) 2016-
2016-2022
Acetate Cigarette filters, 545 0-1%
plastics, LCD, yarn

Highly specialised
Casings Sponges
Cellophane 4% 1% Ethers Construction, 400 3-4%
6% coatings, food,
pharma, personal
care
MCC
11% Speciality paper Automotive filtration, 90 -2%
Acetate bank notes
NC 35%
9% Tire cord High-performance 50 3-4%
tire cords
Tire cord
Nitrocellulose Coatings, printing 140 1%
3%

Other specialities
(NC) inks, nail varnish,
Speciality energetic grades
paper
Ethers Microcrystalline Food, pharma 170 4-5%
6%
25% cellulose (MCC)
Cellophane Food packaging 85 1-2%
Casings Sausage casings 55 3-4%
Sponges Sponge cloths 20 2-3%

Source: Celco market reports, RISI and Borregaard estimates

1) Metric tonne 24
 Speciality Cellulose

Speciality cellulose suppliers

• 13 players supplying 1.6 million mt speciality cellulose
• Top 5 players (Rayonier Advanced Materials, Tembec, G-P Cellulose, Bracell and Borregaard) have 90%¹⁾ market share
• Capacity reduced by 190,000 mt due to Rayonier Advanced Materials’ Jesup conversion in 2015
• Top 5 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

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

Bracell

Saiccor

Kraft Sulphite Cotton linter pulp Owned by viscose fibre producers

1) Borregaard estimates
* Currently not in operation 25
** In the process of being acquired by Rayonier Advanced Materials
Speciality Cellulose
Speciality cellulose customer requirements
What customers typically do
with our speciality cellulose:
• The main raw material for
our customers’ products
• Used in various niche
applications as a building
block for certain cellulose
derivatives
• Customers’ products like
e.g. cellulose acetate and
cellulose ethers are
typically made through a
chemical modification of
our cellulose
Speciality cellulose product
characteristics and
differentiators:
• Borregaard offers a broad
range of high-quality, tailor-
made speciality cellulose
products within and across a
number of application areas
• Key product parameters are
viscosity (ethers), purity
(acetate), brightness, density,
reactivity and product
stability
26
 Speciality Cellulose

Cellulose sales distribution 2016

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
4%
90

80

70 Asia Europe
46 % 50 %
60

50
Customer base and concentration
40 (sales revenues)
30
100 84%
20 80
10 60 38%
40
0 20
Highly specialised 1) Other 0
Top 3 Top 10

Source: Company information

1) Acetate, ether and tire cord grades 27
Speciality Cellulose

Ice Bear

• Main element in the strategy for increased specialisation and flexibility

• Targeting “niches within the niches” (acetate plastics, LCD, tire
cord, food and pharma)
• Improved offering to existing markets
• Capacity expansion decided
• NOK 115 million investment to be completed second half 2018
• Will double capacity to 60,000 mt
• Ramp-
Ramp-up of Ice Bear production will be based on market demand
• Potential estimated to be around 20-30,000 mt/year by end 2018

28
 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
• Main applications
• Biofuel, car care products, household chemicals, solvents, food,
personal care and pharma
• Increasing demand for 2nd generation 100% bioethanol as biofuel
• Expansion project - new dehydration plant
• NOK 63 million investment¹⁾, expected start-up late 2017
• Full flexibility between 96% and 100% bioethanol
• 30% grant from Enova²⁾

1) Includes facility to capture and store biogas

2) State enterprise owned by the Ministry of Petroleum and Energy 29
 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
Operating revenues 2016 Operating revenues 2016
• NOK 335 million • NOK 253 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) Company 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

Exilva – a broad range of opportunities

Focus areas

Other areas testing Exilva

• Packaging, oil field, composites, filters & barriers, batteries, ink

32
 Other Businesses - Cellulose Fibrils

Exilva - investment in commercial scale production

• 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)

• Advanced texture system for food

• Enables formulation of food products with reduced fat content
without compromising mouthfeel, texture or taste
• Still in demonstration phase
• Customer base growing steadily
• Decision on SenseFi expansion most likely delayed until 2018

34
 Innovation Management

Research & development

~14%1) of Borregaard’s revenues
• Innovation Management Teams come from new products2)

• ~100 employees in R&D – of which 68 at the

research centre in Sarpsborg – 36 has a PhD
• R&D and innovation spending ~5% 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. 17% in 2016

2) Launched the last 5 years 35
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-
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

Approaching world class operations

2008 2016

• From 15 decentralised control rooms to one central control room – reorganised

management system
• Competence development and new organisation
• Upgraded human machine interface and standardisation
• Top level control systems based on integrated sensors, automation, analyses and
visualisation of big data

1) Best known operator practice

Source: www.mycontrolroom.com (User Centered Design Services) 37
 Sustainability

Life cycle analysis¹⁾ confirms a sustainable biorefinery

R A W M AT E R I A L S PROCESSES PRODUCTS

Natural, renewable, Investments in reduced Biochemicals replace

sustainable emissions and greener energy petrochemicals
sources

• Life cycle assessment

• Carried out for all products in Sarpsborg
• Cradle to gate results are compared with petrochemical products based on
typical industry data
• Climate impact from use of products and end of life cycle effects are not
included in the assessment, would have improved the relative GHG²⁾
footprint further

1) Third party analysis based on ISO 14044/48, updated 2015

2) Greenhouse gases 38
 Sustainability

The main raw material is renewable

• Wood sourcing for Sarpsborg site

• Sourcing area mainly Norway and
Sweden
• PEFC¹⁾ certified
• Renewable
• Sustainable
• Annual growth 2x the harvest in
Norway
• Lignin raw material sourcing
• Sourced from adjacent pulp mills
• These suppliers purchase their
wood from FSC²⁾ certified sources

1) Programme for the Endorsement of Forest Certification

2) Forest Stewardship Council 39
 Sustainability

Environmentally friendly substitutes for petrochemicals

Concrete additives • Lignin vs synthetic plasticisers in

emissions1)

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

6.8x • Wood-based vanillin vs synthetic

Borregaard 2G bioethanol Petroleum-based diesel
vanillin

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

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.

41
 Financials

Key figures 2013 – 2017 (LTM)¹⁾

mNOK Operating revenues mNOK EBITA adj. & EBITA adj. % % % ROCE and earnings per share NOK
17,4 (EPS)
5 000 16,6 25 10
21,7 21,4
800 16
4492 4591 12,6 800 20 8
4 000 12,3 11,9 747 16,9
4164 16,5
3886 3939 600 12 15,6
3 000 15 6
489 497 5,99
400 486 8 5,55
2 000 10 4
3,86
200 4 3,35 3,34
1 000 5 ROCE % 2
EPS
0 0 0 0 0
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
LTM LTM LTM

• Revenues CAGR 5% since 2013

Profitability target:
• All-time high EBITA adj. and ROCE LTM
• Sustainable profitability that supports
• Progress in all business areas, particularly for Speciality Cellulose
the strategy and dividend policy
• Increased prices and improved product mix in Speciality Cellulose,
growth for key products in Fine Chemicals and increased sales of • ROCE > 15% pre-tax over a business
Specialities for Performance Chemicals cycle
• EPS at NOK 5.99 LTM, up from 2016

1) Last twelve months as per September 2017

42
 Financials

Key cost items 2012-2016

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

Wood
14% 13%
• Annual price and volume contracts, mid-year adjustments occur
14% 12% 11% • Includes inbound logistics, ~30% of wood cost
80% 15%
16%
• Energy consumption: Heat energy 2/3, electricity 1/3
• Heat energy: Base load mainly covered by renewable energy

Energy
27% 28%
60% 24% 26% sources, peak-load mainly covered by LNG and spot electricity
24%
• Electricity: 12-year contract starting 2013
9% 10% 10% • Chemicals1) and other raw materials like lignin raw material

Other CoM
9% 9%
40% • Internal production of caustic soda
• Contract manufacturing of petrochemical-based vanillin
24% 24% 25%
22% 23% • Change in inventories
20%

Distribution
• Most products sold delivered customer

costs
15% 16% 16% 17% 16% • Logistical optimisation important, especially for Performance
0% Chemicals
2012 2013 2014 2015 2016

expenses
Other expenses Payroll expenses Distribution costs
• Continuous productivity improvement, including de-
Other CoM Energy Wood
Payroll manning and cost reduction activities

• Total costs in 2016 close to 3.5 billion NOK

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

• 2.9% CAGR from 2012 to 2016

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
43
 Financials

Sensitivity on EBITA adj.

Sensitivity of 1% change
Cellulose price • Global presence, diversified product portfolio
and GDP-driven demand reduce market risk
Lignin price
• Oil price affects demand and competition in
FX ex hedging certain markets, cost/pricing of substitutes and
raw materials, but main effect is on FX because
FX incl hedging of correlation between NOK and oil price
Wood cost • Significant FX exposure, softened by FX hedging¹⁾
in the medium term
Energy cost
• No major single component in other cost of
Other cost of… materials

Distribution costs
• Distribution cost: Most products sold “delivered
customer”
Payroll expenses • Other expenses are repair and maintenance,
Other expenses
external services, rental/leasing etc.

MNOK 0 5 10 15 20 25 30

1) 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
44
 Financials

FX impact and policy

mNOK Hedging gain/losses on EBITA
Currency hedging strategy
100
Purpose is to delay effects of currency fluctuations and secure
competitiveness 10
0
• Hedging based on expected net cash flow (EBITDA) 1)
– Base hedge - 75%/50% on a rolling basis for 6/9 months -51
-100
for major currencies -86
-115
– 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
2013 2014 2015 2016 2017 LTM
– Contracts 2) - 100% hedged
• Balance sheet exposure hedged 100%
• Net investments in subsidiaries hedged up to 90% of book Borregaard currency basket³⁾
value in major currencies 110,0

FX exposure 100,0
98,9
100,0 96,0
• Borregaard’s revenues are primarily in USD or EUR,
while costs are primarily in NOK
90,0
• Net FX exposure in 2016
– USD: 66% (approximately 208 mUSD) 80,4
– EUR: 33% (approximately 92 mEUR)) 80,0 74,9
– Other: 1% (GBP, BRL, JPY, SEK, ZAR)
70,0
2013 2014 2015 2016 2017 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) 45
3) Currency basket based on Borregaard’s net exposure in 2016 (=100)
 Financials

Key figures 2013 – 2017 (LTM)1)

EBITA adj. & EBITA % adj.
mNOK 23,9 %
600 21,3 22,3 22,2 25 • Top-line CAGR 8% since 2013
18,0
Performance

500 20 • Specialisation and improved product mix

Chemicals

517
400 447 480
15 • Reduced raw material supply 2013-15
300 388
10
200 296 • Lower demand and increased competition in the
5
100 construction and oil sectors from 2015
0 0
2013 2014 2015 2016 2017 LTM
• Favourable FX impact from late 2014 to end 2016

mNOK 19,8 % • Top-line CAGR 1% since 2013

400 20 • Improved market balance due to industry capacity adjustment
15,3 15,7
from mid-2015
300 15
Speciality
Cellulose

11,2 330 • Increased prices and improved product mix from 2016
200 244 7,2 250 10 • Positive FX impact from late 2014, significant contribution from
163 FX in 2016
100 5
104 • Favourable development for key cost elements (wood, energy)
0 0 2013-2016
2013 2014 2015 2016 2017 LTM

mNOK
0 • Top-line CAGR 5% since 2013
-10
-20 • Ingredients: Challenging market situation from late 2011
Businesses

-20
• Fine Chemicals: Volume growth for key products from
Other

-40 -51 -54

2015
-60 -65 • Exilva project: Increasing costs, softened by EU grant from
May 2016
-80 • Favourable FX impact from late 2014 to end 2016
2013 2014 2015 2016 2017 LTM

1) Last twelve months as per September 2017

46
 Financials

Cash flow, net working capital and investments

mNOK Cash flow from operations1) mNOK
Average NWC mNOK Investments
1 400 %
19,8 % 19,9 % 800
1 000 18,8 % 19,0 %
1 200 20% 700
17,2 %
559
1 000 800 878 875 600
769 803 15%
752 500 264
800 600
400
600 1204 10% 184
1086 400 300
400 62 85
715 759 696 200
5% 358 364
200
200 100 226 228 246
0 0 0% 0
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
LTM LTM LTM
Cash flow from operations EBITDA adj. Average NWC % of OpRev ex hedging Replacement Expansion Depreciation

• Strong cash flow from operations; close to EBITDA over time

Cash flow targets:
• Average NWC % relatively stable, below 20% target
• Average net working capital at 20% of
• Significant temporary fluctuations will occur
operating revenues
• Expansion investments increasing from 2015 • Replacement investments at
• Exilva, SenseFi, Ice Bear, Flambeau business, Florida plant, depreciation level
R&D activities

1) Cash flow from operating activities (IFRS) + tax paid +/- net financial items +/- dividend (share of profit) from JV
47
 Financials

Investment forecast 2017-2018

• Replacement investments mNOK Replacement investments - forecast1)
• Targeted at depreciation level
360-390
• Will be above depreciation in 2016-2018 400 358 320-360
due to wood seasoning silos (covered by
insurance) and lignin infrastructure 300
investments in Norway
200
• Expansion investments
100
• New plant LignoTech Florida phase 1:
110 mUSD (100%) ≈ 900 mNOK 0
(late 2016 to mid 2018) 2016 2017 2018
• New Exilva plant: 225 mNOK Actual Low Uncertainty Depreciation (LTM)
(mid 2014 to early 2017)
• Ice Bear project: 115 mNOK (2017 to 2018) mNOK Expansion investments - forecast1)
• Lignin investment in Norway:
500 mNOK, approx. 70% expansion 800 680-740
(mid 2017 to end 2019)
600 400-500
• Other projects (bioethanol plant upgrade,
lignin specialities, fine chemicals capacity, 400 264
R&D activities)
200
• New expansion projects may lead to 0
additional investments 2016 2017 2018
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

Investments and cash flow

Total investments - forecast • Significant investments in 2017-
1 200
2018
• Currently strong cash flow from
1 000 operations
Cash flow before
investments1) (LTM) • Cash flow risk factors/uncertainties
800 • Macroeconomics, including FX
• Demand, competition, raw material
600 prices and supply, operational factors
• Additional expansion investments
400
• Change in net working capital

200 • Capital structure will depend on

future cash flows, investments and
0
dividend payments/repurchase of
2016 2017 2018 shares
Actual Low Uncertainty CF b/investments (LTM)

1) Cash flow from operating activities -/+ net paid (ordinary) to/from shareholders +/- other capital transactions (IFRS cash flow statement)
49
 Financials

Capital structure
mNOK Leverage ratio and loan capacity
• Solid capital structure as per 30.09.17 2 750
• Leverage ratio1) 0.59
2 500
• Equity ratio 59.3%
2 250
• Target: Maintain investment grade rating
2 000
• Leverage ratio targeted between 1.0 and 2.0 * EBITDA
2.0 over time 1 750
1 500
• Borregaard has financial capacity for
expansion 1 250
• Revolving credit facilities (RFC), 1 000
1,500 mNOK, maturity 2021 1.0 * EBITDA
750
• 60mUSD term loan for LT Florida,
tenor 8.5 years from completion of project 500
phase 1 250
• Bond issue,
200 mNOK, maturity 2019 0
2016 Sept'17 2018 2019 2020 2021
• Nordic Investment Bank (NIB) loan,
40 mEUR, maturity 2024 NIB Bond LTF RFC NIBD

1) Net interest-bearing debt (NIBD) divided by last twelve months EBITDA adj.
50
Management

Highly experienced and proven management team

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

Per Bjarne Lyngstad Gisle Løhre Johansen

• SVP Business Development/R&D

R&D
• CFO
CFO

• 19 years in current position • 10 years in current position

• 29 years with Borregaard • 26 years with Borregaard

Morten Harlem Tuva Barnholt

Performance

Sourcing &
Chemicals

Logistics
• EVP • SVP Strategic Sourcing and Logistics
• 14 years in current position • 11 years in current position
• 19 years with Borregaard • 19 years with Borregaard

Tom Erik Foss-

Foss-Jacobsen Dag Arthur Aasbø

Public Affairs
Cellulose
Speciality

• EVP • SVP HR & Comm./Public Affairs

HR &
• 10 years in current position • 9 years in current position
• 21 years with Borregaard • 24 years with Borregaard

Sveinung Heggen Ole Gunnar Jakobsen

Director

• General Counsel • Plant Director - Sarpsborg Site

Plant
GC

• 4 years in current position • 9 years in current position

• 4 years with Borregaard • 22 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
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.

• 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.

52