4 TH QUARTER 2019
Oslo, 5 February 2020 Agenda
• Per A Sørlie, President & CEO • Highlights • Proposed dividend • Business areas • Strategic projects update • Sustainability • Outlook
• Per Bjarne Lyngstad, CFO • Financial performance
2 Highlights – 4th quarter 2019
• EBITA adj.1 73 mNOK (94 mNOK) • 35 mNOK impact from operational incidents at the Sarpsborg site, mainly affecting Speciality Cellulose • Favourable product mix, but reduced sales volume and higher costs and depreciation in Performance Chemicals • Continued strong improvement in Ingredients • Positive net currency impact • Strong cash flow from operations1
1 Alternative performance measure, see Appendix for definition 3 Highlights – full year 2019
• EBITA adj.1 589 mNOK (580 mNOK) • Favourable product mix, but higher costs and increased depreciation in Performance Chemicals • Improved product mix, higher wood costs and operational incidents in Speciality Cellulose • Positive development for bioethanol • Increased sales prices for wood based vanillin • Positive net currency impact
1 Alternative performance measure, see Appendix for definition 4 Dividend proposal for 2019
• Borregaard’s dividend policy • To pay regular and progressive dividends reflecting the expected long-term earnings and cash flows of the Group • Annual dividend is targeted between 30% and 50% of net profit • A dividend of NOK 2.30 per share is proposed by the Board of Directors • 55% of net earnings • Total dividend payment of 229 mNOK
5 Performance Chemicals markets – Q4
2018 NOK per mtds 1 ‘000 mtds 1 Average gross sales price Sales volume 2019 6 500 150 125 122 122 119 125 114 116 6 000 107 111 5 608 5 444 5 489 100 5 500 5 227 5 168 5 125 75 5 022 4 943 5 000 50 4 500 25
4 000 0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1 Q2 Q3 Q4
• Average price in sales currency was in line with Q4-18 • Favourable product mix • Sales to concrete admixtures declined, more than compensated by growth in other construction applications • Sales volume declined by 4% vs Q4-18 • Lower Industrial volumes, Specialities and Construction in line with Q4-18 • Raw material supply from Flambeau ceased late in Q3-19 • Positive FX effects
1 Average sales price and sales volume reflect 100% of sales and volume from the J/V in South Africa. 6 1 Average sales price is calculated using actual FX rates, excluding hedging impact. Performance Chemicals markets – full year
1 1 NOK per mtds Gross average sales price ‘000 mtds Sales volume 6 500 467 469 6 000 500 443 449 5 500 410 5 331 5 366 85 85 5 500 5 229 5 124 400 79 82 76 5 000 300 170 175 121 150 157 4 500 200 4 000 213 214 210 212 3 500 100 209
3 000 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Construction Industrial Specialities • Average price in sales currency slightly below 2018 • Continued strong competition in concrete admixtures and certain low value Industrial applications • Favourable product mix • Sales to concrete admixtures declined, more than compensated by growth in other construction applications • Sales volume increased marginally • Growth for Industrial products, stable volume for Specialities and a slight decline in Construction • Florida sales volume in accordance with the ramp-up plan, but profitability below expectations
1 Average sales price and sales volume reflect 100% of sales and volume from the J/V in South Africa. 7 1 Average sales price is calculated using actual FX rates, excluding hedging impact. Speciality Cellulose markets – Q4
2018 NOK per mt 1 ‘000 mt Average gross sales price Sales volume 2019 11 500 50 42,4 40,0 39,1 38,6 10 908 40 37,6 37,7 11 000 34,5 33,2 10 645 30 10 473 10 485 10 439 10 500 10 357 10 179 10 105 20 10 000 10
9 500 0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1 Q2 Q3 Q4
• 7% lower average price in sales currency • Lower price for cellulose products which were declassified after operational incidents • Slightly higher sales volume and a significant reduction in inventory • Higher bioethanol sales volume • Positive FX impact
1 Average sales price is calculated using actual FX rates, excluding hedging impact. 8 Speciality Cellulose markets – full year
NOK per mt Gross average sales price1 ‘000 mtds Sales volume Highly specialised 12 000 72% 73% 80% 200 64% 62% 11 000 10 575 10 580 57% 10 301 60% 9 986 150 10 000 9 546 153,6 152,3 150,7 150,0 153,1 40% 100 9 000
20% 8 000 50
7 000 0 0% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
• Cellulose prices were slightly below 2018 mainly as a result of sales of declassified cellulose • Improved product mix, sales of highly specialised grades increased to 73% (62%) • Bioethanol had higher sales and production volume, improved product mix and lower production costs • Positive FX effects
1 Average sales price is calculated using actual FX rates, excluding hedging impact. 9 Ingredients & Fine Chemicals markets – Q4 & full year
2018 2018 mNOK mNOK Ingredients - sales revenues 2019 Fine Chemicals - sales revenues 2019 175 160 146 100 150 139 139 138 80 116 73 125 113 69 104 75 65 61 100 54 55 50 75 50
50 25 25
0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
• Ingredients • Fine Chemicals • Strong demand and higher sales for wood based • Sales volume in line with Q4-18, but with a weaker vanillin product mix • Sales revenues increased by 24% in 2019 due to • Sales revenues increased by 5% in 2019 higher sales prices for wood based vanillin
10 Completed and ongoing strategic projects
• Specialisation, diversification and growth within Performance Chemicals • Florida plant (1st phase) started up mid 2018 • Upgrade and increased specialisation in Sarpsborg from Q3-2019 • Extension of joint venture agreement in South Africa to 2032
• Develop the unique biorefinery asset in Sarpsborg • High-end bioethanol expansion started up in Q1-18 • Ice Bear capacity expansion completed end 2018 • Wood based vanillin capacity expansion, completion 1H-21
• Establish Cellulose Fibrils as a new business area • Commercial-scale production facility completed in Q4-16 • Exilva market introduction ongoing
➢ Expansion investments of 1.7 billion NOK in 2015-2019 ➢ All investments projects completed on time and within budget …… ➢ Going forward, focus will primarily be on market execution 11 Cellulose Fibrils – the SenseFi project discontinued
• Advanced texture system for food • Market potential not considered sufficient to move the project from demonstration phase to commercial operation • Write-downs and costs of 11 mNOK as Other expenses1 in Q4-19 • EBITA adj1 impact of -9 mNOK in 2019
1 Alternative performance measure, see Appendix for definition 12 Cellulose Fibrils – Exilva status
• Additive for industrial applications • Improves flow, stability, flexibility and strength in industrial formulations and materials • Market introduction ongoing • ≈50 regular customers • Volumes still relatively small • Strong pipeline growth • >1800 prospective customers received samples and/or in lab/trial phase • More than 500 new prospects last six months • Long lead times • Horizon 2020 grant ends in April 2020
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. 13 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 2) • Documentation • Target based CO2-reductions • Climate: LCA 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
1) PEFC: Programme for the Endorsement of Forest Certification, FSC: Forest Stewardship Council 2) Life Cycle Analysis 14 3) Environment, Health and Safety Sustainability
Science Based Targets for GHG emissions approved by CDP1 • Targeted reductions in greenhouse gas emissions: • 53% by 2030 • 100% by 2050 • Base year = 2009 • Targets are in line with the ambitions in the Paris Agreement and the Norwegian Climate law
Borregaard maintained a CDP ‘A’ rating in 2019 • Highlighted as a global leader in corporate climate action • Achieved a place on the CDP Climate Change ‘A List’ • 8,400 companies reported to CDP in 2019 • 179 (2.1%) were awarded an ‘A’ rating
1 CDP: global non-profit organisation that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests 15 Outlook
• Performance Chemicals • Continued strong competition and further price pressure for lignin products to concrete admixtures and certain low value Industrial applications expected to be partly compensated by diversification and specialisation in 2020 • Sales volume forecast to increase by 0-5% • 40 mNOK cost savings from the upgrade in Norway will be gradually realised through 2020, full effect from 2021 • 20 mNOK cost savings from restructuring of the German lignin operation will have full effect in 2020 • Speciality Cellulose • Average price in sales currency expected to increase by 2% from 2019 • Wood cost in H1-20 will be 25-30 mNOK lower than in H1-19 • Sales volume in Q1-20 is expected to be higher vs Q1-19, with similar product mix • Other Businesses • The current price level for wood based vanillin is expected to continue • Capacity expansion in Ingredients will be gradually realised in 2020 with full effect from H2-21 • No major changes in the market conditions for Fine Chemicals • Sales are gradually increasing for Cellulose Fibrils, but lead time for sales prospects are long • The remaining EU Horizon 2020 grant will end in April 2020
16 FINANCIAL PERFORMANCE Q4 - 19 Borregaard key figures – Q4
1 % 1 2018 mNOK Operating revenues 2018 mNOK EBITA adj. 2018 EBITA adj. margin 2019 2019 2019 20 1 500 200 14,5 13,7 14,5 15
1 250 10 12,6 13,4 12,6 7,7
180 179
150 177 1 340 1
164 5
1 250 1
157
1 239 1 1 234 1
1 000 219 1
1 217 1 5,9
1 199 1 145 1 150 1 0 NOK Earnings per share 750 100 Q1 Q2 Q3 Q4 6 Cumulative 4,76
94 3,96 500 4 50 73 2,69 3,79 4,17 250 2 1,37 2,48 1,26 0 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 • Revenues 1% above Q4-18 • EBITA adj.1 73 mNOK for the Group • Other Businesses improved, Performance Chemicals and Speciality Cellulose had weaker results vs Q4-18 • 35 mNOK impact from operational incidents at the Sarpsborg site • Positive FX effects • EPS at NOK 0.38 (NOK 0.80) • 11 mNOK as Other expenses1 (SenseFi project) and 22 mNOK increase in Net financial expenses
1 Alternative performance measure, see Appendix for definition 18 Borregaard key figures – full year
1 1 1 mNOK Operating revenues mNOK EBITA adj. & margin % % ROCE and earning per share NOK 16,6 16,2 21,7 ROCE % 16 19,1 5 000 800 20 EPS 10 12,1
5 063 5 11,9 11,6 15,6 749
4 000 747 4 785 4 8 4 618 4 600 12 4 492 4 15 12,7 4 164 4 10,9 3 000 589 580 6 8
400 497 10 5,55 5,66 2 000 4,76 4 3,86 4,17 200 4 5 1 000 2
0 0 0 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
• Revenues up 6% vs 2018 • Slightly improved EBITA adj.1 • Other Businesses improved significantly, Performance Chemicals and Speciality Cellulose had weaker results • Positive FX impact • Impact on EBITA adj.1 from implementation of IFRS 16 Leases was +10 mNOK • EPS for 2019 ended at NOK 4.17 (4.76) • Increased net financial expenses and -27 mNOK in Other income and expenses1
1 Alternative performance measure, see Appendix for definition 19 Performance Chemicals key figures – Q4
mNOK 2018 600 2019 • Revenues 1% below Q4-18
500 618
600
571 564
559 •
555 Sales volume 4% lower 552 400 548 300 • Average price in sales currency in line with Q4-18 200 100 • Positive net FX impact 0 • Operating revenues Operating Full year growth 4% Q1 Q2 Q3 Q4
mNOK 2018 125 2019 • Favourable product mix, but lower sales volume
1 100 • Higher operating costs
115 107
75 102 87 • Higher depreciation
50 67
55 EBITA adj. EBITA
25 42 • Positive net FX impact 36 0 • Full year EBITA adj.1 297 mNOK (314 mNOK) Q1 Q2 Q3 Q4
2018 1 % 2019 25 20,7 20 17,9 15 11,9 1 17,3 • EBITA adj. margin declined vs Q4-18 14,5 7,6 10 • Full year EBITA adj. margin1 12.7 (14.0) 5 9,8 6,6 0
EBITA margin adj. EBITA Q1 Q2 Q3 Q4
1 Alternative performance measure, see Appendix for definition 20 Speciality Cellulose key figures – Q4
mNOK 2018 500 2019 • Revenues in line with Q4-18 400
482 • Slightly higher sales volume
434
427 427 426
300 425
392 381 200 • 7% lower sales prices, mainly from declassified cellulose products 100 • Positive FX effects 0 • Operating revenues Operating Full year growth 3% Q1 Q2 Q3 Q4
mNOK 2018
80 2019 • Lower sales prices and production output due to the operational
82 1
60 76 incidents at the Sarpsborg site
67 64
40 50 • Higher sales volume and improved result for bioethanol 48
20 35 •
EBITA adj. EBITA Positive net FX impact 23 0 • Full year EBITA adj.1 188 mNOK (257mNOK) Q1 Q2 Q3 Q4
2018 1 % 25 2019 19,9 20 14,7 15,7 15 19,3 11,7 • EBITA adj. margin1 below Q4-18 10 • Full year EBITA adj. margin1 10.9 (15.4) 5 8,9 10,0 5,4 0
EBITA margin adj. EBITA Q1 Q2 Q3 Q4
1 Alternative performance measure, see Appendix for definition 21 Other Businesses key figures – Q4
mNOK 2018 300 2019
250
277
274
266
256 253
200 239
223 • Revenues 9% above Q4-18 212 150 • Higher sales and strong demand for wood based vanillin 100 • Full year growth 16%
50 Operating revenues Operating 0 Q1 Q2 Q3 Q4
mNOK 2018 40 2019 • Ingredients: Continued strong result 30
1 • Fine Chemicals: Weaker product mix and result vs Q4-18 20 2
35 • Cellulose Fibrils: Reduced cost coverage not fully compensated by 31
10 24 higher sales and improved productivity
14 14
2 EBITA adj. EBITA
0 • Corporate costs were in line with Q4-18
2 -
5 • -10 - Positive net FX effects for Other Businesses Q1 Q2 Q3 Q4 • Full year EBITA adj.1 104 mNOK (9 mNOK)
1 Alternative performance measure, see Appendix for definition 2 The Exilva project has received funding from the Bio-Based Industries Joint Undertaking (BBI) under the European Union’s Horizon 2020 research 22 and innovation programme under grant agreement No 709746. Currency impact
2018 mNOK Hedging effects2 on EBITA adj.1 Borregaard’s currency basket3 2019 109,8 110 3 5 108 106,9
106 104,7 -5 -1 104,3 -6 104 -8 -7 102,7 -15 -13 102 100,7 100 98,9 -25 -23 97,8 98
-35 -32 96 Q1 Q2 Q3 Q4 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19
• Net FX EBITA adj.1 impact +15 mNOK vs Q4-18 • Includes change in hedging effects and based on estimated FX exposure • Net FX EBITA adj.1 impact YTD +95 mNOK • Net FX EBITA adj.1 impact in 2020 estimated to be +30 mNOK vs 2019 • Assuming rates as of 4 February (USD 9.23 and EUR 10.19) on expected FX exposure • Net FX EBITA adj.1 impact in Q1 estimated to be +5 mNOK vs Q1-19 • Significant FX exposure, but delayed impact of FX rate fluctuations due to hedging policy
1Alternative performance measure, see Appendix for definition. 2See appendix for currency hedging strategy, future hedges and hedging effects by segment. 23 3Currency basket based on Borregaard’s net exposure in 2018 (=100): USD 65% (approx. 190 mUSD), EUR 34% (approx. 84 mEUR), Other 1% (GBP, BRL, JPY, SEK, ZAR). Cash flow, investments and NIBD
Increase 1 1 mNOK Cash flow from operations mNOK Investments mNOK NIBD change Decrease 250 350 1 600 353 213 213 300 200 24 31 1 500 183 67 13 250 146 249 150 200 123 1 400 101 1 576 213 150 176 100 47 92 171 189 182 1 300 1 489 43 100 127 50 1 200 50 81 76 54 58 0 0 1 100 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Cash flow from operations EBITDA adj. Replacement Expansion Depr. ex IFRS16
• Cash flow from operations1 increased significantly vs Q4-18 and previous quarters in 2019 • Significant reduction in net working capital in Q4 • Investments in line with Q4-18 and slightly below forecast • Expansion investments mainly related to completion of lignin operation upgrade in Norway • Limited carry-over to 2020 • NIBD1 declined by 87 mNOK in Q4
1 Alternative performance measure, see Appendix for definition 24 Investment forecast 2020-2021
1 mNOK Replacement investments - forecast ) 500 350-400 350-400 • Replacement investments 400 370 • Targeted at depreciation level 300 • Upgrade of caustic soda production facility cannot 200 be handled within target 100 0 • Expansion investments 2019 2020 2021 Actual Low Uncertainty Depreciation ex IFRS16 • Capacity expansion for wood based vanillin the 1 main project (130 mNOK, H2-19 to mid 2021) mNOK Expansion investments - forecast ) 300 • A few smaller expansion projects are ongoing 170-230 or planned 213 200 50-150
100 • New projects may lead to additional investments 0 2019 2020 2021 Actual Low Uncertainty
1 Uncertainty is related to final investment decisions, timing of investment payments, execution time and risk and unexpected events e.g. 25 Q&A
• Per A Sørlie, President & CEO
• Per Bjarne Lyngstad, CFO
26 APPENDIX Borregaard – key figures Amounts in NOK million Q4-2019 Q4-2018 Change YTD-2019 YTD-2018 Change
Operating revenues 1 234 1 219 1 % 5 063 4 785 6 % EBITDA adj. 1 183 183 0 % 1 007 903 12 % EBITA adj. 1 73 94 -22 % 589 580 2 % Amortisation intangible assets -1 -1 -4 -4 Other income and expenses1 -11 0 -27 0
Operating profit 61 93 -34 % 558 576 -3 % Financial items, net -31 -9 -91 -14
Profit before taxes 30 84 -64 % 467 562 -17 % Income tax expenses -12 -19 -116 -137
Profit for the period 18 65 -72 % 351 425 -17 % Profit attributable to non-controlling interests -20 -15 -66 -51 Profit attributable to owners of the parent 38 80 417 476
Cash flow from operating activities (IFRS) 288 70 697 558
Earnings per share 0,38 0,80 -53 % 4,17 4,76 -12 %
EBITDA adj. Margin 1 14,8 % 15,0 % 19,9 % 18,9 % EBITA adj. Margin 1 5,9 % 7,7 % 11,6 % 12,1 %
1 Alternative performance measure, see Appendix for definition 28 Effects of IFRS 16 Leases – Ytd December 2019
INCOME STATEMENT (mNOK) OTHER KEY FIGURES AND RATIOS IAS 17 IFRS 16 Change IAS 17 IFRS 16 Change EBITDA adj.1 935 1 007 72 EBITDA adj. margin1 18,5 % 19,9 % 1,4%-p Depreciation -356 -418 -62 EBITA adj. margin1 11,5 % 11,6 % 0,1%-p EBITA adj.1 579 589 10 Operating profit 548 558 10 Capital employed1 5 323 5 601 278 Net financial items -74 -91 -17 Return on capital employed1 10,9 % 10,5 % -0,6%-p Profit before tax 474 467 -7 Earnings per share 4,24 4,17 -0,07 Net interest-bearing debt1 1 489 1 876 387 Leverage ratio1 1,59 1,86 -0,27 BALANCE SHEET (mNOK) Total assets 6 364 6 744 380 Equity ratio1 54,5 % 51,4 % -3,1%-p Equity 3 471 3 464 -7
IAS 17: Operating leases off-balance sheet as a single expense. Finance leases on balance sheet IFRS 16: Operating leases recognise assets and liabilities on balance sheet. Operating leases to report depreciation and interest separately. Green background: Reported figures in 2019
1 Alternative performance measure, see Appendix for definition 0 4 . 0 2 . 2 0 2 0 29 Operating revenues and EBITA adj.1 per segment Amounts in NOK million Amounts in NOK million Operating revenues Q4-2019 Q4-2018 Change EBITA adj. 1 Q4-2019 Q4-2018 Change
Borregaard 1 234 1 219 1 % Borregaard 73 94 -22 % Performance Chemicals 548 552 -1 % Performance Chemicals 36 42 -14 % Speciality Cellulose 426 427 0 % Speciality Cellulose 23 50 -54 % Other Businesses 277 253 9 % Other Businesses 14 2 Eliminations -17 -13
Amounts in NOK million Amounts in NOK million Operating revenues YTD-2019 YTD-2018 Change EBITA adj. 1 YTD-2019 YTD-2018 Change Borregaard 5 063 4 785 6 % Borregaard 589 580 2 % Performance Chemicals 2 330 2 237 4 % Performance Chemicals 297 314 -5 % Speciality Cellulose 1 725 1 669 3 % Speciality Cellulose 188 257 -27 % Other Businesses 1 073 927 16 % Other Businesses 104 9 Eliminations -65 -48
1 Alternative performance measure, see Appendix for definition 30 Cash flow Amounts in NOK million Q4-2019 Q4-2018 YTD-2019 YTD-2018 Amounts in NOK million Profit before taxes 30 84 467 562 Amortisation, depreciation and impairment charges 121 90 432 327 Change in net working capital, etc 171 -102 -85 -194 Dividend (share of profit) from JV 2 0 5 6 Taxes paid -36 -2 -122 -143 Cash flow from operating activities 288 70 697 558 Investments property, plant and equipment and intangible assets * -213 -213 -583 -762 Other capital transactions 8 2 29 13 Cash flow from Investing activities -205 -211 -554 -749 Dividends 0 0 -224 -199 Proceeds from exercise of options/shares to employees 1 1 35 23 Buy-back of shares -4 0 -60 -32 Gain/(loss) on hedges for net investments in subsidiaries 5 -40 -26 -22 Net paid to/from shareholders 2 -39 -275 -230 Proceeds from interest-bearing liabilities 52 39 1 750 1 292 Repayment from interest-bearing liabilities -143 -24 -1 621 -960 Change in interest-bearing receivables/other liabilities -1 14 -3 -2 Change in net interest-bearing liablities -92 29 126 330 Cash flow from financing activities -90 -10 -149 100 Change in cash and cash equivalents -7 -151 -6 -91
Cash and cash equivalents at beginning of period 92 231 86 180 Change in cash and cash equivalents -7 -151 -6 -91 Currency effects cash and cash equivalents -4 6 1 -3 Cash and cash equivalents at the end of the period 81 86 81 86
* Investment by category Replacement Investments 182 189 370 346 Expansion investments1 31 24 213 416
1 Alternative performance measure, see Appendix for definition 31 Balance sheet Amounts in NOK million 31.12.2019 30.9.2019 31.12.2018
Assets: Intangible assets 93 90 100 Property, plant and equipment 4 232 4 164 3 623 Other assets 251 226 230 Investment in joint venture 99 96 100 Non-current assets 4 675 4 576 4 053 Inventories 931 955 856 Receivables 991 1 051 956 Cash and cash deposits 147 127 86 Current assets 2 069 2 133 1 898 Total assets 6 744 6 709 5 951
Equity and liabilities: Group equity 3 306 3 145 3 123 Non-controlling interests 158 178 198 Equity 3 464 3 323 3 321 Provisions and other liabilities 294 308 271 Interest-bearing liabilities 1 399 1 554 1 115 Non-current liabilities 1 693 1 862 1 386 Interest-bearing liabilities 628 548 272 Other current liabilities 959 976 972 Current liabilities 1 587 1 524 1 244 Equity and liabilities 6 744 6 709 5 951
Equity ratio1 (%): 51,4 % 49,5 % 55,8 %
1 Alternative performance measure, see Appendix for definition 32 Net financial items & net interest-bearing debt1
Amounts in NOK million Net financial items Q4-2019 Q4-2018 YTD-2019 YTD-2018
Net interest expenses -19 -12 -69 -32 Currency gain/loss -3 0 -12 -3 Other financial items, net -9 3 -10 21 Net financial items -31 -9 -91 -14
Amounts in NOK million Net interest-bearing debt 1 (NIBD) 31.12.2019 30.9.2019 31.12.2018
Non-current interest-bearing liabilities 1 399 1 554 1 115 Current interest-bearing liabilities including overdraft of cashpool 628 548 272 Non-current interest-bearing receivables (included in "Other Assets") -4 -4 -4 Cash and cash deposits -147 -127 -86 Net interest-bearing debt 1 (NIBD) 1 876 1 971 1 297 Impact of IFRS 16 Leases 387 395 Net interest-bearing debt 1 excluding impact of IFRS 16 Leases 1 489 1 576
1 Alternative performance measure, see Appendix for definition 33 Currency hedging strategy
Purpose is to delay effects of currency fluctuations and secure competitiveness • Hedging based on expected EBITA adj. impact1 • Base hedge: 75%/50% on a rolling basis for 6/9 months for major currencies • Extended hedge: 75%/50% of the next 24/36 months if USD and EUR are above defined levels EUR; effective rate above 8.50 USD; gradually at effective rates between 7.50 and 8.50 • Contracts2: 100% hedged • Balance sheet exposure hedged 100% • Net investments in subsidiaries hedged up to 90% of book value in major currencies
Contracted FX hedges with EBITA adj. impact (as of 04.02.20) Hedging effects by segment
USD USD EUR EUR NOK million Q4-19 Q4-18 YTD-19 YTD-18 million rate million rate
Q1-2020 36 8.36 24 9.56 Performance Chemicals -8 -1 -19 1 Q2-2020 35 8.36 23 9.85 Q3-2020 35 8.20 23 9.83 Speciality Cellulose -16 -1 -38 -3 Q4-2020 35 8.25 23 10.06 Other Businesses -8 1 -19 -9 2020 141 8.29 93 9.82 2021 142 8.38 94 10.17 Borregaard -32 -1 -76 -11 2022 100 8.77 64 10.47 2023 8 9.26 5 10.81
1 Hedging done mainly in the Norwegian company 2 Strict definition of contracts applied for 100% hedging (mutually binding agreement in which price, currency, volume and time are defined) 34 Credit facilities, solidity and debt
Debt and undrawn facilities • Long-term credit facilities 31.12.2019 • 1,500 mNOK revolving credit facilities, maturity 2021 3 500 • 400 mNOK 5-year bond issue, maturity 2023 3 250 • 40 mEUR 10-year loan, maturity 2024 3 000 2 750 • 60 mUSD term loan for LT Florida, 2 500 tenor 8.5 years from completion 2 250 1 659 2 000 NIBD1 1,489 mNOK • Short-term credit facilities 1 750 • 225 mNOK overdraft facilities 1 500 3 148 81 • 400 mNOK commercial paper 1 250 485 1 000 • Solidity (covenants) 750 1 085 • Equity ratio1 51.4% (> 25%) 500 250 1 • Leverage ratio LTM 1.59 (< 3.25) 0 Long-term debt Other NIBD Cash & cash Undrawn Total available equivalents facilities
1 Alternative performance measure, see Appendix for definition 35 Alternative performance measures
In the discussion of the reported operating results, financial position and cash flows, Borregaard refers to certain measures which are not defined by generally accepted accounting principles (GAAP) such as IFRS. Borregaard management makes regular use of these non-GAAP measures and is of the opinion that this information, along with comparable GAAP measures, is useful to investors who wish to evaluate the company’s operating performance, ability to repay debt and capability to pursue new business opportunities. Such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure. • Cash flow from operations: Cash flow from operating activities (IFRS) + tax paid +/- net financial items +/- dividend (share of profit) from JV. • EBITA adjusted (EBITA adj.): Operating profit before amortisation and other income and expenses. • EBITA adj. margin: EBITA adj. divided by operating revenues • EBITDA adjusted (EBITDA adj.): Operating profit before depreciation, amortisation and other income and expenses. • Equity ratio: Equity (including non-controlling interests) divided by equity and liabilities. • Expansion investments: Investments made in order to expand production capacity, produce new products or to improve the performance of existing products. Such investments include business acquisitions, pilot plants, capitalised R&D costs and new distribution set-ups. • Other income and expenses: Non-recurring items or items related to other periods or to a discontinued business or activity. These items are not viewed as reliable indicators of future earnings based on the business areas’ normal operations. These items will be included in the Group's operating profit. • Leverage ratio: Net interest-bearing debt divided by last twelve months’ (LTM) EBITDA adj., excluding the impact on EBITDA of IFRS 16 Leases. • Net interest-bearing debt (NIBD): Interest-bearing liabilities, excluding the impact of IFRS 16 Leases, minus interest-bearing assets (see slide 26). • Return on capital employed (ROCE): Last twelve months’ (LTM) EBITA adj., excluding the impact of IFRS 16 Leases, divided by average capital employed based on the ending balance of the last five quarters. Capital employed is defined by Borregaard as the total of net working capital, intangible assets, property, plant and equipment (excluding the impact of IFRS 16 Leases) and investment in joint venture minus net pension liabilities.
36 Important notice
This presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated (’relevant persons’). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Borregaard Group. The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions. This presentation includes and is based, inter alia, on forward-looking information and contains statements regarding the future in connection with the Borregaard Group’s growth initiatives, profit figures, outlook, strategies and objectives. All forward-looking information and statements in this presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for the Borregaard Group and its lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as “expects”, “believes”, “estimates” or similar expressions. Important factors may lead to actual profits, results and developments deviating substantially from what has been expressed or implied in such statements. Although Borregaard believes that its expectations and the presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the presentation. Borregaard is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither Borregaard nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use. This presentation was prepared for the interim results presentation for the fourth quarter of 2019, held on 5 February 2020. 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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