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Borregaard Key Figures – Q2

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Borregaard Key Figures – Q2 2 N D QUARTER 2019 Oslo, 16 July 2019 Agenda • Per A Sørlie, President & CEO • Highlights • Business areas • Projects update • Outlook • Per Bjarne Lyngstad, CFO • Financial performance 2 Highlights – 2nd quarter 2019 • EBITA adj. 1 179 mNOK (164 mNOK) • Favourable product mix for Performance Chemicals • Higher wood costs affecting Speciality Cellulose • Continued strong improvement in Ingredients • Positive net currency impact 1 Alternative performance measure, see Appendix for definition 3 Performance Chemicals markets – Q2 2018 NOK per mtds 1 ‘000 mtds 1 Average gross sales price Sales volume 2019 6 500 150 122125 122 125 114 116 6 000 107 5 608 5 444 100 5 500 5 227 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 Q1 Q2 Q3 Q4 • Favourable product mix • Sales volume 2% higher vs Q2-18 • Lower prices in sales currency to concrete admixtures • Sales development in certain markets slower than expected • Positive FX effects • Volume growth for Industrial products and Specialities, Construction volumes slightly lower vs Q2-18 • Florida plant sales volume in accordance with the ramp-up plan 1 Average sales price and sales volume reflect 100% of sales and volume from the J/V in South Africa. 4 1 Average sales price is calculated using actual FX rates, excluding hedging impact. Speciality Cellulose markets – Q2 2018 NOK per mt 1 ‘000 mt Average gross sales price Sales volume 2019 11 500 50 42,4 40,0 39,1 11 000 40 37,7 10 645 34,5 33,2 10 473 10 485 10 439 10 500 30 10 105 10 179 10 000 20 9 500 10 9 000 0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q1 Q2 Q3 Q4 • Slightly lower prices for certain grades vs Q2-18, partly compensated by improved product mix • High sales volume of speciality cellulose • High deliveries of bioethanol • Positive FX impact 1 Average sales price is calculated using actual FX rates, excluding hedging impact. 5 Ingredients & Fine Chemicals markets – Q2 2018 2018 mNOKmNOKmNOK mNOKmNOKmNOK Ingredients - sales revenues 2019 Fine Chemicals - sales revenues 2019 146 150 139 138 100 125 116 113 80 73 104 75 100 65 54 55 50 75 50 50 25 25 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 • Ingredients • Fine Chemicals • High sales prices for wood based vanillin • Low deliveries • Favourable product mix vs Q2-18 • Lower average prices in sales currency vs Q2-18 6 Capacity increase for wood based vanillin • Capacity increase at least 250 tonnes • Part of the increase will be realised before end 2019 • Construction to start H2-19, completion H1-21 • Debottlenecking of existing facility • Capex 130 mNOK 7 Increased utilisation of residuals as bioenergy • Residuals from production processes at the Sarpsborg site are used as bioenergy • Removal of water and salts before burning will increase efficiency and capacity • Investment cost 131 mNOK, support from Enova mNOK 46,2 (net capex mNOK 85) • Completion 2021 • Energy savings 20 GWh per year, longer term potential 34 GWh • Reducing CO₂ emissions by 1,200 tonnes, longer term 1,400 tonnes 8 Norway lignin upgrade/logistics projects Sarpsborg upgrade/specialisation • Additional dryer with packaging capacity • Improved solution for logistics of liquid materials • Capex ≈10% below 500 mNOK budget • Annual cost savings > 40 mNOK, gradual realisation from 2020 • Several further benefits • In operation from July 2019 New lignin warehouse at the Port of Borg • New modern warehouse for dried lignin • Built, owned and operated by the Port of Borg (IFRS 16 Leases effects) • In operation from June 2019 Increased depreciation (total both projects) • 15 mNOK in H2-19 9 Restructuring of German lignin operation • Drying capacity utilised for balancing liquid volumes from Norway and other European sources Sales Office Düsseldorf • Increased drying capacity in Norway reduces the need for drying in Germany • Operation will be aligned with future needs Plant • Reduced logistics costs and manning Karlsruhe • Annual cost savings ≈20 mNOK from 2020 1 • Restructuring costs 16 mNOK recognised in Q2-19 1 In addition to the expected cost savings for the lignin operation upgrade and specialisation in Norway 1 0 Outlook • Performance Chemicals • 2019 sales volume forecast to increase by ≈5% • Continued strong competition and price pressure for lignin products to concrete admixtures expected to be compensated by diversification and specialisation • Fixed costs and depreciation for the Florida plant expected to be ≈45 mNOK above 2018 • In H2-19, depreciation will increase by ≈15 mNOK related to the upgrade of the lignin operation and the new warehouse in Norway • Speciality Cellulose • Average cellulose price in sales currency expected to be in line with 2018 level • Improved product mix will compensate for weaker prices for acetate and textile cellulose, however a more specialised product mix implies a higher manufacturing cost • Wood prices for H2-19 agreed with most suppliers; wood costs reduced vs H1-19 and slightly above H2-18 • Q3 sales volume forecast expected to be lower vs Q2-19, volume of highly specialised products expected to be in line with Q2-19 • Other Businesses • Ingredients expected to continue to deliver strong results in H2-19, driven by the positive market trend for wood based vanillin • No major changes expected in market conditions for Fine Chemicals • Sales will gradually increase for Cellulose Fibrils, but long lead-times for conversion of sales prospects. Remaining grant from EU Horizon 2020 1 will cover a smaller share of costs than in previous years 1 The Exilva 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. 1 1 FINANCIAL PERFORMANCE Q2-19 Borregaard key figures – Q2 1 %%% 1 2018 mNOKmNOKmNOK Operating revenues 2018 mNOKmNOKmNOK EBITA adj. 2018 EBITA adj. margin 2019 2019 2019 20 1 500 200 14,5 13,7 15 12,6 7,7 1 250 10 12,6 13,4 179 150 177 1 340 1 5 164 1 250 1 1 000 157 1 219 1 1 217 1 1 199 1 145 1 150 1 0 NOKNOKNOK Earnings per share 750 100 Q1 Q2 Q3 Q4 6 Cumulative 4,76 94 3,96 500 4 50 2,69 250 2 1,37 2,48 1,26 0 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 • Revenues 12% above Q2-18 • EBITA adj. 1 increased to 179 mNOK for the Group • Performance Chemicals and Other Businesses results improved vs Q2-18, whereas Speciality Cellulose had a decline • Positive FX effects in all segments • EPS at NOK 1.22 (NOK 1.32) • 16 mNOK accrued as Other expenses 1 for restructuring of German operation 1 Alternative performance measure, see Appendix for definition 1 3 Performance Chemicals key figures – Q2 mNOKmNOKmNOK 2018 600 2019 500 618 600 • Revenues 8% above Q2-18 571 559 555 400 552 300 • 2% higher sales volume 200 100 • Positive net FX impact 0 Operating revenues Operating Q1 Q2 Q3 Q4 mNOKmNOKmNOK 2018 125 2019 • Favourable product mix 1 100 • Higher fixed costs and depreciation for the Florida plant 115 107 75 102 87 Higher sales volume 50 • 55 EBITA adj. EBITA 25 42 • Lower prices in sales currency to concrete admixtures 0 Q1 Q2 Q3 Q4 • Positive net FX impact 2018 1 %%% 2019 25 20,7 20 17,9 15 17,3 9,8 1 10 14,5 7,6 • EBITA adj. margin close to Q2-18 5 0 EBITA adj. margin adj. EBITA Q1 Q2 Q3 Q4 1 Alternative performance measure, see Appendix for definition 1 4 Speciality Cellulose key figures – Q2 mNOKmNOKmNOK 2018 500 2019 400 482 • Revenues 13% above Q2-18 434 300 427 427 392 381 200 • High sales volume 100 • Positive FX effects 0 Operating revenues Operating Q1 Q2 Q3 Q4 mNOKmNOKmNOK 2018 80 2019 • Increased wood costs 1 60 76 • High sales volume 67 64 40 50 Improved, but more costly product mix 48 • 20 35 EBITA adj. EBITA • High deliveries of bioethanol 0 Q1 Q2 Q3 Q4 • Positive net FX impact 2018 1 %%% 25 2019 19,9 20 14,7 15,7 15 11,7 1 10 • EBITA adj. margin declined vs Q2-18 5 8,9 10,0 0 EBITA adj. margin adj. EBITA Q1 Q2 Q3 Q4 1 Alternative performance measure, see Appendix for definition 1 5 Other Businesses key figures – Q2 mNOKmNOKmNOK 2018 300 2019 250 274 256 253 200 239 223 212 150 • Revenues 21% above Q2-18 100 • Higher sales in Ingredients 50 Operating revenues Operating 0 Q1 Q2 Q3 Q4 mNOKmNOKmNOK 2018 40 2019 • IngredientsIngredients: Strong result from higher sales prices for wood based vanillin and a favourable product mix vs Q2-18 30 Fine ChemicalsChemicals: Weaker result from lower deliveries and lower 1 • 20 average price in sales currency 35 10 24 • Cellulose Fibrils: Slightly improved result; higher sales and improved 14 2 2 EBITA adj. EBITA productivity more than compensated for reduced cost coverage 0 -2 • Corporate costs were in line with Q2-18 -10 -5 Q1 Q2 Q3 Q4 • Positive net FX effects for Other Businesses 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 and innovation programme 1 6 under grant agreement No 709746. Currency impact 2018 mNOKmNOKmNOK 2 1 3 Hedging effects on EBITA adj. 2019 Borregaard’s currency basket 10 106 104,4 104,7 5 3 104 102,8 0 102 -1 100,8 -5 -6 100 -7 98,8 -10 -8 97,6 98 -15 -13 -20 96 Q1 Q2 Q3 Q4 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 • Net FX EBITA adj.
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