THE BORREGAARD GROUP 1 2 THE BORREGAARD GROUP THE BORREGAARD GROUP 3 Contents The Borregaard Group ................................................... 4 Message from the CEO .................................................. 6 The Board of Directors ................................................... 8 Report of the Board of Directors .................................. 10 Corporate governance ................................................. 16 Sustainability and corporate responsibility .................... 26 The Group Executive Management .............................. 66 Consolidated financial statements ................................ 68 Borregaard ASA – Financial statements ...................... 114 Statement from the Board of Directors ....................... 122 Auditor´s report ......................................................... 123 Historical key figures .................................................. 127 Global reporting intiative ........................................... 128 Independent assurance report on Sustainability reporting .............................................. 132 Alternative performance measures ............................. 134 Group directory ......................................................... 135 4 THE BORREGAARD GROUP THE BORREGAARD GROUP Borregaard operates one of the world’s most advanced biorefineries. By using natural, sustainable raw materials, the Group produces advanced and environmentally friendly biochemicals and biomaterials that can replace oil-based products. BORREGAARD IN A NUTSHELL the feedstock to make biochemicals and biomaterials. Most • A biorefinery with high value-added of the remaining biomass is converted to energy used in • Specialisation in global niches production processes. • Strong innovation ability and continuous improvement • Competence as the main competitive advantage In addition to its biorefinery in Sarpsborg, Borregaard has seven production sites outside Norway dedicated to A BIOREFINERY WITH HIGH VALUE-ADDED producing lignin-based products. The company also has The Group’s business model is closely linked to the sales offices in 16 countries in Europe, Asia, Africa and integrated nature of its biorefinery in Norway, which utilises the Americas serving its global customer base. At the end the three key components of wood – cellulose fibres, of 2019, the Group had 1,1031 full-time equivalent (FTE) lignin and sugars – to produce a diversified portfolio of employees. products. The biorefinery utilises more than 85 percent of BioSolutions BioMaterials Fine Chemicals Global market leader in biopolymers Leading global speciality Leading producer of selected pharma and biovanillin from lignin, with cellulose supplier. Pioneer in intermediates mainly for diagnostics. unique technology and in-depth cellulose fibrils. Large producer of second-generation application competence. bioethanol. 1 See Note 6 to the Consolidated Financial Statements regarding treatment of the joint venture in South Africa. THE BORREGAARD GROUP 5 SPECIALISATION IN GLOBAL NICHES BORREGAARD’S THREE BUSINESS SEGMENTS Borregaard is a supplier of specialised biochemicals and Borregaard has made changes to the Group’s segment biomaterials to a global customer base. The Group’s main reporting and the composition of the business areas, see products are biopolymers and biovanillin from lignin and Note 7 to the Consolidated Financial Statement. speciality cellulose, but the product portfolio also includes second generation bioethanol, pharma intermediates and BioSolutions develops, produces and sells biopolymers and cellulose fibrils. biovanillin from lignin. Biopolymers are used as binding and dispersing agents in a wide range of end-market Borregaard’s niche products serve applications in a wide applications, such as construction, industrial binders, range of end-markets including construction, agriculture, agrochemicals and batteries. Biovanillin is supplied to food and beverages, transport and pharmaceuticals. The flavour and fragrance companies, as well as to the food Group’s strong market positions have been developed and beverage industry. In addition, BioSolutions carries out through in-depth understanding of its markets, production of trading activities in chemicals which are either linked to advanced and specialised products and local presence in the lignin-based products or have previously been produced by form of a global sales and marketing organisation. Borregaard. COMPETENCE AS THE MAIN COMPETITIVE ADVANTAGE BioMaterials develops, produces and sells speciality Borregaard is a competence-driven company with cellulose mainly for use as a raw material in the production production, research and development (R&D) and sales of cellulose ethers, cellulose acetate and other speciality and marketing as its core competencies. To maintain products. BioMaterials also includes cellulose fibrils for its leading position, Borregaard has a strong focus on industrial applications, which are in the market introduction training programmes and cooperation between the various phase. disciplines. Fine Chemicals consists of pharma intermediates and Borregaard has a leading research centre combining wood second-generation bioethanol. chemistry and fine chemistry, focusing on the development of new or improved products, applications and production technologies. The Group had 97 employees in R&D as of 31 December 2019. KEY FIGURES 2 2 EMISSIONS2 2 TO WATER 2 ENERGY2 CONSUMPTION EMISSIONSEMISSIONS TO WATER TO WATER ENERGYENERGY CONSUMPTION CONSUMPTION EBITDA ROCE OPERATING REVENUES EBITDAEBITDA ROCE ROCE OPERAOPTINGER ARTINGEVENU R2EEVSENUES 2 ROCE2 SARPSBORG SITE BORREGAARD GROUP ROCE SARPSBORGSARPSBORG SITE SITE BORREGAARDBORREGAARD GROUP GROUP ROCE NOK mill % NOK mill NOK mill % % % NOK mill % NOK mill CAGR 5.0% mt/day kg/day % NOK mill CAGR 5.0% CAGR 5.0% mt/day mt/day kg/day kg/day GWh % 5,063 GWh % 5,063 5,063 GWh % 1,400 22.8% 5,000 4,785 1,400 1,400 22.8% 22.8% 5,000 5,000 4,785 4,785 22.7% 25% 25 4,618 100 22.7% 22.7% 25% 12,525%25 252,000 4,61822 4,618 100 100 12,5 12,52,000 2,000 22 22 4,492 4,492 4,492 21.7% 21.7% 21.7% 1,200 4,164 1,200 1,200 1,800 4,164 4,164 1,800 1,800 18.2% 18.9% 19.9% 18.2% 18.2% 18.9% 19.9%18.9% 19.9% 20.5% 20.5% 20.5% 19.1% 4,000 19.1% 19.1% 4,000 4,000 20% 20 80 20% 1020%20 20 80 80 10 10 1,600 1,600 1,600 19.5% 1,000 15.6% 1,000 1,000 15.6% 15.6% 20 19.5% 20 20 19.5% 1,400 1,400 1,400 3,000 15% 15 3,000 3,000 800 15% 15 800 80060 15% 7,515 1,200 60 60 7,5 7,5 1,200 1,200 12.7% 12.7% 12.7% 10.9% 1,000 10.9% 10.9% 18 1,000 1,000 18 18 600 600 600 2,000 10% 10 2,000 2,000 10% 10 40 10% 5 10 800 40 40 5 5 800 800 16.5% 16.5% 16.5% 400 400 400 600 16.9% 600 600 16.9% 16.9% 16 16 16 5% 1,000 5% 5% 5 1,000 1,000 5 20 2,55 400 20 20 2,5 2,5 400 400 200 200 200 15.6% 15.6% 15.6% 200 200 200 0 0% 0 0 0% 0% 0 0 0 0 0 0 0 0 0 14 0 0 0 0 0 0 14 14 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2015 20172016 20182017 20192018 2019 2015 2016 2015 20172016 20182017 20192018 2019 2015 2016 2015 20172016 20182017 20192018 2019 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2013 20142013 20152014 20162015 20172016 2017 2013 20142013 20152014 20162015 20172016 2017 2011 2012 2011 20132012 20142013 20152014 2015 EBITDA2 EBITDA margin2 (%) ROCE2 EBITDA2 EBITDA2 EBITDA marginEBI2 TD(%)A margin2 (%) ROCE2 ROCE2 OD Electricity OD OD Electricity Electricity Minimum target over a business cycle Minimum targetMinimum over a targetbusiness over cycle a business cycle Copper (kg/day) Heat Copper (kg/day)Copper (kg/day) Heat Heat 2 Alternative performance measures, see page 134 for definition. CASH FLOW SALES REVENUES NOx AND SO EMISSIONS SO EMISSIONS CO EMISSIONS CASH FLOW SALES REVENUES CASH FLOWNOx AND SO2 EMISSIONS SO2 EMISSIONS SALES REVENUESCO2 EMISSIONS NOx AND SO2 EMISSIONS2 SO2 EMISSIONS2 CO2 EMISSIONS2 FROM OPERATING ACTIVITIES EARNINGS PER SHARE BY GEOGRAPHICAL AREA 2019 FROM FROMOPERATINGBORREGAARD OPERATING ACTIVITIES GROUP ACTIVITIES EARNINGSEARNINGSSARPSBORG PER SHARE PER SITESHARE BY GEOGRAPHICALBY GEOGRAPHICALBORREGAARD AREA GROUP 2019AREA 2019 BORREGAARDBORREGAARD GROUP GROUP SARPSBORGSARPSBORG SITE SITE BORREGAARDBORREGAARD GROUP GROUP NOK mill NOK RoW 1% NOK mill NOKmt/year mill NOK NOKmt/year mt/yearRoW 1% RoW 1% mt/year mt/year mt/year mt/year mt/year mt/year 1,200 6 1,200 1,200400 6 1,6006 160,000 400 400 1,600 1,600 160,000 160,000 5.66 5.665.55 5.66 1,081 5.55 Americas 28% 1,081 1,081 5.55 Americas 28%Americas 28% 1,400 140,000 1,400 1,400 140,000 140,000 1,000 5 4.76 1,000 1,000 5 5 4.76 4.76 300 1,200 300 300 1,200 1,200 120,000 4.17 4.17OBS årstall4.17 120,000 OBS årstall OBS årstall 120,000 780 780 780 3.86 800 4 3.86 800 800 4 3.86 4 i or i or i or 697 697 697 1,000 100,000 1,000 1,000 100,000 100,000 Europe 50% Europe 50%Europe 50% 600 563 558 3 600 563600200 563 558 558 3 3 800 80,000 200 200 800 800 80,000 80,000 600 60,000 600 600 60,000 60,000 400 2 Asia 21% 400 400 2 2 Asia 21% Asia 21% 100 400 40,000 100 100 400 400 40,000 40,000 200 1 200 200 1 1 200 20,000 200 200 20,000 20,000 0 0 0 00 0 0 0 0 0 0 0 0 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 201620152013 201720162014 201820172015 201920182016 20192017 2015 2016201595 972017201699 01 201803201705 072019201809 11 201913 15 17 2013 2014 2015 2016 2017 2013 20142013 20152014 20162015 20172016 2017 95 97 99 9501 9703 9905 0107 0309 0511 0713 0915 1117 13 15 17 2013 20142013 20152014 20162015 20172016 2017