Borregaard Asa · OSL:BRG

Borregaard Asa — Investor Presentation (July 2023)

69 slides from Borregaard Asa's investor presentation, July 2023

1. Slide 1: Business model, businesses & strategy

   Business model, businesses & strategy July 2023

2. Slide 2: Important notice

   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 n

3. Slide 3: Contents

   Contents • Borregaard’s business model and strategy 4 • Sustainability and innovation 12 • BioSolutions – Biopolymers and Biovanillin 17 • BioMaterials – Speciality cellulose and Cellulose fibrils 34 • Fine chemical intermediates and Bioethanol 47 • Financials 49 3

4. Slide 4: Borregaard is a global leader in biochemicals

   Borregaard is a global leader in biochemicals High value added through full raw material utilisation Borregaard’s biochemicals are sustainable and environmentally friendly substitutes for petrochemicals 4

5. Slide 5: Operates one of the world's most advanced biorefineries

   Business model & strategy Operates one of the world’s most advanced biorefineries Integration models: Own integrated Partner integrated Independent Integrated production system serving diverse markets End markets 2022 Chemical/ Construction Construction 22% Others Chemicals/other 35% 28% Agriculture

6. Slide 6: Global niche player with a market driven organisation

   Business model & strategy Global niche player with a market driven organisation BioSolutions BioMaterials Fine Chemicals (58%¹) (33%¹) (9%¹) Largest supplier, technology leader in lignin-based Leading global speciality cellulose Leading producer of fine chemical biopolymers with global markets, only

7. Slide 7: The specialisation strategy

   Business model & strategy The specialisation strategy The Borregaard specialisation strategy Specialisation in global niches Strong innovation efforts and Competence as the main continuous improvement competitive advantage  Markets with high barriers to  Business driven innovation model  Competen

8. Slide 8: Key strategic considerations

   Business model & strategy Key strategic considerations Increasing momentum for bio-based products Consumer and investor attention drives demand for greener solutions  EU Green Deal and Taxonomy  Science Based Targets initiative’s Business Ambition for 1.5°C campaign  Environmental investments str

9. Slide 9: Strategic priorities

   Business model & strategy Strategic priorities Increased specialisation and value growth  Specialisation through innovation and market development  Leverage high-value lignin raw material base in biopolymers and biovanillin  Enhance product mix in speciality cellulose  Development of the cellulo

10. Slide 10: Borregaard actively seeking to invest in biobased start-ups

    Business model & strategy Borregaard actively seeking to invest in biobased start-ups Selection criteria  Conversion of biobased raw materials to chemicals/materials  Strong ESG/sustainability profile  Specialisation potential  Synergies with Borregaard’s existing business/competence  Significa

11. Slide 11: Investment in Alginor – a «blue» biorefinery concept

    Business model & strategy Investment in Alginor – a «blue» biorefinery concept Alginor  Marine biotech company in development phase based in Haugesund, Norway  Core technology: Sustainable harvesting and biorefining of kelp  High-value ingredients to global markets for pharmaceutical and nutraceu

12. Slide 12: Sustainability – integral part of market offering

    Sustainability Sustainability – integral part of market offering RAW MATERIALS PROCESSES PRODUCTS Natural, renewable, sustainable Efficient and sustainable production Sustainable raw materials and value chain biochemicals Sustainable and certified wood Reduced emissions improve LCA2) Products add su

13. Slide 13: Alignment with UN's Sustainable Development Goals

    Sustainability Alignment with UN’s Sustainable Development Goals Contribution to market growth Variety of green solutions SUSTAINABLE Cxvcxv FOOD SUSTAINABLE SUSTAINABLE SUSTAINABLE SUSTAINABLE SUSTAINABLE SUSTAINABLE BUSINESS INDUSTRY RAW MATERIAL PRODUCTION BIOREFINERY RAW MATERIAL cxvcxv PRODUCTI

14. Slide 14: Climate change and the environment – targets and ratings

    Sustainability Climate change and the environment – targets and ratings Science Based Targets for GHG emissions approved by SBTi  Targeted reductions in GHG emissions (scope 1 and 2):  42% absolute reduction by 2030 (base year = 2020)  Net-zero target, 90% absolute reduction by 2050  Targets in

15. Slide 15: Research & development

    Innovation Research & development  ~15% of Borregaard’s revenues come from new products1)  Innovation Management Teams  ~90 employees in R&D – of which 72 at the research centre in Sarpsborg – 29 have a PhD  R&D and innovation spending 2.8% of revenues in 20222)  IP strategies for each BU and m

16. Slide 16: Business driven innovation model

    Innovation 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-work with (

17. Slide 17: BioSolutions

    BioSolutions Market position Key attractions  Largest supplier of lignin  A sustainable and broad product portfolio  Only supplier of wood based vanillin  Large and diverse customer base  Unique technical and application expertise  High barriers to entry Production  Norway, USA, Germany, Czec

18. Slide 18: Biopolymers: Lignin – a sustainable and flexible raw material

    BioSolutions Biopolymers: Lignin – a sustainable and flexible raw material Product performance depends on the pulping process and the raw material Biochemicals Sulphite pulping process  Versatile lignin used in a variety of products/applications Incineration Lignin  Quality depends on the chemical

19. Slide 19: Diversification: 600 products to 2,800 customers

    BioSolutions Diversification: 600 products to 2,800 customers BioSolutions properties and applications Revenues by end-market and region  Ceramics Revenue by end-market 2022 Sales distribution 2022 Binding agent  Dust solutions RoW 1%  Feed Other Construction  Granulated limestone end-markets 19

20. Slide 20: Current global lignin supply

    BioSolutions Current global lignin supply By Sales volume Others Borregaard Russia Burgo Global lignin supply RYAM ~900-950 kmtds Domsjø Nippon Sappi 1) Borregaard manufacturing facilities Others 20 Source: Borregaard estimates

21. Slide 21: Significant specialisation and value growth over time

    BioSolutions Significant specialisation and value growth over time Sales volume (‘000 mtds1)) Sales revenues (mNOK) 300 2 250 2 000 250 1 750 200 1 500 1 250 150 1 000 100 750 500 50 250 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

22. Slide 22: Biopolymers in agriculture

    BioSolutions Biopolymers in agriculture Plant nutrition Crop protection Seed coating Feed Micronutrients Soil Biostimulants Granulated Pesticides Biological pest Encrusted and Animal feed conditioner limestone control pelleted seeds  Complexing  Organic carbon  Nutrient use  Binder  Dispersant

23. Slide 23: Lignin in lead batteries

    BioSolutions Lignin in lead batteries Conventional vehicle Micro-hybrid Hybrid Electric vehicle Automotive: Flooded battery as start Absorbent Glass Mat (AGM) AGM and EFB as start/stop Flooded battery for hotel battery and Enhanced Flooded battery function1) Battery (EFB) as start/stop battery Fuel

24. Slide 24: Innovation strategy

    BioSolutions Innovation strategy Priorities  Specialisation and value growth  High-value and advanced applications  Unique and tailor-made solutions  Increase value of Florida product portfolio Competitive edge  Unique competence base  Softwood raw material base and advanced technology  Well

25. Slide 25: Sustainability – a competitive edge offering new opportunities

    BioSolutions Sustainability – a competitive edge offering new opportunities Supplier of green alternatives to fossil-based products World leader in sustainable lignin-based biopolymers and biovanillin Well-documented competitive edge in sustainability  Life Cycle Assessments (LCA) and Environmental

26. Slide 26: Agriculture – suspension concentrates

    BioSolutions Agriculture – suspension concentrates  Suspension concentrates is the largest and fastest growing segment in liquid crop protection products  Lignin-based biopolymers traditionally used in granulated products  Customers’ perception of the biopolymer colour prevented use in aqueous fo

27. Slide 27: Agriculture – suspension concentrates and water dispersible granules

    BioSolutions Agriculture – suspension concentrates and water dispersible granules  Novel product range for crop protection  High performance binders and dispersants for liquid and granulated formulations based on proprietary technology  Superior performance in formulations with high electrolyte (

28. Slide 28: Vegetable leather tanning

    BioSolutions Vegetable leather tanning Chrome used in leather tanning since 1800’s  Poor environmental profile Leather tanning industry gradually changing to a greener technology  Returning to vegetable tanning Sustainability offering new opportunities Borregaard biopolymers part of the sustainabl

29. Slide 29: Textile industry - Pigments and inks

    BioSolutions Textile industry - Pigments and inks Challenging sustainability profile  Fossil-based dispersants widely used Industry changing to new and environmentally friendly technologies and dispersants  Focus on water reduction and green additives  Growing trend towards digital textile printi

30. Slide 30: Lead batteries – energy storage systems

    BioSolutions Lead batteries – energy storage systems Batteries play a crucial role in decarbonisation  Electrification of the transportation sector  Energy storage systems (ESS) for renewable energy  +200%1) growth in period 2020-2030 ESS – a growth opportunity for lead batteries  Need for alter

31. Slide 31: LignoTech Florida

    BioSolutions LignoTech Florida The venture  Located at Rayonier Advanced Materials’ (RYAM) Fernandina Beach softwood sulphite pulp mill  Borregaard (55%) and RYAM (45%) ownership  Borregaard’s know-how and technology Expansion project in two phases  Phase one (2018) represents 100,000 mtds capac

32. Slide 32: Positive trend for Borregaard's wood-based vanillin

    BioSolutions Positive trend for Borregaard’s wood-based vanillin Vanilla Oil based Plant based vanillin beans vanillin & ethyl vanillin Raw material Beans Ferulic acid Eugenol from Lignin from Guaiacol from Guaiacol Guethol from clove wood creosote/tar (vanillin) (ethyl vanillin) bran/straw Natural/

33. Slide 33: Biovanillin – well positioned for growth

    BioSolutions Biovanillin – well positioned for growth Strong demand growth for bio-based vanillin  Consumer preferences  Sustainability Competitive edge  Global market leader in bio-based vanillin  Advanced and attractive flavour profile  >90% reduced carbon footprint vs fossil-based vanillin 

34. Slide 34: Speciality cellulose

    BioMaterials Speciality cellulose Market position  Strong positions in Europe and Asia within high-end niches Production  Sarpsborg, Norway with capacity of 160,000 metric tonne Focused applications Market growth1)  Ethers ≈4%  Acetate 0%  Nitrocellulose 0%  Casings 3-4% High quality specialit

35. Slide 35: Increasing specialisation

    BioMaterials The speciality cellulose market Total global cellulose market Speciality cellulose market ~1.6 MMT Casings 3% Sponges 1% Cellophane 4% Chemic Construct Speciality MCC 11% al/Othe cellulose ion rs Acetate Dissolving 35% pulp Viscose (textile) 6 to7 NC 8% 28% Increasing specialisation MMT

36. Slide 36: Speciality cellulose market

    BioMaterials Speciality cellulose market Market Annual Speciality cellulose size ‘000 growth Segments Applications mt (2022) 2021-2022 demand (1.6 million mt1)) Acetate Cigarette filters, plastics, LCD, 550 0% Casings 3% Chemic yarn Construct Sponges 1% Highly specialised Cellophane 4%al/Othe Ethers

37. Slide 37: The speciality cellulose industry

    BioMaterials The speciality cellulose industry Others Sales volume by producer (2022) The speciality cellulose market is ≈1.6 million tonnes1)  Top 5 producers have ≈80% market share RYAM Borregaard  Kraft or sulphite pulping process  Hardwood and softwood raw material Sappi  Some cotton linter

38. Slide 38: Speciality cellulose suppliers

    BioMaterials Speciality cellulose suppliers  12 players supplying 1.6 million mt speciality cellulose  Top 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 RYAM. Temiscaming So

39. Slide 39: Cellulose ethers – water soluble polymers with high barriers to entry

    BioMaterials Cellulose ethers – water soluble polymers with high barriers to entry  The market for water soluble polymers consists of Water soluble polymers Cellulose cellulose ethers, natural and synthetic products ethers sales >7.2 million tonnes3)  Cellulose ethers have no direct substitutes wi

40. Slide 40: Cellulose ethers – solid growth and attractive opportunities

    BioMaterials Cellulose ethers – solid growth and attractive opportunities Cellulose ethers Others market segments Current demand for cellulose for ethers is 480,000 tonnes  Projected annual growth ≈4% Pharma/  Highest growth in segments requiring high viscosity pulp personal Construction  The alt

41. Slide 41: Borregaard well positioned for growth and further specialisation

    BioMaterials Borregaard well positioned for growth and further specialisation Borregaard position ‘000 tonnes  A major and growing share of Borregaard’s cellulose sold to cellulose ethers 700 producers  Complete portfolio of ether cellulose grades with a high degree of tailor-making 600  Most reg

42. Slide 42: Ice Bear – continued growth and new applications

    BioMaterials Ice Bear – continued growth and new applications Strategic initiative for high purity cellulose in all market segments  Maintain existing market positions in cellulose acetate  Enable further specialisation in all target segments Sustainability trends create opportunities for Ice Bear

43. Slide 43: Cellulose fibrils

    BioMaterials Cellulose fibrils Global leader in micro-/nanofibrils  Competitors in pilot plant or captive use phase Large scale plant with 1000 tonnes dry capacity  Use cellulose as raw material  Zero emissions Embryonic but fast-growing market Product is a network of micro and nano fibrils with

44. Slide 44: Cellulose fibrils – Exilva

    BioMaterials Cellulose fibrils – Exilva  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 biobas

45. Slide 45: Cellulose fibrils – growing pipeline and customer base

    BioMaterials Cellulose fibrils – growing pipeline and customer base Customers and plant trials 119 regular customers 225 200 Regular customers  Promising development within selected applications 175 Plant trials 150  Corrugated board 125 100  Coatings 75 50  Agrochemicals 25 0 Dec 16 Dec 17 Dec

46. Slide 46: Sales distribution 2022

    BioMaterials Sales distribution 2022 Borregaard is positioned in high-end segments in Europe and Asia, with strong and long-lasting customer relationships Volume split % Geographical split (sales revenues) RoW 100% 6% 90% 15% Europe 62% 80% Asia 32% 70% 60% 50% Customer base and concentration 40% 85

47. Slide 47: Fine Chemicals

    Fine Chemicals Fine chemical intermediates Bioethanol Market position Market position  Leading producer of intermediates for contrast agents  Leading producer of second-generation bioethanol Production Production  Sarpsborg, Norway  Sarpsborg, Norway Products Products  C3 aminodiols  Pure and

48. Slide 48: GHG emissions

    Fine Chemicals Sustainability Favourable climate footprint Fuel – production and use GHG emissions1) 7x Borregaard 2G bioethanol Gasoline 2nd generation bioethanol vs petroleum-based fuel  Increased demand in different countries due to incentives 48 1) GHG emissions “cradle to grave”, third party a

49. Slide 49: Financial objectives and dividend policy

    Financials Financial objectives and dividend policy Financial objectives  ROCE²⁾ >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 key financial ratios correspondi

50. Slide 50: Value creation since IPO

    Financials Value creation since IPO mNOK 25 000 20 000 15 000 CAGR Share price, including reinvestment of 24.3% 10 000 dividend Enterprise value = 5 000 18.2% market cap + net debt 0 Net debt Market capitalisation Accumulated dividend 50

51. Slide 51: Key figures 2019 – 2023 (LTM)

    Financials Key figures 2019 – 2023 (LTM)1 Operating revenues EBITDA2 & EBITDA2 % ROCE2 and EPS3 mNOK mNOK % % NOK ROCE % 2 000 23,6 23,9 24,1 25 8 000 25 EPS 15 7 335 1 770 6 881 21,2 7 000 1 750 1 643 19,9 20 20 18,8 12 5 805 1 500 18,1 6 000 1 372 5 328 16,1 5 063 5 000 1 250 1 132 15 15 9 1 007 9

52. Slide 52: Key segment figures 2019 – 2023 (LTM)

    Financials Key segment figures 2019 – 2023 (LTM)1 BioSolutions BioMaterials Fine Chemicals mNOK % mNOK % mNOK % EBITDA2 & EBITDA %2 EBITDA & EBITDA % EBITDA & EBITDA % 1 200 50 600 50 600 50 509 42,9 986 1 000 942 928 500 500 40 40 40 36,4 427 33,5 800 400 400 31,0 29,7 647 30 30 333 30 632 318 600

53. Slide 53: Key cost items 2018-2022

    Financials Key cost items 2018-2022 % of total cost 100% • 75%-85% sourced from Norway, the rest mainly from Sweden Wood 12% 13% 11% 9% 9% • Annual price and volume contracts, mid-year adjustments occur 11% 10% 8% 11% 16% • Includes inbound logistics, ~30% of wood cost 80% • Energy consumption: Heat

54. Slide 54: Sensitivity on EBITDA

    Financials Sensitivity on EBITDA¹⁾ Sensitivity of 1% change (based on 2022)  Global presence, diversified product portfolio and GDP- Sales price BioSolutions driven demand reduce market risk Sales price BioMaterials  Oil price affects demand and competition in certain markets, but main effect hist

55. Slide 55: Resilient specialisation strategy in the face of a potential recession

    Financials Resilient specialisation strategy in the face of a potential recession Specialised products less exposed to cyclicality Reduced exposure to cyclical markets over time  Sales to concrete admixtures reduced by >50%  Fully specialised cellulose business A recession will affect demand in ge

56. Slide 56: FX impact and policy

    Financials FX impact and policy mNOK Hedging gain/losses on EBITDA1 Currency hedging strategy 0  Purpose is to delay effects of currency fluctuations and secure competitiveness -29 -50  Hedging based on expected net cash flow (EBITDA2) 3 -100 -76  Base hedge - 75%/50% on a rolling basis for 6/9 m

57. Slide 57: Cash flow, NWC and investments 2019 – 2023 (LTM)

    Financials Cash flow, NWC and investments 2019 – 2023 (LTM)1 Cash flow from operating activities Average NWC Investments mNOK % mNOK mNOK 22,7 23,3 1 800 1 750 22,5 24 900 1 600 20,3 1 687 1 500 18,6 20 750 701 1 400 664 1 408 1 250 583 1 200 1 298 16 600 1 165 503 303 243 1 000 1 000 1 082 464 12 4

58. Slide 58: Continuous reduction of emissions and effluents

    Financials Continuous reduction of emissions and effluents 2030 environmental targets  42% reduction in CO2 emissions from 2020  Electrification, energy conservation, innovative heat recovery  30-50% reduction in effluents to water (COD) from 2020  Process improvements and wastewater incineratio

59. Slide 59: Environmental investment of 230 mNOK at the biorefinery in Norway

    Financials Environmental investment of 230 mNOK at the biorefinery in Norway Improved environmental footprint  Removing absolute dependency on LNG  30,000 tonnes annual reduction of CO2 emissions  Part of investment plan announced at CMD Increased energy flexibility and efficiency  Significant c

60. Slide 60: Borregaard's transition plan to cut scope 1 and 2 GHG emissions

    Financials Borregaards transition plan to cut scope 1 and 2 GHG emissions 60

61. Slide 61: Significant potential for further specialisation and value growth

    Financials Significant potential for further specialisation and value growth  Continuous specialisation and product mix improvements  Innovation portfolio and sustainability offering new opportunities  Exploit full potential of previously completed expansion investments  Additional expansion opp

62. Slide 62: Specialisation investment in BioSolutions

    Financials Specialisation investment in BioSolutions 70 mNOK expansion investment in lignin-based biopolymers  Debottlenecking of existing facilities at the Sarpsborg biorefinery  Volume expansion for highly specialised products  Low-risk investment with known technology to Borregaard  Reduction

63. Slide 63: Specialisation investment in BioSolutions

    Financials Specialisation investment in BioSolutions 100 mNOK expansion investment  1,000 mtds1/year demonstration plant at Sarpsborg biorefinery  Completion mid-2025, gradual start-up from H2-24 New green technology platform for high-end applications  Next generation lignin-based biopolymers  G

64. Slide 64: Investment forecast 2022-2025

    Financials Investment forecast 2022-2025 Replacement investments mNOK Investments forecast1)  Targeted CO2 and COD reductions explain above target 1 000 900 900 level investments +/-100 +/-250 750  Supporting specialisation and value growth investments +/-250 800 275 275 Expansion investments 225

65. Slide 65: Impact from expansion investments on track

    Financials From CMD 2020 Impact from expansion investments on track Runrate LTM1)  Significant improvement from lignin upgrade in Norway  Biovanillin, Ice Bear and Fine Chemicals slightly ahead of targets  Improvement in Florida and cellulose fibrils, but still below targets mNOK 2023 targets Run

66. Slide 66: Increasing EPS, progressive dividends and solid financial position

    Financials Increasing EPS, progressive dividends and solid financial position NOK per share Earnings per share (EPS) & dividend 8,95 9,00 Extraordinary dividend 8,00 Ordinary dividend 6,95 7,00 EPS 5,55 5,66 6,00 4,78 5,00 4,19 4,38 3,86 4,00 3,35 3,34 2,25 2,76 3,00 1,75 2,00 2,75 3,25 1,00 2,00 2,

67. Slide 67: Capital structure – credit facilities and maturities

    Financials Capital structure – credit facilities and maturities Long term credit facilities Leverage ratio and loan capacity mNOK  Revolving credit facilities (RCF) in July 2020, 4 000 maturity 2025 and 2027, margin linked to sustainability targets 3 500 2.25 * EBITDA  60 mUSD term loan for LignoT

68. Slide 68: Highly experienced and proven management team

    Management Highly experienced and proven management team CEO Per A. Sørlie • CEO since 1999 • Member of management team since 1990 • 33 years with Borregaard Per Bjarne Lyngstad Liv Longva • CFO • SVP Strategic Sourcing • 25 years in current position • In current position from June 2020 • 35 years w

69. Slide 69: Appendix – alternative performance measures

    Appendix – 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

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