Borregaard ASA · OSL:BRG
Borregaard ASA — Investor Day (September 2018)
76 slides from Borregaard ASA's investor day presentation, Sep 18, 2018
Slide 1: Welcome to Borregaard's Capital Markets Day
W E L C O M E T O B O R R E G A A R D ’ S C A P I TA L M A R K E T S D AY Oslo 18 September 2018
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
Slide 3: Agenda
AGENDA 08:30-10:00 We l co me a n d o p e n i n g S t a t u s , s t r a t e g y, s u s t a i n a b i l i t y Financials 10:00 Coffee Break 10:15-12:00 Performance Chemicals Speciality Cellulose Cellulose Fibrils 12:00 Lunch 3
Slide 4: Status, strategy, sustainability
S TAT U S , S T R AT E G Y, S U S TA I N A B I L I T Y Per A. Sørlie President & CEO
Slide 5: Borregaard is a global leader in biochemicals
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 5
Slide 6: Global niche player with a market driven organisation
Global niche player with a market driven organisation PERFORMANCE SPECIALITY OTHER CHEMICALS CELLULOSE BUSINESSES 4 7 % 1) 3 7 % 1) 1 6 % 1) • Largest supplier and • Leading global speciality • Ingredients technology leader in cellulose supplier Only producer of wood-based vanillin lignin-based prod
Slide 7: The specialisation 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 c
Slide 8: Selling specialities & buying commodities
The specialisation strategy «Selling specialities & buying commodities» Sales distribution 2017 • A global niche player in speciality chemicals • Global competitive arena Asia 25 % • Value-based pricing philosophy for specialities Europe • Changes in costs and effect of currency fluctuations 46 % ra
Slide 9: Borregaard portfolio - strategic priorities
Borregaard portfolio - strategic priorities • Growth and specialisation within Performance Chemicals • Increased sales of high-value lignin products • Establish new lignin raw material sources • Develop BALI1) as a strategic lignin raw material option • Develop the unique biorefinery assets in Sarps
Slide 10: Update on strategic priorities
Update on strategic priorities • Growth and specialisation within Performance Chemicals • 50% volume growth in high-value lignin products from 2009 until 2017 • Successful start-up of new Florida plant (1st phase) mid 2018 • 500 mNOK upgrade and increased specialisation in Sarpsborg (2019) • Extensi
Slide 11: Sales distribution - business areas
Sales distribution - business areas 2011 2017 Other Other 20 % 16 % PC 39 % PC 47% SC SC 37% 41 % • Performance Chemicals has increased its share of Borregaard’s revenues from 39% in 2012 to 47% in 2017 11
Slide 12: Innovation strategy
Innovation strategy Existing businesses • Drive specialisation and diversification • Focus on sulphite technology platform and niche products • Sarpsborg biorefinery • Unique process based on calcium sulphite technology and softwood feedstock • Performance Chemicals • Development of water soluble sp
Slide 13: Innovation strategy
Innovation strategy New business opportunities • Contribute to increased specialisation • Natural raw materials • Utilising existing core technology and competence • Potential synergies with established applications and markets Examples • Cellulose Fibrils • Radical innovation based on core competen
Slide 14: Innovation strategy
Innovation strategy 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- C
Slide 15: Key element of business mission
Sustainability Key element of business mission B o r re ga a rd s h a l l p ro v i d e s ustai nabl e s o l u t i o n s b a s e d o n re n e wa b l e ra w m a te r i a l s a n d u n i q u e co m p e te n c e
Slide 16: One of three core values
Sustainability One of three core values Sustainability • Green chemicals that substitute petrochemicals • Sustainability demonstrated through life-cycle analysis • Focus on EHS across the organisation • Profitability is key to sustainability Long- Long-term perspective • Consistent strategy over tim
Slide 17: Alignment with UN's Sustainable Development Goals
Sustainability Alignment with UN’s Sustainable Development Goals Contribution to market growth Variety of green solutions THE SIX PRIORITISED SUSTAINABLE DEVELOPMENT GOALS FOR BORREGAARD Alignment with long-term global goals 17
Slide 18: Integral part of market offering
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 t
Slide 19: Favourable climate footprint
Sustainability Favourable climate footprint Fuel – production and use • 2nd generation bioethanol vs petroleum-based fuel GHG emissions1) • Increased demand in different countries due to incentives 7x • Most of Borregaard’s products have favourable GHG footprint compared with alternatives Borregaard
Slide 20: Positive trend for biobased vanillin
Sustainability Positive trend for biobased vanillin > 300 USD/kg Natural vanilla 25- 25-100 USD/kg Biobased vanillin < 20 USD/kg Oil-based vanillin Natural raw material Key selling Labelled as “natural” Price Sustainability points Unique taste profile Taste profile 20
Slide 21: Positive EHS impact in crop protection
Sustainability Positive EHS impact in crop protection • Lignin products in crop protection have a favourable environmental impact • Water-based solutions as an alternative to solvent-based formulations • Good safety and health performance as binders (less dust) in crop protection granules 21
Slide 22: Strategic priorities – next steps
Strategic priorities – next steps • Increased specialisation and volume growth • Successful market introduction of new lignin volumes from Florida • Ice Bear product range • Cellulose Fibrils • Grow specialities volume in Performance Chemicals and Speciality Cellulose • Sustainability • Increase mar
Slide 23: Financials
FINANCIALS Pe r B j arn e Ly n g stad CFO
Slide 24: Value creation since IPO
Value creation since IPO mill NOK 10 000 8 000 CAGR 6 000 Share price, including 29,5% reinvestment of dividend 4 000 Enterprise value = 20,8% market cap + net debt 2 000 0 2012 (IPO) 2013 2014 2015 2016 2017 2018/8 Net debt Market capitalisation Accumulated dividend 24
Slide 25: Key figures 2012 – 2018 LTM
Key figures 2012 – 2018 LTM1) Operating revenues EBITA adj.2) & EBITA adj. %2) mNOK mNOK % 5000 16,6 16,2 800 16 4 618 4 642 14,0 13,9 4 492 4000 4 164 12,6 747 749 12,3 11,9 3 838 3 886 3 939 600 647 12 3000 539 489 486 497 400 8 2000 200 4 1000 0 0 0 2012 2013 2014 2015 2016 2017 2018 2012 2013 20
Slide 26: ROCE and profitability objectives
ROCE1) and profitability objectives ROCE 25% 21,7 % 19,5 % 19,1 % 20% 16,9 % 16,5 % 15,6 % 15,2 % Profitability objectives 15% • ROCE >15% pre-tax over a business cycle 10% • IRR >15% pre-tax for expansion 5% investments 0% 2012 2013 2014 2015 2016 2017 2018 LTM ROCE pre-tax Minimum target 1) Non-GA
Slide 27: EPS and dividend
EPS1) and dividend Dividend and payout ratio2) NOK 6,00 5,55 5,66 100% 5,06 5,00 Dividend policy 80% 4,00 3,86 63,1 % • To pay regular and progressive dividends 3,35 3,34 2,76 60% reflecting expected long-term earnings, 3,00 36,2 % 32,7 % 37,3 % 38,8 % 1,75 35,3 % 40% free cash flow and expansion in
Slide 28: Key figures 2012 – 2018 LTM by segment
Key figures 2012 – 2018 LTM Performance Chemicals Speciality Cellulose Other Businesses mNOK EBITA adj.1) & EBITA % adj.1) % mNOK EBITA adj.1) & EBITA % adj.1) % mNOK EBITA adj.1) 600 23,9 25 500 25 20 22,3 21,3 20,6 20,6 500 517 18,1 20 400 18,5 20 0 18,0 17,2 -8 15,6 447 449 15,7 400 15,3 350 -20
Slide 29: Cost development
Cost development Operating expenses Cost distribution H1-18 (change from H1-17) mNOK H1-18 vs H1-17 1 925 20 10.7% (+0.8%-p) Wood 1 900 20 1 875 15 11.0.% (-1.1%-p) 20 Energy 1 850 1 924 1 825 50 25.6% (+0.4%-p) Other cost of 1 800 materials 1 775 1 799 10.8% (-0.4%-p) Distribution costs 1 750 25.6%
Slide 30: Productivity
Productivity1) Sales/FTE Sales/capital employed Variable costs2)/sales Fixed costs3)/sales mNOK % % 4,63 4,57 4,51 1,40 4,5 1,4 45 35 1,34 1,34 1,33 1,35 43,4 43,4 33,3 32,9 32,8 1,32 41,9 32,2 31,6 31,7 4,07 1,3 1,27 41,0 3,96 30,1 4,0 3,87 40 30 3,83 38,4 1,2 37,6 37,1 3,5 1,1 35 25 1,0 3,0 30 20
Slide 31: Continuous improvement
Continuous improvement Projects completed in 2017 and 2018 Ongoing and new initiatives • Energy savings • Lignin operation upgrade in Sarpsborg • ~125 GWh (base year 2014) • >40 mNOK in cost savings expected, full impact from 2021 • Full effect from late 2018 • Sarpsborg site improvements • >10% red
Slide 32: Sensitivity on EBITA adj.
Sensitivity on EBITA adj.1) Sensitivity of 1% change (based on 2018 LTM) • Global presence, diversified product portfolio and Cellulose price GDP-driven demand reduce market risk Lignin price • Oil price affects demand and competition in FX ex hedging certain markets, but main effect historically ha
Slide 33: Cash flow, NWC and investments
Cash flow, NWC and investments Cash flow from operations1) Average NWC Investments mNOK mNOK % mNOK 19,8 % 19,9 % 1200 1000 19,2 % 18,8 % 19,0 % 20% 968 18,4 % 1000 958 17,5 % 1000 800 15% 800 800 622 600 624 655 600 600 1204 10% 430 264 878 875 960 997 400 820 858 385 725 769 752 400 313 400 759 63
Slide 34: Investment forecast 2018 – 2020
Investment forecast 2018 – 2020 mNOK Replacement investments - forecast1) Replacement investments 500 360-400 300-375 • Targeted at depreciation level 400 344 310-350 • Above target in 2017-2018 due to wood seasoning silos 300 (covered by insurance) and part of lignin operation upgrade in Norway 200
Slide 35: Capital structure
Capital structure • Target for capital structure • Maintain key financial ratios corresponding to an mNOK Leverage ratio and loan capacity investment grade rated company 3 000 • Leverage ratio1) targeted between 1.0 and 2.0 over time 2 500 • Solid capital structure as per 30.06.18 2.0 * EBITDA • Lev
Slide 36: Agenda
AGENDA 08:30-10:00 We l co me a n d o p e n i n g S t a t u s , s t r a t e g y, s u s t a i n a b i l i t y Financials 10:00 Coffee Break 10:15-12:00 Performance Chemicals Speciality Cellulose Cellulose Fibrils 12:00 Lunch 36
Slide 37: Performance Chemicals
PERFORMANCE CHEMICALS Morten Harlem Executive Vice President
Slide 38: Overview
Overview Market position Key attractions • Largest supplier with a global presence • A sustainable and broad product portfolio • Unique technical and application expertise • Large and diverse customer base • High barriers to entry Production • Operating revenues 2,176 mNOK (2017) • Norway, USA, Sout
Slide 39: Lignin – the supply side
Lignin – the supply side By sales volume 2017 Others Borregaard Russian Nippon Burgo Sappi Rayonier AM Domsjö Borregaard manufacturing facilities Others Source: Borregaard estimates 39
Slide 40: Concrete admixture formulation preferences
Concrete admixture formulation preferences Northern Europe Southern Europe North America Asia • Admixture market diverse, Middle East lignin competes with captive South America synthetic products • Regional and local formulation preferences Lignin • Climate influences formulation Synthetics Sources:
Slide 41: Industrial and Specialities
Industrial1) and Specialities mtds Industrial sales volume Specialities sales volume mtds 160 80 120 60 80 40 40 20 Industrial Industrial ex Polish customer 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2009 2010 2011 2012 2013 2014 2015 2016 2017 Industrial (previously Miscellaneous) Specialitie
Slide 42: 600 products to around 2,800 customers
600 products to around 2,800 customers (2017) Split between segments (volume based) Lignosulfonate properties 60% Properties Applications 50% Feed binder 40% Binding agent Construction Granulation aid 30% Ceramic tiles Industrial Dust binder 20% Specialities Concrete admixture 10% Dispersing Agroche
Slide 43: End markets growth forecast
End markets growth forecast Construction Industrial Specialities Construction Feed Industry Agro /Agchem Automotive EMEA 2 - 4% 2 - 4% 1 - 2% 3 - 5% 1 - 3% Americas 0 - 3% 2 - 4% 1 - 3% 5 - 8% +/- 0 Asia/Pacific 2 - 4% 3 - 7% 5 - 7% 6 - 10% 2 - 4% Indicative annual rates to 2021 based on 2.5% annual
Slide 44: LignoTech Florida
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 • New plant officially opened 26 June 2018 • Investment completed on time and cost • Produc
Slide 45: Upgrade and specialisation of Sarpsborg operation
Upgrade and specialisation of Sarpsborg operation • 500 mNOK investment programme • Partly expansion, partly replacement • Additional dryer with packaging capacity • Tanks for storage of liquid materials • Improved solutions for logistics, infrastructure and energy • Completion investment programme
Slide 46: Economies of scale in operations
Economies of scale in operations • Investments in added capacity and capabilities in USA and Norway will secure further specialisation and diversification • 3 cornerstones (Norway, USA and South Africa) give ability to capture global market growth with improved cost efficiency • Reduced freight cost
Slide 47: Specialisation
Specialisation • Drive growth within agchem, plant nutrition and batteries • Growth through application development based on new and existing products • Innovation focused on improved properties for existing and adjacent niches • Growth within other speciality areas • Sustainability drive within oil
Slide 48: Further diversification
Further diversification Industrial Industrial Industrial Dust Feed Paper and binder binder dispersant Resins Ceramics suppression binders board application application application II 48
Slide 49: Driving specialisation and diversification
Driving specialisation and diversification Industrial and Specialities targeted to represent 70% of total sales volume by end 2021 49
Slide 50: Sustainability – feed additives
Sustainability – feed additives • Activation of immune system as an alternative to antibiotic growth promoters • Organic acids function as antimicrobial agents • Borregaard’s patented SoftAcid technology • Organic acids combined with lignin derivative • Efficient, far less corrosive and safer to han
Slide 51: Sustainability – dye dispersants
Sustainability – dye dispersants • Dyes used for colouring textiles • Borregaard products a sustainable and renewable alternative to synthetic dispersants • Similar or improved performance • GHG reduction 51
Slide 52: Sustainability – agchem
Sustainability – agchem • Trend towards replacing conventional petrochemical (solvent-based) liquid formulations with water-based and granulated formulations • Water-based suspension concentrates and water dispersible granules require a dispersing agent • Lignin is a biobased, biodegradable, non-tox
Slide 53: Strategic priorities
Strategic priorities • Specialisation and diversification • Bring new speciality products and applications to market • Continue growth in industrial applications based on hardwood and new softwood capacity • Capacity reductions in hardwood reduce dependency on concrete admixtures • Target to increas
Slide 54: Speciality Cellulose
SPECIALITY CELLULOSE To m E r i k F o s s - J a c o b s e n Executive Vice President
Slide 55: The speciality cellulose market
The speciality cellulose market Total global cellulose Speciality cellulose market ~1.6 million mt market Sponges 1% Casings 4% Speciality Cellophane 4% Dissolving cellulose Increasing specialisation MCC pulp Viscose 11% (textile) ~5.4 Acetate million mt 35% NC 8% Tire cord 4% Speciality paper 4% Et
Slide 56: Speciality cellulose industry
Speciality cellulose industry Speciality cellulose sales volume by producer Dissolving pulp segments by wood species and pulping process Others Bracell Borregaard Rayonier AM Georgia Pacific Top 4 speciality cellulose producers by wood species and pulping process Hardwood/ Softwood/ Hardwood/ Softwo
Slide 57: Acetate industry status and outlook
Acetate industry status and outlook Acetate tow capacity by producer Other Other Chinese • Top 5 acetate tow producers represent >90% of global capacity NCFC (China) Rhodia • Cigarette filter sales ~85% of total sales • In 2012-17, demand for acetate pulp declined -2.6% Daicel annually, expected at
Slide 58: Ether industry status and outlook
Ether industry status and outlook Cellulose ether capacity1) by producer DowDuPont Others • Top 4 ether producers represent ~45% of global capacity Ashland • 1/3 of global capacity is in China Shin Etsu • Construction & coatings account for ~60% of total sales, China sales to food, pharma and person
Slide 59: Ice Bear status
Ice Bear status Dissolving pulp segments by wood species and pulp process • Strategic initiative enabling further specialisation and flexibility • Higher purity products important to defend existing and compete for new/additional filter tow business • Increasing interest from other speciality segmen
Slide 60: 2nd generation bioethanol
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 • Expansion project - new dehyd
Slide 61: Speciality Cellulose - strategy
Speciality Cellulose - strategy • Secure and further develop current strong positions • Leading supplier to cellulose ethers • A key supplier to cellulose acetate • Strong presence in other speciality segments • Specialisation and innovation • Develop new business with sustainable price premium vs v
Slide 62: Cellulose Fibrils - status and opportunities
C E L L U L O S E F I B R I L S - S TAT U S A N D O P P O R T U N I T I E S Pål Romberg Executive Vice President
Slide 63: Cellulose Fibrils
Cellulose Fibrils • Two product categories • Exilva – additive for industrial applications • Commercial size plant in Norway • SenseFi – additive for food applications • Demonstration plant in the US 63
Slide 64: The Exilva technology
The Exilva technology Cellulose fibres defibrillated into millions of tiny fibrils 64
Slide 65: Nanocellulose landscape
Nanocellulose landscape • Three main product categories • NCC/CNC - nano cellulose crystals NCC/CNC – • NFC/MFC - nano/microfibrillated cellulose strength focus • CNF - ionic cellulose nano fibrils • Significant variations within each product group • Few standards exist • Typically more complementar
Slide 66: Nanocellulose market still embryonic
Nanocellulose market still embryonic • Market analysts estimate that the nanocellulose market could grow to 700-1,000 mUSD by 20241) • NFC/MFC estimated to be 50% • Awareness a possible limitation • NFC/MFC market today • Largest volumes in paper and packaging (captive) • The rheology modifiers mark
Slide 67: Why use Exilva – rheological properties
Why use Exilva – rheological properties • Control or improve flow • Examples • Thickening solutions • Glue application • Stability of solutions • Prevent settling or separation • Becomes thin when force is applied • Spray thicker or higher solids • Regains viscosity very fast • No sagging or drippin
Slide 68: Why use Exilva – film forming properties
Why use Exilva – film forming properties • Create a barrier or a film • Examples • Block air and oil/grease • Sound insulation or packaging material • Prevent cracking • Coating edges or thicker layer • Increase strength • Light weighting boards • Efficient distribution • Large surface area, e.g. su
Slide 69: How do we sell it?
How do we sell it? • Inbound marketing • Blogs, social media, Google AdWords • Potential customers initiate contact and take active part in innovation • Free samples programme • Specialised distributors (>20) • Increased reach • CRM tools • Customer leads from patent analysis • 15-20 new nanocellulo
Slide 70: Exilva pipeline status
Exilva pipeline status Active prospects (>1000) • Active prospects Commercial • >20 applications Plant/pilot • Coatings, adhesives, personal care and agchem constitute >60% • Net increase ~50 prospects per month Lab • ~50% of prospects that provide feedback move forward • Time to market (from sample
Slide 71: Horizon 2020 support
Horizon 2020 support1) • 25 mEUR over a 3-year period • Covers 60% of total costs, including depreciation • Not covering costs outside EEA • Support period ends 30 April 2019 • Application to extend project period with 12 months • Decision pending 1) Exilva has received funding from the Bio-Based In
Slide 72: SenseFi
SenseFi • Advanced texture system for food • Enables formulation of food products with reduced fat content without compromising mouthfeel, texture or taste • Status • Pipeline >200 active prospects • Still in demonstration phase • Costs adjusted to activity level • Decision on commercial scale-up pe
Slide 73: For more information go to Exilva.com or Sensefi.com
For more information go to Exilva.com or Sensefi.com for 73
Slide 74: Agenda
AGENDA 08:30-10:00 We l co me a n d o p e n i n g S t a t u s , s t r a t e g y, s u s t a i n a b i l i t y Financials 10:00 Coffee Break 10:15-12:00 Performance Chemicals Speciality Cellulose Cellulose Fibrils 12:00 Lunch 74
Slide 75: Appendix - Non-GAAP measures
Appendix - Non-GAAP 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
Slide 76: TTT i
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