Borregaard Asa · OSL:BRG
Borregaard Asa — Investor Day (September 2020)
58 slides from Borregaard Asa's investor day presentation, Sep 17, 2020
Slide 1: Welcome to Borregaard's Capital Markets Day
Welcome to Borregaard’s Capital Markets Day 17 September 2020
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 communica ted (’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
Slide 3: Agenda
AGENDA 09:00 – 09:50 10:00 – 11:15 Opening and welcome by NFF Business areas and markets Strategy, sustainability and financials BioSolutions – Tom Erik Foss-Jacobsen, EVP Per A. Sørlie, President and CEO BioMaterials – Gisle Løhre Johansen, EVP Per Bjarne Lyngstad, CFO Cellulose fibrils – Pål Rombe
Slide 4: Strategy and Sustainability
STRATEGY AND SUSTAINABILITY Per A. Sørlie President & CEO 4
Slide 5: 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 continuous
Slide 6: Strategic Priorities (CMD 2018) Update
STRATEGIC PRIORITIES (CMD 2018) UPDATE Increased specialisation and volume growth Successful market introduction of new lignin volumes from Florida Sales volume on track, margins lower than expected so far Ice Bear product range Value proven Cellulose fibrils Strong pipeline development and volume g
Slide 7: Strategic Priorities (CMD 2018) Update
STRATEGIC PRIORITIES (CMD 2018) UPDATE Ongoing and potential expansion initiatives Complete lignin operation upgrade and increased specialisation, Sarpsborg (2019) On track Florida lignin expansion – 2nd phase (50,000 mtds) Pending Exilva (Cellulose fibrils) – 2nd phase (1,000 mtds) Pending Explore
Slide 8: Strategic Priorities – Key Considerations
STRATEGIC PRIORITIES – KEY CONSIDERATIONS BioSolutions Lower raw material supply base than previously expected (South Africa, Spain) Primarily reduced supply of hardwood lignin Specialisation and diversification main focus going forward Expansion opportunities Explore value-adding initiatives at Sar
Slide 9: Alignment with UN's Sustainable Development Goals
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 9
Slide 10: Documented Sustainability Performance: LCA Approach
DOCUMENTED SUSTAINABILITY PERFORMANCE: LCA1) APPROACH RAW MATERIALS PROCESSES PRODUCTS Natural, renewable, Efficient and sustainable Sustainable sustainable raw materials production and value chain biobased products Favourable environmental/climate footprint compared with non-renewable/oil-based alt
Slide 11: Sustainable Sourcing of Wood Raw Materials
SUSTAINABLE SOURCING OF WOOD RAW MATERIALS RAW MATERIALS FOREST AS CLIMATE ACTION UN Special Report on Climate Change and Land Sustainable and certified wood Carbon storage: Biodiversity: Fossil carbon alternative: • Documentation Plant more trees Forest restauration Wood-based products • PEFC1) and
Slide 12: Improved Environmental Footprint from Processes
IMPROVED ENVIRONMENTAL FOOTPRINT FROM PROCESSES PROCESSES SCIENCE BASED TARGETS Targeted reductions approved by CDP1)(base year 2009): • 53% by 2030 Improved environmental footprint • 100% by 2050 • CO2-reductions, CDP A rating • Reduced emissions to water and air CO2 reductions 2009-2019: 35-40% •
Slide 13: Products with Multiple Sustainability Features
PRODUCTS WITH MULTIPLE SUSTAINABILITY FEATURES PRODUCTS Favourable CO2 footprint emissions GHG Natural, renewable raw material Improved EHS performance 13
Slide 14: Coronavirus Effects on Borregaard's Business
CORONAVIRUS EFFECTS ON BORREGAARD’S BUSINESS Health and safety first Emergency measures established and procedures implemented to limit the risk of infection throughout the global organisation Operational effects Production at the calcium sulphite line at Sappi’s Saiccor pulp mill stopped in April,
Slide 15: Strategic Priorities
STRATEGIC PRIORITIES Specialisation and diversification within BioSolutions Specialisation through innovation and market development Balance market risk through diversification of product portfolio Timing of further volume expansion guided by demand development and profitability Increased value adde
Slide 16: Financials
FINANCIALS Per BjarneLyngstad CFO 16
Slide 17: Value Creation Since IPO
VALUE CREATION SINCE IPO mNOK 16,000 14,000 12,000 CAGR 10,000 Share price, including 8,000 29.7% reinvestment of dividend 6,000 Enterprise value = 22.3% 4,000 market cap + net debt 2,000 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 (IPO) August Net debt Market capitalisation Accumulated dividend
Slide 18: Solid Financial Position
SOLID FINANCIAL POSITION NOK Leverage & equity ratios % 5.00 70% 58.1 % 56.2 % Solid capital structure despite significant expansion 55.8 % 51.4 % 60% 4.00 49.4 % investments 44.2 % 50% Leverage ratio¹⁾ 2.01 and equity ratio¹⁾ 44.2% (Q2-20) 3.00 40% 1.86 2.01 2.00 1.44 30% Maintain key financial rat
Slide 19: Key Figures 2015 – 2020 LTM
KEY FIGURES 2015 – 2020 LTM1) Operating revenues EBITDA2) & EBITDA %2) mNOK mNOK % 6000 1,400 25 22.7 22.8 1,200 20.6 19.9 5000 5,203 18.9 20 5,063 18.2 4,785 1,072 4,492 4,618 1,000 1,055 1,021 1,007 4000 4,164 903 15 800 3000 758 600 10 2000 400 5 1000 200 0 0 0 2015 2016 2017 2018 2019 2020 2015
Slide 20: Key Segment Figures 2015 – 2020 LTM
KEY SEGMENT FIGURES 2015 – 2020 LTM1) BioSolutions BioMaterials Fine Chemicals mNOK % mNOK % mNOK % EBITDA2) & EBITDA %2) EBITDA & EBITDA % EBITDA & EBITDA % 800 35 800 35 800 32.7 35 31.0 700 647 650 30 700 700 30 30 605 25.8 25.9 600 600 24.8 600 24.6 545 25 25 25 509 499 500 23.6 500 20.4 500 19.
Slide 21: Cash Flow 2015 – 2020 LTM
CASH FLOW 2015 – 2020 LTM1) Cash flow from operating activities mNOK Strong cash conversion over time 1200 95% of profit ex depreciation, amortisation and write-downs last 5 years ends up as cash flow from operating activities 1000 800 Net working capital Significant fluctuations 600 Increasing tren
Slide 22: Net Working Capital (NWC) 2015 – 2020 LTM
NET WORKING CAPITAL (NWC) 2015 – 2020 LTM1) NWC average mNOK % Increase in net working capital from 2018 23.7 25 Accounts receivable stable over time relative to revenues 1400 22.7 Inventories increasing (volume, costs, specialisation, FX) 1200 19.9 19.0 20 18.2 Accounts payable decreasing relative
Slide 23: Investments and Return on Capital Employed
INVESTMENTS AND RETURN ON CAPITAL EMPLOYED (ROCE1) Investments ROCE mNOK 25% 968 1000 21.7 % 20% 19.1 % 800 762 15.6 % 622 624 583 15% 600 527 416 12.7 % 430 264 10.5 % 10.6 % 213 148 400 10% 184 200 370 379 5% 358 344 346 246 0 0% 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 LTM LTM²
Slide 24: Investment Forecast 2020-2023
INVESTMENT FORECAST 2020-2023 Replacement investments Replacement investments - forecast1) Targeted at depreciation level mNOK 575 Upgrade of caustic soda production facility a major investment in 600 +/-50 2020 and 2021 475 500 +/-60 200 400 400 Expansion investments 100 +/-60 +/-60 400 Capacity ex
Slide 25: Major Expansion Investments - BioSolutions
MAJOR EXPANSION INVESTMENTS - BIOSOLUTIONS Florida – Biopolymers Sarpsborg site – Biopolymers Sarpsborg site – Biovanillin New lignin plant Upgrade and specialisation of plant Capacity expansion Investment 890 mNOK (110 mUSD) in Investment 450 mNOK in increased drying Investment 130 mNOK in increase
Slide 26: Major Expansion Investments – BioMaterials & Fine Chemicals
MAJOR EXPANSION INVESTMENTS – BIOMATERIALS & FINE CHEMICALS Sarpsborg site – Speciality cellulose Sarpsborg site – Cellulose fibrils Smaller expansion projects Ice Bear project Exilva plant and commercialisation Bioethanol and pharma intermediates Investment 215 mNOK in increased capacity and Invest
Slide 27: Impact from Investments on Key Financials
IMPACT FROM INVESTMENTS ON KEY FINANCIALS mNOK EBITDA¹⁾ target from investment projects ROCE¹⁾ and EPS²⁾ targets from investment projects % NOK 1,800 20 9.10 10 18.0 1,600 200 17 17.4 8.20 8 1,400 225 16.6 7.30 1,597 14 6 1,200 200 +/-100 1,000 11 4 ROCE 1,072 10.6 3.72 EPS 800 8 2 2020 LTM³⁾ FX @ I
Slide 28: BioSolutions
BIOSOLUTIONS Tom Erik Foss-Jacobsen ExecutiveVicePresident 28
Slide 29: Diversity: Products to Around 3,000 Customers
DIVERSITY: 650 PRODUCTS TO AROUND 3,000 CUSTOMERS BioSolutions properties Revenues by end-market and region1) Revenue by end-market (2019) Sales distribution (2019) Properties Applications RoW 3% Ceramics Construction Binding agent Dust solutions Chemicals/ food/other 25% Feed Granulation ai
Slide 30: Current Global Lignin Supply
CURRENT GLOBAL LIGNIN SUPPLY By sales volume Borregaard Domsjø RYAM Sappi Burgo Nippon Russia Others Global lignin supply reduced to ~1 million mtds in 2021 (assuming South Africa and Spain not operating; Florida ramp-up) Borregaard manufacturing facilities Others Source: Borregaard estimates 30
Slide 31: Implications of Reduced Lignin Raw Material Supply
IMPLICATIONS OF REDUCED LIGNIN RAW MATERIAL SUPPLY Lost volume is hardwood-based with limited potential Sales volume - BioSolutions kmtds for specialisation 500 Construction and Industrial low-end markets affected 450 400-425 375-400 400 350 Construction – a cyclical market with increasing use of 30
Slide 32: Strategic Priorities – Key Considerations
STRATEGIC PRIORITIES – KEY CONSIDERATIONS New supply situation kmtds1) Volume split 2009-2019 - an opportunity to sharpen strategy 60% 50% Optimise value of biopolymers portfolio 40% Reduce exposure to low-end and cyclical markets 30% Diversify based on value-added 20% Focus on advanced applications
Slide 33: Sustainability - Competitive Edge
SUSTAINABILITY -COMPETITIVE EDGE Capitalise on Borregaard’s biorefinery model and biobased solutions Replace fossil raw materials Documented favourable environmental footprint Wood-based biopolymers 2nd generation feedstock LCA - Life Cycle Analysis EPD - Environmental Product Declarations 33
Slide 34: Sustainability - Competitive Edge in Use
SUSTAINABILITY -COMPETITIVE EDGE IN USE Plant nutrition 35 30 Plant nutrition – favourable environmental footprint 25 Borregaard's biopolymers - the sustainable alternative to synthetics kg CO 2 eqv. 20 for formulating micronutrients 15 High efficiency, lower dosage 10 90% reduction in CO 2 emission
Slide 35: Biovanillin - Well Positioned for Growth
BIOVANILLIN - WELL POSITIONED FOR GROWTH Strong demand growth for plant-based vanillin Consumer preferences Sustainability Competitive edge Global market leader in plant-based vanillin Attractive flavour profile % 90% reduced carbon footprint (as CO 2 eq) Unique raw material base 100 Certified spruc
Slide 36: Innovation Strategy
INNOVATION STRATEGY Priorities Specialisation and diversification High value applications Unique, tailor-made solutions Increase value of Florida product portfolio Competitive edge Unique competence base Diverse raw material base and advanced technology Sustainability 36
Slide 37: Innovation - Introducing Novel Products
INNOVATION - INTRODUCING NOVEL PRODUCTS Plant protection – opportunities in water-based formulations New products for water-based formulations, the fastest growing segment in plant protection Batteries – unique product performance New organic expander for improved charging commercialised Proven perf
Slide 38: Strategic Priorities
STRATEGIC PRIORITIES Optimise value of biopolymers portfolio Diversification based on value-added Specialisation through innovation and market development Volume expansion and specialisation at LignoTech Florida Execute specialisation and growth projects at Sarpsborg site Successful completion of bi
Slide 39: Speciality Cellulose
SPECIALITY CELLULOSE GisleLøhreJohansen ExecutiveVicePresident 39
Slide 40: Borregaard and the Speciality Cellulose Industry
BORREGAARD AND THE SPECIALITY CELLULOSE INDUSTRY Borregaard focused applications Market growth 1) Ethers: 3 -4 % Borregaard has strong market positions within high-end Acetate: -2 - 0 % niches in Europe and Asia Nitrocellulose: 0% Production capacity is 160,000 tonnes Casings: 3 -4 % The speciality
Slide 41: Cellulose Ethers Overview
CELLULOSE ETHERS OVERVIEW Borregaard supplies speciality cellulose wood pulp to cellulose ether producers The three main products manufactured by the ether producers are: Methyl cellulose derivatives (MC, MHEC, MHPC) Carboxy methyl cellulose (CMC) Hydroxy ethyl cellulose (HEC) Almost all products ar
Slide 42: Cellulose Ethers – Solid Growth and Attractive Opportunities
CELLULOSE ETHERS – SOLID GROWTH AND ATTRACTIVE OPPORTUNITIES In 2015-19, demand for ether pulp grew > 4% annually, expected at 3- Others 4% going forward Solid growth in all segments – temporary setback due to Covid-19 Pharma/ Construction personal care Top 6 cellulose ether producers represent appr
Slide 43: Cellulose Acetate Overview
Triacetate CELLULOSE ACETATE OVERVIEW LCD 22’ mt Coatings, plastics and Yarn 35’ mt film 30’ mt Films Cellulose Speciality triacetate Fibres Acetate cellulose flake wood pulp or producer Cellulose Plastic CLP diacetate Fibres Films Filter tow 475’ mt Coatings Top 5 acetate flake producers represent
Slide 44: Ice Bear – Continued Growth and New Applications
ICE BEAR – CONTINUED GROWTH AND NEW APPLICATIONS Strategic initiative defending existing market positions and enabling further specialisation and flexibility within acetate Ramp-up based on market demand and customer qualification 2020 sales estimated to 13-17,000 tonnes Further growth projected in
Slide 45: Speciality Cellulose – Sustainability Driving Growth
SPECIALITY CELLULOSE – SUSTAINABILITY DRIVING GROWTH Increasing demand for wood certification and sustainability assessments driven by current consumer trends Customers active in consumer goods applications (food, pharma and personal care) are very committed to sustainable sourcing of renewable or b
Slide 46: Cotton Linter Pulp vs. Speciality Wood Pulp
COTTON LINTER PULP VS. SPECIALITY WOOD PULP Cotton linter pulp (CLP), a by-product from cotton farming, is an alternative raw material for cellulose based products like ethers and acetate Used "as is" or in blends with fluff pulp Where GMO-free is a must, CLP cannot be used Cotton’s use of land, pes
Slide 47: Speciality Cellulose – Strategy 2021-2023
SPECIALITY CELLULOSE – STRATEGY 2021-2023 Secure and further develop current strong positions Leading supplier and further growth in cellulose ethers A key supplier to cellulose acetate Strong presence in other speciality segments Specialisation and innovation Further growth within ethers in coating
Slide 48: Cellulose Fibrils
CELLULOSE FIBRILS Pål Romberg ExecutiveVicePresident 48
Slide 49: Exilva Cellulose Fibrils
EXILVA 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 large surfac
Slide 50: Exilva – Growing Pipeline and Customer Base
EXILVA – GROWING PIPELINE AND CUSTOMER BASE 50+ regular customers Sales doubling year on year Customers and plant trials development 120 regular customers Good growth with key customers 100 plant trials 80 More than 2000 active prospects 60 40 Classified as a prospect when a sample is sent 20 Net in
Slide 51: Sustainability and Performance Driving Demand
SUSTAINABILITY AND PERFORMANCE DRIVING DEMAND Moving from solvent based to water-based Exilva enables some coatings and adhesives to be reformulated to water-based systems without reducing performance Replacing carbomers Carbomers are versatile acrylic copolymers used amongst other in personal and h
Slide 52: Exilva in Coatings
EXILVA IN COATINGS Reformulating to water-based coatings Avoid cracking without sacrificing flow and levelling in wood coatings Several customers Large trials scheduled Maintain spray ability of thick protective coatings in industrial applications Several customers in multiple systems 52
Slide 53: Exilva in Personal and Home Care
EXILVA IN PERSONAL AND HOME CARE Increased consumer awareness makes it attractive to replace synthetic additives in personal and home care products Cosmetics Two major companies launching new products with Exilva mid next year Personal care First customer successfully replaced acrylic copolymers wit
Slide 54: Exilva Replacing Borates/Boron Additives
EXILVA REPLACING BORATES/BORON ADDITIVES Borates classified by ECHA* as Substances of Very High Concern Suspected of damaging fertility and the unborn child Borates present in all adhesives for corrugated board No satisfactory alternatives available Exilva can replace boron Require good tech support
Slide 55: Exilva in Bioplastic Polymers
EXILVA IN BIOPLASTIC POLYMERS Bioplastic polymers are expected to grow rapidly A key challenge for most bioplastics is strength New technology developed by Gneuss German equipment manufacturer New technology enabling incorporation of nano materials into bioplastics Most successful trial results achi
Slide 56: Priorities Going Forward
PRIORITIES GOING FORWARD Focus on following up key leads and key accounts Current pipeline New leads generated by inbound marketing and Projects distributors Key leads Leverage Borregaard sales force across certain applications and/or markets D’s Ensure maximum support in key projects C’s Dedicated
Slide 57: Q&A
Q&A The Q&A session will be moderated by: Anne Gjøen, Analyst, Handelsbanken Capital Markets Mikkel Nyholt-Smedseng, Analyst, Carnegie AS 57
Slide 58: 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 t