Borregaard Asa · OSL:BRG
Borregaard Asa — Investor Presentation (October 2021)
68 slides from Borregaard Asa's investor presentation, October 2021
Slide 1: Business model, businesses & strategy
Business model, businesses & strategy October 2021
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: Borregaard is a global leader in biochemicals
Business model & strategy 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 3
Slide 4: 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 2020 Chemical/ Construction Construction 27% Others Chemicals/other 33% 28% Agriculture
Slide 5: Global niche player with a market driven organisation
Business model & strategy Global niche player with a market driven organisation BioSolutions BioMaterials Fine Chemicals (57%¹) (33%¹) (10%¹) Largest supplier, technology leader in lignin-based Leading global speciality cellulose Leading producer of fine chemical biopolymers with global markets, onl
Slide 6: The specialisation strategy
Business model & 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 in
Slide 7: Strategic priorities
Business model & strategy 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 pr
Slide 8: Completed and ongoing strategic projects
Business model & strategy Completed and ongoing strategic projects Specialisation, diversification and growth within BioSolutions Florida plant (1st phase) started up mid 2018 Upgrade and increased specialisation in Sarpsborg (2019) Develop the unique biorefinery asset in Sarpsborg High-end bi
Slide 9: Investment in Alginor – a «blue» biorefinery concept
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 nutraceutical applications Similar
Slide 10: 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
Slide 11: Integral part of market offering
Sustainability Integral part of market offering RAW MATERIALS PROCESSES PRODUCTS Natural, renewable, sustainable Efficient and sustainable Sustainable raw materials production and value chain biochemicals Sustainable and certified wood Reduced emissions improve LCA2) Products add sustainability valu
Slide 12: Climate change – targets and rating
Sustainability Climate change – targets and rating Science Based Targets for GHG emissions approved by SBTi¹ Targeted reductions in greenhouse gas emissions: 53% by 2030 100% by 2050 Base year = 2009 Targets are in line with the ambitions in the Paris Agreement and the Norwegian Climate La
Slide 13: 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
Slide 14: 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
Slide 15: Diversity: Around 620 products to 3,000 customers
BioSolutions Diversity: Around 620 products to 3,000 customers BioSolutions properties Properties Applications Revenues by end-market and region1) Ceramics Revenue by end-market (2020) Sales distribution (2020) Binding agent Dust solutions RoW 2% Feed Construction Granulation aid Chemicals/
Slide 16: Current global lignin supply
BioSolutions Current global lignin supply By sales volume Borregaard Domsjø RYAM Sappi Burgo Nippon Russia Others Global lignin supply ~1 million mtds in 2021 Borregaard manufacturing facilities Others 16 Source: Borregaard estimates
Slide 17: Implications of reduced lignin raw material supply
BioSolutions Implications of reduced lignin raw material supply Sales volume - BioSolutions Lost volume is hardwood-based with limited potential Kmtds¹⁾ for specialisation 500 Construction and Industrial low-end markets affected 450 375-400 400 350 Construction – a cyclical market with increas
Slide 18: Strategic priorities – key considerations
BioSolutions Strategic priorities – key considerations Volume split 2009-2020 New supply situation Kmtds¹⁾ - an opportunity to sharpen strategy 60% 50% Optimise value of biopolymers portfolio Reduce exposure to low-end and cyclical markets 40% Diversify based on value-added 30% Focus on advanced a
Slide 19: Industrial and Specialities
BioSolutions Industrial and Specialities Kmtds1) Industrial sales volume Kmtds1) Specialities sales volume 200 100 170 80 140 60 110 80 40 50 20 20 0 -10 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Industrial Specialities sa
Slide 20: Lignin applications, functionality and substitutes
BioSolutions Lignin applications, functionality and substitutes Value proposition: Application Functionality Competing technologies Green Cost/value alternative vs. synthetics Batteries Crystal growth control Few ✓ ✓ Oil field chemicals Dispersant and binder Synthetics ✓ ✓ Crop protection Dispersant
Slide 21: Lignin in agriculture
BioSolutions Lignin in agriculture Plant nutrition Crop protection Micro-nutrients Soil conditioners Macro-nutrients Pesticides ( Zn, Fe, Cu, Mn) (source of organic carbon) (N, P, K, S) (dispersant) Complexing agent Nutrient use efficiency Basic nutrients Water-based Solvent-based ✓ ✓ × ✓ × Binder f
Slide 22: Lignin in lead acid batteries
BioSolutions Lignin in lead acid 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
Slide 23: Concrete admixture formulation preferences
BioSolutions Concrete admixture formulation preferences Northern Europe Southern North America Europe Asia Middle East South America Lignin Admixture market diverse, lignin competes Synthetics with captive synthetic products Regional and local formulation preferences Climate influences formula
Slide 24: Sustainability - competitive edge
BioSolutions 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 Prod
Slide 25: Sustainability - competitive edge in use
BioSolutions Sustainability - competitive edge in use Plant nutrition 35 Plant nutrition – favourable environmental footprint 30 25 Borregaard's biopolymers - the sustainable alternative to synthetics for kg CO2 eqv. 20 formulating micronutrients 15 High efficiency, lower dosage 10 90% reducti
Slide 26: Innovation strategy
BioSolutions 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 26
Slide 27: Innovation - introducing novel products
BioSolutions Innovation - introducing novel products Crop protection – opportunities in water-based formulations New products for water-based formulations, the fastest growing segment in crop protection Batteries – unique product performance New organic expander for improved charging commerciali
Slide 28: 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
Slide 29: Update on Sarpsborg lignin investment programme
BioSolutions Update on Sarpsborg lignin investment programme 500 mNOK capex, 70% expansion/30% replacement Additional dryer with packaging capacity Tanks for storage of liquid materials Improved solutions for logistics, infrastructure and energy In operation from July 2019 Capex ≈10% below
Slide 30: 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/
Slide 31: Biovanillin - well positioned for growth
BioSolutions 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 CO2 eq) Unique raw material ba
Slide 32: Capacity increase for wood based vanillin
BioSolutions Capacity increase for wood based vanillin Capacity increase at least 250 tonnes Construction started 2H 2019, completed 1H 2021 Debottlenecking of existing facility Capex NOK 130 million 32
Slide 33: 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 3-4% Acetate -2-0% Nitrocellulose 0% Casings 3-4% High quality speci
Slide 34: Increasing specialisation
BioMaterials The speciality cellulose market - 2020 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 specialisat
Slide 35: Speciality cellulose market
BioMaterials Speciality cellulose market Market Annual Speciality cellulose size ‘000 growth Segments Applications mt (2020) 2020-2023 demand 2020 (1.6 million mt1)) Acetate Cigarette filters, plastics, LCD, 550 -2-0% yarn Highly specialised Casings 3% Chemic Sponges 1% Ethers²) Construction, coatin
Slide 36: Speciality cellulose suppliers
BioMaterials Speciality cellulose suppliers 12 players supplying 1.6 million mt speciality cellulose Top 4 players (Rayonier Advanced Materials (RYAM), Georgia-Pacific (G-P) Cellulose, Bracell and Borregaard) have 90%¹⁾ market share Top 4 players use textile and fluff markets as capacity fille
Slide 37: Speciality cellulose industry
BioMaterials Speciality cellulose industry Speciality cellulose market is approximately 1.6 million mt Speciality cellulose sales volume by producer Top 4 speciality cellulose producers have 90 % market share Others and use hardwood and softwood as raw material In addition, there are a few cot
Slide 38: Cellulose ethers overview
BioMaterials 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) Alm
Slide 39: Cellulose ethers – solid growth and attractive opportunities
BioMaterials Cellulose ethers – solid growth and attractive opportunities Others In 2015-20, demand for ether pulp grew > 4% annually, expected at 3-4% going forward Pharma/ Construction Solid growth in all segments – temporary setback due to Covid-19 personal care Top 6 cellulose ether produc
Slide 40: Cellulose acetate overview
BioMaterials Cellulose acetate overview Triacetate 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 produ
Slide 41: Ice bear – continued growth and new applications
BioMaterials 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 Further growth projected in 2021-23 within several spe
Slide 42: Speciality cellulose – sustainability driving growth
BioMaterials 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
Slide 43: Cotton linter pulp vs. speciality wood pulp
BioMaterials 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 Cott
Slide 44: Exilva cellulose fibrils
BioMaterials 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 fibril
Slide 45: 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
Slide 46: Nanocellulose landscape
BioMaterials Nanocellulose landscape Three main product categories, with significant variations within each product group, NCC/CNC – few standards exist strength focus NCC/CNC - nano cellulose crystals NFC/MFC - nano/microfibrillated cellulose CNF - ionic cellulose nano fibrils NFC/MFC – Typ
Slide 47: Exilva – growing pipeline and customer base
BioMaterials Exilva – growing pipeline and customer base 76 regular customers per 1. June 2021 (LY 52) Customers and plant trials development Significant sales increase 150 Promising growth within regular customers plant trials 100 Corrugated Elastomeric and cellulosic coating 50 Agrochemi
Slide 48: Sustainability and performance driving demand
BioMaterials 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
Slide 49: Sales distribution 2020
BioMaterials Sales distribution 2020 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 5% 90 Europe 68% 80 Asia 70 27% 60 50 Customer base and concentration 40 (sales revenu
Slide 50: 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
Slide 51: 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 51 1) GHG emissions “cradle to grave”, third party a
Slide 52: Research & development
Innovation management Research & development ~18%1) of Borregaard’s revenues come from new products2) Innovation Management Teams ~90 employees in R&D – of which 67 at the research centre in Sarpsborg – 28 have a PhD R&D and innovation spending 3.6% of revenues in 20203) IP strategies for
Slide 53: Business driven innovation model
Innovation management 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-
Slide 54: Financial objectives and dividend policy
Financial objectives 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 c
Slide 55: Value creation since IPO
Financials Value creation since IPO mNOK 25 000 20 000 15 000 CAGR Share price, including reinvestment of 10 000 33.3% dividend 5 000 Enterprise value = 25.2% market cap + net debt 0 Net debt Market capitalisation Accumulated dividend 55
Slide 56: Key figures 2016 – 2021 (LTM)
Financials Key figures 2016 – 2021 (LTM)1 Operating revenues EBITDA1 & EBITDA1 % ROCE2 and EPS3 mNOK mNOK % % NOK ROCE % 1 800 28 25 15 6 000 5697 EPS 5328 21,7 5063 24 5 000 4785 1 500 4618 1 372 20 19,1 12 4492 20 1 200 1 132 16,0 4 000 1 021 1 055 1 007 15 9 16 12,7 903 3 000 900 11,4 10,5 12 7,1
Slide 57: Key segment figures 2016 – 2021 (LTM)
Financials Key segment figures 2016 – 2021 (LTM)1 BioSolutions BioMaterials Fine Chemicals mNOK % mNOK % mNOK % EBITDA2 & EBITDA %2 EBITDA & EBITDA % EBITDA & EBITDA % 900 865 45 800 40 800 40 800 40 700 35 700 33,5 35 31,0 32,1 700 647 35 632 600 30 600 30 605 25,8 25,9 600 545 30 24,8 24,6 499 500
Slide 58: Key cost items 2016-2020
Financials Key cost items 2016-2020 % of total cost 100% • 75%-85% sourced from Norway, the rest mainly from Sweden Wood 10% 10% 12% 13% 11% • Annual price and volume contracts, mid-year adjustments occur 11% 12% 11% 11% 8% • Includes inbound logistics, ~30% of wood cost 80% • Energy consumption: He
Slide 59: Sensitivity on EBITDA
Financials Sensitivity on EBITDA¹⁾ Sensitivity of 1% change (based on 2020) 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
Slide 60: FX impact and policy
Financials FX impact and policy mNOK Hedging gain/losses on EBITDA1 Currency hedging strategy 0 -11 Purpose is to delay effects of currency fluctuations and secure competitiveness Hedging based on expected net cash flow (EBITDA2) 3 -100 -72 -76 -79 Base hedge - 75%/50% on a rolling basis for 6
Slide 61: Cash flow, NWC and investments 2016 – 2021 (LTM)
Financials Cash flow, NWC and investments 2016 – 2021 (LTM)2 Cash flow from operating activities Average NWC Investments mNOK mNOK mNOK % 1 600 1 500 24% 1000 1 400 1 250 20% 1298 800 1 200 1 165 1 146 1 000 16% 1 000 624 600 875 875 416 800 750 820 12% 269 1491 264 213 400 159 600 1081 500 8% 400 8
Slide 62: Investment forecast 2021-2023
Financials Investment forecast 2021-2023 Replacement investments mNOK Investment forecast1,3 Targeted at depreciation level 550 Upgrade of caustic soda production facility a major investment in 600 +/-60 2020 and 2021 500 Expansion2 investments 150 400 400 +/-60 +/-60 Capacity expansion for wo
Slide 63: Major expansion investments – BioSolutions
Financials From CMD September 2020 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 dry
Slide 64: Major expansion investments – BioMaterials & Fine Chemicals
Financials From CMD September 2020 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 fine chemical intermediates Investment
Slide 65: Impact from investments on key financials
Financials From CMD September 2020 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
Slide 66: Capital structure
Financials Capital structure Target for capital structure Maintain key financial ratios corresponding to an investment grade mNOK Leverage ratio and loan capacity rated company 3 000 Leverage ratio1 targeted between 1.0 and 2.25 over time Solid capital structure as per 30.9.21 2 500 2.25 * EBITD
Slide 67: 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 • 31 years with Borregaard Per Bjarne Lyngstad Liv Longva • CFO • SVP Strategic Sourcing • 23 years in current position • In current position from June 2020 • 33 years w
Slide 68: 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