Borregaard Asa

Good morning and welcome to the third quarter 2025 presentation for Borgard. My name is Tom-Erik Foss Jakobsen. I'm the new CEO since 1st of August, and I'll be joined today by Per-Bjarne Lyngstad, our CFO, and we will take you through this agenda. I'll begin with the key highlights from the quarter and provide an update on the market situation across our business segments. I will then share details on our second investment to increase capacity at our site in Salzburg, which has recently been approved on the board level, as well as our participation in a convertible loan to Algenor. Finally, I'll summarize the outlook for the remainder of the year before handing over to Per Bjarne, who will walk you through the financial performance in more detail. Before we continue, I just would like to remind those of you watching the webcast live that you're welcome to submit questions at any time during the presentation, and we'll address them at the end of the presentation. Let's begin with the highlights for the third quarter. EBITDA came in at 440 million, down from 524 million in the same quarter last year. The overall result was reduced due to lower bioethanol prices and disruption in cell-lose production. The disruption had a negative EBITDA impact of approximately 40 million. We saw solid performance in biosolutions, driven by continued sales growth in agriculture, marking the seventh consecutive quarter of growth in that area. In biomaterials, we continued to see increased sales prices. Our fine chemical intermediates delivered a strong result. Across all business areas, we had positive net currency effects. Now let's turn to the market situation, starting with BioSolutions. Sales volume increased 4% compared to the same quarter last year. This growth was again driven by our broad agriculture portfolio, with no single product group or single market standing out. We offer a broad portfolio to the agricultural sector. It's comprising approximately 200 different products and we are serving around 1,000 customers within agriculture. The average price in sales currency and the product mix were in line with the same quarter last year. Q3 typically sees a seasonally weaker product mix, which may slightly dampen the average sales price. The anti-dumping duties on Vanlin from China continued to have a positive, though limited, impact on Borgard's Vanlin products. We also saw positive net currency effects across the segment in the quarter. Then next over to biomaterials, where performance was weaker in the quarter. The average price in sales currency was 9% higher than in the third quarter 2024, primarily driven by price increases. However, higher sales prices and an improved product mix were more than offset by a significant decline in sales volume compared to the same quarter last year. The lower sales volume was due to the temporary disruption in sales production and strong deliveries in the corresponding quarter last year. Net currency effects were positive for biomaterials in the quarter. Then I would like to address the recent developments regarding allegations of dumping of specialty cellulose products from Norway, specifically Borgaard, into the US market. In August, RIEM and the United Steelworkers Union filed petitions in the US requesting anti-dumping and countervailing duties on specialty cellulose imports. The petition targets products from both Norway, meaning Borgard as a company, and also Brazil, where we have a company named Bracel, which is the target. For Borgard, this means anti-dumping duties, while Brazil faces both anti-dumping and countervailing duties. Borgard does not recognize the basis for these claims and have engaged both legal and accounting specialists to defend our position. It's important to note that Borgard's historical sales of specialty cellulose to the U.S. have been limited. However, there was a moderate increase in sales in 2024, driven by higher demand following the closure of Georgia Pacific's Foley plant in Florida. Regardless of the petition, our exports to the U.S. will decrease in 2025. As of 1 August, specialty cellulose products from Norway are already subject to a 15% import duty, and any additional anti-dumping duties beyond that are expected to have a limited impact on our export volumes to the US. A preliminary decision is expected late in Q1 2026, at the earliest. with a final decision expected likely late in Q3 next year. Now moving on to fine chemicals, where performance was weaker in the quarter. The main driver here was the continued lower sales prices for our advanced bioethanol. In addition, deliveries of bioethanol were lower compared to the high volumes in the same quarter last year. As previously explained, the decline in sales prices for our advanced bioethanol is largely due to a significant increase in market supply driven by the favorable incentives we have seen in Europe. In fine chemical intermediates, we saw a strong quarter supported by a more favorable product mix and higher sales prices compared to the same period last year. The net currency impact in fine chemicals was positive. Then I would like to update you on the progress of our capacity expansion at the Salzburg site, which is a key part of Borgard's long-term growth strategy. We have now committed to the second step of our two-phase expansion plan at Salzburg with an investment of 308 million. This follows the first investment of 490 million, which was launched in Q3 last year as part of the investment plan that we announced at our Capital Markets Day. The main goal for us here is to de-bottleneck and increase production capacity at the site. When both steps are completed, we expect a total capacity increase of 5 to 10%. The expansion covers our core product areas, lignin-based biopolymers, specialty cellulose and bioethanol. Production output is expected to increase gradually from second half 2026. In addition to higher capacity, these investments will also deliver environmental and cost benefits, including reduced costs and volume of residuals, energy savings, and also reduced caustic soda consumption. We also anticipate a reduction in COD effluents, supporting our ambitious sustainability targets. Then I would also like to update you on Borgard's participation in the recent financing solution for Alginor, which is an important step in supporting their ongoing investments. The financing package is designed to ensure Alginor can complete and commission its commercial scale demonstration plant for alginates. As part of the financing solution, the convertible loan is being guaranteed by three main shareholders, Borgard, Must Invest and Hatteland Group. Our share of the loan will be between 83 and 111 million, depending on the level of participation from other shareholders. Then finally, I will share our outlook for Q4. In BioSolutions, we anticipate Q4 sales volumes to range between 70 and 75,000 tons, which means below the 77,000 tons recorded in the same quarter last year. Anti-dumping duties on vanillin from China are anticipated to continue having a positive but limited impact for Borgard's vanillin products. In biomaterials, Q4 sales volume is expected to be in the range 35 to 38,000 tons. We anticipate a higher share of highly specialized grades compared to Q4 last year, and the average sales price should remain largely in line with Q3 this year. For fine chemicals, sales prices for bioethanol will continue to be significantly lower than last year, The product mix for fine chemicals intermediates in Q4 is expected to be weaker than in Q3. On the cost side, wood costs in Q4 will be slightly lower than in Q4 last year. However, we expect energy consumption, spot energy prices and energy-related raw material prices to increase seasonally in Q4 compared to Q3 this year. The annual maintenance stop at the Sarge Pro site will also affect production volumes in Q4. Finally, we will continue to monitor the uncertainty in the global economy, particularly related to tariffs, war and conflict, which may impact our markets and costs. With that, I'll hand it over to our CFO, Per-Bjarne Lyngstad, who will take you through our financial performance and key figures for the quarter. Thank you.

Thank you, Tom-Erik, and good morning, everyone. Border Guard's operating revenues in the third quarter declined by 8% compared with the third quarter of 2024, mainly due to lower sales volume in biomaterials and lower sales prices for bioethanol. EBITDA was 440 million NOC, down from 524 million in the third quarter last year. Biosolutions delivered a slightly improved result, while biomaterials and fine chemicals had weaker performance. Net currency effects were positive by about 30 million NOC compared with the third quarter of 2024. In September, an unexpected outage occurred at a facility at the SARSBOR site, which supplies a key chemical used in cellulose production. During the outage, we produced cellulose grades outside specifications, leading to delayed deliveries of certain grades. Production of lignin-based biopolymers, biovanillin and bioethanol, remained unaffected by the outage. The EBITDA impact from the production disruption was about 40 million NOC, as previously mentioned by Tom Jarek. The EBITDA margin ended at 24.5%, close to the margins we've had in previous quarters this year, but below the margin in the same quarter last year. Earnings per share were 1.96 NOC compared with 2.51 in the third quarter last year. The reduction in earnings per share was mainly due to the decrease in EBITDA adjusted for tax. In bio-solutions, operating revenues increased by 3%, primarily driven by higher sales volume. EBITDA was 277 million NOK, a slight improvement of 6 million NOK compared with the third quarter last year. Continued growth in sales to agriculture was offset by cost increases exceeding the general inflation. These cost increases were mainly due to higher input and manning costs at our US manufacturing sites. Anti-dumping duties on Vanlin from China had a positive but limited impact on Vanlin products. The net currency impact was positive for BioSolutions in the quarter. And the EBITDA margin in the third quarter was 26.2% in line with the same quarter last year. A lower sales volume due to the disruption in cellulose prediction and high deliveries in the third quarter last year resulted in 15% lower operating revenues in the third quarter for biomaterials. EBITDA was 112 million NOC, 19 million lower than in the same quarter last year. On the positive side, we had higher sales prices and an improved product mix. However, this was more than offset by the lower sales volume, in addition to higher wood costs. The wood costs were impacted by an above normal inventory level at higher prices at the beginning of the quarter, in addition to an unfavorable mix of wood in the quarter. The net currency effects were positive for biomaterials. The EBITDA margin was 19.2% in line with the third quarter of last year. Operating revenues in fine chemicals declined by more than 30% compared with the third quarter of 2024, primarily due to lower sales prices for bioethanol. EBITDA ended at 51 million NOC, compared with 122 million last year. The reduction in EBITDA was mainly driven by continued lower sales prices for bioethanol. Lower deliveries of bioethanol compared with the high deliveries in the third quarter last year also contributed to the decline. Fine chemical intermediates delivered a strong result, supported by a more favorable product mix and price increases compared with the third quarter last year. Net currency effects were positive also for fine chemicals. The EBITDA margin was 30.5% in this area, close to 20 percentage points below the same quarter last year. As mentioned earlier, the net currency impact on EBITDA was positive by about 30 million NOC compared with the third quarter last year. The positive impact was primarily due to reduced currency hedging losses. Hedging losses were 21 million NOK in the third quarter, compared with a loss of 86 million in the same quarter last year. The positive impact from lower hedging losses was partly offset by a stronger Norwegian kroner, particularly against the dollar. Based on Borregaard's currency basket, the NOC was about 4% stronger compared with the same quarter last year. Using currency rates as of yesterday, the estimated net currency effect for the full year of 2025 is now positive by 115 million NOK compared with 2024. The corresponding impact for the fourth quarter is estimated to be positive by about 5 million NOK. Borregaard had a cash flow from operating activities of 423 million NOK in the third quarter. The relatively strong cash flow was driven by the cash effect from EBITDA and a reduction in networking capital. Investments were 160 million NOK in the quarter. The largest expenditures were related to the SARS-CoV-2 site and ongoing environmental investments, the de-bottlenecking project, and specialization projects in biosolutions. In addition, Borregaard participated with NOK 23 million in the repair offering in Alginor's capital's arrays. Net interest bearing debt decreased by as much as 283 million NOK in the quarter. At the end of the quarter, Borregaard remained well capitalized with an equity ratio of 60% and a leverage ratio, which is net interest bearing debt over EBITDA, of 1.11%. And that concludes today's presentation. Tom-Erik and I will now be ready to answer any questions, both from the audience present here in Oslo and from those who follow the webcast. Our Vice President Finance, Veronica Sjevik-Frey, will moderate the webcast questions.

Thank you, Per-Bjørne. We have some questions here. The first one is from Mr. Magnus Rasmussen at SCB regarding capex. You have a knock 1 billion capex guidance for 2025 and have spent just 542 million year to date. Should we expect the 450 million of capex in Q4? And if not, is it actually lower capex or just phasing?