Okay. So now I think we are ready to start. Welcome to this Fourth Quarter twenty nineteen Presentation for Borgard. My name is Pear Suhrle. I'm the President and CEO, and I will be joined this morning by our CFO, Pedjarne Lindgster, and we will take you through the following agenda.
I'll take you through the highlights in the quarter and for the year, the dividend proposal from the Board, the market situation for the business areas, a slight strategic update on our key projects and also a few slides on sustainability and finally, the outlook. Pebjornen will then take over and go through the detailed financials for the fourth quarter and the year. First, for the fourth quarter came in an EBITA at SEK73 million and compared to $94,000,000 a year ago. Included in that number is $35,000,000 impact from the operational incidents that we had at the Sarasvos site in the fourth quarter, where we sent out a release to the stock exchange in December. And this has mainly affected the EBITA in Specialty Cellulars.
The Performance Chemicals business had a favorable product mix, but reduced sales volume and higher costs and depreciation. So a net effect was slightly negative for that business. The Ingredients business continued to perform very strongly. We had a positive net currency impact and also notably for the quarter, a very strong cash flow that corrected some of the deviations we have had earlier in the year. If you look at the full year, the EBITA came in at €589,000,000 compared to $580,000,000 again, a favorable product mix in the Performance Chemicals business, but also higher costs and increased depreciation.
The Sprinkling Cellulose business had a fairly strong improvement in the product mix, but also had higher wood costs and again this operational incident in the fourth quarter, that had an impact on the result overall. The bioethanol business had strong progress in the year as well as the price development in wood based vanillin that gave a strong improvement in that result. Also the net currency impact was positive for all business areas. The dividend proposal from the Board, just to remind you about the policy, is that we should pay regular and progressive dividends. And the dividend should be targeted between 3050% of net profit.
The Board has proposed a dividend of SEK2.30, which is 55% of net earnings. So the proposed dividend, in other words, is slightly above the 30% to 50% target. However, the Board's assessment has been that when you take into consideration the extraordinary events, particularly in the fourth quarter, there is room for a small increase in the dividend compared to last year. So hence, the proposal of SEK2.30 to the AGM that will take place in April year. If that is approved, it's a total dividend payment of NOK229 million.
Then on to the development in the market. First, Performance Chemicals. The price in Norwegian krone is increasing has increased year on year approximately 7%. But if you look at the price development in sales currency, that is fairly flat. So the price average price in currency is in line with the same quarter last year.
This is achieved through price pressure in the concrete admix area. It's compensated by a more favorable product mix. And also specifically inside the construction area, the sales to concrete admixture is declining, but it's more than compensated by growth in other construction applications. Sales volume overall declined by 4%, and this is driven by lower industrial volumes. Specialties and Construction is comparable to the same quarter last year.
The raw material from one of our suppliers, Flambeau, ceased late in the third quarter, in September in the third quarter. So hence, there has been no raw material deliveries from Flambeau in the fourth quarter. The supply, this has no impact on our ability to supply customers because we can supply from other manufacturing units. But on the other hand, this has an impact on the overall balance between raw material in and the sales volume. The positive cash effects, FX effects, are also relevant for Performance Chemicals.
If we look at the full year development, again, the same development in pricing. The sales currency price in sales currency is slightly below $20.18, but it's fairly flat. Again, same drivers behind the price development, strong competition in concrete admixtures and certain of the low value industrial applications, and this is compensated by a more favorable product mix and growth in other construction applications that have better prices than the concrete admixture. The sales volume is fairly flat and growth in Industrial Products, but slower growth than we have seen in recent years and stable volumes of Specialties and a slight decline in Construction. Again, to remind you that inside construction, there is a decline in concrete admix, but a growth in the other better priced construction applications.
The Florida sales volume is in accordance with the ramp up plan, which means that we have a speed of approximately 50,000 tonnes per year at the 2019. So this is in line with the ramp up plan, but the profitability is below expectations. And this is explained by a weaker product mix and also geographically longer distances to deliver products, which gives drives the distribution costs. So both mix and distribution costs and certain fixed costs are higher than expected. Then on to Specialty Cellulose, 7% lower average sales price in currency than we had than the last year the year before, and this is driven solely by the operational incidents we had in the fourth quarter, which led to lower production and also the classified material that had to be sold at lower prices.
We think that we have cleaned up most of these effects in the quarter itself. You can see that we had a slightly higher sales volume in the quarter compared to last year, and this has led to a significant reduction in inventory because we had a lower production than the same quarter last year. The bioethanol business did well in the fourth quarter, high sales volume. And also this business has a positive FX impact. If we look at the full year, the cellulose prices were slightly below in currency compared to the last year, but this is solely explained by the declassified material in the fourth quarter.
The price level in the ordinary markets is on average flat from year to year in currency. However, we had a good improvement in the product mix. It came up to from 62% to 73% in highly specialized grades. And the volume was also at a normal level, 153,000 tons sales. The bioethanol had an excellent year, both with higher sales and production volume and improved product mix and lower production costs.
And this is, of course, driven by the investment that we completed a couple of years ago in the ethanol facility that has led to reduced energy consumption and also a stronger product mix. In this area, also positive currency effects. Then, other businesses. First, the Ingredients business, high sales of Wood based Vanlin in the quarter, driven by strong demand. If you look at the full year, sales revenues have gone up 24% compared to 2019, and this is more or less only driven by higher sales prices for wood based Van Lin.
So this also has a comparable effect on the bottom line. In Fine Chemicals, the sales volume in the quarter was in line with the same quarter last year, but a slightly weaker product mix. Sales revenues year on year increased by 5%, so fairly stable development year on year. Then I'll talk a few slides on the strategy. This, back in five years ago, in 2014, just over five years ago, we presented our strategic agenda for the next five year period, and we have completed a number of investment projects now to execute on that strategy.
And first, we said that we would do changes in the Performance Chemicals business, both to be able to grow specialties and to diversify the business away from concrete admixture into other applications and reduce the dependency on that particular application and also put in place the ability to grow with the market. So the first phase in plant, first phase in Florida was completed back in the 2018. Last year, in the second half, we completed the upgrade and put in more equipment to specialize in the Salzburg facility. And also, a couple of years ago, one point five years ago, we extended the joint venture agreement in South Africa until the 2032 in this at this time. Then we have made several targeted investments in Norway in the Salzburg facility to increase specialization.
I already mentioned the high end bioethanol expansion that is giving good results already was completed in 2018. The iceberg capacity expansion was completed in at the 2018. You can see also some results of that in the strong increase in the high value cellulose share of our sales. And we are now in progress to increase the capacity of wood based vanillin that will be completed in the 2021, but it will go on throughout 2020. And finally, in 2016, we completed late in 2016, we put into production our first commercial scale production facility for the Exilva cellulose fibrils, and the market introduction is ongoing there.
So all in total, this investment program has had a total CapEx of SEK1.7 billion between the years 2015 and 2019. So all the investments have been completed on time and within budget. So now the focus is primarily on market execution. We will certainly do some smaller expansion CapEx also going forward, but it will be in the interim period now, it will be of a different magnitude than what we have had in this period from 2015 to 2019. Cellarose Fibrills has a small part that is called Sensify.
And in the fourth quarter, we made a decision to discontinue this particular part of the Fibrills business. The Sensify project is an advanced texture system for food, a texturizer that gives the right mouthfeel and can replace fat, milk fat in different food products. We do have we have established a number of customers and sales in this area, but we feel that the market potential is not sufficient to move the project from demonstration phase into commercial operation. So we have written down €11,000,000 under other expenses in the fourth quarter, and the EBITA impact last year was minus €9,000,000 from this business. So then that also tells you that it was a fairly small operation in our total in the context of Borgard's total operations.
The main part of cellulose fibrils is related to the Exilva microfibrilla cellulose business. And this is an additive for industrial applications. It improves flow, stability, flexibility and not least gives strength in different industrial formulations and materials. The market introduction is ongoing here. We have reached roughly 50 regular customers, but most of these customers take fairly small volumes.
That's indicated by the fact that this is an additive. An additive can be added from anywhere around 1% down to very small levels. It's a very potent product. However, we have an incredibly strong pipeline here. More than 1,800 prospective customers in addition to the 50 regular customers are working on this product, either through samples in their lab or in different trial phases in piloting in large scale, full scale trial phase.
And the pipeline has an exponential growth. In the last six months, more than 500 new prospects have been added. However, long lead times, we have now been working for close roughly three years on this, and we typically see that lead times are three to five years from the time a customer starts to look at it until they become a regular customer, but very optimistic on the pipeline for this business. This, of course, is also on Horizon twenty twenty project that has received a significant grant from the EU. The grant runs until April 2020.
It has been gradually taken down throughout 2019, but it will end completely at the 2020. Then a few slides on sustainability. BorreGard has worked with sustainability for the last, I would say, twelve, thirteen years. We started doing life cycle analysis of our production processes and all our finished products back twelve, thirteen years ago. And this is a very schematic presentation of the value chain.
If you start with the raw materials, all our raw materials come from sustainable and certified wood according to the PEFC and FSC standards. And this also goes for the lignin raw material that we receive at our facilities around the world. The pulp mills that receive that deliver raw materials are all using certified wood. The life cycle analysis is mostly focused on the production processes that we have, where we have worked diligently over the years to reduce emissions to water and air, particularly CO2 reductions and also looked at greener logistical solutions. So the climate footprint of our different products have come down significantly throughout this twelve, thirteen year period that we have been working on sustainability.
However, when it comes to the products that we are offering to the customers, we think about sustainability in a broader context than just the CO2 footprint. As we see it, there are three different things that we can offer to our customers. On the one hand, it's the climate part. The life cycle analysis demonstrates the favorable greenhouse gas footprint of our products and can also give the customer comparable numbers for the synthetic alternatives that he has as an option. But we also offer bio based products.
It's becoming more and more obvious that customers and markets prefer natural starting materials, and we have 100% natural raw materials. And this is especially evident in recent times in the biovanillin, wood based vanillin offering that we have to the market. And particularly inside the lignin business, we offer a number of products that have a favorable environment, health and safety profile. So especially for the agricultural markets that are quite important for our specialties in lignin, we offer nontoxic harmless products as an alternative to petrochemicals that are giving an undesired exposure to the farmer as the end user. So all across these different areas, we think that sustainability is important.
So a lot of discussion around the standardizing measurements of sustainability. We are rated by a number of different agencies. The largest one, I would say, is CDP. CDP is a global nonprofit organization that is owned, among others, by U. N.
Global Compact and WWF. And BorreGard has reported to CDP for several years. And two areas, really: first, last year, second half last year, our science based targets for greenhouse gas emissions were approved by CDP. We have targeted reductions of 53% in CO2 emissions by 5,100 by 2015. The start year starting year base year is 02/2009.
We are already well on the way to achieving the 53% by 02/1930. The other thing that CDP is doing is that they have a rating every year of different companies, and there are more than 8,000 companies that report to CDP and are evaluated by CDP. And it's roughly 2% of the companies, 179 companies last year, that were awarded an A rating. And Borgard has an A rating, and I don't think there are many chemical companies among the 179. There are five companies in Norway, Storbland, DNB, Remotusen and Weiddeke are the other four companies in Norway that have an A rating.
And we had an A rating also in 2018. Then I will round off by taking a look at the outlook for 2020. The market dynamics in the Performance Chemicals business are expected to be roughly the same, strong competition and price pressure in lignin to concrete admixture and also into certain low value industrial applications. But again, we expect that this will be partly compensated by diversification and specialization. So a favorable product mix will, to a large extent, equalize the effect of this price pressure.
The sales volume is forecast to increase somewhere in the range of zero between the range of zero to five percent. And also to remind you that the NOK500 million investment that we have just completed in Norway will also have a significant cost reduction effect. First of all, million in cost savings will be realized in Norway. This will be gradually realized through 2020 with full effect from 'twenty one. In addition, million in cost savings from restructuring in Germany as an indirect effect of the Norwegian investment.
And this restructuring will have full effect from 2020. In Specialty Cellulars, the average price in sales currency is expected to increase by roughly 2% from 2019. Again, this is driven by more by improved product mix than by price increases. The wood cost in the first half will be down to between NOK25 million and NOK30 million compared to the same time in 2019. Pricing for the second half will be negotiated just before July 1.
The sales volume in the first quarter will be comparable or expected to be higher than in the same quarter in 'nineteen, but with a similar product mix. Then under other businesses, the price level that we have reached for wood based Vanlin is expected to continue. We think that it is flattening out at the current level. So that means that the good results we saw in 2019 should continue into 2020. And we are also doing a capacity expansion in Ingredients that will be have full effect from the second half twenty twenty one.
But already in 2020, we will see some volume effect from this capacity expansion because it's a number of different investments that are being made in the existing facility in order to raise capacity. Fine Chemicals will have another stable year, no major changes in the market conditions. Sales are gradually increasing for cellulose fibrils. We expect to increase the number of customers and the volume, but the lead times is, like I said before, is in general quite long. And this EU Horizon grant will will end in April 2020.
So it means that it's important that we increase sales so that we can compensate for the reduction in support from the EU. So that completes the presentation on the market and strategy. And I will hand over to Pebjane for the financials.
Thank you, Pierre, and good morning, everyone. Borregards operating revenues increased by 1% in compared with the 2018. EBITDA adjusted was 73,000,000 compared with NOK 94,000,000 in 2018. We had an improvement in other businesses, but both Performance Chemicals and Specialty Cellulose declined. The operational incidents at the Sarasbur side had a negative impact on EBITA adjusted of about million in the quarter.
Net currency effects were positive by NOK15 million compared with the same quarter in 2018. The EBITDA adjusted margin was 5.9% in the fourth quarter, 1.8 percentage points lower than the corresponding quarter in 2018. Earnings per share were NOK0.38 compared with NOK0.80. And earnings per share were negatively affected by several items in the quarter. The NOK11 million in write downs and costs related to the Sensify project was recorded as other expenses.
Net interest expenses increased by NOK7 million, mainly from the implementation of IFRS 16 regarding leases. And then other financials other financial items had a negative change of million, mainly from an increase in committed return on an unfunded pension plan. For the full year of 2019, Borregards operating revenues increased by 6%, mainly from currency effects and increased sales in ingredients. EBITDA adjusted ended at NOK589 million compared with NOK580 million in 2018. Also for the full year, other businesses result improved, while Performance Chemicals and Cellulose had weaker results.
The net currency effect or impact was positive by million for the full year. The EBITDA adjusted margin ended at 11.6% compared with 12.1% in 2018. Return on capital employed was 10.9%, down 1.8 percentage points from 2018. And the reduction was mainly due to high investments and a higher net working capital level. Earnings per share decreased to NOK4.17 compared with NOK4.76 in 2019.
NOK27 million in restructuring costs related to the German Lingen operation and the Sensify project. Increased interest expenses partly from IFRS 16 and the increase in committed return on a pension plan all affected earnings per share negatively. Operating revenues in Performance Chemicals were 1% below the same quarter in 2018, mainly as a result of 4% lower sales volume. For
the
full year, operating revenues increased by 4%, mainly from net currency effects. EBITDA adjusted was million in the fourth quarter compared with NOK42 million in 2018. A favorable product mix and positive net currency effects were more than offset by reduced sales volume and higher operating costs and depreciation. Sales volume declined by 4%, mainly for low value industrial products and sales to concrete admixtures. For the full year, EBITDA adjusted was NOK $297,000,000 compared with NOK $317,000,000 in 2018.
The result declined due to increased depreciation both in Florida and in Norway and from higher costs in the Florida operation. These effects were largely offset by positive net currency effects and a more favorable product mix. The EBITA adjusted margin was 6.6% in the fourth quarter and 12.7% for the full year, both decreasing by about one percentage points compared with the corresponding period last year. In Specialty Cellulose, operating revenues were in line with the fourth quarter twenty eighteen. For the full year, operating revenues increased by 3%, mainly from currency effects and an improved product mix.
EBITDA adjusted was NOK33 million compared with NOK50 million in the 2018. The operational incidents at the Sarco side affected specialty cellulose in particular and resulting in reduced production volume and the classified products, which have been sold at lower prices. The sales volume was slightly higher than in the 2018, resulting in a significant reduction in inventory. The result for bioethanol increased mainly due to higher sales volume in the quarter, and the net currency impact was positive also on the EBITA level. For the full year, EBITA adjusted was NOK 188,000,000 compared to NOK $257,000,000 in 2018, and the reduced result was mainly due to increased wood costs and the fourth quarter operational incidents.
Net currency effects were positive. The result for bioethanol increased due to higher sales and production volume, improved product mix and lower production costs. The weaker result in Specialty Cellulose led to the EBITDA adjusted margin decreasing to 5.6% in the fourth quarter and 10.9% for the full year. For other businesses, operating revenues were 9% above the same quarter in 2018, mainly from higher sales in Ingredients. For the full year, operating revenues increased by 16% in other businesses, again mainly from higher sales in Ingredients.
EBITDA adjusted was NOK 14,000,000 in the fourth quarter compared with NOK 2,000,000 in the 2018. For the full year, EBITDA increased significantly to $2.00 4,000,000 compared with NOK9 million in 2018. The improvement in other businesses, both in the fourth quarter and for the full year, was mainly due to a significantly stronger result in ingredients from increased sales prices for wood based vanillin. Fine Chemicals had a weaker product mix and result in the fourth quarter. But for the full year, Fine Chemicals had a slightly better result than in 2018.
Cellulose fibrils had a weaker result compared with the 2018 as reduced cost coverage from the EU grant was not fully compensated by higher sales and improved productivity. For the full year, cellulose fibrils had a result in line with twenty eighteen, which means that we managed to fully compensate for the reduced cost coverage from the EU grant in the year. Net corporate costs were in at the same level as in both the fourth quarter and the full year of 2018. And also for other businesses, net currency effects were positive both in the quarter and for the full year. The net currency impact on EBITA adjusted was, as I said, initially positive by about NOK 15,000,000 compared with the 2018.
The positive impact came from a weaker Norwegian kroner, which weakened by about 7% compared with the 2018 if we use Borregoard's currency basket. Hatching losses in the fourth quarter were 32,000,000 compared with NOK 1,000,000 in the 2018, partly offsetting the positive impact from a weaker Norwegian kroner. For the full year, the net currency impact on EBITA adjusted was positive by about NOK95 million. Hedging losses were NOK76 million compared with NOK11 million in 2018. And using currency rates as of yesterday, the net currency impact for the full year of 2020 is estimated to be positive by about NOK30 million compared with 2019.
And the corresponding impact for the first quarter is estimated to be positive by million dollars compared with the 2019. Borregards' cash flow from operations improved significantly in the fourth quarter compared with the previous four quarters, as you can see on the graph to the left. And the good cash flow was mainly from a significant reduction in net working capital. For the full year, cash flow from operation increased by close to NOK 200,000,000 due to the cash effect from an improved EBITDA adjusted and less unfavorable development in net working capital compared to 2018. However, the average net working capital over operating revenues ratio ended at close to 23%, which is above our 20% target.
Investments were in line with the 2018 and slightly lower than our latest forecast. As you can see on the graph, we put a lot of replacement investments in the fourth quarter, and that's related to that we have our annual maintenance stop in the fourth quarter, and we also use that to put in a lot of new equipment. The investment carryover to 2020 is limited and has not led to any changes in our forecast. Net interest bearing debt decreased by NOK87 million in the fourth quarter, mainly as a result of the NOK171 million reduction in net working capital. And at the 2019, BorreGard is well capitalized with an equity ratio of 51% and a leverage ratio, which is net interest bearing debt over EBITDA of 1.59 if we exclude IFRS 16 impacts.
We have updated our investment forecast for 2020 slightly. In addition, we are now presenting our first forecast for 2021. For 2020, total investments is forecast at $575,000,000 with an uncertainty of plusminus NOK 55,000,000. For 2021, the forecast is NOK 100,000,000 lower, NOK $475,000,000 with plusminus 75,000,000 uncertainty. Over time, replacement investments are targeted at depreciation level.
However, due to the NOK207 million upgrade of the caustic soda production facility, we believe it's likely that we will be above the target both in 2020 and 2021. The main expansion project in 2020 and 2021 is the capacity increase for wood based Vanlin, which is we expected to be fully operation mid-twenty twenty one. And potential new project, which so far are unknown or have not been communicated, may lead, of course, to additional investments. And that concludes today's presentation. Now, and I will be ready to answer any questions.
Mikael here from Carnegie. Just to first ask a couple of questions on Xilva. When you say the number of prospects grew by 500 during the 2019, can you elaborate a bit on how many prospects you have had whom have proceeded not to or have decided not to proceed with your product?
Yes. Yes, I can do that. I mean, is like a funnel where you enter by getting a sample. You start to work on the sample. You progress further to lab trials, pilot trials, large scale trials and finally become a customer.
And right now, we have, like I said, more than 1,800 in that funnel, plus roughly 50 that have become customers. So let's say 18 close to 1,900. Roughly 20%, in addition to that, have left the funnel over the first three years. So that means that 80% of the ones that come in are still in the funnel. So we think that's a fairly solid number.
And the first two, three years that we were working on this were roughly 50 net 50 additions every month. Now that has gone up to 80 new potentials coming in every month net. That is after deducting the ones that leave in that same period.
Do you have a hunch for when you'll see a large contract being signed?
Well, there are so many different applications. And like I said, most customers are taking small volumes, there are a few customers that take larger volumes. And of course, in this big pipeline, there are quite a large number of customers that potentially could take large numbers. But it's impossible to predict. But it could be a slow buildup, but it could also be a stepwise if some of those large potentials kick in.
And then more in the short term, on the cost effect you would expect for Q2 then and 2020 related to not being having the grants from the EU Horizon program anymore, Just in terms of if you could quantify somewhat what we could expect to see then Q2 when it's phased out and then probably 2020 full year? What
we have left, we have just a small amount left of the grant now. Have taken into account most of the grant. The reduction in 2019 in how much we took in from the grant was about 25,000,000, and we have about CHF 8,000,000 left of the grant. So there, you see the difference on the years. So we have the CHF 8,000,000 will be recorded in the first four months, and then there will be nothing.
So rather small amounts.