Good morning, and a warm welcome to this Capital Markets Day for Borregaard. My name is Tom-Erik Foss-Jacobsen, and I am the CEO of the company. I joined Borregaard in 1996, and I have been a member of group executive management since 2007. During my career, I held a range of commercial and leadership positions, leading our speciality cellulose business from 2007- 2019, and our BioSolutions business from 2019- 2025, before becoming CEO in August 2025. Having spent nearly three decades with Borregaard, I feel privileged to have been part of the journey that has transformed the company into a global leader in sustainable speciality chemicals. Most importantly, I have had the opportunity to work alongside many talented colleagues who made that transformation possible. Today, we look forward to sharing how we will continue to build on that strategy and create greater value in the years ahead.
Let me briefly walk you through today's agenda. We have structured today into two parts with a Q&A session following each part. In the first part, we will start with the overall Borregaard story and how we intend to continue advancing our specialization strategy and delivering greater value. We will then focus on BioSolutions, including our technology platform, innovation pipeline, and growth opportunities in agriculture, and how we are winning new customers and entering new markets. In the second part, we will turn to BioMaterials and our manufacturing platform, and our financial ambitions for profitable growth towards 2030. Throughout the day, you will meet a broad Borregaard team and hear directly from several of the leaders responsible for executing our strategy. Among them is our Business Director, Agriculture, Eduardo Pereira, who is presenting at CMD for the first time.
Agriculture has grown significantly in recent years and represents an attractive opportunity for future growth. Before we begin, just a quick reminder to those of you watching the webcast live, that you are welcome to submit questions at any time during the event, and we will address them during the dedicated Q&A sessions. I would also like to introduce our moderators for today's Q&A sessions. Seated at the table beside the stage here are Elliott Jones, Analyst at Danske Bank, and Ole-Petter Sjøvold, Analyst at SB1 Markets. They will moderate the Q&A sessions and help facilitate your questions throughout the day. With that, let us get started. The title of today's presentation is Scaling Presentation. Excuse me. Scaling Specialization and Delivering Greater Value. Those five words capture both what Borregaard has achieved and where we are heading.
Over many years, we have transformed a traditional industrial business into a highly specialized global company with leading niche positions built on renewable raw materials and deep expertise. That transformation has delivered strong growth, improved margins, high returns on capital, and significant shareholder value creation. Importantly, today's CMD is not about introducing a new strategy. It is about demonstrating why our strategy remains highly relevant, where we see attractive opportunities ahead, and how we will continue to create greater value from the platform we have built. Our ambition is clear: to continue growing organically while creating greater value through specialization, productivity, and disciplined capital allocation. Throughout the day, we will show how we intend to translate these opportunities into profitable growth. The common theme is simple. We are scaling what already works. Before discussing the future opportunities, let me start with the platform itself.
Borregaard's strength is built on our unique integrated biorefinery. From a renewable raw material stream, we create a broad portfolio of high-value products serving multiple applications, industries, and end markets. Across many of our applications, we help customers replace fossil-based alternatives with specialized bio-based solutions. We utilize virtually all components of the wood, continuously shift our portfolio towards higher-value applications, and build resilience through diversification. Today, we serve around 3,100 customers across 100 applications and 100 countries. A key driver of Borregaard's successful journey has been our specialization strategy. Rather than competing in commodity markets, we focus on specialized positions where performance matters, where customers value our deep expertise, and where barriers to entry are significant. This strategy has created leading positions across our businesses.
Today, we are the clear global leader in lignin-based biopolymers, a leading supplier of specialty cellulose, the world's only producer of wood bio-based vanillin, a significant producer of advanced bioethanol, and a leading producer of fine chemical intermediates for contrast agents. Innovation and a strong culture of continuous improvement are embedded throughout the organization, enabling us to continuously develop new products, enter new applications, strengthen customer relationships, and increase operational productivity. This is the highly diversified and resilient business model we will continue to build on. The best evidence that our model works is our track record. Since becoming a listed company, we have delivered strong and consistent value over time. Return on capital employed has remained above our long-term target of 15%. EBITDA margins have improved significantly, earnings per share have increased substantially, and our dividend has grown strongly and shareholders have seen attractive returns over time.
The important point is what has driven that value creation. It has not been volume growth, it has not been financial engineering, and it has not been favorable market conditions alone. The primary drivers have been increasing specialization, innovation, continuous improvement in operations, and disciplined capital allocation. We have consistently moved our portfolio towards the higher value applications we are in. We have strengthened our market positions, invested selectively, improved productivity, and increased capacity for our high-value products. That combination has enabled us to create significantly more value from largely the same industrial platform. That is highly relevant as we look ahead, because the same underlying drivers remain available to us today. So the value creation model is proven. The opportunity now is to build on that success. Why do we believe Borregaard is better positioned today than a few years ago? The external environment has become more demanding.
Markets are more volatile, and input costs and currencies fluctuate more than they did in the past. Despite these challenges, our performance has improved significantly over time and remains at historically strong levels, demonstrating the quality and resilience and also the adaptability of our business model. Operationally, our manufacturing platform is performing well. We have continued to invest in capacity, specialization, cost competitiveness, and sustainability, while strengthening our organization and enhancing the capabilities needed to support future growth. Most importantly, we see a stronger set of opportunities today than we did a few years ago. Demand for high-performing and sustainable solutions continues to grow across several high-value markets, while also the regulatory developments are creating new opportunities across our businesses. At the same time, the investments we have made and those currently underway are strengthening our ability to capture these opportunities while supporting continued profitability.
The investment case today is not only that Borregaard is stronger than before, it is that we are better positioned at a time when the opportunities ahead are becoming larger and more visible. When we discuss the future today, the starting point is therefore not a turnaround story. The starting point is a stronger platform, and the next phase is about scaling what works. This slide summarizes how Borregaard creates value. Growth alone is not our objective. Many companies can grow revenues. What matters is converting that growth into value. At Borregaard, we do this through two mutually reinforcing priorities. The first one is specialization and innovation. By moving towards higher value products, increasing our presence in attractive markets, and strengthening niche leader positions, we create more value from existing production volumes. The second is productivity and cost discipline.
We continuously improve the asset utilization, the energy efficiency, automation, and digitalization while maintaining strict cost discipline. These two dimensions are working together. Specialization increases the value of what we sell. The productivity improves efficiency and margins. Together they increase value creation per employee and improve returns on invested capital. As the chart shows here, value creation per full-time employee increased by an average of 8% annually from 2020- 2025. This dual focus has been a key contributor to Borregaard's performance over many years, and as you will hear throughout today, this remains central to how we intend to create profitable growth going forward. The remainder of today's story can largely be summarized through five value creation levers. The first lever, specialization, remains the most fundamental. Expanding further into specialized applications and strengthening our competitive positions improve the value we create from every ton we produce.
The second lever is capacity. Targeted investments and operational improvements enable us to produce more specialty products and capture additional growth opportunities. The third lever is geographic scaling. Many of our strongest products still have significant growth potential in markets where penetration remains relatively low. Around this world, many potential customers have yet to discover how Borregaard's solutions can help improve their operations and create value for them. The fourth lever is productivity and cost discipline. Continuous improvements in productivity, energy efficiency, automation, and cost management help protect margins, strengthen competitiveness, and support profitable growth. The fifth lever is an external one. Across industries, the sustainability trends and regulatory developments increasingly support the shift towards bio-based alternatives, creating opportunities across several of our businesses.
Taken together, these five levers build on the same proven drivers that have supported Borregaard's performance over many years and give us confidence in our ability to deliver continued profitable growth in the years ahead. Not through broad expansion, not through chasing volume, but through disciplined allocation of resources towards the most attractive opportunities. Borregaard is entering the next phase from a position of strength. We have a unique biorefinery platform, highly diversified revenue streams, strong and specialized market positions, and most importantly, a proven model for creating value. The story forward is therefore not about changing strategy. It is about being even more selective in where we are focusing our resources. We will continue increasing exposure to higher value products and applications. We will invest selectively in capacities supporting growth in specialty markets.
We will build on proven successes by deepening our presence in high-potential markets and expanding into new geographies. We will maintain discipline in our operations, costs, and capital allocation. Our ambition remains clear: to deliver sustainable organic growth, strong profitability, and attractive returns. In short, same strategy, sharper priorities, greater value creation. Today's CMD focuses on what we believe will be some of the most important drivers of value creation going forward across our BioSolutions and BioMaterials businesses, and also in our manufacturing. To begin, I would like to introduce Knut-Harald Bakke, who joined Borregaard in 2019. He became Executive Vice President for BioSolutions in August 2025. Prior to his current role, he served as Director of Energy and later as Director of Investor Relations, so a familiar face to many of you.
He holds a Master of Science in Industrial Economics and Technology Management from the Norwegian University of Science and Technology. Drawing on 14 years of commercial, operational, and strategic experience, Knut-Harald will take us through how we're capturing the significant growth opportunities ahead in BioSolutions. Knut-Harald, the stage is yours.
Thank you, Tom Erik. BioSolutions has a strong platform with significant untapped value. In this part of the presentation, we will show how BioSolutions can capture more of that value by scaling what already works. I will begin by describing the foundation we're building on, then explain how we prioritize the portfolio, and finally outline three pathways to greater value creation. Let me start with the foundation. BioSolutions has developed strongly over the past decade, with specialization as an important driver. The chart on the right shows the development in sales revenues. The volume split beside it is equally important. Specialties represent around 60% of revenues, while only accounting for 28% of volume. Today, specialties include, among others, bio-based vanillin, battery additives, oil field chemicals, and the high end of the agriculture portfolio. This illustrates the value of shifting the portfolio towards applications that create greater customer value.
The opportunity is not limited to products currently classified as specialties. Most of our volume still is in industrial and construction. Also here, we can move up the value ladder through more specialized applications, more advanced formulations, and stronger customer positions. This is the key point. We see significant headroom to create more value from the existing volume base, rather than relying on volume growth alone. Our broad portfolio gives both resilience and opportunity. It also means we need to be very deliberate about where we focus our efforts. To understand those opportunities, let's first look at the capabilities we already have in place. The reason we see so many opportunities is that the starting point is strong. First, we have unique technology and expertise. We combine renewable raw materials with leading technology and deep application expertise to develop differentiated solutions across a wide range of applications.
Second, we have proven customer value. We serve 2,800 customers across industries and geographies with documented performance and global reach. Third, we have already established specialty solutions across agriculture, industrial specialties, and consumer ingredients. Together, these strengths give us a broad range of growth options. Technology is often not the limiting factor. In many areas, we already understand what we need to do technically. The bigger challenge is identifying the most important customer needs, understanding where we can create the greatest value, and concentrating resources behind the opportunities th at matter most. We have many opportunities, but we cannot pursue all of them with the same intensity. That is why clear portfolio priorities are essential. This framework translates opportunities into priorities and resource allocation. The horizontal axis reflects the strength of our position, including customer relationships, commercial proof, and how we win.
The vertical axis reflects realistic value growth potential based on market attractiveness, customer demand, and our ability to differentiate. In the top right, we have our core champions. Plant nutrition is one example. An established position with proven customer value and attractive opportunities across customers, applications, and geographies. Our priority is to strengthen and expand these businesses. In the top left, we have our emerging stars. Fertilizer coating is one example. The opportunity is attractive and close to capabilities we already have, but broader commercial validation is still required. Here we invest selectively against clear milestones. Mature positions, such as concrete admixtures, remain important businesses. We protect these positions, optimize the mix, and improve the businesses. In constrained segments, such as dyestuffs in textiles, growth potential and returns from additional resources are less attractive. We therefore limit incremental spending while managing the existing business responsibly.
The important point is that this is not just a way of describing the portfolio. It guides where we allocate commercial attention, innovation resources, and capacity. These priorities lead directly to three pathways to greater value creation. Let me briefly explain those three pathways. First, we scale our core champions. We will win more customers and strengthen proven positions, including plant nutrition, crop protection, animal feed, and gypsum boards. Second, we move up the value ladder. We will shift more of our volumes towards applications where performance, formulation expertise, and regulatory capabilities command higher value. Third, we expand geographically. We will take proven products and customer solutions into new markets where our current penetration is relatively low. These three pathways reinforce each other.
A core champion can expand into new geographies, an established industrial or construction application can move up the value ladder, and a validated emerging star can become a future core champion. We see substantial untapped potential in the portfolio we already have. In many cases, capturing that potential is as simple and as difficult as identifying customer needs and connecting them with solutions and capabilities that already exist in BioSolutions. Digital tools and AI can help us connect customer insights, market signals, and technology expertise more effectively, but they do not replace being close to customers. Local commercial and technical presence remain essential. This is focused growth, primarily built on an existing platform, proven customer value, and capabilities we already have. The objective is to increase contribution margin in absolute terms while making effective use of the capabilities and asset base we have.
The next part of the presentation will make this more tangible. Guro Elise Fredheim is our CTO. She holds a PhD in biopolymer chemistry and has more than 20 years of experience from innovation and leadership roles within Borregaard. Eduardo Pereira is Business Director, Agriculture. Since joining Borregaard in 2002, he has held a range of commercial roles across applications, regions, and markets, and today leads our agriculture business globally. Anders Sjöde is Vice President, Sales. He holds a PhD in wood chemistry and has nearly 20 years of experience across innovation, business development, project execution, and commercial leadership within Borregaard. Together, they will show how we scale proven winners through specialization, market penetration, and geographic expansion. Guro will begin with our portfolio, pipeline, and competitive position. Guro, the floor is yours.
Thank you, Knut-Harald. I will give you an introduction to our unique product properties and the diversity of the end markets we serve within BioSolutions. The core of our offering are high-performing products that can be tailored to deliver cost competitiveness in the end application. They are multifunctional, a concept I will explain in more detail later, and valued by customers for their robustness in use. We also support our sustainability claims with strong documentation, including life cycle assessment and environmental product declarations for all our products globally. Our products span a wide range of physical properties, enabling us to serve markets with different growth drivers and economic cycles. The first area is the binding applications, where our products improve strength, durability, and process efficiency. Examples include animal feed and crop protection, which you will hear more about later.
A second major area is dispersing and rheology control, where our products help ensure stability, flowability, and uniform distribution of, for example, particles across broad application areas from construction materials such as gypsum board to crop protection formulations. These products typically improve processability, energy efficiency, and end product performance. We also create value for our customers through crystal growth control, helping to control, for example, precipitations in high-end applications such as batteries and oil field chemicals. Our platform also extends into flavors and fragrances, where lignin-based bio-based vanillin is used in food, fragrances, and personal care applications. Our products also have additional features such as antioxidant, complexing, or UV protection properties. These properties come on top of the other features mentioned. In several applications, our products are valued for their multifunctional mode of action.
Taken together, this wide range of properties and applications is what gives us a strong competitive advantage. There is a unique application and technical know-how in the organization, founded in a 100-year history within lignin business. The product and application know-how, customer-specific tailoring, and global market reach builds barriers to entry, as well as a basis for further specialization. Borregaard holds a strong competitive position despite operating in a fragmented and highly competitive market. The competitive landscape can be divided into four broad categories. Within lignosulfonates, Borregaard is a clear global leader. We combine the industry's broadest product platform with decades of technology development, application expertise, and market knowledge. In addition, our global manufacturing and commercial footprint enable us to provide reliable supply across all key markets. Several regional lignosulfonate suppliers exist, including Donghae, Sappi, Nippon Paper, and various local producers in China and Russia.
Please also note that other types of lignin, for example, standard kraft lignin and soda lignins, are not applicable for lignosulfonate applications. We compete not only with other lignosulfonate producers, but also with a broad range of synthetic chemistries, including naphthalene sulfonates, polycarboxylates, EDTA, and phosphonates. Importantly, this is not a winner-takes-all market. For decades, lignosulfonates and synthetic chemistries have coexisted, with customers selecting the solution that provides the best balance of performance, cost, and sustainability for their specific need. Borregaard has successfully maintained and developed our position alongside these fossil-based alternatives. We also compete with a range of bio-based alternatives, including starch-based products, cellulose derivatives, sugars, amino acids, and seaweed-derived materials. Many of these technologies target specific application niches and face limitations related to performance, scalability, economics, or also competition with food resources. In many applications, customers do not choose a single technology.
Instead, they combine multiple ingredients and optimize formulations to achieve the desired performance at the lowest cost in use. As a result, competitive success increasingly depends not only on the performance of the individual component, but also on the formulation synergies, compatibility, and application-specific optimization. Borregaard's competitive advantage extends beyond the product itself. Our technical experts, recruited from the end user industries in combination with our R&D organization, have in-depth knowledge of the customer's applications. We operate dedicated application-specific test laboratories, including, for example, plant nutrition and feed formulation facilities. This application expertise enables us to evaluate products and formulations in end applications to find the best solution for the customer. Our customers do not buy chemistry, they buy performance. Borregaard wins by understanding the application and the customer pain points better than the competition, and translating that into value. Let's continue with innovation.
Our innovation strategy is focused on turning strong market positions and deep technology expertise into profitable growth. Our innovation portfolio is prioritized according to three selection criteria. We focus on projects within core champions and emerging stars, meaning application areas with a high margin, and where we either have or we see the potential to develop a strong market foothold. Referring also what you heard from Knut-Harald. This means we prioritize projects with high-value potential, enabling us to move up the value ladder. Third, innovation must be driven by a clear market pull and customer needs. This matrix, as you see here, illustrates our innovation portfolio. In the down left corner, we have projects focusing upon new products into new markets, whilst in the upper right corner, we have product line extensions into existing markets. So down left, high risk, upper right, low risk.
As you can see, the portfolio is weighted towards the top right corner. The core champions. Meaning with product line extensions and towards existing markets where we have a strong foothold. Here you find projects such as biostimulants and gypsum board and crop protection, where we have significant application knowledge and current market access. You will hear more about this from my colleagues in the coming presentations. If you go down the right, we have product line extensions into new markets such as biocontrol and fertilizer coating, where our existing products and technology platform create differentiated solutions in new end markets. If you go down left corner, we have more exploratory opportunities with new products into new markets, including home care and emerging feed applications. These are longer-term, higher-risk projects. Finally, we have new products going into existing applications.
In the coming slides, I will tell you a bit more as to our project upon granulated lignin. The takeaway is that we have a strong innovation pipeline with clear priorities. The portfolio consists of core champions and emerging stars, building on our strengths to improve the likelihood of commercial success. Differentiation is central to how we create value and protect our product position. We are the first lignosulfonate producer globally to offer lignin products in granulated form. Our demonstration plant has been operational since the first half of 2026 with a capacity of 1,000 tons, and we can deliver product in granulated form to selected end markets. Importantly, this innovation is driven by market pull. Customers are looking for products that are safer, easier, and more efficient to handle. Granulation provides clear benefits across the customer value chain.
The granulated products improve environment health and safety with minimal dusting, supporting a cleaner working environment and improved handling. It also enables higher productivity at the customer site, reducing time for processing. Finally, it improves logistics, including transport and storage. The technology will be applied to a selected range of our products for key markets. For our customers, this means operational savings as well as overall better user experience. For Borregaard, it strengthens differentiation in the lignin market and creates an opportunity to capture more value from our product portfolio. We will now show a video demonstrating the difference between handling a standard lignosulfonate product in powder form versus handling a lignin product in granulated form. The standard powder product is to the right, and the granulated lignin is to the left.
As you can see, the granulated product flows much more easily and creates far less dust. If you can imagine this at industrial scale, the impact becomes even more significant. This is an example of how we combine technology with understanding of customer needs to move up the value ladder. Thank you for your attention. Now I'll give the words to Eduardo Pereira.
Thank you, Guro. Good morning. Today, I will explain why we are confident agriculture will continue to be a major contributor for Borregaard's future growth and value creation. Agriculture accounts for 45% of BioSolutions revenues and around 25% of Borregaard total revenues. It has delivered strong growth over the last years, and we believe the best opportunities are still ahead of us. But before talking about Borregaard, let's start with the challenge farmers are facing today. Agriculture uses around half of the world's habitable land, and around 75% of that is used for livestock production. It accounts for roughly 70% of the freshwater withdrawals, and it has a significant contribution of the global greenhouse gas emission. At the same time, farmers are dealing with soil degradation, nutrient losses, and declining soil quality in many regions. These challenges are real, and they are not going away.
Food and animal protein demand continues to grow. Climate conditions are becoming less predictable. Natural resources are under pressure. Regulatory and consumer trends require more sustainable farming practices. These challenges are driving demand for solutions that improve productivity, reduce losses, and support more sustainable agriculture. Agriculture is changing and moving from input intensity to input intelligence. The focus is no longer on using more inputs. It is on getting more value from every input used. We see the strength in four important areas. Smart fertilizers programs, where farmers are increasingly looking for ways to improve nutrient use efficiency. This includes crop-specific nutrient programs, micronutrients, and digital agronomy tools. The goal is better performance, lower losses, and higher crop quality. Biostimulants are becoming a normal part of crop nutrition programs. They help improve nutrient uptake, plant resilience, and crop quality. This is one of the fastest-growing segments in agriculture.
Farmers and regulatories increasingly expect the same or better performance with a lower environmental impact. That requires smart formulations, better delivery systems, and improved efficiency. Advanced dispersants, adjuvants, and biological formulations help achieve this growth. The same trend is also visible in animal production. Livestock producers are looking for higher feed efficiency, better nutrient utilization, and lower environmental impact. Solutions such as feed binders, bypass proteins help improve animal performance while reducing waste and emissions. Just like all agriculture sectors, animal nutrition is becoming more precise and more knowledgeable-driven. The next question is: how is Borregaard positioned to benefit from this shift in agriculture? We have an extensive and diversified agriculture offering split into three main segments: plant nutrition, crop protection, and animal feed. Plant nutrition is our fastest-growing area. It includes biostimulants, micronutrients, fertilizers, and seed coating, and granulated fertilizers.
These applications help improve nutrient efficiency, crop performance, and productivity. Crop protection remains our largest and most established platform. Here, we support traditional crop protection, biocontrol solutions, and adjuvant systems. Our technologies improve stability, compatibility, and overall performance in the field. The third area is animal feed. Here, our solutions improve pellet quality, feed efficiency, and protein utilization. What is important is that all three segments benefit from the same long-term trends we discussed on the previous slide, helping farmers and food producers get more value from every input. At the bottom, you can see the estimated annual growth rate in the different end markets. Plant nutrition is the fastest-growing area, and we expect that our business to grow faster than the end markets due to performance and sustainability.
Crop protection remains a large and resilient market, where we also expect to exceed market expectations due to some of our most advanced products in good active formulations. Animal feed provides a stable growth with growth of 3%-5%. Together, this business give us both solid growth and resilience. Let us be more specific. Plant nutrition is our main growth engine. It has delivered strong growth over the last several years and will continue to deliver strong growth going forward. I would like to highlight three growth areas. First, biostimulants. We already have commercial products in the market, including EU CE marked products. It indicates that a product complies with EU health, safety, and environmental protection standards. Second, micronutrients. We offer ready-to-use solutions that simplify implementation for customer. Third, fertilizer coating. These technologies improve nutrient efficiency and support high crop yields.
The winning formula is a combination of innovation, performance, and scale-up. First, innovation. Our field trials help customers demonstrate performance and support product claims, saving customers time and accelerating their product introduction. Second, performance. We generated validated nutrient use efficiency results across multiple crops and applications. Third, scale-up. Many of these solutions can be scaled up across regions, customers, and formulations. This creates opportunities to grow faster than the underlying market. The chart on the right illustrates this journey. Over time, plant nutrition has become a significant contributor to our crop performance revenues, consistently growing faster than crop protection. While plant nutrition is our fastest growing segment, animal feed is another attractive market with a different growth profile. Our business is built around three main application areas: pelleted feeds, feed emulsions, and bypass proteins. These solutions help improve feed efficiency, pellet quality, and nutrient utilization.
What makes this business attractive is our ability to combine innovation with application expertise. Again, the winning formula is the combination of innovation, performance, and scale-up. The first pillar is innovation. New products create opportunities both with existing customers and in new markets. The second pillar is performance. Changing regulations create opportunities for approved solutions. The third pillar is scale-up. We still see significant growth opportunities, especially in pelleted feed application. The chart on the right shows the strong growth achieved in animal feed over time. This growth demonstrates our ability to create value even in a mature market. In summary, our agriculture portfolio combines leading positions across plant nutrition, crop protection, and animal feed, all supported by strong long-term trends in productivity, sustainability, and resource efficiency. What differentiates Borregaard is not only our high-performing products with strong market positions, but also our deep application expertise.
Our dedicated agriculture team, with more than 50 professionals, brings this together. Agronomists, veterinarians, formulation specialists, application experts, laboratory and R&D capabilities, many with extensive experience from the agriculture industry. Our sustainability credentials and our ability to help customers meet increasing and demanding regulatory requirements position us well to scale proven winners, accelerate growth, and create increasing value in the years ahead. Thank you. Now I will leave you with Anders. Anders, the floor is yours.
Thank you, Eduardo. Up until now, we've talked about the platform, the portfolio, and how we prioritize opportunities. Now I would like to bring this down to two very concrete examples. Both illustrate the same principle but are somewhat different. The first is replacement of synthetics in gypsum boards, and the second is geographical expansion. At the first glance, they look very different. One is a new application opportunity, the second one is a new market opportunity. But in reality, they're driven by exactly the same logic. We start with existing products, existing capabilities, and proven customer value, and then we scale. No major technology leap, no new production platform, proven customer value, and that is what we scale. It's just disciplined commercial execution built on strength we already possess, and that's why we call it new customers, new markets, same winning formula. Let me start with gypsum board.
This is one of our most exciting examples right now. A small opportunity becoming a real growth platform. Historically, the industry has relied on synthetic additives such as polynaphthalene sulfonate and polycarboxylate ethers. For many years, manufacturers had little or no reason to change, but the market has changed. CO2 targets, regulations, rising additive costs, supply chain uncertainty, suddenly the discussion is different. That creates an opportunity for us. We have a sustainable solution that replaces synthetics on a one-to-one basis. What is particularly encouraging with this is that it is no longer a laboratory story. With more than 200 R&D tests, successful plant trials, and commercial use already during 2026. Here is our key reflection. Sustainability starts the discussion. Performance decides the outcome. We are invited by our customers to the table because we are sustainable, but they buy from us because the product performs.
The job ahead is no longer proving the concept, it is scaling it. Every new plant adds additional volume, and with a 10%-20% global replacement, this will allow us to have a 4%-8% growth rate within Borregaard's construction segment in the years to come. Plant by plant, customer by customer, geography, that is how we build our core champions. If gypsum shows how we win in new applications, geographical expansions shows how we win in new markets. The most important part about this slide is not what we are saying. It is actually what we are not saying. We are not building a new business, not developing fundamentally new products, and not making large speculative investment. Instead, we ask a simple question: where do we already have solutions that work, and where are they underrepresented?
There are many markets where Borregaard has limited penetration despite highly relevant products and proven customer value. The map on the right side is not a sales forecast. It highlights untapped potential. The darkest countries represent areas where the market has developed faster than Borregaard's footprint. The economics are appealing. Modest investment, low technology capability risk, limited assets needed. This is built on existing strength, a second growth engine for BioSolutions. The playbook itself is simple. We start with proven platforms, then choose markets carefully. Not every opportunity deserves an investment, and today that points us towards selected parts of Asia, Oceania, and Latin America. Then comes local reach. This is the part where I feel strongest about. One lesson I have learned throughout my career is that customers buy from people.
Despite all the AI and digitalization we have around us, local presence and local engagement is the vital part for success. Without that, you can have the world's best product, but progress will be slow. Finally, once we have proof, we replicate and scale it. It is a little bit like franchising a good restaurant. You do not reinvent the menu every time you open a new restaurant. You simply find a new good location, and you scale it. That is exactly what we are trying to do here. We will repeat it with discipline. This final slide brings it all together, and the secret is, there is really no secret. The winning formula is straightforward. We take our market leadership positions with global leading positions across multiple segments, a unique product portfolio that solves real customer problems, application expertise built over decades, high barriers to entry. These positions are hard to attack.
That is the foundation of BioSolutions. Focused innovation, a high-value pipeline with every project, market pull driven. We do not invent and then go looking for a customer. The customer asks first, and we solve their real problems. That is how we transform expertise into new opportunities and reach the market faster. Geographical expansion is where we scale proven winners, no experiments. We take what already works and move it into untapped growth markets like Asia, Latin America, and Oceania. The model is replicable, so every new market is faster than the last. The three, they reinforce each other. Leadership gives us customer insight. Innovation turns insight into new opportunities. Geographical expansions moves those winners into new areas.
That is how we win. It is not growth built on hope and dreams. It is growth built on evidence, proven products, proven customer value, and economics. New customer, new markets, same winning formula.
Thank you very much, Anders. That concludes the presentations in part one of today's CMD, and we will now move on to the Q&A session. We will be joined on the stage here by Knut-Harald Bakke, and we will take questions one from the audience and from those joining us via the webcast. Following the Q&A, we will take a short break, resuming with part two at 11:00 A.M. Elliott and Ole-Petter, please take it from here and moderate our first Q&A session.
Thank you, Tom Erik and the Borregaard team. Just a reminder to everyone tuning in online, please do not be afraid to ask some questions on the portal and also in the audience, and a microphone will make its way to you. But I guess I can start with the first question here on the BioSolutions side. A key part of the specialization strategy has always been, and will still continue to be, shifting to the higher value products. You highlighted an impressive chart at the beginning showing the growth of this, but the question is essentially, is there a theoretical ceiling as to what percentage of BioSolutions can be specialized? If so, what level?
Yeah. If you start with what we have in place. We have a unique raw material. We have the technology, or at least we know what to do technically. The bottleneck, if you like, is market and product development, which is really encouraging because we have the faith in our own hands. The potential is, it is significant. What we have explained here today is that our focus is on scaling what already works. Our focus is on the core champions in particular, because there we are coming from a position of strength, and we see from today and going forward that there is a great value potential. I will not give you any numbers, but for sure, the potential is significant.
I guess I could I have a question related to that. Just how do you assess the investment opportunities in increasing your total capacity, introducing BALI technology into this mix or increasing further capacity versus investing more into further specialization? How do you consider these two alternatives against each other?
Our main focus is value growth, so moving up that value ladder. From our perspective, from a risk-averse perspective, that is the smart thing to do. But of course, if we at some point need or want more volume, we have the options and the toolbox to do that. We are already doing that, with the debottlenecking in Sarpsborg, we will get more also of lignin-based biopolymers. We will actually get more of everything, specialty cellulose and bioethanol. That's the starting point in the short term. As you point out, we have in the midterm, options in the U.S. to expand by another 50,000 tons. In the longer term, I think we could consider that a strategic insurance if we at some point wanted to build a greenfield plant, the BALI technology. But for the time being, our focus is on climbing that value ladder.
First of all, the volumes we will get from the debottlenecking in Sarpsborg.
Yeah. I also think it is worth remembering that a 5%-10% capacity increase in Sarpsborg in big markets, I mean, we have 1.4 million tons of specialty cellulose, 850,000-900,000 tons of lignosulfonate. These are highly valuable volumes when gradually phased in by Borregaard. In these big markets, it is also a cautious approach to growing in that market.
I think I have a question.
Thank you. Marcus Gavelli , Pareto. You mentioned the geographical expansion, which will certainly be a big part of the growth strategy going forward. Could you just try to elaborate on how we should think about quality sales and marketing expansion? Certainly you have a global base which you can utilize. Coming into these markets, I would assume also will require some increased investments. I think modest investments was mentioned
in sales and marketing and just how we should think about the financial incremental steps.
Yeah
in that journey.
Yeah. Now, like Anders pointed out, this is asset-light. It is mainly human capital, if you like, in the designated geographies. We are particularly looking into Oceania, Australia, Spanish-speaking part of Latin America, where we are significantly underrepresented today in terms of sales, and some other countries, specifically in Southeast Asia. To answer your question, I think it will vary between these different regions. A natural starting point is to find a small niche distributor that we can work with. We are not ruling out that at some point we could perhaps buy one of those small distributors, or we could establish a sales office from scratch. The modes of action will vary across the regions.
Certainly what we are doing here is that we take proven solutions, things that we know work into new geographies, typically things that work in Europe and in North America into these other regions. From a risk perspective, of course, there are some commercial risks, but there is no technology risk, and it is to a large extent, a risk that we can control. We can exit at any time if we want.
Also, looking back at our Capital Markets Day two years ago, we mentioned, for example, Asia as one of the high-growth areas, with agri being one of the, I would say, the most interesting area. Since then, we have opened a new office in Mumbai where we have been and seen. We have recruited highly capable personnel on the commercial side, on the technical side, also have an R&D lab for agri and industrial specialties. We have recruited people in Indonesia, Vietnam, China. Also we have office in Brazil, South America, and we have well-established platforms. This is also a scaling approach. We will use those platforms to build on further.
Thank you.
One more. Yeah.
Yeah. Magnus Rasmussen, SEB. The strategy is shifting a little bit more towards scaling what works. You are framing this as a big opportunity, of course, but I also want to know, is it a reflection also of a bit of a challenging start to 2026 with more cost pressure? You are taking a more cost-cautious approach. Is it also a reflection of a bit of a slowdown in new, exciting product development?
No, I would not say so. I think, given the position that we have, perhaps one of our biggest risks is actually spreading ourselves too thin. What we are doing here is really positioning ourselves where we see we are coming from a position of strength. We have documented proven customer value. We are actually solving some pain points for our customers globally here. These shifts, these structural drivers that we are seeing, for instance, in agriculture and gypsum boards, these things are at the nexus of performance, regulatory aspects of sustainability. These are the kind of sweet spots, if you like, where we want to be. So we are sharpening the priorities a bit here. It does not mean that innovation is not important anymore because it really is, as Guro just explained. But we try to allocate resources behind the opportunities that we think matter most now.
Thanks.
I would also say, Magnus, that in today's environment, it calls for high discipline and a bit more focused approach. With that comes clearer and sharper priorities. As you've seen, we have through the year, taken down our exposure in biobased investments. We have been doing assessments and reviews of our innovation portfolio, where we are focusing more on the near-term, midterm commercial, high potential projects. Also, we have announced last quarter we have a cost project where we will save NOK 150 million, and that will be realized in 2028. You're also right that we are looking carefully over what we're doing to ensure we have that discipline and are focused in what we're doing.
Thanks. Another question, if I may. The oil price volatility that we've seen this year, also rising energy costs. Can you share some thoughts about how you think about pricing going into next year and also the opportunities versus oil-based alternatives that you often compete with? I'm assuming they might be struggling a bit.
Shall I start?
You can start.
No, for sure. It's a volatile geopolitical situation, and energy prices are on the rise. For us, that means that variable costs are increasing for energy and energy-related costs for district costs. We are in the business of selling specialties and buying commodities. When these things happen, typically, our margins get a bit under pressure. We may not, from one quarter to the other, be able to offset that cost increase, but over time, we should be able to do so. We see also that it affects some of the end markets. Some end markets are soft. From where we're standing, strategically, we ask ourselves the questions, are we solving the most important customer challenges? We think we are.
It affects timing for us, this market cycle, but it doesn't change the underlying value proposition of what we do and deliver to the customers.
Yeah. I think we see some selective opportunities, where it has impact on certain products, where we could get more requests for our products. I think you can also see that higher oil price also means higher energy prices for certain industries and customers where that's the impact. Over time, we believe it's favoring Borregaard's products and solutions, where more and more will look towards the bio-based solutions.
Thank you.
Maybe I can take one more. Just speaking of customer challenges. Farmers in recent times have seen significant. Farmer affordability has been very tough. Just in terms of agriculture, can you provide some color as to when we see a very high fertilizer price?
Is that typically positive or a negative in terms of customer acquisition for Borregaard?
Yeah. That's actually an excellent question. There are several parts of our agriculture portfolio. It's crop protection, like Eduardo explained, that's the legacy, that's the foundation. Up until today, it's the biggest part. Then you have plant nutrition growing at a very high pace, and we expect that to grow double digits, percentage-wise, going forward. To answer your question, intuitively, when fertilizer prices are on the rise, if you're smart, you buy the plant nutrition products because that enables you to, everything else equal, use less fertilizer and have the same yield, for instance. Also in terms of climate change and changing weather patterns, these things makes the plants and the crops more robust, able to withstand so-called abiotic stress, droughts and floods and so forth. These are really the kind of products for the future.
But if you look at crop protection, what is happening, and when we talk to our customer, because we see that crop protection in the first half of 2026 is significantly lower than last year. What is happening is probably that, as you say, farmer economics are under pressure, and then we see that the distributors, they get more cautious, and then the formulators are building down their safety stocks. Typically, we supply to the latter. If we believe what our customers are telling us is the truth, you have a softer end market demand at the customers, which is the farmer, which sort of gets amplified through this value chain back to us.
Who knows what the weather looks like next year, but if you just assume that farmer economics stays exactly the same in 2027 as 2026, everything else equal, we should do a little bit better in crop protection because safety stocks cannot be built down forever.
I have another question off. The core message from this in the sharp prioritization, right? How do you work differently in the company specifically? Do you work differently with the customers as you implement more systems to sort of see where the best ideas are, or how do you value growth opportunities versus introducing more technological risk into new products?
If you remember that chart that Guro showed you, the axis were the degree of product familiarity, so the degree of technology familiarity to us, and the degree of market familiarity. It is now weighted towards existing product lines, technology we know, markets we know fairly well. But as you can see, we are also in areas where there are new products into new markets. And as Guro pointed out, higher risk, but also high reward. Typically, in these areas, qualification cycles are longer. Innovation cycles are longer, and customer conversion is more gradual. But over time, if we succeed, this would typically be new specialty areas to us. And the positive side of the fact that this takes time is that once you're in that formulation with the customers, or once you're in their production process, you're in there for years, if not decades.
That's what we're trying to do.
That makes sense.
Just maybe go back to specialization again. You mentioned 60% of the revenues were linked to specialized volumes, but obviously just 28% by volume is specialized. Can you give some insight into the EBITDA per ton uplift for specialized ton versus a non-specialized ton?
Good question. The margin, in relative terms, is not necessarily that different. But in absolute terms, it makes one heck of a difference. What we're trying to do numerically is instead of selling a standard lignin product to NOK 1 /kg, incurring, let's say, NOK 0.40 /kg in variable costs, then you have a contribution margin of 60%. We're trying to use that same raw material in more specialized processes and sell it for NOK 10 /kg. Specialization also means things are more resource-intensive, so variable costs are up to NOK 4 /kg. So the contribution margin is still 50%, but in absolute terms, that's what we're after. That's what we numerically are trying to do with the specialization strategy.
It's an application or an area with 1,000 customers, 200 products. So it's a wide range here, and some of those products are definitely also helping farmers to get a better economy. I'm sure that's what you'll see also the plant nutrition part going forward.
There is a question from online here. I think we sort of touched on it, but you stopped disclosing your R&D spends. However, as a percent of revenue, it had declined from 5%-6% in 2016-2017, to around 3% in 2023. We also saw the innovation rate hit a record low in 2025. Has innovation simply become harder? Is that why you are now talking about client-driven innovation?
Yeah, it is right. Innovation was 3% our spend in 2025. I think it is with innovation that you place bets like you do with startups. You place bets. I think also that is why we have been looking carefully at our portfolio, because some of these projects we have been working on, we have been working on for quite some time. Also, some of these projects have had a longer time horizon than what we think is the right focus now. So that is also a reason for making sharper priorities. Like I said, we are focusing more on short-term, midterm projects. We do not have a target to take down our resources within innovation. But as a consequence of growth in revenues, that share has come down a bit.
Last question from me. With the example of the granular products you showed on the video, how should we think about the split shared of this value creation between you and your customer? Do you think when you go into this process and develop a product with the customer, are you trying to keep the 50%/50% each of the value at least you introduce to the product, or how is this shared? At least how do you think about this?
The question was on granulation?
Yeah, as an example.
No, the customer is willing to pay for a product in a granulated form. Those are the ones we are addressing. Bear in mind, this is a 1,000 tons demonstration plan. Typically, we will start with niche markets. In some market, it is a prerequisite to have it in granulated form, such as home care, where we want to go in. This technology, it opens doors to new opportunities, but also to existing ones. It's an ability to differentiate. We need to figure out the value in use for our customers from this technology. At some point in time, perhaps we will make a bigger investment, but at this point in time, it is the 1,000 tons demonstration plan.
We're quite confident when we're starting to send out samples of this product together with others. It will be something many customers will like.
Just a question here on the agriculture sub-segments. Plant nutrition, crop protection, and seeds. Can you provide any color as to the approximate percentages of the agriculture top line? How those three sit right now?
Yeah. Again, crop protection is the legacy business. We have been in there since the 1970s, and we enable a water-based solution as opposed to a solvent-based solution when the farmers spread the pesticides out on the field. That was the starting point. That has grown steadily over the years. What you saw from Eduardo's slide is that from 2012, plant nutrition was relatively low. A small business that has grown significantly over the years. To give you some color, everything else equal, by 2028, we expect plant nutrition to surpass crop protection in terms of value creation for Borregaard, everything else equal. That is also from a strategic point of view, a good thing, because as you know, this crop protection business, there is some kind of cyclicality to it. So the higher plant nutrition share, the less pronounced that market cyclicality will be in the future.
I will not disclose the split between feed, crop protection, and plant nutrition. Bear in mind, feed is then not part of specialties, but part of our industrial business. So somewhat lower margins than in the specialties.
Just to touch on the batteries, because in the previous ND you held in 2024, you mentioned that you had some trials with global lithium-ion battery manufacturers.
Have any of those trials processed to commercial volumes, or what sort of roadmap are you looking into there?
The question is on lithium-ion.
Yeah.
We are still in key customer trials with, I would say, the big names, predominantly in China. Again, qualification cycles are long. But when we get in, that will be a good moment for us. We have some small repeating orders. To answer your question directly, it will not move the needle next year on profitability. We do not think so. We are also now looking into the more second-tier companies in China that is working with sodium-ion and silicon carbon anodes, where we see that we have a performance that actually solves some problems for them. Early days, but perhaps the innovation cycles are a bit faster there, so we can get faster traction. But early days. We are encouraged, but it will not move the needle on profitability next year.
Maybe just one more from me before the break. I think also in the last CMD, you mentioned that it can be tricky to increase both volumes and the specialty at exactly the same time. Given that, when we are thinking about potential new tonnage from debottlenecking coming in,
should we expect then initially that the margin is to be lower and then to kind of catch up in the years after? Or is there a different dynamic at play?
Yeah. So generally, when we introduce new volumes to the market, typically, we introduce that on the margin. To answer your question, we will introduce those volumes gradually and based on market demand. Initially, it may be that they will start going into industrial or construction applications. But over time, we will improve that mix. And our EVP Manufacturing will get back to that in the next section, how we now plan to invest in new specialty lines that will help that transition.
All right. I see we are running out of time, so I think we will go to a break and be back here at 11:00 A.M.
Thank you very much. See you after the break. Thank you.
[Break]
Let's introduce our next speaker, Gisle Løhre Johansen. Since joining Borregaard in 1991, Gisle has held several leadership positions across the company, spanning the manufacturing site in Sarpsborg, R&D, business development, and Fine Chemicals. Since 2019, he has served as Executive Vice President, Specialty Cellulose and Fine Chemicals. He holds a master's degree in organic chemistry, and drawing on more than three decades of experience across Borregaard and his current role leading our specialty cellulose business, Gisle is ideally placed to discuss how we will continue to strengthen competitiveness and create value in specialty cellulose. Gisle, please.
Thank you for the introduction, Tom Erik, and good morning to all of you. Today, I would like to focus on how we continue to create and grow value in specialty cellulose. Our strategy is not built around becoming the largest producer in the market. It is built around value growth by becoming increasingly more specialized. Over many years, we have moved our portfolio towards applications where quality, consistency, and technical support matters, and there, our softwood sulfite platform is an advantage. It is several years since we exited the textile viscose commodity market. That has strengthened our market positions and improved value creation. The next step is a continuation of the same journey. We see attractive opportunities in premium niches such as regulated applications and high-purity markets. Combined with our biorefinery platform and the ongoing capacity expansion, this gives us a clear path towards even higher value creation through to 2030.
Yeah. Sorry about that. Before discussing markets and growth opportunities, it is worth reminding ourselves what role specialty cellulose plays. You start with a renewable raw material, certified spruce softwood from living Scandinavian forests. From that material, we enable products that reach well beyond the cellulose industry itself. Our materials is used in pharmaceuticals, food, building materials, and a wide range of other consumer products, and where our cellulose constitute from approximately 60% up to 100% of approximately 50% direct customers' products. One implication of this is that most customers will seek to maintain at least two qualified suppliers due to the criticality of this raw material. What is particularly interesting is the scale of the full value chain we participate in. A relatively concentrated specialty cellulose industry supports thousands of the downstream products and ultimately reaches billions of end users globally.
Our cellulose represents from less than 1% up to 100% of the final consumer products, spanning from veggie burgers, toothpaste, and concrete to bioplastics and sausage casings. The total downstream value chain is estimated to exceed $100 billion. The key point is that we are not selling into one market. We are part of a supply or supplying critical functionality in many different applications, industries, and end users all over the world. That diversification creates resilience and provides numerous opportunities to identify and move into attractive niches where we can create additional value over time. The specialty cellulose market is approximately 1.4 million tons and remains relatively concentrated. The five largest producers account for more than 80% of global supply. However, not all producers are positioned in the same way. Many competitors still have significant exposure to commodity grades. Borregaard is different.
Among the major producers, we have a market share just about 10%, but we are the only company that is fully specialized, and we have a sulfite spruce softwood platform, which is a must in some applications. This gives us a great flexibility across applications, grades, and customers. The ongoing capacity expansion supports further value creation. When market conditions change, like the building industry, we can redirect volume towards more attractive segments. That flexibility becomes increasingly valuable as competitive conditions evolve. We are currently seeing changes across several parts of the market, including the strategic review of the market leader and ongoing trade measures affecting certain regions. At the same time, geopolitical uncertainty is driving higher costs for energy, chemicals, and logistics across the industry. This may support selective price increases going ahead towards 2030.
When we look at the specialty cellulose market, as described in the picture to the right, not all segments are equally attractive. Our strategy is therefore not to become a Turkish bazaar and grow everywhere. Our strategy is to grow where we have the strongest competitive advantages. In ethers, regulated applications such as food, pharma, and personal care, and niches within technical applications remain attractive. These segments have high barriers to entry and place greater emphasis on quality, documentation, and technical support. They are favored by the capabilities of our plant to produce a full range of viscosities. In acetates, our focus is increasingly on premium niches such as liquid crystal displays, acetate yarn for textiles, specialty coatings, and bio-based plastics. These are areas where performance and purity requirements are high and where our softwood-based product characteristics are valued by our customers.
Rather than chasing market share broadly, we are selectively increasing exposure to the most attractive parts of the portfolio. Common for both segments in these applications is that customers' qualifications can take years, which creates barriers to entry for new suppliers. This slide is important because it demonstrates execution. Our strategy is not only about future ambitions, it is also about what we have already delivered. Several years ago, we identified and communicated a clear opportunity and ambition to move further into demanding high-purity applications, and we branded it Ice Bear. This required substantial investments in research and development, equipment, customer qualifications, and long-term commercial development. Through the Ice Bear qualifications, we are successfully building positions in applications such as regulated ethers, LCD, acetate ion, specialty coatings, and biodegradable plastics, where our cellulose constitutes approximately 60% of our customers' products.
Many of these applications are dependent on softwood raw material, and we have increased our acetate sales to these segments from a low level to an estimate of around 35% of total acetate sales in 2026. It demonstrates that we can identify attractive niches, qualify products, develop existing customer relationships, and create value over time. That gives us confidence in the continuation of our portfolio development. Ethers represent another large and attractive area for continued growth. Here, the barriers to entry are significant, and softwood and the sulfite process are mostly required to reach the necessary product specifications. Regulations, customer approvals, and technical requirements limit the number of viable suppliers. This plays directly into Borregaard's strength. For decades, we have supplied bio-based vanillin and Fine Chemicals to the most demanding food and pharma customers, which makes us unique in our industry.
We have a broad portfolio, deep technical expertise, and a leading position in sustainability documentation and certification. Our focus is particularly on pharma, food, and personal care, but also selected industrial and high-purity applications where competition is limited. For example, high and ultra-low viscosity grade ethers. These markets fit well with our capability profile, which probably makes us the most advanced player in this segment, and it supports continued value growth. The key point is simple. Growth in ethers is not driven by volume alone. It is driven by growing in the right applications. To quote a technical auditor from one of our larger customers, "I wish we could buy more from you." When we bring the pieces together, we have a clear roadmap towards 2030. This figure is an illustration of the direction we are going in.
We will continue to improve our product and customer mix, expand capacity through debottlenecking and higher plant utilization, and further strengthen our position in premium and regulated markets. As we have a very high flexibility in our manufacturing setup, it is fairly straightforward to move volume from lower value segments to increase our contribution margin. Importantly, our ambition is not volume growth alone. The objective is higher value growth through a combination of increased specialization, targeted capacity expansions, and stronger product mix, combined with price increases in some segments. To conclude, our strategy can be summarized in three points. First, we continue to increase our exposure to the most attractive markets and applications. Demand for high-performance, sustainable, and highly specialized cellulose solutions continues to grow across a range of end markets.
We will further optimize our product and customer portfolio towards applications where performance, quality, and technical expertise are valued and rewarded. At the same time, we will strengthen our position in high purity and regulated segments, the barriers to entry are high, and customer relationships are long-term. Second, we average our unique biorefinery platform to capture these opportunities. Our integrated production model, operational flexibility, and application expertise allow us to meet demanding customer requirements for quality, consistency, and maybe mostly important, security of supply. These capabilities enable us to compete in markets where reliability and technical support are critical, creating advantages that are difficult for competitors to replicate. Third, we expand capacity to accelerate value growth. Through targeted investments, debottlenecking initiatives, and improved plant utilization, we are creating additional capacity that can be directed towards the most attractive growth opportunities in our portfolio.
We allocate capital where returns are the highest and where the greatest potential to create barriers to entry and long-term value are present. Importantly, our growth strategy is not centered on volume growth alone. It is centered on increasing earnings and value creations through a more favorable product mix. All incremental capacity will be targeted towards higher revenue applications with stronger margins, rather than commodity volume. This is not a change in direction. It is the next step in a strategy that has consistently delivered value, increasing our exposure to attractive markets, leveraging our differentiated platform, and creating more value from every ton of cellulose produced. Thank you.
Thank you very much, Gisle. Then I am delighted to introduce our next speaker, who is Ole Gunnar Jakobsen. He is our Executive Vice President for Manufacturing and Technology, including all our international manufacturing units. Ole Gunnar joined Borregaard in 1995 and has been a member of group executive management since 2006. During his career, he has held a variety of manufacturing and operational leadership positions, and he has served as the plant director of our Sarpsborg site from 2006 to 2025. He holds a master's degree in process engineering from the University of South-Eastern Norway. With more than three decades of experience from Borregaard operations, Ole Gunnar is uniquely positioned to explain how our manufacturing platform enables growth, competitiveness, and long-term value creation. Ole Gunnar, the stage is yours.
Thank you, Tom Erik, and good morning, everyone. Over the next few minutes, I will show you how we turn strategy into results in our accounts. One of my key messages is the strength in our continuous improvement culture. This is our single most important competitive advantage, and it is the hardest one for others to copy. Let me start with where we produce. The core of our manufacturing platform is the biorefinery in Sarpsborg. In addition, we have lignin plants in Wisconsin, Florida, Germany, the Czech Republic, and the U.K. The roles of the sites are different, and that is deliberate. Sarpsborg is the fully integrated biorefinery, where wood is refined into specialty cellulose, lignin-based biopolymers, bioethanol, and bio-based vanillin. The other plants produce lignin for the local regions. This is a global manufacturing platform that is very hard to replicate.
Our lignin products are produced close to our customers with lignin plants across continents. This provides supply security across all key markets, and we are not dependent on a single site or region. In addition, we have flexibility. Production can be shifted across units and applications, allowing us to respond to changing market conditions. This allows us to produce regional qualities where they belong and scale a proven process across several sites. Down to Sarpsborg, which is the foundation of the strategy. The sulfite biorefinery is one of a kind and makes specialization, growth, and stable earnings possible over time. This is where the most demanding and valued qualities are produced, and it is our main platform for technology and competence development. The Sarpsborg sites accounts for more than 70% of the value creation in the group. Two factors makes it strong.
The integrated value chains, where processes in energy and competence are shared, and the fact that we are highly self-sufficient with our own caustic soda and SO2 plants, waterworks, and wastewater treatment plants. Add full utilization of the raw material, where every part of the wood becomes a product, and then we have a really unique production platform. The message is simple. A one-of-a-kind biorefinery at the core, combined with a global and flexible network, is very difficult to copy. I would say probably impossible. This is what protects our margins and gives us room to growth in specialties. Continuous improvement is the core of the culture at Borregaard and our most important driver for value creation. Borregaard was an early adopter of a lean mindset. Over decades, this mindset has developed internally and in cooperation with external partners into the model we have today.
The culture is the enabler, and the result is higher output from the asset that we already have, and the target is always the same. Reduce energy consumption, improve yield, reduce cost, and add more capacity to redirect volume to more specialized product with higher value. This gives earnings in the short terms and stronger specialization and competitiveness over time. Every initiative is tracked from potential to realized run rate with a strict cost discipline. As an example, the 2025 portfolio identified the potential of NOK 270 million , and we realized NOK 140 million through more than 50 different initiatives. We have a strong track record, and we still have a pipeline to take out, and the same applies for 2026. In Sarpsborg, we have 3 km with connected plants and around 20 production units.
The biorefinery is fully integrated with steam, biogas, and energy systems, which gives cost and quality advantages. The biorefinery is also set up with its own caustic soda plant, sulfur dioxide plants, waterworks, and wastewater treatment plants. All these units are physically and technically connected and make the biorefinery highly self-sufficient. In addition, one improvement, one place, changes conditions for several others, creating an accumulation of returns. Keep this picture in mind for the next two slides as we talk through the expansion and energy. The expansion investment in Sarpsborg is a clear example of continuous improvement translated into value. An expansion that delivers improved mix, flexibility, and returns, and those are the key takeaway messages. It builds on the principle of creating more value from the same asset base.
The benefits do not come from volume alone, but from improved product mix, lower energy and chemical consumption, as well as improved yield. The project is progressing according to plan, and the main benefits will materialize gradually from second quarter of 2027. First, the debottlenecking itself. It has an expected capacity increase of 5%-10% from second quarter of 2027. It has a low risk, which is in an asset that we already own, and an investment with a variable return requirement of 15%. Secondly, it creates greater flexibility between products, markets, and a larger share of higher value specializations in the mix. This is not a volume investment alone. Thirdly, the expected developments towards 2030 is higher earnings from mix and volume and lower cost from improved yields, energy and savings, and lower chemical consumption.
The figure to remember is the 5%-10% capacity increase and the return of above 15%. The chart puts numbers to it. We have averaged about 153,000 tons over the past five years, and we expect to reach around 165,000 tons from 2027 and onwards. 2026 is the transition year, and that's why the line is dashed. Below, you see the specialty projects following the debottlenecking. We will increase the specialty capacity in both lignin and cellulose by 15,000 tons and 10,000 tons respectively. In short, more volume, better mix, and lower unit costs from assets that we already have. Our climate investments are about much more than just climate solutions. Our climate investments have been even more profitable than expected. They have given lower emissions, lower energy costs, and higher energy flexibility. The mechanism is quite simple.
Electrification and more use of own biomass replaces fossil natural gas. 30,000 tons of CO2 are removed to date, with around NOK 45 million lower energy costs for 2026. We have a further potential of 35,000 tons-60,000 tons of CO2 per year. This comes from specific projects in our existing assets and where our own people continuously look for better ways of operating. The completed projects are already delivering sustainable cost reductions alongside significant emission reductions, and our pipeline follows the same logic: lower emissions, lower cost, and higher flexibility. Digitalization and AI is the next step in our continuous improvement work. Not technology for technology's sake, but to capture more value from the assets that we already have. Reliability and data-driven decisions are already a part of how we work. Today, sensors and process data give early warnings of deviations and enable smarter maintenance.
AI turns data into decisions that we can act on gradually into more autonomous process optimization. This means higher uptime, improved yield, lower energy consumption, and fewer unplanned disruptions. In the specialty business, stable operations directly protects volume, quality, and deliveries to customers. To summarize, we have a biorefinery and a global network that are almost impossible to replicate. We have an improvement culture that converts potential into realized run rate and a disciplined investment pipeline in an asset we already own. Everything we have been through points in the same direction. More capacity and a better mix from Sarpsborg, one operating model across our sites, cost and energy disciplines that protects margin, and digitalization and AI that raises uptime. In short, manufacturing delivers higher earnings, stronger cash flow, and better results. This completes my presentation.
Thank you, Ole Gunnar Jakobsen . Our final speaker today is Per Bjarne Lyngstad, our Chief Financial Officer. Per Bjarne joined Borregaard back in 1988 and was appointed CFO in 1998. Prior to that, he held a range of finance and administrative positions within Borregaard. He holds a graduate degree in economics and business administration and brings nearly four decades of experience with the company. Per Bjarne will now take us through our financial ambitions for profitable growth. Per Bjarne, the stage is yours.
Thank you, Tom Erik, and good morning, everyone. Over the next 20 minutes, I will take you through Borregaard's financial development and key drivers behind our performance and the ambitions that guide us towards 2030. I will start by looking back at our performance over the past five years, both for Borregaard in total and for the three business areas. I will then discuss our ambition for revenue growth and EBITDA margin, which together support a significant improvement in earnings towards 2030. Next, I will cover cost development and our continued focus on cost discipline, our investment forecast, and a strong financial position that provides a solid platform for future growth. Finally, I will touch on our dividend policy and capital allocation priorities. We have delivered a strong financial performance and profitable top-line growth over the past several years.
Since 2021, operating revenues have grown by an average of 7.4% per year. EBITDA has increased by more than 8% annually. All years we had a consistently high EBITDA margin. We have also achieved a pre-tax return on capital employed above our 15% target throughout the period. Earnings per share have increased from NOK 6.95 to NOK 8.67 if we exclude impairments on bio-based startups in 2025. We have achieved these results in a period with significant uncertainty in the global economy and a challenging business environment due to the COVID-19 pandemic, the wars and conflicts in Ukraine and the Middle East, and increasing trade barriers. Our solid performance reflects the benefits of continued specialization and diversification, productivity improvements, and profitable expansion in environmental investments.
Underpinning this performance is our resilient business model and diversified market strategy that have enabled Borregaard to adapt to changing market conditions and continue to create value over time. Since 2021, all three business areas have delivered strong earnings growth and maintained attractive margins. In BioSolutions, the significant EBITDA improvement in 2024 and 2025 was driven by strong sales to the agriculture sector, supported by rising demand for multi-active ingredients in crop protection, and the reauthorization of Borregaard's lignin for use in animal feed in the EU. EBITDA in BioMaterials increased by almost 80% during the period. Higher sales prices and improved product mix, driven in particular by increased sales of high-purity cellulose to regulated applications in food, pharma, and home care, and personal care, as well as to bio-based plastics, have more than offset higher wood, chemical, and energy costs.
In Fine Chemicals, the bioethanol business had two very strong years in 2023 and 2024, driven by EU incentives for biofuels and increased sales prices. As additional supply, particularly from agricultural waste, entered the market late 2024, prices for advanced bioethanol came significantly down and normalized in 2025. Over the five-year period, both bioethanol and fine chemical intermediate businesses have implemented measures to increase capacity, resulting in higher sales volume. The past five years have been one of the most volatile and unpredictable periods in the past two to three decades. Even so, we have delivered a solid top-line growth of close to 8% for reported numbers and about 5% if we adjust for currency hedging and fluctuation in exchange rates. In general, this growth has been driven by our specialization strategy, product mix improvements, and price increases.
In BioSolutions, we have successfully optimized sales and product allocation to compensate for lost raw material supply in South Africa, Spain, and the U.S. BioMaterials has demonstrated a strong ability to adapt pricing to changing market conditions while steadily improving its product mix. This has included ongoing quality improvements and increased sales into regulated applications. Within Fine Chemicals, sales volumes have gradually increased as we have continued to debottleneck production capacity for contrast agents intermediates and for bioethanol. For fine chemical intermediates, we have also improved our product mix and increased prices. Historically, we have been reluctant to provide a specific top-line growth target for Borregaard, as several important drivers of revenue, including currency movements and broader macroeconomic and geopolitical conditions, are outside our control.
That said, we believe the time is right to be more explicit about our ambitions and provide clearer guidance to both investors and to our own organization. Today, we have discussed the strength of our unique business model and growth platform. We see further growth potential through continued specialization, expansion in high-value applications, increasing demand for bio-based alternatives, a sharper execution and capacity expansions from ongoing and planned investments. Pricing will remain an important value driver. Taken together, these factors support our ambition to deliver average annual top-line growth of 5% through the business cycle, adjusted for currency movements. The chart illustrates the sensitivity of revenue growth to changes in volume, pricing, and currency. The value of additional volume depends on how specialized the additional volume is. Currency remains the most volatile factor affecting reported revenues longer term, beyond our up to three years hedging horizon.
With approximately 95% of sales generated in foreign currencies, a 1% change in the Norwegian kroner will have close to 1% impact on reported revenue longer term. This is why our ambition is stated excluding currency effects. Over the past five years, we have delivered a strong and stable EBITDA margin, despite a period of significant uncertainty and volatility. This reflects the strength of our business model, our culture for continuous productivity improvement and innovation, our increasing specialization, and the benefit from expansion and environmental investments. In 2026, we have seen some headwinds, including a stronger Norwegian kroner and higher energy-related costs, particularly following the conflict between Iran, Israel, and the United States. Should the stronger NOK persist, our hedging strategy will help mitigate the impact over the next two to three years, giving us time to adapt and continue executing our strategy.
Taken together, we believe these factors position us well to maintain attractive margins. Our ambition is to maintain an EBITDA margin of 25% through the business cycle, assuming no major changes in foreign exchange rates. We believe this is an ambitious but achievable target. It is supported by profitable revenue growth and continued cost discipline, productivity improvements, and investments that strengthen both competitiveness and sustainability. As we have discussed today, we operate in markets that are affected by global economic conditions, raw material and energy cost fluctuations, inflation, and currency movements. The chart illustrates the sensitivity of EBITDA to changes in some of these key factors. At the same time, we have several mechanisms that help us reduce volatility. These include longer-term sourcing agreement, captive production of energy and caustic soda, a flexible energy system, and a predominantly Nordic and Northern European supply base.
In addition, our currency hedging strategy delays the impact of larger exchange rate movements. Looking ahead, assuming the current currency situation, we expect gains from our current hedging positions to gradually decline over the next few years. Our ambition is therefore to offset this through continued improvements in the underlying profitability of the business. Combining our top-line growth ambition of 5% with a 25% EBITDA margin implies an EBITDA improvement of about NOK 500 million from 2025- 2030 based on exchange rates that we have seen so far in 2026. As I said, we operate in a volatile environment where geopolitical developments, energy prices, weather conditions, and supply disruptions can all impact our cost base. In 2026, wood prices are reduced by about 15%, resulting in a cost reduction of between NOK 120 million and NOK 130 million compared with 2025. Energy costs have moved in the opposite direction.
Around 80% of our energy needs are covered by long-term contracts and internal steam production, limiting our exposure to market volatility. For the remaining 20%, we rely mainly on short-term prices for electricity and liquefied natural gas, LNG. Based on current LNG and electricity spot and forward prices and assuming this persists throughout the year, we estimate an increase in short-term energy cost between NOK 100 million and NOK 120 million this year, offsetting to a large extent the savings on wood. The total energy costs are expected to increase by between NOK 100 million and NOK 140 million compared with 2025. That means an additional about NOK 20 million. We have recently seen a sharp increase in sulfur prices as a consequence of the latest Middle East conflict. For this year, we expect an additional cost of between NOK 50 million and NOK 60 million compared with 2025, if current price levels persist.
Pricing for most other raw materials, chemicals and freight are relatively stable, not least thanks to longer term contracts. At the same time, our ongoing cost improvement program targets NOK 150 million in savings, helping to offset cost inflation and protect margins. More importantly, Borregaard is well-positioned to manage these fluctuations through our strong market positions, long-term supplier contracts, captive production, operational flexibility, and a predominantly Nordic supply base, reducing both cost volatility and supply risk. Taken together, these measures give us confidence in our ability to navigate a more volatile cost environment while continuing to improve our underlying earnings. We have now updated our investment forecast for 2026- 2029. One of our financial objectives is to keep replacement investment at depreciation level, excluding depreciation from leasing. As you can see from the illustration, replacement investments will continue to be slightly above our target.
As Ole Gunnar talked about in the previous session, we continue to invest in climate projects to meet our 2030 CO2 emission target. These investments will, in addition to CO2 reduction, also reduce our exposure to energy volatility and support further specialization. We expect that both completed and ongoing and planned climate investments will be profitable. In addition to climate investments, we will invest in productivity improvement, including in equipment utilizing best available technology and AI. A large portion of our replacement investments will be done to maintain and to improve our valuable assets, including environmental investments to further reduce effluents and emissions. Expansion investments have to meet our target of at least 15% internal rate of return pre-tax to be approved.
The main project for this year and into next year is the debottlenecking in Sarpsborg Biorefinery, which will increase our capacity for specialty cellulose, lignin-based biopolymers, and bioethanol. In addition, we plan to do several projects to further specialize our product offering. There are, of course, uncertainties in these estimates related to final decision, execution, payment schedules, among others. Borregaard has over time generated a strong cash flow from operating activities and maintained a solid capital structure, with financial ratios well within investment-grade levels. Annual cash flows varies mainly due to changes in net working capital. Our net working capital ratio has increased in recent years, driven primarily by higher inventories supporting increased specialization and by higher government grant accruals. Despite the recent increase, we continue to target a 20% ratio of net working capital over operating revenues longer term.
Equity ratio has remained above 50% over the past five years, while the leverage ratio, net interest-bearing debt over EBITDA, has been between 1 and 1.2, well within our targeted range of 1 to 2.25. A strong financial position provides a solid platform for further growth investments and environmental projects. Our dividend policy is to pay regular and progressive dividend based on long-term earnings, free cash flow, and investment opportunities. Earlier this year, we increased the payout range from between 30%-50% to between 40%-60% of net profit. Since listing in 2012, the dividend has increased significantly and was almost five times higher for 2025 than at the time of listing. Looking ahead, capital allocation will remain focused on value-creating investments in our existing businesses, while continuing to provide shareholders with regular and growing dividends.
I will then leave the stage to Tom Erik for him to briefly sum up the key takeaways from today's presentation.
Thank you, Per Bjarne. Let me then briefly bring together the key messages from today. We have shown today that Borregaard has attractive and tangible opportunities across the BioSolutions and the BioMaterials businesses. In BioSolutions, we will build on our market-leading positions, strong innovation pipeline, and deep application expertise. We will scale proven solutions, expand into under-penetrated markets, and continue moving the portfolio towards higher-value applications. In BioMaterials, we will further strengthen our position in premium and regulated markets, supported by targeted capacity expansion and continued improvements in product and customer mix. Our manufacturing platform enables these ambitions through continuous improvement, debottlenecking, energy investments, and increasingly data-driven operations. We will create more capacity, improve productivity, and strengthen Borregaard's overall competitiveness. Finally, as you have heard from Per Bjarne, we have clear financial ambitions and a disciplined approach to investment and capital allocation. The common thread is clear.
We are building on established leadership positions, proven technologies, and deep capabilities, supported by a business model that has delivered attractive results over time. This gives us the confidence in our ability to deliver profitable organic growth, maintain strong profitability, and generate attractive returns. We know what works. The opportunity now is to do more of it. Same strategy, sharper priorities, and greater value creation. That concludes the presentation part of Borregaard Capital Markets Day 2026. I would like to take the opportunity to thank all of you for taking the time to be here with us today and joining in on the webcast. Thank you for your continued interest in Borregaard and the opportunity we have to share with you how we intend to create value going forward. I would now like my colleagues from group executive management to join me on stage for our final Q&A session.
Elliott and Ole-Petter Sjøvold will once again moderate the discussion. Following the Q&A, those of you joining us here in Oslo are warmly invited to lunch at Glasshuset upstairs, I think, in Oslo Concert Hall. Knut- Harald, Gisle, Ole Gunnar, and Per Bjarne, please join me here on stage.
Thank you very much, Tom Erik and the Borregaard team. We will just open round two of Q&A. Again, just a reminder online, please submit your questions through the portal. Maybe I can start. In terms of the financial ambitions, very helpful top line ambition of 5% growth. Is there any way you can break down for us essentially how much of that growth could come from volumes, how much from pricing, how much from mixed effects? In other words, does it include volumes that are not just debottlenecking but potentially further out in time? Any type of color on that would be helpful.
I would say that the major part has to come from further specialization. That means product mix improvements. The debottlenecking, if you can do the calculation based on the sensitivity, will, I think, initially contribute to the top line growth of NOK ±250 million and growing to about NOK 300 million. So it is an important part, but it is not the largest part. We will also gradually increase the capacity for some specialties. For instance, Ice Bear is really But that will improve the product mix mainly, not the total capacity. The big question mark is, of course, pricing, and that depends more on markets. But of course, we have to do price increases, at least in line with GDP, and then we will see what more we can do in the years to come.
I think the most important thing is what we have talked about most today, is about specialization, product mix improvement.
On that target, do you think the NOK 300 million in growth CapEx that you are planning from 2029 will be enough to facilitate that growth going forward? There is a thing you need to spend more to achieve that growth.
That is 2029 is a bit ahead. We have quite concrete projects in the nearer future. The further out in the period, the less concrete it is, but we have quite good ideas of what we will do in 2029. It might become a bigger number, but that depends on how the world around us moves also.
I just mean, if you put that into your model, then you will see some over-capitalization at some point. How should we think about that capital allocation at the time when the investment period now is done?
Yeah, if you have over-capitalized. What we have done in the past is mainly to give extraordinary dividend. We can also look at initiating a buyback program, but let's see that that really happens. Let's hope we have good projects that really the investors appreciate and that we can spend money on those. That is really the flexibility.
Then maybe one from me back to BioMaterials. In the U.S., there has been some pretty aggressive competition out there in recent times in terms of pricing. Could you maybe provide some color in terms of how that could enable market share capture over there for yourself or not?
Yes. There's been a lot of discussion about that in the market. First of all, I must remind you that we carry through quite substantial price increases from 2024 to 2025 . To defend our EBITDA and to increase volumes in select segments, we actually on average, reduced our pricing somewhat this year. The main target for us all the time is to maximize the EBITDA and the contribution margin. I must say, which is something I'm not going to go into detail with, price is not always telling the whole story, because we have significant differences in the run rate of different specialty cellos qualities, and that is also a very important element when we adapt to the current market situations. I think I'll stop with that.
In your presentation, you stated that customer qualification could take a long time, especially in regulated applications such as food and pharma. Could you quantify how much longer it takes for those qualification processes and how much stronger the margins could be in those markets?
Well, when it comes to qualification time, it can take up to two to three years from initial discussions until you are in a commercial supply situation. When it comes to the margins of those products, of course, it's quite a big correlation between the pricing power and how advanced the products are. That's of course why we target those segments. It works very easily once you're inside, you are fairly protected at least for some time. The second is that the margins are more attractive than the segments we are in, replacing those the segments we're replacing with those products.
Then just back to the pricing. You mentioned at the beginning of the year some competition from China in selective sub-segments. Could you provide an update on if there's been any dramatic changes there and what you guys have done in response to that and maybe capture some share, for example?
Well, it is a twofold strategy. One is, as we have discussed several times, is that we are gradually moving our volumes from the more vulnerable construction market, which is not only facing some competition from China, but we are also in a down cycle. We move those volumes into the more high-value added segments, not only necessary regulated ethers, but other applications as our plant is highly flexible. Part of the reason that we choose to adjust prices this year was actually to, in a way, make our European customers able to compete more straight on with the Chinese imports. That has been, I think, fairly successful, it has stabilized the situation and on a margin basis, it has been positive actually for specialty cellos. Of course it will be, I would say in any segment, continued competition from China is there to stay whatever market you are in.
You just have to, yeah, to the extent it is meaningful for us is to adapt prices. But the best solution will be in some segments long term to maybe replace with other products. But for the time being, I feel the situation is stable. That said, let's see what happens when we go into next year. We haven't started those discussions yet.
We have also seen that it's given a good and stable situation with adjustments we have done throughout the year. It's really been giving good effects for our customers.
Also it's important to bear in mind that this is not the major chunk of our business. When you look at our highly specialized business that we report once a year, a little bit more than half is ethers in 2025. This also varies from year to year. Out of that half plus, about 40% goes into construction. Then you can calculate that this is not the major share of the business. It's important to be aware of.
On to another topic. We haven't heard about the Exilva product in a long time. Could you provide some update on this?
Yes. We have been working on this for a long time, as you know. We have, as we have done with other things, we have also put sharper priorities in this project. We have reallocated resources. We are focusing more selectively on those fewer applications we believe have the highest probability of success. Throughout the year, we have seen very positive developments in those areas. That means we have not thrown in the towel here. We're still going. As you know, Borregaard, we are a long-term company, and we feel there's something here that we really fully want to understand and make sure that we have done our best to develop if we're able. So, good progression with that sharpened priority, but we will get back and report when there is significant enough for you to hear about it.
One more here. I think you've touched upon some of these points, but the number of attractive organic growth projects ahead and a strong balance sheet. How should shareholders think about the capital allocation priorities between reinvesting in the core business, pursuing adjacent growth opportunities, and returning capital through dividends and buybacks?
I think I answered that. If we have good projects, and we have some ideas when we go into 2028- 2029, that is not included in the portfolio. We might look at that. If we are not successful there, we will probably allocate more to shareholders. We will continue to increase our dividend, I'm quite sure of that, every year.
Did you also mention bio-based? I don't think. Did I get your question correctly?
No. Not quite right. Just adjacent growth opportunities and returning capital through dividends and buybacks.
Yeah. It was just on bio-based. As you have seen over the last year, we have taken down our exposure significantly. As for now, we will not take on any new investments into the inorganic growth area. We will focus on those we have left and with the exposure we have. Nothing new coming into that portfolio. That's also part of the sharpened priority.
On the debottlenecking project, could you just touch on what you have completed in this process and what remains to sort of get a grasp on what the key risk to the potential delays or CapEx arounds there?
Yeah. What I can say is that the major components are at place. So we brought in the major components that will eventually bring the expansion forward, but now it is more like a closing of that major components, which lowers the risk a lot of that project. So looking quite good, I think.
Yeah. So Q2 2027 is when-
we will see the gradual-
startup.
But no impact from the new equipment as of today.
And then just piggybacking on that. When you say gradual improvement, is that a matter of quarters or a matter of years?
Could you repeat the question?
If we are getting a ramp up gradually from Q2, would you expect the ramp up to last, say three to four quarters? Or is this a much more gradual ramp up?
I expect the startup to be quite smooth, actually. So I expect it within some months to deliver on the volume.
Could you touch on I imagine sharper priority is a lot different within BioSolutions and BioMaterials. I think it's more customer-driven, the innovation BioSolutions than it is in BioMaterials. Could you just explain how you work differently in BioMaterials to prioritize more sharply?
Yeah. The change is really not that big in BioMaterials because we have a very different structure. If you take the 10 biggest customers, that situation is quite stable over years. We tend to have long-term project with these customers, where we focus on the parameters that we often discuss, on viscosity, on purity, on minor adjustments of the product. That's really our R&D effort, which partly goes on in the lab and partly in the plant and partly at the customer site where they qualify the modifications. We are not really changing our strategy compared to bio-polymers. We are actually more continuing the way we have been working for many years, which is highly appreciated and rewarded by our customers.
On the positive thing is actually that, as I commented, as there are a lot of things going on in the market, we actually see an increase from our customer side, an increased interest to qualify Borregaard as a second supplier. I think we will not do anything different. If you go more detailed into the innovation rate, which we haven't done here, we see that BioMaterials is actually dragging that percentage up. By the way, this also means that when we sharpen our focus, we don't increase our costs. We are doing this with the same set of people that we have been working with for many years, really. We don't really need to hire additional resources to make more advanced products.
Just on to working capital, which is notoriously quite tricky to approximate going forward, but you've been a bit higher than the target, but you're maintaining the target of 20%. I think you mentioned that the rationale for it being above the target is due to some specialization products, but you're obviously not stopping with that journey. Can you just explain maybe the pathway to kind of get down to the 20%?
Yeah. It is mainly about the markets. Of course, we are in many markets in a difficult situation now. Construction market, maybe in particular, but some other markets, and you have all the uncertainty and volatility in the world. Which really should, if things calm down at some point, we should see better markets. Then you would see inventories moving down again. That is the particular partner that has to go down. Borregaard, of course, we are dependent on the pulp mills and what they produce for the lignin operation. The strategy for our lignin business has always been to, instead of pushing volume into the market, we use inventories to regulate the market. We are a little bit in that situation also now. So we are not concerned about the inventory.
I think they will, at some point, normalize, maybe not down to 20%, because specialization drives also inventory levels. But I think it is the markets that are a bit depressed in some respects for the time being.
Just two questions on Fine Chemicals, if I may. So first on bioethanol. With the volatility and geopolitical uncertainties you have seen, are you considering changing the way you are pricing your products from annual contracts into more index-linked pricing or, yeah, in other ways than we are currently seeing?
You are asking about bioethanol?
Yeah.
Well, bioethanol is a highly commoditized market these days. As we have said repeatedly, the two to three golden years, they are over. Our products is now more back to a more commodity status. There is a certain premium compared to conventional bioethanol, and that's it. There are no really certain opportunities. We will keep on mainly contracting on a yearly basis also because this is a high volume product that we store in tanks at Borregaard, and we need to be sure that we are moving it continuously, so we don't stress up the production situation. There are really no big advantages as I see it to be more optimistic and spot-oriented in that market. I think what you see now is what you will get also in the future. We are back to a more normal situation.
The great thing is really that we were ready to grab that opportunity when it came along these two to three years, because not everybody were in the position to do that. We should count the money we put into the basket in those years and expect a more flat development in the years ahead. Although we get some effect of that volume expansion as we have been talking about.
Yeah. Also in the Fine Chemical intermediates, could you touch on new opportunities there? Is that primarily additional volumes for existing customers or do you see new products coming on stream here as well?
Which area was that?
Fine chemical intermediates.
Intermediates?
Intermediates.
It is mainly the same customer base. Increased volumes and also over time, a shift to selling more volume in Europe and less in Asia where the competition is a bit tougher.
Just staying on Fine Chemicals, obviously the gas oil spreads globally are very high. A lot of the other refiners probably making a lot of money. So you are saying that there is not really a read across potentially, with what we are seeing in the current market to the bioethanol side of things going forward.
The main volume here is the big commodity volume from the U.S. and Brazil. So far, there are some movements caused by the energy situation, but it is not really making a huge difference when it comes to the pricing over modest volume.
Back to the financials. On the cost side, because you state that your longer-term contracts help reduce impact on all the raw materials. Are these mainly dominated by annual contracts or are more like five years tender contracts? If they are to be renewed at current levels, would that be a material step up? Could that impact?
No, of course, we have a variation in the length of contract. If you talk about electricity, there we have historically had up to 10-year contracts. We have most of our contracts today, they are to 2030 - 2033. We are renewing parts of that portfolio gradually. For most other raw materials, it is either an index for the next month or the next quarter. For transport costs, for instance, it is more annual contracts on the freight rates. That is probably why you haven't seen the effect of freight rates in our accounts for this year really yet, because we have contracts. That is a question mark for next year. There is a big variation there.
Just one more on the investment forecast side of things. It looks like around NOK 1 billion in expansion CapEx from 2027 - 2030. Could you potentially just maybe break down segmentally what that refers to in terms of BioSolutions, BioMaterials, and Fine Chemicals? Is that hard to do?
The debottlenecking is of course, a big number this year and next year. The total investment is close to NOK 800 million. Of course, some of that has been paid out already, or were paid out in 2025. That is a big chunk of it. To mention some projects, we have the Ice Bear. We are putting more money into the Ice Bear technology on the BioMaterial side. We have the U.S. upgrade on the facility there. We are doing a few things in fine chemical intermediates really to increase volume there. The rest will be smaller, medium-sized projects, add-ons in the different business areas. To give you a split, it is even harder the further ahead you go. I don't think I will go into that because the world will change when we get there. It is more a frame of how much we can invest, really.
The world around us will tell us whether we can do more or have to do less.
A final one from me. You have identified NOK 130 million of unrealized improvements potential. When should we expect to see this feed through the P&L?
What we should expect from it next year or?
We were talking about productivity improvements, Ole Gunnar was talking about, and that will seek through the P&L. The cost program, which is mainly about what we call fixed cost, is a different issue. That will be an additional improvement.
Unless there's no further questions, I think that can conclude the Q&A for the day.
Good. Thank you very much again, everyone, and thank you to our moderators.