Good morning. On behalf of and the Norwegian Society for Financial Analysts, I'd like to welcome you all to Borregard's Capital Markets Day twenty twenty outside of the headquarter here in Sarpsborg, Norway. Today's presentation will be split into three sessions: first, a company run through by the C level executives then followed by the business area breakdowns from vice presidents lastly, we will do a Q and A session and you are free to send in your questions all day during the webcast facilitation software. And you could also for those questions that will not be answered during today, they will be replied to in full written afterwards. So with that, I'd like to leave the stage to Mr.
Per Sole, the CEO. The floor is yours.
Thank you, and good morning, everyone. I will take you through two topics this morning, strategy and sustainability. And first, we start out with strategy. And for in many ways, you can say that Borgard has been following the same timeless strategy for the last thirty years, what we often refer to as our specialization strategy. And I'll just spend a few minutes now recapping that to start my presentation.
We often refer to ourselves as a global niche player. We want to be present in market niches with high barriers to entry. By high barriers to entry, we mean that we have value high value added products that are protected by know how, by intellectual property, by technology or even by access to raw materials. So building high barriers to entry is a key activity for Borregaard in the specialization strategy. At the same time, we try to build leading market positions by application knowledge, by knowing what the product does when it's applied by our customers and also proximity to markets.
Although we are a fairly small company, we have a global market reach with our own sales service people. Finally, we also add that we have a diversified market strategy. Burgard has more than 700 products in its portfolio, which is a significant high number for a small company like us. That means that we are extremely diversified. At the same time, we have global market positions, which we think is much safer than having regional market positions.
So combined, the specialization strategy is there to give us robustness and flexibility and safety for the future of our company. The way we execute our strategy is in two ways. First of all, we have a business driven innovation model and this involves the entire organization. And innovation, of course, is there to drive the top line, but also to preserve the bottom line, the margins in the company over time. But we cannot only do innovation, we also have to do continuous productivity improvements.
And usually, we try to do this in a combination where we use technology in a smart way. This can be not necessarily new technology, but new to Borgard. We raise the competence level in the organization to utilize the technology in the right way. And finally, we adjust the organization to use the technology efficient way. Finally, competence is the key driver if you have a specialization strategy.
And we try to use competence as a differentiator from our competitors. And we usually refer to this as the golden triangle competence. And we say there are three areas, sales and marketing, R and D and production that we try to utilize to drive the strategy. And as a management team, it's our job to create working processes where involve all these competencies at the same time to get maximum leverage from our competence base. So this summarizes sort of the timeless strategy.
Over time, obviously, we move we are on a long journey towards specialization and we do different actions over time. And we usually refer to these as strategic priorities, what is important right now in order to move the company towards an even more specialized position. I'll now take you through what we said exactly two years ago when we had our previous last Capital Markets Day in September 2018. And these were the strategic priorities back then, and I'll give you an update on them. First of all, we said that we were focusing again on increased specialization but also volume growth.
And the first sort of activity there was that we were looking to have a successful market introduction of our new lignin volumes coming out of our new plant in Florida. The sales volume ramp up from that facility is fairly much on track. We have a linear curve saying that in the first three years, we should go from zero to 100,000 tonnes in sales, and we are more or less on track for that. However, the margins so far are lower than we had expected. So the profitability in this plant is not as expected.
So we still have a way to go in terms of developing a better sales better quality sales, better product mix so that we can deliver a better result from this investment. The next thing we mentioned was the iSphere product range in specialty cellulose. And this investment has proven its value over and over again in these two years and especially right now where we are in a situation where the alternative is to sell Intritexcel cellulose, and this business is now the extended product range that we have from the Ice Bear technology has made it possible to minimize sales into textile and increase the share of highly specialized volume in our overall portfolio. So I would say that this has been a very successful investment so far. The third one was cellulose fibrils, where we have a strong pipeline development and we are also seeing very strong growth at the moment, albeit from a low level.
So we still have a way to go on this initiative, but it's quite promising as we speak now. And we will revert to both the iSPEAR and the cellulose fibrils when the Executive Vice Presidents come back later in the presentation. And generally, we also said that we wanted to grow the specialties volume in Performance Chemicals and Specialty Cellulose. And we are pleased with both the developments in the specialties in Performance Chemicals, but even more in Specialty Cellulose, where we have taken the high specialty share from below 60% to well into the 70s in percentage points in this period. Then the second major topic that we raised was sustainability, where we said that we wanted to increase the market awareness of Borgard's bio based products.
And we have seen positive development in this area, particularly inside biovanillin, the plant based biovanillin and the biopolymers going into ag chem have been particularly positive in this period. Then we said that we would have some ongoing and potential expansion initiatives. And the major investment in these last two years has been the lignin operation upgrade and preparation for increased specialization here in Salisborg. This was originally NOK500 million investment. It came in roughly 10% below the budget and it came in on time.
And it will generate NOK60 million in cost savings over the next this year and next year. So we are quite pleased with the performance and execution of this project so far. Then we have the Florida lignin expansion second phase. Given what I said about where we are right now in this project, this is still pending. It's an attractive second step because we have invested in the infrastructure in the first step.
So once the timing is right, this will be executed upon. Then we have Exilva, where we also have laid the foundation for a second phase and other doubling of capacity, and this is also pending since the volumes are still not reached a level where it's right to make the next step. So both of those will be hopefully coming on later. Then we said that we would explore other specialization and capacity expansion opportunities, and we have executed on several things. We are in the process of increasing our capacity for plant based bioaniline.
We have upgraded our bioethanol business and we have raised increased the capacity in pharma intermediates by roughly 30% in this period. So all these investments add to the value added creation at the Saisbah biorefinery. Altogether, just to complete history here, in the period 2015 to 2019, we have spent billion on expansion initiatives, and all these projects were completed on time and within budget. But this also means that we have sort of reached the end of this heavy investment phase at this point. What is important going forward?
And I'll take you through a few key considerations here. In the business area of BioSolutions, where we make biopolymers and biovanlin, we have seen a lower raw material supply base than we had expected a couple of years ago. And this is particularly related to the mothballing of the South African operations and the Spanish raw material supplier, who is in a liquidation process right now. So this means that we have lower raw material coming in than we had planned for. And also, it should be noted that this raw material is primarily hardwood lignin, which means that it goes into certain markets, primarily construction and low end of the industrial applications.
So the consequence of that, of course, is that we will see less focus on volume growth than in the previous strategic priorities and more focus returning back to the history where we had specialization and diversification as our main focus. So this will have to be taken into consideration when we define our strategic priorities going forward. Then the expansion opportunities, I mentioned that we have done several initiatives we are doing several initiatives at the Sasqua biorefinery. We still think that there are other opportunities that could be interesting to do that will add to the value added coming out of that biorefinery. And as we identify and as we make a decision on those, we will publicize make them public when and if we do that.
But we think that there are still more to be done at the Saipur biorefinery. The second step in Florida and Exilva, obviously, are also key considerations. The groundwork has been done. These are very tempting and should be very profitable add ons when the timing is right. Then we are seeing opportunities for bio based products.
There is a strong emphasis on ESG, and we are increasingly focusing on ESG aspects across our entire value chain. So all these considerations have to go into our thinking when we define our key strategic priorities going forward. And I'll come back to them later in the presentation, but I'll this time to take one step back and talk a bit about sustainability. Sustainability is both a positive and a negative risk. For some companies, it's obviously a threat.
Climate change is a threat. For other companies, it could be an opportunity. And if you take a look at the challenges that we are facing with climate change and what we need to do as everyone involved in these problems and that's all of us need to do. From Borgard's perspective, we think that this can contribute to market growth and it can give us new opportunities in the marketplace. And we have looked at UN's 17 Sustainable Development Goals and Boregaard can contribute across a number of those.
And we have green solutions that are both helping out in terms of making industry more sustainable, but also making our customers' industries more sustainable. And we are using a sustainable raw material as well. So there are a number of areas where we feel that we can contribute, And we have sort of defined or prioritized six of the long term global goals, and this is more clearly laid out and reported on in our sustainability report, which is an integral part of the directors report in our annual report. But I'll take a step further and talk about how we approach this issue of ESG and sustainability. Borgard started actually well over ten years ago.
I think it's thirteen years ago. We started on a regular basis to conduct life cycle analysis across our whole product portfolio. So in other words, we have an independent third party come into our company and assess all our total value chain from cradle to gate, from we cut a tree in the forest until the finished product leaves our inventory warehouse. We have a full documentation of the environmental footprint from that production process. At the same time, the same company also made assessments of the alternative products for our customers that are usually fossil based, so that we can document towards the marketplace what is the environmental footprint from our delivery to you.
And this shows in many ways very favorable footprint compared to the alternative. And what we have spent the last ten, fifteen years working on is to improve this climate footprint even further, primarily by working on our production processes to reduce the emissions into water and air. And I'll take you through each and every one of these three elements here. The wood raw materials, all the raw materials that comes into our facilities, whether it's the biorefinery here in Norway or any of the lignin operations that we have internationally, the origin of all the raw material is from certified forests, either through the PEFC or FSC standards. And if you take a look at United Nations Special Report on Climate Change and Land, there is a special also there description of forests and how forests can contribute to climate action.
And forests can contribute in three ways. It can do carbon storage. You have to preserve biodiversity and you can use the wood based products as an alternative for fossil products. And of course, the biodiversity and the carbon storage will have to be taken care of through the certification standards so that you can you have to use if you want to use all these three different objectives, if you want to deliver on them at the same time, you have to balance how much wood you use for wood based products and how much you need for biodiversity and carbon storage. So we have a sustainable raw material.
Then if we look at the improved environmental footprint from our processes, on the left hand side here, we have, like I said, worked dedicated in a dedicated way to reduce CO2 reductions, but we have also reduced other emissions to water and air. And we are focused on greener logistical solutions, more by sea, less by transport on roads and so forth. We are certified by CDP, which is a global nonprofit organization owned by the UN and WWF among others. More than 8,000 companies are rated by CDP. Only 2.1% received the highest A rating and Borgard is included in that to 1.1%.
So we are quite proud to have an A rating as a chemicals company. And we are also working with CDP in one other area, and this is targeted reductions, CO2 reductions over time, so called science based targets, where we sort of present to CDP what our plans are for CO2 reductions and what our planned actions are to deliver on those targets. And these are then approved by CDP. And we have this approval. We received this approval last year.
And our base year is 02/2009, and the target is to reduce our CO2 emissions by 53% by 2030 and one hundred percent by 02/1950. The CO2 reductions so far after ten years is down in the range 35% to 40%, as you can see in the figure on the right hand side here. And we are going to deliver on the 2030 target by increasing the use of bioenergy, increasing the use of electricity, green electricity for steam production and by further energy conservation work to reduce the overall energy consumption at biorefinery here in Norway. Finally, the products that we offer to our customers usually have components from the raw material itself. We add very few other chemicals or other components to the finished product.
So it's usually components from the biomass. And now I talked a lot about the environmental footprint. And obviously, with the life cycle analysis, it's an important selling point for several of our products that we can document the environmental footprint from the product itself. However, we think that there are multiple sustainability features that we can offer to the market. And one other thing is a lot of customer segments are also interested in the fact that it's a natural renewable starting material.
And our plant based BioVanlin is the most stellar example of that because there you have a lot of oil based alternatives and customers have an increasing preference for a natural starting material, however, produced with an industrial production process. Finally, we think the health and safety aspect is also an important aspect when it comes to sustainability. And our large product range towards agriculture has a very mild health and safety features, which means that the customer, the end customer can improve his health and safety exposure by using our products as opposed to petrochemical alternatives. So this is summarizes how we look at ESG and sustainability issues at Borgard. It's difficult in this situation not to talk about the coronavirus and the pandemic as we are in the middle of it, and it's affecting our business.
So I think I thought I would just take one minute to take you through and summarize what we have said around the coronavirus effects for Borjegard. First of all, health and safety issues. Obviously, this has meant that we have had to introduce a number of measures and new procedures in our business in order to limit the risk of infection. So we are this is actually affecting the way we run our business in terms of home offices, in terms of how we do maintenance, how we introduce external help into our factories and so forth. Operational effects, we have reported at the beginning of the second quarter this year that we had to stop our business in South Africa because we did not receive any more raw material from Sapi Sykor pulp mill when that stopped in early April.
And as a consequence of that, the Board of Directors of the South African 50% held joint venture has made the decision to mothball the plant in South Africa and retrench all the employees and terminate all third party agreements there. So we are in a state where we have mothballed this operation, and it's a significant volume for us, obviously. At the same time, a new piece of information. We usually have a scheduled annual maintenance stop for one week in October every year in the fourth quarter. Because of the coronavirus situation, we have decided to split this annual maintenance stop into three, four shorter stops in order to minimize the risk connected to the coronavirus situation.
So this will be spread over the third and fourth quarters. This is more a practical issue, but obviously when you do it in three, four steps instead of one step, it will take slightly longer time and cost slightly more in terms of lost production. But it's a prudent thing to do given the situation we are in. We have also mentioned that we see reduced demand in some polymer sectors, biopolymer sectors and for certain specialty cellulose grades. The biopolymer sales volume is forecast to be between 1015%, down from last year, and this is particularly impacting concrete admix and low value industrial applications.
But we are also seeing reduced demand from applications like oilfield chemicals and automotive. So the pandemic is leading to reduced activity in a number of areas. Construction is a key area where you see a reduction in activity, and this is also with reference to the specialty cellulose area, where we deliver wood pulp into cellulose eaters, which are used mainly in the construction application. And of course, this is a high growth area for us when it comes to specialty cellulose, but I think the pandemic will we will see some temporary setbacks in the growth rate during the pandemic if it prolongs. Also, as a general disclaimer, we have said that there is a possibility for lower growth in the world economy and indirect consequences from suppliers, business partners and infrastructure that is hard to see beforehand.
But so far, the things I mentioned are sort of what has a negative impact on our business. Finally, the bioethanol has partly shifted from fuel to disinfectants. And of course, this gave us a strong contribution to the result in the second quarter. And we also said that we expect that in the second half, it will be more normalized where there will be more sales again back into biofuel and less into disinfectants, but still some impact from disinfectants, not like we saw in the second quarter. So that summarizes how we see the coronavirus pandemic right now.
Then I will finally conclude my presentation by going through the current strategic priorities. First of all, specialization and diversification within BioSolutions, driving specialization through innovation and market development, balancing the market risk by having a diversified product portfolio and we have the opportunity to expand this business further, particularly out of Florida, but this will be driven by the profitability that we see in that business. When and if we see that profitability is right, we can execute on the second step. Then we have the Sarsapar biorefinery, where we think that we can increase the value added even further. We have a very high value lignin raw material base that we can utilize in biopolymers and biovanillin.
We still think that we can enhance the product mix, especially cellulose and bioethanol. And this has to be done through innovation and productivity efforts, but also, like I mentioned earlier, targeted add on investments that can increase the value added could also be an alternative in this area. Then we have development of the cellulose fibrils business, continued market development across multiple applications and geographies. We have a very broad opportunity area for this product. It can be used in many applications, and there is strong interest across both applications and geographies.
The timing of the second step will be guided by demand development. When we see that the demand reaches a sufficient level, we will push the button for the second step. And finally, sustainability. We think that this will become increasingly important for Borregaard, and we will continue to work on ESG aspects across the entire value chain. So that completes my presentation this morning.
And I will hand over to the next speaker, which is our Chief Financial Officer, Pebiani Lindgster. Thank you, Per, and good morning, everyone.
I will take you through the development of some key financials and then go through the larger expansion projects and talk about the targets we have for delivering improved EBITDA from those projects. BoroGuard has now been listed for close to eight years. We've had we've seen some fluctuations in the share price in certain periods. But in total, we had a strong value creation since the IPO and a very strong development over the last months. The share price, including reinvestment of dividend, has on average increased by approximately 30% per year and close to 8x since the IPO.
The enterprise value, which is the market value plus the net debt, has increased by more than 20% annually or close to 5x since the IPO. External factors like currency, raw material prices and the world economy have in total worked in our favor, but are far from explaining the total value creation. Boregard has been through a period from 2015 with significant expansion investment, which initially have negatively impacted key ratios. However, our financial ratios are still well within what are required of an investment grade company, and we continue to consider the company to be well capitalized. The equity ratio has been strong throughout the whole investment period.
However, a weaker Norwegian kroner and hence an increase in unrealized losses from currency hedging has negatively impacted the equity ratio during the coronavirus turmoil positive for BorreGard as sales are mainly in U. S. Dollars and euros. The leverage ratio, net interest bearing debt over EBITDA, has increased from a very low level, both from investments and from increasing dividends. The implementation of IFRS 16 leases in 2019 increased the ratio by about 0.25.
In a situation with a weak Norwegian kroner like we have today, our target is to bring the ratio below 1.75, which means to bring the ratio down by approximately 0.25 from today's level. During the 2020, Borregar has refinanced its revolving credit facilities at attractive terms and with margins linked to sustainability targets. We see this as a sign that also the banks view Boregard's financial position as solid. Since 2012, has paid regular and increasing dividends in line with the dividend policy, which is to pay between 3050% on net profit for the preceding year. For 2016, Borregard paid an extraordinary dividend due to increased earnings and a strong cash flow that year.
Top line growth has in average been 5.1% per year since 2015, helped by a weaker Norwegian kroner, but also from further specialization and volume growth. EBITDA and the EBITDA margin have fluctuated a bit more than the revenues. The 2016 EBITDA improvement was mainly due to the weakening of the Norwegian kroner late in 2014, but where the result impact was delayed to 2016 due to currency hedging. In 2018, higher wood and caustic soda prices, the continued negative development for lignin products to concrete admixtures and ramp up costs for the Florida lignin plant put pressure on EBITDA and the EBITDA margin. From 2019, EBITDA has improved due to further weakening of the Norwegian kroner, continued specialization and diversification and positive effects from the investments.
Since 2015, all business segments in Borregard have achieved significant improvements in EBITDA. Biosolutions has improved through specialization diversification and positive currency effects. The increased demand for plant based ingredients and the repricing of Boregard's wood based vanillin has been a strong contributor improved result. On the other hand, strong competition and price pressure for lignin based biopolymers in concrete admixtures, together with full fixed cost while ramping up the volume in the Florida plant, have put pressure on the result and margin. Biomaterials result peaked in 2017 with a strong product mix and favorable raw material prices for specialty cellulose.
Raw material prices increased significantly in 2018 and the 2019 result was affected by further price increase for raw materials and by operational incidents at the Sarzburg site. Cellulose fibrils have been hurting the EBITDA in biomaterials through the whole period, softened by EU's Horizon 2020 grant. Sales volume is gradually increasing from a low level and had compensated for the reduced EU grant, which ended in April. Fine Chemicals has improved significantly since 2015, mainly as a result of increased specialization and higher prices for Borregards second generation bioethanol. The result peaked in the second quarter this year due to increased demand and a higher price level for bioethanol to disinfectants.
Investments in increased capacity for water free bioethanol and for pharma intermediates have contributed to the result improvement. BoroGuard has a strong cash flow from operating activities over time. From year to year, there are significant fluctuations in the cash flow, mainly from period end changes in the net working capital level. When comparing the cash flow with profit for the year, excluding depreciation, amortization and write downs, the cash conversion rate has been 95%, which we consider to be quite downs, healthy. The main factor affecting the conversion rate is the change in net working capital.
Net working capital will normally increase in absolute terms with top line growth. However, from 2018, we have had an increasing trend in net working capital, both absolutely relatively. There are several factors which have had a negative effect on net working capital. The value of inventories has increased gradually in the whole period from 2015. There are several reasons for this increase: higher volume in inventory, increased manufacturing costs from higher raw material prices and from increased depreciation, increased specialization and currency effects on input factors.
From 2018, accounts payable has been decreasing relative to operating revenues due to a lower investment level. In addition, the impact from changes in larger accruals, like utilizing the prepaid EU grant, reduction in environmental accruals and outstanding CO2 compensation have negatively affected net working capital. Accounts receivable has been quite stable over time relative to operating revenues, which also means that days of sales outstanding are more or less unchanged. Accounts receivables is closely monitored and followed up in Borregard. The absolute numbers are in addition affected by currency and top line growth.
Borregard's target to keep net working capital at 20% of operating revenues over time is unchanged. The key to bring net working capital in line with the target is a reduction in inventories. Biopolymers inventories will be reduced over time over the next quarters since demand is higher than supply for the time being. For the other businesses, the inventory levels will depend on sales and cost development. Borregard has now been sorry.
As mentioned earlier, Boregard has been through a period with larger than normal investments. In total, more than NOK 1,700,000,000.0 has been invested in expansion projects over the last five years, and a similar amount has been spent on replacement investments. Borregards' main profitability target is to have return on capital employed above 15% pretax over our business cycle. We expected an initial drop in the return on capital employed from the expansion investments as they would increase Borregoard's capital employed significantly. In addition, the results were expected to be hurt since we, for some projects, had to add manning, fixed costs and full depreciation during the volume ramp up period.
Five out of seven larger investments have so far delivered results on or above our expectations. However, the profitability for two of the larger expansion projects are so far below our expectations and have put pressure on the return on capital employed. After a period with substantial expansion investments, our main focus going forward is to realize the targeted results from these investments. Boregard's investment forecast for the period from 2020 to 2023 reflects a lower overall investment level and a low level of planned expansion projects. Replacement investments are targeted at the ordinary depreciation level, excluding depreciation from IFRS 16 leases.
The upgrade of the caustic soda production facility in Norway is a major replacement investment in 2020 and 2021. We expect replacement investments to be below depreciation for 2022 and 2023. Capacity expansion for wood based vanillin is the main ongoing expansion investment in 2020 and 2021. Borregard has a pipeline of early stage ideas that might materialize in investments, and Pierre mentioned a few ideas we have at the Sarzburg site. In addition, the second phase of the Florida Lignin plant and the second phase of the Ixilva plant are potential expansion investment.
We cannot rule out possible acquisitions either. Such projects are not included in the forecast and may lead to additional expansion investments, of course, assuming that such projects are profitable and meet our profitability hurdle of at least 15% internal rate of return pretax. In BioSolutions, we have finalized two major expansion projects and are in the construction phase for the third project. The largest project is the lignin plant in Florida, where we, together with Rayonier Advanced Materials, have invested a total of close to million. The plant started up mid-twenty eighteen.
The volume ramp up, as Per said, are in line with our three year plan, but the profitability is so far behind our expectations due to an unfavorable product mix and higher distribution and fixed cost than expected. The second largest investment totaling NOK450 million is the upgrade and specialization of the lignin plant in Norway. The upgraded facility started up mid-twenty nineteen. So far, cost savings in Norway are according to plan, mainly from improved logistical solutions. In addition, the restructuring of our German operation has given additional cost savings.
The capacity for expansion for wood based Vanlin, estimated at NOK130 million is ongoing and will be completed mid-twenty twenty one. A smaller part of the capacity increase has already been installed and has given some extra volumes. In total, we have targeted an EBITDA improvement of 150,000,000 to NOK $250,000,000 from these three investments over the next three years. The improvement will be from increased volume, optimization of product mix, further specialization and cost savings. In biomaterials and fine chemicals, we have finalized several larger and medium sized expansion investments.
The Iceberg project, where in total have invested million in increased capacity and quality improvement for high purity cellulose, has been important for further specialization and for stabilizing results over time. Reduced exposure to textile cellulose has also been an important consequence of the iceberg project, especially during a period now where textile cellulose prices have been depressed. Sales volume and results from the investment in a commercial scale planned for cellulose fibrils totaling NOK225 million is still not profitable and behind our initial expectations. However, we see a growing number of commercial customers and the interest from potential customers is still strong. We think that this project is among the most promising in Borregoire's innovation portfolio and continue to be optimistic for the future.
Two smaller projects totaling more than NOK 100,000,000 in investment are the increased capacity for water free bioethanol and for pharma intermediates. Both these projects have delivered results above expectations and most of the potential for these projects has already been realized. In total, we have targeted an EBITDA improvement of 75,000,000 to NOK 125,000,000 from these four investments over the next two years. The improvement will be from increased volume and further specialization. If the EBITDA targets from the seven expansion projects are met and the currency rate stays at today's level, we would realize an EBITDA improvement between NOK425 million and NOK625 million over the next three years, which then would bring the EBITDA level to between NOK1.5 billion and NOK1.7 billion.
The currency impact alone is NOK200 million, assuming today's currency rates in the whole period, and is mainly a result of reduced losses on hedging positions. Using the same targets and assumptions, return on capital employed should increase from 10.6% the last twelve months to between 16.618%. Earnings per share should increase from NOK3.72 the last twelve months to between NOK7.30 and NOK9.10. The targets are assuming investments at forecast midpoints, net working capital increasing with revenues and dividend increasing in line with the company's dividend policy. Potential larger expansion investments beyond the investment forecast may negatively affect key financials in the period.
All other parameters are assumed to remain constant, which of course is unrealistic, but mostly beyond our control. Major uncertainties are market demand, the world economy, the COVID-nineteen situation, general inflation and input factor prices. And that completes my presentation today. We will then take a short break till 10:00 when we continue with BioSolutions presentation and the Executive Vice President in BioSolutions, Tom Erikfoss Jakobsson.
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made High utilization of renewable raw materials and products that replace oil based alternatives results in a small carbon footprint and makes Borregard a sustainable and innovative company with solutions the world needs.
Morning, everyone. My name is Tom Erik Fossi Jakobsen, and I'm the Executive Vice President for BioSolutions, which includes the business of our polymers biopolymers and biovalid business. Today, I will be presenting a quick review of the BioSolutions business and its remarkable, I would say, diversity. I will talk about the changes in the global supply, also about the implications of the reduced lignin supply we have seen over the past year and how Borgard intends to adapt to this. I will also talk about sustainability and how this is becoming increasingly important in the market and how we capitalize and intend also to capitalize going forward on what we see as our competitive edge here.
And I will also talk about our innovation strategy and give you some examples of the new of some of the new products that we have commercialized lately. Finally, I'll summarize with our strategic priorities. With six fifty products sold to 3,000 customers in a wide range of applications and a wide range of geographies. The BioSolutions business is a highly diversified one. This provides a very solid platform with good spread of risk, and this also makes our business more stable over time.
If we look at the end markets, agriculture constitutes a significant part of our sales with close to 40% of our total revenues. And this end market is clearly one of the important drivers for our business. Looking at the concentration on the customer side, we have a few relatively large customers, but the concentration has been declining over the years. And looking today at the top three customers, they're counting for less than 10%. So we can say that the majority of our customers are typically small and midsized companies that really value our competence and our products and solutions.
Let's take then a look at the current global linen supply. Earlier, we have estimated that the global linen capacity has been around 1,100,000 tonnes. This has now been reduced to 1,000,000 tonnes through the last year. And this is, of course, primarily due to the Borgard plant curtailments. Our operations in South Africa have been mothballed for an indefinite period and our operation in Spain are being liquidated.
Vorigard's market share by sales volume is estimated in the range 35 to 40%. But I will also say that in revenue and value, it's significantly higher. Our main competitor is Dumsche in Sweden. We have indicated the sales volume for 2020 to be around 400,000, 425,000 tonnes, which is down 10% to 15% versus last year. Following the reduced raw material supply, we assume sales volume over the next two to three years to be in the range of 375,000 to 400,000 tonnes.
As Per mentioned, the lost volume is hardwood based eucalyptus and also then with limited potential for specialization. As a consequence of this reduced supply, the construction markets will be affected and also the some of the industrial log end markets will be affected. Looking at the construction market, this is a cyclical market. And we have seen over the past years now also that they have been increasing their use of the oil based alternatives to lignin. And this trend has also been even further reinforced by a low oil price.
Going forward, we will make volumes available in those markets where we see that the value of our biopolymers are being recognized. In the industrial markets, our main priority will be diversification based on value and the specialty markets will not be affected. If we look at the new supply situation, we see this as an opportunity, an opportunity to sharpen our strategy. We will optimize the value of our biopolymers portfolio. We will do this by further reducing our exposure to the low end and cyclical markets.
In the recent years, we have had a strategy to reduce our exposure to the construction market as one big single segment in our portfolio due to its cyclicality, due to the commodity bias and to the increased competition. With the reduction in supply, we now see that our exposure to the construction market is on a level where we don't see this as a big risk any longer. The significant drop exposure also forms a very good basis for our specialization and diversification strategy. We will continue diversifying our portfolio based on value added with focus on advanced applications where we add significant value and also where we see stable growth and where customers have a clear preference for our sustainable solutions. If I look at the graph and our sales development in the Industrial segment, we have had a significant volume growth since 2015.
The growth is across a wide range of applications and geographies, and it just demonstrates our strong capabilities to innovate and develop markets and to sell our products and solutions. So I think here we have a very robust and growing customer and application base that we will further optimize. If we look at the specialties here, even though volumes have been fairly flat within specialties over the last years, we have seen a significant increase in value. We have prioritized specializing our business with full force through innovation and market development. We will drive value going forward and drive the growth of value based on our expertise, our sustainable solutions and products with unique performance.
I will also say that we have strong ambitions for growth in specialties going forward, and I will revert to this in one of the next slides. But first, I'll also talk a little bit about sustainability. Borgard have an important competitive edge in sustainability. And going forward, our target is clearly to capitalize on our biorefinery model and our bio based solutions. As we heard Pierre talk about, the Borgard biopolymers and our products have a very favorable environmental footprint and can replace synthetic and fossil based products in many applications.
Lignin is a biopolymer derived from wood and it's the earth's second most abundant biopolymer, next after cellulose, that you will hear more about. Our raw material is harvested from sustainable forestry resources, and linen is also derived from second generation feedstock, something we normally talk about when we talk about ethanol. But this is also highly relevant for our biopolymers, especially when we compete with starch and sugar based products in certain applications, but also versus existing and future green chemicals that will be based on food grade sugar. The sustainability of our products is documented in LCAs. And also, we have EPDs or so called environmental product declarations available.
The LCA assesses environmental impacts associated with all the stages on a product's life, from raw material through the materials processing and the manufacturing, including distribution. Borgard's LCAs and EPDs are verified and all based on third party verification. So why is this documentation and the fact based approach important? We also heard about our alignment with United Nations Sustainability Development Goals. I will provide three examples from our biopolymers business to explain how we think and how we work on this.
The first example is within plant nutrition. Our biopolymers can be used to formulate micronutrients for plant nutrition, for increased crop yields. In this area, we typically compete with synthetics like EDTA. And our biopolymers offers high efficiency and can be used at a lower dosage. As you see in the graph to the right, by replacing the synthetic alternative with Borgard biopolymer, you can actually get a CO2 saving of 90%.
Then the second example here, within resins, where our products also can be used as a sustainable alternative to petrochemicals, urea formaldehyde and phenol formaldehyde based resins are used as a glue in a number of industries like wood based panels, coatings, moldings and insulation materials. These resins are coming under increasing environmental scrutiny. Consequently, blends and substitution of oil based resins with our biopolymers are becoming more and more attractive to the resin producers and end users. Borgard's biopolymers can be used in, for example, phenolic resins to partially replace phenol. As shown in the graph to the right, for resins, by replacing phenol with our biopolymer in phenolic resins, the CO2 emissions can be reduced with over 65% per feedstock unit.
Then the last example here is linked to our business in the animal feed markets. As a response to desire for less medicated feed in the food chain, Borgard have developed a feed additive technology called soft acid. One way to reduce the disease is to reduce the microbials that cause the disease. This can be achieved by additional antibiotics or alternatively organic acids. But organic acids, they have certain aspects that make them challenging to use.
When combining an organic acid with a modified biopolymer, the resulting product retains antimicrobial properties and is far less corrosive and much safer to handle than organic acids in its pure form. Our patented technology works with formic acids, with acetic acids and propionic acids, to name a few. The technology also works in fish preservation and fish silage preservation, where proteins and oils are protected. So in conclusion for that, we can say that we contribute to responsible consumption and production. We contribute to towards hunger zero hunger and through more efficient food production.
And we generally contribute to a safer and cleaner food chain. Let's also take a look at our BioValin business. Our BioValin business, we think, is very well positioned for growth. And it's in a small but highly attractive niche market for plant based and sustainable vanillin. Preferences for green products are driving the demand here.
Customers both in the B2B market and B2C are willing to pay premium prices for plant based products. According to Nielsen Marketing Research, sales of products in sustainable attributes now make up 22% of total store sales. And this market share moved up close to three percentage points from twenty fourteen to 2017, and it could hit 25% by 2021, which is next year. We estimate the market for plant based vanillin to be more than 2,000 tonnes versus the old based vanillin market of more than 20,000 tonnes. Borgard has a strong competitive edge in the plant based vanillin market as we are the single largest producer and also the global market leader in plant based vanillin.
We believe that this segment will continue to see healthy growth in the years to come. Our flavor profile is considered unique by our customers and attractive. The Valvoline from Borgard gives a smoother and a more balanced flavor than our competitors. This is especially important in the food sector, which also is our largest customer segment. We have a unique raw material base based on natural and sustainable feedstock.
The product is 100% plant based with wood from certified sustainable forestry. And the Borgard Vanlin also has a highly favorable environmental footprint with more than 90% reduction in the carbon footprint compared to oil based Vanlin. When considering that we have the lowest cost in this segment and can grow with the markets, we think that we have a pretty attractive package to offer here. Innovation is very important in Borgard. Our overall target for innovation is to strengthen the biopolymers portfolio and increase the value through specialization and diversification.
We are targeting high value applications and niches within the niches where our products are valued for their superior product performance. We focus on applications with value growth potential and less cyclicality. And as mentioned earlier, examples are plant protection, plant nutrition and animal feed additives. And here, I think, one of our strengths is that we are able to make tailor made solutions through modification of the biopolymers. That's key to our success here.
With the investments that we have made in the recent years and with the flexibility to broaden our specialty portfolio even further, we think we are very well set also with the new products that we have in the pipeline. We have had several new products being launched the last years. I'll give you a few examples shortly. And we have an innovation pipeline progressing towards commercialization. Going forward, we will focus on bringing our innovation portfolio out to our customers and prospects.
We have split the innovation opportunities into a few different categories that I will share with you. Those given the highest priority have an underlying strong value growth potential. In other areas, we have a more defensive strategy where we want to protect our market position. We also see opportunities within novel applications, several of these with sustainability pull from the customers and end users. Finally, in some applications with significant fluctuations over time, we will take an opportunistic approach and take advantage of the opportunities as they come.
Going forward, I would also like to mention that it will be key here to increase the value of the Florida product portfolio, and we will do this through product and application innovation. We want to capitalize further on this competitive edge we have and the customer pool we see in the market. We have a unique competence base with our sales and marketing team being out there every day close to the customers and our manufacturing team that we also work very closely with and our R and D organizations. This competence base is built over more than ninety years. And this is one of the main strengths we have.
We have a very diverse raw material base, including softwood and hardwood. We have advanced technologies designed to do what I talked about, this tailor making of the products, the modifications that are important to exactly that customer and with that desirable performance in various high value applications. As you see in the previous examples I've been showing, there are requests for sustainable alternatives from customers and prospects in several industries. So here, I'll give you some examples of novel commercialized products that we are proud of. These products are often the result of long term development programs driven by customer needs, often requiring three to five years of innovation work by R and D production and our market teams.
And as I mentioned earlier, agriculture is a very important sector for us. In Plant Nutrition, there are a wide range of formulations used by the industry today. Our current products are mainly used in dry formulations, like in powders or granules. There is a trend in the industry now to move towards water based systems like suspension concentrates and soluble liquids. We have introduced new products with unique performance and unique characteristics as real sustainable alternatives to synthetics in this, which is called the fastest growing segment within this area.
Another area with demand for unique products is the battery sector. Borgard have developed a sustainable organic additive to meet customers' performance requirements for improved charging of the so called EFB batteries. The EFB batteries are a new and cost efficient technology, which is approaching the existing state of the art technology, also referred to as AGM, and it is for automotive start stop function. The key benefits of our new product here are improved charge acceptance, cold crank and battery life. Then to my last example of our Knoll products here, which is from oilfield chemicals.
And Borgard are selling high performance products for petroleum drilling applications. We have recently commercialized our Biodrill product range to meet the industry's increasing demand for efficiency, productivity, but also sustainability, which is also becoming more and more important within this sector. The product line includes cement retarders and drilling fluid additives. As part of these efforts, Borgard have launched a new high performing and sustainable product for water based drilling muds. This is to reduce the loss of moisture or fluidity in the drilling process.
The product contributes towards maintaining the right rheological properties under extreme drilling conditions, a highly tailor made product. So in conclusion, I would like to summarize our strategic priorities within the BioSolutions business area. We will optimize the value of our biopolymers portfolio. We will have sharp focus on diversification based on the value added and specialization through innovation and market developments. We heard about Per saying the expansion in Florida is pending and also depend on profitability.
Our focus now is to fill the capacity, ramp up volumes and also increase the value of Florida. It's also very important for us to execute on the specialization and growth projects that Peddi Arne outlined in his presentation at the Sarfro site, both for biopolymers and biovenylene. And the successful completion of that capacity expansion to be in by Hemlo first half next year. So that concludes my presentation. Thank you very much.
And I would like to introduce my good colleague, next speaker, Gis Lelo Johan Sven, Executive Vice President for the Specialty Cellos and Fine Chemicals.
Thank you, Tom Erik. The specialty cellulose industry is fairly easy to describe because there is not that many players. It's about it's five it's four big players with Ryan being the largest by far the largest. Then it's Borrevoje, Georgia Pacific and Brazil and then there are some others. In total, this industry manufactures about 1,600,000 tonnes of pulp and Borregoych capacity is about 10% of that total volume, about 160,000 tonnes.
In addition to producing from wood as a raw material, there is also some producer based on byproducts from the cotton industry, what we call cotton linter pulp, which you will hear more about later. And most of these producers are located in China, but there are also some players in The U. S. It's an industry with high barriers to entry. So of course, like Poregol originally was a viscose manufacturer, it's possible to grow into these segments by acquiring know how and technical capability.
But we see limited competition from these players and mainly then in the lower specialized segments like nitrocellulose and casings. We focus on four major end user groups. It's the ethers, the acetates, the nitrocellulose and the casings. I will come back to ethers and acetates. Nitrocellulose is, for example, raw material for materials that for printing ink and casings, that's for instance sausage sins.
There is growth in the eater segment, strong growth I would say if you look back in the last few years, while on the other hand, there is decline in the acetate segment. Nitrocellulose is pretty stable and casing also growing. So in total, this means that there is, I would say, some slight growth in the segment as such. The cellular eater is a quite diversified segment. There are not that many big producers, but there are many products and also both cellulose ether products and users of those products.
So you find them so we supply our cellulose to the cellulose ether producer. He make a range of derivatives like methylcellulose, carboxy methylcellulose or hydroxyethylcellulose. And those, again, goes into a wide range of applications. The larger ones are construction and coating, but there is also a big and growing segment, which we call regulated and that's pharma, food, personal care and we are present in both of them. As I said, the growth have been strong over the last few years.
And although we now see a flattening due to the effects of the COVID-nineteen virus, especially in the construction segment, while the other segments remain pretty strong, I would say. Six producers account for about 50% of the global capacity and the major players are Dow, SI, Thylose, DuPont, Ashland, Lotte and Neurium. Most of these players are located in Asia and in Europe, but there are a few also in The United States. This is, of course, something we see as an advantage for Boiregolf because we are pretty close to our customers in Europe based in Salzburg, Norway. There is competition from China, mainly using again this cotton linter pulp, but it's not applicable in all segments.
For instance, in some applications, the customer wants no GMO material for their regulated products and then it becomes pretty difficult to do that with the cotton byproducts. We have seen new cellulose capacity coming on stream and there are still projects being executed. So in total, in the last one to two years and the upcoming one to two years, we talk about adding about 40,000 tonnes of new fresh need for cellulose ether pulp, which is quite strong signal from that segment that this is a growth segment. Being having a strong presence with the industry as it is, we see ourselves very well positioned for strong growth and further specializations in the year to come. There is also some consolidation of the industry, so we have seen lately the IFFF and DuPont merger and Norion acquiring CP Calco.
When it comes to cellulose acetate, the main product is filter though and most of that goes into cigarette filters. But there are also other applications like in yarn, LCD screens and bioplastics. Total market for acetate cellulose acetate pulp is about 560,000 tonnes. It's a quite consolidated industry, the acetate flake producer, which is our customer. Its five players account for about 90% of the global capacity.
Two of them are located in The U. S. That's Celanese and Eastman, mainly in The U. S. Surdia both have presence in The U.
S. Europe and Baisel and CFC are located in Asia. So we supply the acetate flake producer and then this flake is then could either be cellulose triacetate or cellulose diacetate, which again is further processed to the final products like the films, the plastic products or the filters. As I said, due to the especially then filter tone for cigarette filters being the main product, there has been some decline in this sector over the last few years. Global cigarette consumption
There are other technologies for smoking, like the heat not burn cigarettes. And there is also upcoming growing concern for waste issues related to cigarette filters. So all of these, I think, are together means that there is no reason to see a dramatic change in this trend moving on. So then it's very important both for our customers and their customers and us to focus on other opportunities for cellulose acetate and cellulose acetate pulp or cellulose acetate. And then it's important to notice that IceBear, that is really an enabler for entering those non filter tow applications.
We do not have a strong presence in this segment today, but with the iSpear technology, we really have bought ourselves or invested opportunity to grow into these segments. As I've been mentioned before, Iceberg has been a fairly successful history so far. We are ramping up our production according to the growth in the market for our iceberg. And this year, we estimate sales to between 13,000 tonnes and 17,000 tonnes with further growth in the years to come. So it's not only a way of defending and growing our existing markets and working with our existing customers, but there's also an opportunity to enter business with new customers and to enter these more advanced non filter segments.
And we have several initiatives going on with key customers developing ice iceberg grades that may fit into these segments. When it comes to cellulose acetate, it ticks off some of the important things when you talk about a new green sustainable economy. It's a plant based plastic with a high content of carbon coming from plant based sources. Some of the acetate products cellulose acetate products can be tailored for biodegradability. And that means that the important play forward here is for us using the IceBear technology to work with our customers to tailor make our IceBear just for their application.
And in addition, we see already further opportunities both in the Ether segment and also in the tire core segment where IceBear can be an enabler. We have also there several projects and tests going on with potential new or existing customers. So we think that especially at the cellulose, as I said, both in the Ether and in the acetate segment, it ticks off important points when it comes to sustainability. We see that one of the more popular examples is like the metal cellulose goes into non meat hamburgers and we see several of our customers having strong growth in that segment. Of course, that is limited segment in size.
It's not unlimited, but it's a good example that the heaters fit in very well. The cellulose heaters also fit in very well in the general trend, from oil or solvent based system to water based system. They are most often used as rheology or flow modifiers and then used in water based systems because increasingly, the world don't want to use solvent based system. It's oil based, it's nonrenewable, but there's also issues with emissions from volatile compounds in those formulations. The alternative when you come to producing ether grades and also some acetate pulp grades, that's byproducts from the cotton industry.
And as the textile industry has become very aware of, cotton is becoming more and more controversial and we see that major end users of textiles, they turn from cotton to other alternatives. When you harvest the cotton, you end up with the cotton itself and you have the seeds, which is covered by a layer of fiber and that is the cotton linter. The cotton linter pulp can be used as it is. It's a good starting point for some of the most advanced eater products, which require extremely high viscosity, but it can also be used to dilute fluff pulp, which is in periods fairly competitively priced compared to specialty cellulose and then blend that fluff pulp with the CLP to achieve the desired raw material properties. But in some areas, CLP is no go.
You have no guarantee when it comes to GMO. So there we have customers that just don't use it due to that aspect. Cotton is land intensive, water intensive crop. There is pesticides connected with farming. And as I said, it's becoming increasingly controversial.
So due to this, CLP has a significantly higher environmental footprint compared to the wood pulp. And I think we will see growing environmental concern among customers that may favor our wood pulp for Ether applications in the upcoming years to come. So coming to our strategy, it's not big changes here compared to the strategy we communicated two years ago. We want to continue to be a leading supplier and further growth in cellulose and really piggyback on the growth the general growth industry, not only expanding the volumes on existing products, but also adding on with new niches within niches products in this segment. We see strong opportunities there.
We want to continue to be a key supplier to the cellulose acetate industry, especially then playing on the opportunities that we have gotten now with IceBear. And we also want to continue a strong presence in other specialty segments like the nitro and casings and in general then avoid the textiles segment if possible. So I think that we will see the growth in the Ethers both in the Coatings, Construction and the Regulated segments. It's a general growth all over the different product and product groups. We want to see that we enter non filter segments with our iSphere qualities to our key asset sales customers.
And we also want to target niches in other product groups like tire cord. And we want to back our value proposition to a much stronger degree, documenting the sustainability of our products, both our products as such, but also their strength compared alternative products. So that finished my presentation, and I will now go give the word to my good colleague, Mr. Polarum Berg, who is EVP of Cellulose Fibrills.
Thank you, Gisela. I will talk about Cellulose Fibrills, which is a very exciting innovation project in Buregard. I will first take you through a little bit about the status of where we are. We are the global leader in this area, and it's called micro nanofibrils, which is one out of three categories under the nanocellulose umbrella. Of course, we have some competitors in this area, which is good.
And they can be categorized into typically two different types, the ones that have captive use as the main purpose. They have plants that are feeding their own products. This is typically the case in packaging companies. And then we have other competitors, more like us, which are developing the markets, and most of those are today in a pilot phase stage. And yes, I guess we have something like 10 of those out there.
We have a large scale plant, 1,000 tonnes of dry capacity. Maybe that doesn't sound that much, but we supply the product in 2% and a 10% solution. So it's somewhere between 10,050 product tonnes coming out. And as previously mentioned, we have the setup to double that capacity when the market is ready. We use cellulose as a raw material, and we have the setup so we can actually use different cellulose grades, which enables us to have the flexibility to develop new product ranges when the market is looking for that.
And the plant is zero emission, which, of course, is very nice. The market is still somewhat embryonic, meaning that a lot of the companies out there are still in the development phase. They are spending time on trying to develop new innovations based on this material. But we also see that the number of customers that are starting to use this commercially is also growing fast. Fast.
The
product, it's not so easy to explain what it is. It's sort of a network of micro and nano fibrils, you can imagine, like a spaghetti network, and it's very big. So one gram covers a tennis court. So that's one way to visualize sort of what it is. It's tricky.
The benefits of the products can be sort of grouped into two areas. It's improving and controlling flow, meaning that some of the properties here is what is referred to as shear thinning, which means when you apply shear to the product, it becomes where it's in and flows very easy. And as soon as you remove the shear, it becomes viscous very fast again. And this is attractive in several product formulations. The other property or benefit from these product groups is that it can create a barrier, so you can create an oxygen barrier, for instance, which is attractive in packaging.
And also you can create a film, which enhances strength and flexibility in products. And what we see so far is that it's attractive in a lot of different application areas. So we have more than 30 application areas today, varying from very sophisticated pharma things to more robust large volume like, for example, concrete. So where are we? We have today more than 50 regular commercial customers, and we see that sales is doubling year on year, which is nice, of course.
And we see good growth as well with our key customers, meaning that when they learn more about how to use the product and the benefits, they broaden their product range and they also develop new products in their portfolios. You can see on the graph to the right that the curves are pointing the right direction. We would, of course, like them to go steeper, and that's what we're aiming at going forward. We have a pipeline active pipeline of more than 2,000 prospects today. And the way we measure it is that when a company gets a sample, they are classified as a prospect.
And we see that our pipeline typically grow with something like 50 new prospects per month. Then we also measure when these prospects give us feedback from their lab work. Not all of them do, but some of them do. And we measure how many of those we have. And today, we have 400 of those, plusminus.
That's growing. And we have in addition, we have more than 100 companies that are now in what we call the plant or pilot plant phase. So they have developed the technology into a stage where they really want to take it into their plant and test it out in large scale. And as you can see, that curve is also constantly growing. One of the challenges here is that it takes a long time.
We see development time from sample received until they start buying regularly, varies from one year to five years. And here, we also actually see quite big differences between the application areas. Some of the application areas are much more conservative and uses longer time, while some others are actually we have customers that have developed new innovations here in less than a year. But on average, we are typically seeing three years as a development time here. We're also starting to look more on why some of these prospects or companies have stopped using our product.
And typically, it is, of course, because they couldn't get the results they were looking for. It didn't work as they were hoping. There is, however, no clear trends on this. So there is not like this technology or this application is the product doesn't work. It's evenly spread out.
And also, we see that less than 10% of the prospects stopping stops because of price or other cost issues, which is promising. I will now take you through some areas where we have had success and try to explain a little bit more in detail what those areas are and why they are successful. And as the headline says here, it is quite clearly a trend that sustainability is important. And our products gives companies the opportunity to become more sustainable their product offerings to their markets. But of course, performance isn't necessary here.
They will not develop new, more sustainable products if the performance of their products again is weaker. I will give you four areas where we have had success and talk a little bit more in detail about those as I move forward, but I will just say a few words about them here. Moving from solvent based to water based systems is, of course, in coatings and in adhesives, not new. It's been going on for many years, but this is enormous markets and huge product product groups, like BASF, for instance, have 18 subgroups into the coating area. So it's a lot of opportunities out there that still struggle to become water based or more sustainable in this area.
Another area we see getting more and more attention is what is referred to as Carbomere, which is acrylic copolymers used in a lot of areas, we see a lot of attention in the personal and home care markets for this. These are products that are thickeners and getting agents and also stabilizers and suspension agents, and they are very robust and also easy to get rid of. I'll show you a couple of examples of that later. Then we have boron compounds or borates, which also is a large area of chemicals that are getting under more and more scrutiny from regulatory and have are in Europe, they are classified as a substance of very high concern, which is something that European chemical agency want to get rid of. And I will show you some examples of where we're able to replace this.
And then the last area I will talk a little bit about, which is exciting as well, is bioplastics, which is, of course, very hot on the agenda. Getting bioplastics is either plastics that are from bio based raw materials or it's biodegradable plastics. And one of the challenges that they are facing is to be able to replace conventional plastics, they need to have the same performance. And currently, they struggle with that, particularly on the strength side. In the Coatings area, I have picked two examples where we see good development.
It's wood coating, which is an area which is quite challenging because wood is not a dead material, so it expands and contracts and so on. And when you want to put on a thin coating there, you have problems with cracking and you have problems with the coating sagging or not getting a level good application when you put it on. We have many customers in these areas, and we have also some very large trials coming along this year. And we think that, again, here the film forming properties that Exelo brings makes the coating stronger and more flexible. Then we have another area here, which is thick protective coatings, which is used in the industry.
It could be fire protecting, anti rust coatings, where you want to put on a very thick layer to avoid putting many layers on. And we have several customers in this area. And these are typically coatings that are heavily loaded with particles, and then they become very difficult to apply and you get sagging and so on. Exilva helps with that both when it comes to spray and when it comes to uniform distribution of the particles because of the three d network of the product. In Home Care and Personal Care, we also see good development.
And I think the cosmetics and personal care companies, they are constantly hunting for becoming greener, more bio based and so on, and they are looking into all kind of new materials to see if they can use that. And this is, of course, consumer driven that the consumers are also looking at the labels to see what's in this product. In cosmetics area, we have two of the biggest guys out there that are launching new products mid next year. Of course, cosmetics, there's not big volumes, but I think it's going to be good for us to be able to reference this because they have very high demand on operations, consistent quality and so on, which is going to be a good feather in the hat, so to speak, for us to use in other areas as well. In Personal Care, they use a lot of these carbonates or acrylic copolymers in their products, and they're very hard to replace.
So I would say that we have had a sort of mini breakthrough with the customer here that has successfully replaced these synthetic products with Exilva in the hair care range. So that's very, very nice for us. In the Home Care area, which is detergents and cleaning products used in the home and also in the industry, We are proud to say that we got a raw material sustainability award from one of the top three companies in this area, Henkel, last year. And we can also say that we are present in a lot of Procter and Gravel patents in this area. And this area uses a lot of microcapsules in their products and Exilva the network of Exilva makes it possible to keep these capsules nicely suspended, and you can then have a very even and good distribution of them in the products.
Replacing borates, I mentioned it earlier. This is also, I think, a very exciting area. These products are not very nice, some of them, and they are classified in EU as such a very high concern. And there is actually labeling requirements in Europe for this. So you have to put on your label that this product is suspected of damaging fertility on the unborn child, which, of course, is not very nice either for the manufacturer or for the user of this.
What we have discovered is that they are actually present in all corrugated board adhesives out there. And the reason for that is that nobody has been able to come up with an alternative that is as good as these products. The solutions on the market today are typically not working for all the difficult grades, and then the composite companies don't like to use them because they don't want to have do too much adjustments in between their grades. We have worked now over the last two to three years on a solution for this, and we are proud to say that we have a solution which works on all box grades out there. So we can replace these compounds.
It's tricky. It requires a lot of support from us. So we have hired an industry expert to help us drive this through. Another obstacle is that the adhesive cost goes up. But when you realize that the adhesive cost as percent of the total cardboard cost is less than one percent, so it's not going to be significant for the cost of the final cardboard box, this one.
And here, we have patent applications to protect us in this area. Last example is bioplastic polymers. This is, of course, high on the agenda all over. People would like to replace conventional plastic with bioplastic. And as you can see on the chart there, the market to market, this market survey company, they think that this area is going to triple over the next five years.
We have been involved in several projects on this for many years with very limited success, haven't been able to really do much improvements. But now this year, a German equipment manufacturer called Gneus, they have developed a brand new technology, which is some sort of vacuum technology, which enables incorporations of nanoparticles into the polymer matrix in a very uniform and good way. And they have built a pilot plant, and they have tested a lot of nanomaterials in this and the best results they have achieved with our products. And they see between 1035% strength increase in the tensile strength of bioplastics. And this has, of course, then gotten the attention of the big guys that are producing these materials today, and they have most of them signed up for pilot trials in fourth quarter this year.
So this is, of course, early days, but I think if it works, it's going to be very exciting. What are we going to focus on then going forward? As our pipeline grows quite rapidly, we need to be better at ensuring that we focus our resources on the most promising prospects, the ones where we think the potential is the biggest. So we are focusing on only part of the pipeline and prioritizing those leads and following those up very closely. And then we will have our distributors taking take care of the rest of pipeline.
And we will also continue to have new leads generated mainly by distributors and inbound marketing and not run around and knock on doors or run to trade shows and so on. And as the pipeline grows, we see that we will need more resources in sales as well. So we will start to also leverage and get help from the broader sales force that we have in Burgard, especially in biopolymers, where we also see synergies in applications. Several of the new and exciting applications we are in are already served by other people in Borgard. And then we have some projects where we have very, very good results and where we really believe that we need to put all we can when it comes to resources.
So we are dedicating R and D and sales resources to those projects. Corrugated Board is one of those examples. And we are working also here to find partners which are better than us in understanding the technologies and can help us open doors and move faster in this area. And if we see that we need more technical experts as we develop further, we will hire those, and we've already done that in the corrugated board area. So that concludes my presentation, and I will then leave the floor for questions and answers.
Thank you. Then we start the Q and A session. We have quite some questions received now, But I repeat again, then every question will be answered, but probably we don't reach everyone as in the next fifteen minutes. But I will start with one question for the CEO, and that is, your peers typically struggle from oversupply within textile. And, we heard also today that generally, it is difficult to enter many of your segments due to high barriers entry.
But do you see an increasing risk of tougher competition than before in some segments, if some competitors are expanding or change strategy, that is kind of more of a threat for you? Or is it so that also the competitors spend quite a lot on R and D and find alternative ways of growing?
Well, again, I think that it's good for us that we are into so many different areas because there is no single answer to what you're asking. And I think that the reference you started out by making is basically back to the specialty cellulose business, where we have only seen one new entrant over the last twenty, twenty five years actually. And there are significant barriers to entry there in terms of technology and managing emissions to air and water and so forth. So it's not something you can do in a short period of time. Also in the biopolymers business, we have there is a limitation to raw material for those kind of lignosulfonates that are attractive.
And Borgard both have control or access to the best quality raw materials, and we also have lots of intellectual property or know how that we can capitalize on. So in those areas, think that we feel quite comfortable. But of course, there are other areas where like, for instance, the developments we have seen in plant based biovanillin, of course, makes that extremely attractive for a number of companies. So you can never rule out that new technologies will appear on the scene and that things will change over time. So that's an inherent risk we have.
That's why innovation is so important. We always in general, you always see that yesterday's specialties are tomorrow's commodities. So you have to develop new specialties all the time. So we have seen that multiple times. But as we have talked about today, innovation takes time.
So that doesn't only apply for Borgard, that also applies for Borgard's competition. So I don't think that things will happen tomorrow, but in the long run, some things can always change.
There's another question incoming here on the supply and demand balance for the different business areas. You've been commenting on biosolutions, but is it possible to give some further breakdown, especially versus how the situation was back in 2018 when you last held the Capital Markets Day?
You're thinking Biosolutions now? For all Yes. Business Well, I think that for again, I mean, in Biosolutions, we have pointed to the fact that we, in particular, this time around, have lost access to some raw materials. The history of lignin over time has been much like that. I think that what we talked about a lot two years ago was that we wanted to diversify our exposure, reduce our exposure to construction.
The reason for that was that the construction area also has an alternative product based on oil. So you have to go in and look at each segment really. The robustness of BoroGuard is that we don't compete with the same alternatives in the different segments. And inside BioSolutions, we actually have 600 products. But what we talked about two years ago was that one of these areas, the construction area, had significant competition and it was oil based.
And that's why we wanted to, over time, reduce the exposure and work our way to we didn't want to leave the segment altogether, but we wanted to reduce the exposure. Now by default, because we have reduced our raw material supply, we have sort of fulfilled that ambition by default. Now we can adjust the portfolio, and that's what we have talked about today that going forward, we will diversify easier because of that. In other areas where we have really seen a big change in demand, of course, is in the biovanillin plant based biovanillin. If you go back two years, I think the market to a much larger degree than now viewed oil based and plant based as the same thing.
So that's been a dramatic change in the demand curve for plant based vanillin. And we are now scrambling to try to cope with that by doing an expansion. And like I said, I'm sure that other people are looking at that opportunity as well, but we feel that we are well positioned with a good cost position and also the ability to expand as we are doing as we speak. In the other areas where we are active in the specialty cellulose, we haven't seen large movements in that area. The major concern over time there has been the cigarette filter application for acetate.
And we have made our moves. We have invested in the iceberg technology. We are focusing on the ether grades. So I think that if you're going to see a breakthrough there, you need to see some big developments to replace, let's say, the cigarette filter application. And there are potential for that on the acetate side.
I think our customers are working hard at that. Bioplastics is also an opportunity there, but of course, it's expensive compared to oil based plastics. But I'm sure that we will see changes there going forward, but we don't foresee that in the next strategy period that we have talked about today. The other areas we are in, I would say, are fairly stable. The fine chemicals is growing healthy growth with X-ray contrast media.
The bioethanol is a commodity product, but we have this special feature that it's bioethanol. And the as a paradox, the COVID-nineteen has been positive for the demand development in that area.
I think
I'll close there.
Yes. That was a question for Kenneth from Kenneth Sievers. He has more question, but I think we'll come back to that because that's probably for the CFO. But we have one from Carlos Breedingen from Berenberg. He says, could you please elaborate about the two out of the seven recent investments that have delivered below return on capital employed expectations and whether these can eventually catch up with that of the rest of the group?
And if so, what would be needed from you and the market for this to happen?
Yes. No, I think we have elaborated on it quite a lot through the presentations subsequent presentations. Mean, the two projects we're referring to is, first of all, is the Florida project, where we have talked about the volume is okay, but the profitability is not okay. So there is a job to be done to improve the product mix and to also develop applications that are will improve the cost position in terms of distribution costs and so forth. So I think we are hard at work doing that.
And the ambitions that we expressed are all included in Peviane's targeted improvements for the EBITDA. The second one is cellulose fibrils and the Exilva presentation, the last presentation we had, where we continue to have very strong expectations for that area. But we also have to conclude that things take time. There is strong interest, but development take time. But I don't see that we haven't really changed our expectations around that business area.
And like I said, it's really demand development that will trigger the next step. The pricing, the interest in the market is quite okay.
It was said in the presentation during the CapEx projections that you cannot rule out potential acquisitions. Could you elaborate a bit more on what that could entail?
No. It's a general disclaimer, I would say, because basically, most of Borgard's if you look at Borregards history, most of our success has come from organic growth and innovation. And I think that that's there were sort of two things we talked about. One, you have to expect some add on investments. It will not be of the magnitude that we have seen in recent years, but we still think there are some opportunities.
And I'd say that it's more likely with add on investments than acquisitions, but I don't think we shouldn't rule it out. I mean we are being approached by different people, and we are looking at things. And it has to be something that is close to what we are already doing, where we can benefit from our competence or our market positions. But we don't have any specific things in mind at this stage.
We have one question here from Susan Selenhard from Mirrova. Could you please elaborate on batteries applications, how Borgor can replace oil based solutions? Could you assess the market size, could be for Borgore? Could you give more information on the references from batteries producers?
Well,
it's a very technical question. Do you want to comment on that for that? Okay, very good.
I'll try and make a try on it. Well, we usually don't specify the size breakdown of our specialties. Specialties. But what we normally say is that in biopolymers, roughly 20% of our volume goes into specialties, and they are priced at four and even up to 10x the average. And there are three really large segments inside the specialties.
One is the batteries application that you just asked about. The other one is oilfield chemicals. And the third one is everything that related to agrochemicals. And so this is one of three sort of unique positions. The general thing I have to say about lignin is that or biopolymers is that there are different fields of competition or arenas for competition.
And in this particular area, batteries, the batteries application, the lignin has superior performance versus the alternatives. So it's not a cost benefit thing. It's like we have the highest performance. And as we presented today, we have improved our product range even lately because there are new demands for batteries because of the technology developments that are taking place. So in general, if you go into we have more technical information available, obviously, in brochures and things like that.
But generally speaking, the battery products extend the lifetime of the product by seven to 10 times. So it's a small addition to the asset in the battery, but it has a huge impact on the performance of the battery and the long lifetime of the battery. And as we talked about today, we have now added more performance criteria. This the new way you use batteries with the start stop function, for instance, tears down the performance of the battery. So this cold crank and recharge applications that we talked about today means that our product can offer even more performance elements than it did in the past.
So we think that we have a unique position here because of our technologies and our raw material. So we don't really see much competition from other lignin producers here because of the raw material technology. And we compete with oil based alternatives that don't have a similar performance. And this has been the case for a long time. But in recent years, as we presented today, we have tried to add new performance elements because we see that there is a lot of things going on in the battery area.
And we have to you have to follow-up with new products so that you can defend your position in that area.
I can remember back in time that it was said Bali, the Borger Advanced Linear Technology, will be put to market The question is when. Now being in an undersupplied state, have you, call it, cleaned the dust of the volley drawings recently, or have you become more comfortable thinking about that that future could be a near term reality? Or how should we think about Bali now?
It's an option. It, what we said about Bali is that it's both offensive and a defensive strategy. It's an offensive tool in that you can grow the lignin raw material base by adding Bali plant. It's also a defensive tool in the sense that if something happens like we have seen in South Africa and Spain now, you can protect your business by replacing it with a Bali plant. The thing about Bali is that it requires a co product, and the co product is sugar based.
And the first sort of thing that comes to mind is to make bioethanol from it. However, bioethanol is a commodity and bioethanols can usually be sold in huge volumes compared to the lignin market. So it's not an ideal combination because it's the value added from a commodity is not high enough and the volume requirement is too big. So that's why Bali is still alive and kicking. And the key one of the key things there is to find the right partner, the right value added from the sugar side.
And what we the decision we made some years ago, obviously, was to go with the safe choice, which was to add more capacity in Florida from a traditional raw material base source. So right now, for the short to medium time period, we are working off Florida, and there is potential to expand the capacity in Florida. But further on further down the road, obviously, Bali, it could be an alternative still.
I have a question here from Quentin Badol from Mirova. Based on a figure communicated by your company, most of the mass of the initial wood already seems to be used to produce specialty cellulosa, biopolymers, etcetera. Would new products mean reduced production of some of the existing products?
Absolutely. I mean, I'm sure the reference here is to this biorefinery slide for Saisport, where we show that we utilize more than 87% of the raw material to make finished products and the remaining 12%, 13% becomes energy, green energy for the processes. And for that biorefinery, that's exactly the concept that we want to increase the value added. But in that case, we have to remove from the bottom of the pyramid, if you like, the least attractive part of the portfolio. So that's exactly the reference in the new strategic priorities that we want to increase the value added from the biorefinery.
So that means adding more profitable products on top and taking out the least profitable at the bottom.
Higher distribution and fixed costs are mentioned as a reason for poor profitability in Florida so far. But how will a restart of Flambeau River affect that?
Well, as far as we see it, it does not because the Flambeau business is located in Central U. S, in the Midwest, North Northern Part of the Midwest, and it's a local liquid business. So while it has been out of operation, Florida has not replaced those deliveries. And we don't so we don't really expect a big overlap between the Florida business and the Flambo business.
And then I have a question from Kenneth Sievers, Neperoetto again. And that is probably, first of all, for the CFO. He asked, With earnings projections, reduced CapEx and improved net working capital, leverage will fall below the target range at current dividend policy. Would buybacks and or extraordinary dividends be considered as measurements to keep the leverage?
Yes. I think the answer to that is yes. We have given an extraordinary dividend in the past and we might consider that or the Board might consider that also in the future. But of course, we need to see the leverage ratio coming at least close to one and probably below that before that's an alternative. But it's right, with the projections, the leverage ratio will come down quite significantly.
In regards to the annual maintenance stop, do you have any estimates for how much more the 2020 annual stop will cost over earlier years?
No, not really. We don't expect that to be a significant number. And of course, what's also a question with the annual stops is we have a planned period for the maintenance stop, but it might be prolonged with one or two days. And the production loss connected today is probably more than the additional costs. So there are always uncertainties with the annual maintenance stop.
And I don't think you should expect larger uncertainty this year than in other years.
We have one question from Thurs Enginen in Sabyr in BioSolutions. What is your target for volume split, construction, industrial and specialties in 2023?
We haven't really specified that anymore. As Per said, that the goal we had on bringing the construction share down to 30% that we presented two years ago is more or less fulfilled now with mothballing of the South African plant. So we don't want to be specific on the share here. We want to optimize the portfolio like Tomerik has said, and we'll do that regardless of where the volume comes.
Another question on the same topic is whether you could elaborate expected sales split between ethers and acetate going forward?
Well, I think it comes from Gisela's presentation that our growth ambition is larger in ethers than in acetate. And over the last years, the volumes going into eaters has been quite substantially higher than acetate volumes. So we think that will continue, but we don't really give any specific numbers.
And with increasingly push on the environmental footprint impacting multiple industries, you've mentioned a lot about sustainability so far, but have you expected any sustainability effects in your anticipated growth projections for Boragard?
We haven't been specific on that because that's longer term trends. And it might be that we will, of course, see some development in the first three years. But also beyond that, we see effect from that. So we haven't really been specific on that in the projections. But of course, what you heard today is that it's a lot of ambitions in the organization to increase that share.
We have some remaining questions, but we haven't got time for more. So all of you, they will be answered. But thank you all, and I'll give the word over to the CEO again with some final remarks.
Yes. I just want to thank you for participating in today's session, Capital Markets Day. And as it was said now, we couldn't have time we did not have time to answer all the incoming questions, but I would refer you to our Investor Relations department that can pick up and be happy to respond to any questions that you might have already or that you could have discovered during this Q and A session. So please do that, and we look forward to seeing you next time, third quarter in the October. Thank you very much.