I. Executive Summary

Core Thesis

Borregaard ASA (Borregaard) represents a compelling case of a successful, multi-decade transformation from a commodity pulp and paper company into a highly specialized, technology-driven biochemicals producer. Its unique, integrated biorefinery model serves as the foundation for a significant competitive moat, enabling exceptionally high raw material utilization and the production of a diversified, high-value product portfolio. This specialization strategy, a core tenet of management’s focus for over 30 years, has delivered resilient financial performance, particularly through the strength of its BioSolutions segment, even amidst significant macroeconomic headwinds and input cost inflation. The company’s ability to convert wood components—fibres, lignin, and sugars—into a synergistic stream of specialty cellulose, advanced biopolymers, and bioethanol underpins a business model that is difficult for less-integrated competitors to replicate.

Bull Case Synopsis

The investment case for Borregaard is predicated on four key pillars:

1. Continued Execution of the Specialization Strategy: The ongoing strategic shift towards higher-value, niche products is the primary driver of margin expansion and return on capital. This is not merely a narrative but a quantifiable process, evidenced by improving product mix and resilient profitability.
2. Favorable End-Market Exposure: The company is well-positioned to capitalize on structural growth in its key end-markets, such as agriculture, batteries, and regulated applications (food, pharma), which are supported by powerful secular trends including sustainability, food security, and electrification.
3. Disciplined Capital Allocation: Management has demonstrated a commitment to a disciplined capital allocation framework, prioritizing high-return organic growth projects, maintaining a healthy balance sheet, and providing progressive shareholder returns.
4. Defensible Competitive Position: Borregaard’s competitive advantages are deeply entrenched, fortified by proprietary technological expertise in wood chemistry, high customer switching costs in regulated markets, and a structurally advantaged, integrated supply chain.

Bear Case Synopsis

Key risks that could challenge the investment thesis include:

1. Input Cost Volatility: Sustained high costs for key raw materials, particularly Norwegian spruce, and energy could continue to pressure margins, especially within the more commodity-exposed parts of the BioMaterials segment.
2. Cyclical Downturns: Despite diversification, a significant portion of revenue is tied to economically sensitive end-markets, such as construction and automotive. A sharp, prolonged global recession would inevitably impact demand.
3. Increased Competition: As the market for bio-based chemicals and materials grows and becomes more attractive, there is a risk of new entrants or existing competitors developing disruptive technologies that could erode Borregaard’s market share or pricing power.
4. Execution Risk: The company’s growth is partly dependent on the successful execution of major capital projects, such as the Sarpsborg debottlenecking, and the effective commercialization of its innovation pipeline, including new technologies like cellulose fibrils.

Valuation Perspective

Borregaard trades at valuation multiples that reflect its status as a high-quality, specialized chemical company with a resilient growth profile. A direct peer-to-peer comparison is challenging due to its unique, integrated business model, making a sum-of-the-parts (SOTP) framework a more conceptually appropriate lens for valuation. This approach highlights the disparate value drivers across its segments, from the high-margin, high-growth BioSolutions business to the more capital-intensive BioMaterials segment. The current market valuation appears to recognize the company’s stability and the strength of its core business, but it may not fully price the long-term optionality embedded in its innovation pipeline and its ability to capitalize on the structural shift towards a bio-economy.

II. Company Analysis: The Integrated Biorefinery Model

A. The Biorefinery Concept: Foundation of the Moat

Borregaard’s entire business strategy and competitive positioning are built upon its operation of one of the world’s most advanced and sustainable biorefineries.¹ This is not a tangential aspect of its operations but the very core of its value creation engine. The model is centered on the principle of full raw material utilization, converting natural, renewable wood feedstock—specifically, Norway Spruce—into a wide array of advanced biochemicals, biomaterials, and bioethanol that serve as substitutes for oil-based products.⁴

The process is fundamentally designed to capture value from the three key components of wood: fibres, lignins, and sugars.⁵ This integrated approach is remarkably efficient, with the company reporting that 94% of its feedstock is converted into commercial products and energy.⁶ This high level of efficiency achieves two critical strategic objectives. First, it minimizes waste, aligning with modern sustainability principles. Second, and more importantly from a financial perspective, it maximizes the economic value extracted from each ton of wood processed. This creates a fundamental cost structure and operational efficiency that would be exceedingly difficult for a non-integrated competitor to replicate.

The integrated nature of the biorefinery creates a powerful, self-reinforcing synergistic flywheel that is central to Borregaard’s competitive advantage. The process begins with the production of specialty cellulose from wood fibres in the BioMaterials segment. A crucial co-product of this process is lignin. In a traditional pulp mill, this lignin might be treated as a low-value byproduct, often burned for energy. At Borregaard, however, this internally generated lignin serves as the critical, cost-advantaged feedstock for the high-margin BioSolutions segment, which produces lignin-based biopolymers and the world’s only wood-based vanillin.⁶

This internal linkage provides a profound structural advantage. A hypothetical standalone competitor wishing to enter the lignin-based biopolymers market would face a difficult choice: either invest hundreds of millions of dollars to build its own pulp mill to secure a lignin source—a massive capital expenditure—or attempt to purchase lignin on the open market, exposing itself to volatile pricing, inconsistent quality, and uncertain supply. Borregaard, by contrast, benefits from a secure, consistent, and high-quality internal supply of its key raw material. The cost basis for this lignin is intrinsically linked to its own integrated operations, not to the whims of an external market. This structural advantage is a key reason why the BioSolutions segment can achieve superior and more stable margins, insulating it from the raw material volatility that a standalone competitor would inevitably face. The profitability and strategic strength of the BioSolutions segment are therefore directly and positively dependent on the scale and efficiency of the BioMaterials segment, demonstrating a deep, synergistic connection that underpins the entire business model.

B. Segment Deep Dive: The Three Pillars of Value Creation

Borregaard’s operations are organized into three distinct business segments, each leveraging a different component of the wood feedstock and serving different end-markets.⁸

1. BioSolutions (55% of 2024 Sales Revenue

⁹

The BioSolutions segment is the crown jewel of Borregaard’s portfolio and the primary engine of its profitability. This segment develops, produces, and sells high-value products derived from lignin, the natural binder in wood.⁸ Its product portfolio includes a wide range of lignin-based biopolymers and wood-based biovanillin.

The biopolymers function as high-performance dispersing and binding agents and are sold into a diverse array of applications, including agrochemicals (as adjuvants in pesticides and fertilizers), advanced batteries (improving performance and lifespan), industrial binders, and construction (as concrete admixtures).⁸ The other key product, biovanillin, is supplied to the flavour, fragrance, food, and beverage industries.⁸ Borregaard holds a unique competitive position as the market and technology leader in lignin-based biopolymers and is the only producer in the world of wood-based vanillin, which is PEFC certified for its sustainable sourcing.⁶

This segment has been the standout performer, consistently driving the group’s overall results. In the first quarter of 2025, BioSolutions delivered an all-time high result, a performance largely attributed to strong sales into the agriculture sector.¹³ This positive momentum continued into the second quarter of 2025.¹⁴ For the full fiscal year 2024, the BioSolutions segment generated an EBITDA of NOK 1,104 million on revenues of NOK 4,241 million, translating to a robust EBITDA margin of 26.0%.¹⁶ This level of profitability underscores the value of its technological leadership and the successful execution of its specialization strategy.

2. BioMaterials (34% of 2024 Sales Revenue

⁹

The BioMaterials segment is the operational starting point of the biorefinery, focusing on the fibre component of wood. It produces high-purity specialty cellulose, which is primarily sold as a key raw material for the manufacturing of cellulose ethers, cellulose acetate, and other advanced specialty products.⁷ These derivatives find their way into a broad spectrum of end-markets, including food, pharmaceuticals, personal care products, industrial filters, and sausage casings.¹² This segment is also home to Borregaard’s emerging technology, cellulose fibrils (marketed as Exilva®), a novel microfibrillated cellulose that offers unique properties for various industrial applications and is currently in the commercialization phase.⁸

The competitive strategy for BioMaterials is centered on a continuous push up the value chain, focusing on more technically demanding, regulated, and high-purity applications where it can command premium pricing.¹⁸ However, this segment is more exposed to the volatility of raw material costs, particularly the price of wood. This was evident in 2024, when a significant increase in wood costs, coupled with lower average sales prices, led to a decrease in the segment’s EBITDA to NOK 434 million, despite an impressive 11% increase in sales volume.¹⁶ This highlights the margin sensitivity of this segment to input cost fluctuations.

3. Fine Chemicals (11% of 2024 Sales Revenue

⁹

The Fine Chemicals segment utilizes the sugar components extracted from the wood during the pulping process, as well as other chemical synthesis capabilities. It produces two main product lines: second-generation advanced bioethanol and fine chemical intermediates.⁸ The advanced bioethanol, which boasts a significantly lower carbon footprint than synthetic alternatives, is sold into markets such as biofuels, industrial solvents, disinfectants, and personal care products.⁷ The fine chemical intermediates are highly specialized products supplied primarily for the production of non-ionic X-ray contrast media, a critical component in medical imaging.⁴

Borregaard is a leading producer of these intermediates for contrast agents and a significant producer of advanced bioethanol in Europe.⁶ The performance of this segment can be opportunistic and is often influenced by the prevailing market prices for bioethanol. For instance, the segment’s results in the first half of 2025 were weaker than the prior year, a direct result of lower bioethanol sales prices.¹³ This demonstrates the segment’s partial exposure to more commodity-like price dynamics.

The “Specialization Journey” as a Quantifiable Strategy

Borregaard’s management frequently refers to the company’s “specialisation journey,” a process that began with its transformation from a forest products company to a specialty chemicals company in the 1990s.⁶ This is more than just a corporate narrative; it represents a tangible, measurable, and long-term strategy designed to de-commoditize its product portfolio and systematically enhance profitability and returns.

The journey began over three decades ago, moving the company away from the cyclicality of the pulp and paper industry. The core of this strategy has been to leverage its unique competence in wood chemistry, particularly using the sulphite pulping process with softwood raw materials, to continuously upgrade its product portfolio.⁶ The success of this long-term endeavor can be quantified. While the company has delivered solid top-line growth, with a compound annual growth rate (CAGR) in operating revenues of 9.3% between 2020 and 2023 ⁶, the true measure of the specialization strategy’s success lies in the quality of that revenue.

Management provides a key performance indicator to track this progress: “value creation per employee.” This metric has more than tripled over the past 15 years.⁶ This is a powerful testament to the strategy’s effectiveness. It shows that as the company moves towards more specialized products, it generates significantly more value from its human and capital asset base. Increasing specialization brings with it greater complexity and higher indirect costs in areas such as regulatory affairs, intellectual property, and technical sales support. The fact that value creation per employee has risen so dramatically indicates that the margin and value uplift from these specialized products has far outpaced the associated increase in complexity and cost. This provides a clear framework for evaluating future strategic initiatives and capital investments, as they must contribute to this ongoing journey of enhancing value creation.

III. Industry Dynamics & Competitive Positioning

A. Market Structure and Trends

Borregaard operates at the confluence of two major, favorable industry trends: the shift towards specialty chemicals and the growing demand for bio-based solutions. The specialty chemicals industry is fundamentally different from the commodity chemicals sector. It is characterized by a focus on customized, performance-enhancing products designed for specific applications, which typically command higher margins and exhibit less cyclicality than their commodity counterparts.²¹

Simultaneously, the market for bio-based chemicals and materials is experiencing a powerful, secular growth phase. This market is projected to expand significantly, with some estimates suggesting it could reach $500 billion by 2030.²² This growth is being propelled by strong regulatory tailwinds, such as the European Union’s Sustainable Products Initiative, and a widespread push from corporations to meet their net-zero and sustainability pledges.²² Consumers are also increasingly demanding products with a lower environmental footprint.

Borregaard is uniquely positioned to benefit from these dual tailwinds. Its products are not just “bio-based” in their origin; they are also highly “specialized” in their function, providing specific performance benefits to customers. This dual identity allows the company to capture value from both the “green premium” and the “performance premium.” The company has strategically cultivated a presence in global niches where it can establish and defend a leading market position. This strategy is executed through a diversified portfolio of over 800 products sold into a multitude of end-markets, which provides a natural hedge against downturns in any single sector or geography.⁶

B. Competitive Landscape and Moats

The competitive environment for Borregaard is fragmented and varies significantly by business segment, reflecting the specialized nature of its products.

In the BioMaterials segment, the primary competitors are other pulp producers who have also undertaken a specialization journey to upgrade their output from commodity grades to higher-value specialty cellulose. This peer group includes established players such as Sappi, Lenzing, and Rayonier Advanced Materials (RYAM).²³

In the BioSolutions segment, which focuses on lignin valorization, the main competitors are other lignin producers. This includes companies like Ingevity (NGVT), which also produces lignin-based specialty chemicals for various industrial applications.²³

The Fine Chemicals segment faces a more diverse competitive set, spanning other producers of fine chemical intermediates for the pharmaceutical industry and other manufacturers of bioethanol.

A significant recent development in the competitive landscape is providing a notable tailwind for Borregaard’s BioMaterials segment. The announced closures of competitor plants, specifically the GP facility in Foley, Florida, and the RYAM facility in Temiscaming, Quebec, are resulting in a meaningful reduction of softwood specialty cellulose capacity in the market.¹⁹ This rationalization of supply creates a tighter supply-demand balance for these niche products. This market shift directly benefits Borregaard in two critical ways. First, it presents a clear opportunity to capture displaced customer volume, with the company estimating a potential to absorb an additional 15,000 to 20,000 metric tonnes of demand, primarily in high-purity grades.¹⁹ Second, and perhaps more importantly, the tighter market provides significant support for higher pricing across its specialty cellulose portfolio. This external catalyst directly reinforces Borregaard’s internal strategy of improving the product mix and margins within the BioMaterials segment, potentially accelerating its path to higher profitability and helping to offset the persistent headwind of high wood costs. This represents a key near-to-medium-term positive factor for the company.

Borregaard has built and maintained several durable competitive moats that protect its market position and profitability.

1. Proprietary Technology & Process Knowledge: The most significant moat is the company’s deep, institutional knowledge of wood chemistry, accumulated over more than 30 years of its specialization journey.⁶ This expertise, combined with the proprietary processes within its integrated biorefinery, allows it to create products that competitors find difficult to replicate. The production of wood-based vanillin, where Borregaard is the sole global producer, is the clearest manifestation of this technological advantage.⁷
2. High Customer Switching Costs: In many of its key markets, particularly regulated ones like pharmaceuticals and food, customer switching costs are substantial. When a customer formulates a product—be it a pharmaceutical tablet, a food ingredient, or a high-performance industrial good—around a specific grade of Borregaard’s specialty cellulose or biopolymers, switching to a new supplier is not a simple procurement decision. It is a complex, costly, and time-consuming process that involves extensive re-testing, re-formulation, and potentially new regulatory qualification. This creates a sticky customer base and provides a degree of pricing power.
3. Integrated Supply Chain: As detailed previously, the internal sourcing of lignin from the BioMaterials segment provides a significant and structural cost and quality advantage for the high-margin BioSolutions segment. This integration is a formidable barrier to entry for potential competitors.
4. Operational Scale in Niches: While Borregaard is a small player in the context of the global chemical industry, it has deliberately chosen to become a big fish in small ponds. It holds leading global market positions in its chosen niches, such as lignin-based biopolymers.⁶ This leadership position provides benefits of scale in R&D, production optimization, and global market access that are specific to those niches, allowing it to serve global customers effectively.

IV. Financial Performance & Health Analysis

An analysis of Borregaard’s financial performance over the past five years reveals a company on a clear growth trajectory, characterized by resilient profitability and prudent financial management. The successful execution of its specialization strategy is evident in the key financial metrics.

Table 1: 5-Year Consolidated Financial Summary (2020-2024)

(All figures in NOK million, except per-share data and margins)

Metric	2024	2023	2022	2021	2020
Operating Revenues	7,617	7,132	6,881	5,805	5,328
EBITDA	1,874	1,781	1,732	1,539	1,288
EBITDA Margin (%)	24.6%	25.0%	25.2%	26.5%	24.2%
Profit Before Tax	1,079	1,124	1,120	973	759
Net Profit	829	856	868	758	589
Earnings Per Share (NOK)	8.25	8.73	8.71	7.61	5.91

Sources:.⁶ Note: Historical data for 2020-2022 is derived from multiple reports and presentations; 2023 and 2024 figures are based on the most recent annual reports. EBITDA for 2020-2022 is calculated based on reported figures where available.

The consolidated data underscores a period of robust growth. Operating revenues have expanded from NOK 5.3 billion in 2020 to over NOK 7.6 billion in 2024, a CAGR of approximately 9.4%. More impressively, EBITDA has grown from NOK 1.3 billion to a record high of NOK 1,874 million in 2024.²⁸ The EBITDA margin has remained remarkably stable and strong, consistently hovering around the 25% mark. This resilience is particularly noteworthy given the significant inflationary pressures on raw materials and energy during this period, and it serves as strong evidence of the company’s pricing power and ability to improve its product mix towards higher-margin specialties.

Table 2: 5-Year Segment Performance (2023-2024)

(All figures in NOK million)

Segment / Year	Operating Revenues 2024	EBITDA 2024	EBITDA Margin 2024	Operating Revenues 2023	EBITDA 2023	EBITDA Margin 2023
BioSolutions	4,241	1,104	26.0%	3,944	915	23.2%
BioMaterials	2,622	434	16.6%	2,492	599	24.0%
Fine Chemicals	799	336	42.1%	741	324	43.7%
Other/Eliminations	(45)	(0)		(45)	(57)
Total	7,617	1,874	24.6%	7,132	1,781	25.0%

Source:.¹⁶ Note: Detailed segment data for 2020-2022 is not readily available in a consistent format across the provided materials. The table focuses on the most recent, fully reported years to illustrate the current dynamics.

The segment-level performance provides critical texture to the consolidated story and validates the core investment thesis. BioSolutions is clearly the primary driver of growth and profitability. In 2024, its EBITDA jumped by over 20% to NOK 1,104 million, and its margin expanded significantly to 26.0%.¹⁶ This performance was driven by strong demand and an improved product mix. Conversely, the BioMaterials segment demonstrates the impact of input cost pressures. Despite higher revenues from increased volumes, its EBITDA fell sharply in 2024 as higher wood costs compressed its margin from 24.0% to 16.6%.¹⁶ The Fine Chemicals segment has delivered exceptionally high and stable margins, though its smaller size means its contribution to the group’s overall profit growth is more modest. This segmental view clearly illustrates that the company’s ability to drive growth in the high-margin BioSolutions segment is the key to offsetting challenges elsewhere in the portfolio.

A. Balance Sheet and Cash Flow Assessment

Borregaard maintains a strong and prudently managed balance sheet. At the close of fiscal year 2024, net interest-bearing debt stood at NOK 2,240 million, an increase from NOK 1,791 million at the end of 2023.¹⁶ This resulted in a leverage ratio, defined as Net Debt to EBITDA, of 1.20x.¹⁶ This level is at the low end of the company’s stated target range of 1.0x to 2.25x, a range designed to maintain an “investment grade” credit quality.²⁹ The equity ratio remained healthy at 53.1%.¹⁶ This conservative leverage provides significant financial flexibility to fund growth initiatives and weather potential economic downturns.

An analysis of cash flow reveals a noteworthy trend. In 2024, cash flow from operating activities declined to NOK 1,068 million from a much stronger NOK 1,563 million in 2023.⁹ The company explicitly attributes this reduction to an increase in net working capital.¹⁶ A build-up in working capital can sometimes be a negative signal, indicating slowing sales leading to rising inventory or difficulties in collecting payments from customers. However, in Borregaard’s context, where revenues and sales volumes were growing, particularly in the BioMaterials segment ¹⁶, the increase in working capital is more likely attributable to other factors. These could include the higher valuation of inventories due to the significant inflation in raw material costs (such as wood), and potentially a strategic decision to carry higher levels of inventory to ensure supply chain security and meet growing demand in a volatile global environment.

While the balance sheet is more than strong enough to absorb this, the trend warrants monitoring. It has a direct impact on free cash flow generation. A key question for analysis is whether this represents a temporary, reversible fluctuation or a new, structurally higher level of working capital required to operate the business. A permanent increase would have negative implications for the company’s long-term cash generation profile and, consequently, its valuation.

Table 3: Key Financial & Solvency Ratios (2020-2024)

Ratio	2024	2023	2022	2021	2020
Leverage Ratio (Net Debt/EBITDA)	1.20x	1.01x	1.03x	1.09x	1.34x
Equity Ratio (%)	53.1%	53.7%	52.8%	53.1%	50.9%
Return on Capital Employed (ROCE, %)	17.1%	18.3%	19.4%	18.6%	15.6%
Return on Equity (ROE, %)	16.6%	18.5%	19.8%	18.2%	15.1%

Sources:.⁹ Note: Ratios are based on reported figures. ROCE is a key company metric. ROE is calculated as Net Profit / Average Equity.

The ratios in Table 3 paint a picture of consistent financial discipline and strong value creation. The leverage ratio has been managed well within the company’s target band over the five-year period. The equity ratio has been stable and robust. Most importantly, the Return on Capital Employed (ROCE) has been consistently excellent. At 17.1% in 2024 ¹⁶, it remains comfortably above the company’s long-term target of exceeding 15% over a business cycle.²⁹ This sustained high level of ROCE is a crucial indicator of management’s effectiveness in deploying capital and generating profitable returns from its unique asset base.

V. Growth Strategy & Capital Deployment

A. Management’s Strategic Priorities

Borregaard’s growth strategy is a direct extension of its successful specialization journey. At its Capital Markets Day in September 2024, management’s key message was that this “specialisation journey will persist,” with the top priority being organic growth driven by market-focused innovation.⁶ This strategy is not about chasing volume for its own sake, but about systematically improving the value and profitability of that volume. The core strategic initiatives are clear and consistent with past actions:

• Product Mix Enhancement: The primary lever for value creation is the continuous upgrading of the product portfolio. This involves leveraging the company’s high-value lignin raw material base to develop new applications in BioSolutions and pushing the BioMaterials segment’s product mix further towards highly regulated and technically demanding specialty cellulose grades that command premium prices.¹²
• Geographic Expansion: While Borregaard is a global player, it sees significant potential for deeper market penetration, particularly in Asia. The focus is on growing its presence in the agriculture and industrial application sectors across the region, supported by an expansion of its R&D capabilities in India.⁹
• Market-Driven Innovation: Innovation is at the heart of the growth strategy, with a significant share of revenue consistently derived from products launched in the last five years.¹⁹ The R&D pipeline is focused on solving customer problems and capitalizing on sustainability trends. Key projects include developing new bio-based alternatives to petrochemicals like polyacrylates for the home care market and creating novel products for high-growth sectors like electric vehicle batteries.¹⁹

B. Capital Expansion and R&D

Borregaard’s approach to capital deployment for growth is characterized by discipline and a focus on high-return, risk-managed projects. In October 2024, the company announced a significant NOK 490 million investment to debottleneck and expand capacity at its core Sarpsborg biorefinery. This project is expected to increase overall capacity by 5-10% by 2027, with incremental production coming online starting in the second half of 2026.⁹ This is a classic example of disciplined capital deployment, as it leverages the company’s existing infrastructure, deep operational expertise, and proven technology to generate incremental growth. Such projects are expected to meet or exceed the company’s strict internal rate of return (IRR) hurdle of over 15%.²⁹

In parallel to this core expansion, Borregaard is pursuing a more venture-style approach to long-term innovation. The company has steadily increased its investment in Alginor, a Norwegian marine biotech company, with its total commitment now reaching NOK 419 million for a 35% ownership stake.⁹ Alginor is focused on developing a “blue” biorefinery, using kelp as a feedstock to produce high-value ingredients.⁹ This investment is a sophisticated, risk-managed “option” on the future of biorefining. It allows Borregaard to gain valuable exposure to and knowledge of a non-wood-based feedstock and a different set of technologies without committing the massive capital required to build such a plant from scratch. If Alginor’s technology proves successful, Borregaard is perfectly positioned to be a key strategic partner or an eventual acquirer. If the venture does not succeed, Borregaard’s core business remains insulated from any significant financial impact. This dual approach—combining low-risk, high-return brownfield expansions with calculated, option-based investments in new technologies—demonstrates a mature and prudent growth strategy.

C. Capital Allocation and Shareholder Returns

Borregaard’s capital allocation policy is well-defined and prioritizes a balance between reinvesting for growth and returning capital to shareholders.

Table 4: Capital Allocation Summary (2023-2024)

(All figures in NOK million)

Allocation Category	2024	2023
Total Capital Expenditures (CapEx)	861	838
Replacement Investments	598	516
Expansion Investments	263	322
Dividends Paid	374	324
Share Repurchases	~38 (est.)	0

Sources:.⁹ Note: The 2024 share repurchase value is estimated based on the announced program of up to 200,000 shares and the prevailing share price during the repurchase period.

The data shows a clear adherence to the company’s financial policies. Replacement CapEx is consistently managed around the level of depreciation, ensuring the long-term integrity of the asset base, as per company policy.²⁹ Expansion CapEx is directed towards the strategic growth initiatives previously discussed.

The company’s dividend policy is to pay a “regular and progressive” dividend, with a target payout ratio of between 30% and 50% of net profit over time.²⁹ An examination of the

dividend history confirms this commitment. The ordinary dividend has been progressive, increasing from NOK 2.30 per share for the 2020 fiscal year to a proposed NOK 4.25 per share for the 2024 fiscal year.³¹ The company has also demonstrated flexibility in returning excess cash to shareholders through special dividends, such as the one paid in 2022, which brought the total payout for that year to NOK 5.00 per share.³¹

Share buybacks have not historically been a primary method of capital return. However, the company did execute a small, opportunistic share repurchase program in late 2024, which was completed in December of that year.³² The authorization granted by the Annual General Meeting allows the board to repurchase up to 10% of the company’s outstanding shares, providing another tool for capital management, though it appears to be used sparingly.³⁴

VI. Headwinds, Risks, and Catalysts

A. Recent Challenges & Management Response

Despite its resilient performance, Borregaard is not immune to macroeconomic and industry-specific challenges. The most significant of these has been the substantial inflation in raw material and energy costs. The cost of its primary feedstock, wood, increased by a substantial 24% in 2024 compared to 2023, driven by a tight pulpwood market in the Nordic region.⁹ This has been a primary source of margin compression for the BioMaterials segment.¹³ Energy costs have also been volatile, though the company has actively worked to mitigate this impact through investments in energy efficiency and, critically, by securing a new 10-year hydropower purchase agreement that provides long-term price stability and predictability.⁹

The company also faces risks from a potential economic slowdown. While its diversified portfolio across numerous end-markets and geographies provides a strong natural hedge ²⁹, certain key markets, such as construction and automotive, are inherently cyclical and would be negatively impacted by a significant economic downturn.¹²

Management’s primary strategic response to these challenges, particularly cost pressures, is the relentless execution of its specialization strategy. By continuously moving its product portfolio up the value chain into more advanced, higher-value applications, the absolute cost of raw materials becomes a smaller percentage of the final sales price. This strategy allows the company to better protect its margins from input cost volatility compared to a more commodity-focused business.

B. Risk Assessment

A comprehensive assessment of Borregaard must consider a range of potential risks across several categories.

• Operational Risks: The high degree of integration at the Sarpsborg biorefinery, while a source of competitive advantage, also represents a concentration risk. Any unplanned shutdowns, operational disruptions, or major incidents at this core facility could have a material impact on the entire group’s production and financial results.
• Financial Risks: While the balance sheet is currently strong, a sharp and sustained rise in global interest rates would increase the cost of servicing its debt. The recent trend of increased working capital, if it were to become a permanent structural feature, could constrain free cash flow generation over the long term. The company also has exposure to currency fluctuations, given its global sales footprint; while recent net currency effects have been positive, this could reverse.¹³
• Strategic & Competitive Risks: The primary strategic risk is a failure to maintain its innovation momentum. The bio-based chemicals market is becoming increasingly attractive, which will likely draw in more competition. There is a risk that larger, well-capitalized competitors could enter Borregaard’s niches or that a new, disruptive technology could emerge that challenges its current process advantages.
• Commodity & Cyclical Risks: Despite the successful execution of its specialization strategy, the business retains a degree of exposure to commodity price cycles. This includes the price of its key feedstock (pulpwood), energy prices, and the economic cycles of its major end-markets, particularly construction.

C. Key Catalysts

Several potential catalysts, both positive and negative, could significantly impact Borregaard’s performance and valuation in the medium term.

• Positive Catalysts:

1. Successful Commercialization of New Technologies: A significant breakthrough in the commercialization of its emerging products could open up substantial new, high-margin revenue streams. This includes achieving wider adoption of its cellulose fibrils (Exilva®) or the successful launch and scaling of its new green technology platform for the home care and industrial coatings markets.¹⁹
2. Sustained Pricing Power in BioMaterials: If the market tightness in specialty cellulose, driven by recent competitor plant closures, proves to be durable, it could lead to a faster-than-expected and more significant recovery in the BioMaterials segment’s margins, providing a meaningful boost to group profitability.
3. Favorable Regulatory Changes: Any acceleration of regulatory measures in Europe, North America, or other key markets that further favor bio-based and sustainable materials over their petrochemical-based alternatives would act as a powerful structural tailwind for Borregaard’s entire product portfolio.

• Negative Catalysts:

1. Sharp Spike in Input Costs: A sharp, sustained, and unexpected increase in the price of wood or energy that the company is unable to fully pass on to its customers would lead to severe margin compression and a significant decline in profitability.
2. Sharp Global Recession: While the business has proven resilient, a deep and prolonged global recession would likely lead to a significant contraction in demand across most of Borregaard’s key end-markets, overwhelming the benefits of its diversification.
3. Technological Disruption: The emergence of a new, more cost-effective technology for producing lignin-based products or vanillin, perhaps from a non-wood source or through a different chemical pathway, could fundamentally threaten the technological moat of the core BioSolutions segment.

VII. Valuation Analysis

A. Valuation Multiples

An analysis of Borregaard’s valuation indicates that the market assigns it a premium relative to more traditional chemical or pulp and paper companies. This reflects the market’s appreciation for its specialized business model, strong and resilient margins, and consistent growth profile. As of mid-2025, the company’s key trailing twelve-month (TTM) valuation multiples stood at approximately:

• Price-to-Earnings (P/E) Ratio: ~22.5x ³⁵
• Price-to-Sales (P/S) Ratio: ~2.5x ²³
• Price-to-Book (P/B) Ratio: ~3.5x ³⁵

These multiples cannot be assessed in a vacuum. Their appropriateness must be judged relative to a carefully selected peer group and the company’s own historical trading ranges. The current valuation suggests that Borregaard is not considered a “cheap” stock on standard metrics, but rather is valued as a high-quality industrial growth company.

B. Peer Group Comparison

Identifying a perfect peer group for Borregaard is inherently difficult due to its unique, integrated business model that spans several sub-sectors of the chemical and materials industries. A meaningful comparison requires looking at companies that compete with its individual segments.

Table 5: Peer Group Valuation Comparison

Company	Ticker	Market Cap (USD B)	EV/Sales (TTM)	EV/EBITDA (TTM)	P/E (TTM)	Div. Yield (FWD)
Borregaard ASA	BRG.OL	~1.9	~2.8	~12.3	~22.5	~2.1%
Ingevity Corp.	NGVT	1.5	1.9	11.2	9.98	–
Quaker Chemical	KWR	2.0	1.4	12.8	18.1	1.7%
Ashland Inc.	ASH	2.4	1.7	10.9	14.2	3.3%
Sappi Ltd.	SAP.JO	0.9	0.6	4.8	5.7	9.0%
Lenzing AG	LNZ.VI	1.0	1.0	9.8	N/M	–

Sources:.¹⁰ Note: Data as of mid-2025, sourced from multiple financial data providers. EV/Sales and EV/EBITDA for Borregaard are calculated based on latest financials. N/M = Not Meaningful due to negative earnings.

The peer comparison reveals a nuanced picture. Borregaard’s valuation appears to be at a significant premium to its more pulp-and-fibre-focused peers like Sappi and Lenzing, which have lower margins and have faced more significant market headwinds. This premium is justified by Borregaard’s superior profitability and more specialized product mix. When compared to pure-play U.S. specialty chemical companies like Ingevity, Quaker Chemical, and Ashland, Borregaard’s EV/EBITDA multiple is broadly in line, while its P/E multiple is at the higher end of the range.

This comparison highlights the inadequacy of using a simple peer average to value Borregaard. A more sophisticated approach requires a qualitative sum-of-the-parts (SOTP) perspective. This framework acknowledges that Borregaard is not a monolith, but a combination of distinct businesses with different growth and profitability profiles.

• The BioSolutions segment, with its high and expanding margins, strong growth drivers, and formidable technological moat, should logically command a valuation multiple in line with high-end specialty chemical or food ingredient companies.
• The BioMaterials segment, while strategically important and improving, is more capital-intensive and subject to greater input cost volatility. Its valuation should be benchmarked more closely against other specialty pulp producers.
• The Fine Chemicals segment is smaller and its profitability is more opportunistic, warranting a different, perhaps lower, multiple.

The company’s consolidated valuation is a blend of these different components. The current multiples likely reflect this blended reality. However, this also implies that any significant acceleration in the growth and profitability of the high-value BioSolutions segment could justify a re-rating of the entire company’s valuation multiple upwards, as it would become an even larger driver of the group’s total value.

C. Free Cash Flow (FCF) Analysis

An analysis of free cash flow in 2024 reveals the impact of the company’s investment cycle and working capital movements. Based on the reported operating cash flow of NOK 1,068 million and total investments of NOK 861 million, the free cash flow for 2024 was approximately NOK 207 million.⁹ This figure is significantly lower than in previous years, a direct consequence of the aforementioned build-up in working capital and a period of elevated capital expenditures for both maintenance and expansion.

Based on this single year, the free cash flow yield (FCF divided by market capitalization) would be relatively low, at just over 1%. However, it is crucial to view this in a broader context. A single year’s FCF can be misleading during a period of heavy investment. The current high level of CapEx is an investment in future growth, efficiency, and environmental performance, which is expected to lead to higher and more sustainable free cash flow in subsequent years. A proper FCF-based valuation would need to normalize for the working capital swings and model the expected returns from the current investment cycle. The company’s long-term ability to convert its high EBITDA into distributable cash for shareholders remains a key determinant of its intrinsic value.

VIII. Management Quality & Governance

A. Management and Board

Borregaard benefits from a stable and experienced management team with deep expertise in the specialty chemicals and materials industry.⁴⁰ A key recent development that underscores this is the appointment of Tom Erik Foss-Jacobsen as the new President and CEO, effective from August 2025.³⁶ This move represents a seamless internal succession, as Mr. Foss-Jacobsen was previously the Executive Vice President of the highly successful BioSolutions segment, the company’s primary engine of growth and profitability.²²

This promotion sends a clear and powerful signal to investors about the company’s strategic direction. By elevating the leader of its most successful and specialized division to the top role, the board is signaling a definitive doubling-down on the specialization and value-creation strategy that has defined the company’s success over the past decades. This reduces strategic uncertainty and provides a strong sense of continuity for the market.

The Board of Directors is composed of individuals with relevant and diverse experience from other major Norwegian and international industrial and financial companies, providing robust oversight and strategic guidance.⁴⁰

B. Alignment and Transparency

Borregaard demonstrates a strong commitment to aligning the interests of its management with those of its shareholders and maintaining a high level of transparency. The company provides clear information on the shareholdings of its management team and board members, and all insider transactions are promptly disclosed to the market.³⁴

The compensation structure for senior management includes mechanisms designed to foster long-term value creation. The incoming CEO, for example, is expected to use personal funds to acquire company shares until his holdings equal twice his annual base salary.⁴¹ Furthermore, the company’s share option program requires that at least 50% of the after-tax proceeds from exercised options must be used to purchase shares, which are then subject to a three-year lock-up period.⁴¹ These policies create a direct financial incentive for management to focus on the long-term appreciation of the share price.

In terms of transparency, Borregaard maintains an active and open dialogue with the investment community. The company holds regular quarterly result presentations, investor meetings, and comprehensive Capital Markets Days where it outlines its strategy and performance in detail.¹⁸ Its financial objectives are clearly articulated, publicly available, and consistently tracked in its reports, allowing investors to hold management accountable for its stated goals.²⁹

IX. Conclusion: Investment Thesis Synthesis

This analysis has dissected Borregaard’s unique business model, competitive standing, and financial trajectory. The findings can be synthesized by revisiting the core questions that framed this research.

• How has Borregaard’s profitability and margins evolved across business cycles?
  The company’s profitability has become progressively more resilient and of a higher quality. This evolution is the direct result of its multi-decade specialization strategy, which has deliberately shifted the portfolio’s center of gravity away from cyclical commodity products towards high-margin, niche applications. The strong and growing contribution from the BioSolutions segment has successfully offset margin pressure from input cost inflation and cyclicality in other parts of the business, leading to a consolidated EBITDA margin that has remained robustly in the mid-20% range even through challenging macroeconomic periods.
• What is the company’s competitive position in lignin-based products and vanillin?
  Borregaard’s position in these markets is one of clear global leadership and represents the heart of its competitive moat. In lignin-based biopolymers, it is a market and technology leader. In wood-based vanillin, it is a monopolist. This dominant position is not based on scale alone but is underpinned by decades of proprietary process knowledge, a structurally advantaged integrated cost base derived from its biorefinery, and high barriers to entry for potential competitors.
• How sustainable are current margin levels given raw material and energy cost pressures?
  While margins will always be subject to fluctuations in input costs, particularly wood, the current levels appear broadly sustainable. This sustainability is not based on the assumption of stable input costs, but rather on the company’s proven ability to counteract these pressures through three key levers: 1) the continuous upgrading of its product mix towards higher-value applications where margins are less sensitive to raw material costs; 2) ongoing operational efficiency and cost-saving initiatives; and 3) favorable supply/demand dynamics in key segments, such as specialty cellulose, which are currently supporting pricing.
• What is the runway for organic growth versus the need for acquisitions?
  The primary runway for growth is organic. The company has a clear path to expansion through a combination of market-driven innovation, product mix enhancement, and targeted, high-return debottlenecking projects at its existing facilities. Acquisitions are likely to remain small, tactical, and opportunistic—focused on acquiring new technologies or niche market access—rather than being a driver of large-scale, transformational growth.
• How does the company’s valuation compare to its historical trading range and fundamental drivers?
  The company’s valuation reflects its status as a high-quality, specialized business that has consistently delivered strong returns on capital. It is not “cheap” on standard valuation metrics when compared to the broader chemical or materials sectors. However, a sum-of-the-parts analysis suggests that the valuation may be reasonable, given the superior profitability and growth profile of its core BioSolutions segment. The valuation appropriately rewards the company for its successful de-commoditization and resilient performance.
• What are the key catalysts that could drive outperformance or underperformance?
  Underperformance would most likely be triggered by external shocks, such as a severe and prolonged global recession that impacts demand across its diversified end-markets, or a sharp, sustained spike in input costs that it cannot pass on to customers. Conversely, outperformance is most likely to be driven by internal execution, specifically the faster-than-expected commercialization and scaling of its new product pipeline, or by a more rapid and sustained margin recovery in the BioMaterials segment, fueled by continued market tightness.

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