Borregaard is the world’s leading company in the field of wood-based speciality chemicals, in addition to holding strong positions in the ingredients, fine chemicals and energy industries. The company has developed unique expertise over more than a century of operations and offers a range of increasingly specialised, added-value products. Borregaard is an international company and has production plants and sales offices in the main industrial markets.
Borregaard’s unique competence and long-term focus on wood-based chemicals has positioned the company as the world’s largest player in the field of lignin-based binding and dispersing agents and a global leader in selected segments of the speciality cellulose market. The manufacture of vanillin, yeast products and bioethanol ensures high utilisation of raw materials and provides a platform for a broader product portfolio, including ingredients for food products. Borregaard also hold attractive positions on the electric power market and as a supplier of fine chemicals for the pharmaceutical industry. The company has production plants and sales offices in most of the important industrial markets in Europe, Asia, America and Africa.
As a result of the restructuring of much of the company’s non-core business, Borregaard’s operations are now more focused and better defined than before. The restructuring programme was largely completed in the course of 2005 and within the budgets allocated for this purpose.
To compensate for poorer operating parameters, a new improvement programme was established with effect from 1 January 2006 for all of Borregaard. The programme aims at an annual improvement of NOK 400 million by the end of 2007.
In June, a scrubber at Borregaard’s plant in Sarpsborg, Norway, was identified as the source of the epidemic of Legionnaire’s Disease in the region. The company deeply regrets that this has resulted in death or illness for many people. In cooperation with the authorities, an extensive monitoring and operating programme has been initiated to prevent similar situations in relevant facilities.
Borregaard’s operating revenues for 2005 totalled NOK 4,358 million, which is equivalent to 2 % underlying1 growth. Operating profit before amortisation amounted to NOK 299 million, compared with NOK 356 million in 2004. This decline is ascribable to weaker results from the cellulose and lignin businesses, while the energy, ingredients and fine chemicals businesses reported good growth. Difficult market conditions for cellulose, high oil-related costs and unfavourable currency factors (a stronger NOK and reduced effect of currency hedges) were partly offset by the good impact on profit of restructuring and improvement programmes.
Macro-economic factors continued to affect Borregaard’s results negatively in 2005. In addition to weak, unstable markets for parts of the company’s businesses, the USD continued to weaken during the year, putting pressure on profitability. The EUR also weakened against the NOK, but this had a somewhat lesser effect. The long-term currency hedges for the USD, which were entered into at favourable exchange rates in 2001-2002, had on the whole been terminated by the end of the year and made a far lower contribution to profit in 2005 than in previous years, particularly in the second half of the year. Furthermore, high oil-related costs (energy, freight and certain raw materials) reduced margins for key parts of the business.
Denofa’s fat factory was closed down at the start of the year. The soya business has continued to operate under improved framework conditions and external majority shareholders. Borregaard’s fine chemicals operations outside Norway have been restructured, entailing the sale of the factory in the USA and closure of the production plant in Madone, Italy. The fine chemicals plant in China was also sold in January 2006. In Sarpsborg, production at the sulphuric acid plant was wound up. The provisions made for the restructuring programme in 2004 are considered to be sufficient.
Borregaard’s speciality chemicals business is based on utilisation of the various components in timber as raw materials for highly processed products. The speciality chemicals business consists of Borregaard LignoTech and Borregaard ChemCell.
With production plants in eleven countries, Borregaard LignoTech is the world’s leading supplier of lignin-based binding and dispersing agents. In 2005 the business reported a 2 % decline in operating revenues compared with 2004. Profit was somewhat lower than in the year before, primarily due to higher oil-related costs (freight and energy), less favourable currency rates and a slightly weaker product mix. In terms of volume, sales rose 5 %, largely driven by the improved performance of products for the construction industry. Sales of animal feed binders remained stable, while speciality products reported a slight decrease. This is ascribable to a decline in the oil-drilling segment and structural changes in the dyestuff and kraft lignin segments, which led to the closure of the plant in Bäckhammar, Sweden. Lignin production in Vargön, Sweden, will be phased out in 2006 since operations have become unprofitable due to the loss of a local source of raw material. In 2006, Borregaard LignoTech will focus on maintaining volumes and improving profitability through price adjustments, more optimal utilisation of capacity, further rationalisation of operations and an improved product mix.
Borregaard ChemCell is the leading European supplier of speciality cellulose for chemical applications and a global leader in selected niche markets. This business area has production plants in Norway and Switzerland. Operating revenues for underlying1 operations were 5 % lower than in 2004. The marked decline in profit in 2005 can primarily be ascribed to high oil-related costs, unfavourable currency rates and lower volumes and prices for textile cellulose in Asia. This market slump was partly a correction due to a substantial increase in capacity in Asia and partly a result of restrictions on textile imports from China. With regard to speciality cellulose, both volumes and prices have risen and new contracts will take effect in 2006. The ethanol business achieved profit on a par with 2004 results. The improvement programmes implemented in Norway and Switzerland contributed to lower costs and higher productivity.
Borregaard’s business in ingredients and pharmaceutical products consists of supplying advanced products that meet high standards of quality and hygiene. Total operating revenues for underlying1 operations were 5 % higher than in 2004.
Since 1 January 2006, Borregaard has grouped its activities in the food ingredients and selected animal feed segments in a new business area, Borregaard Ingredients. This area has its own production plants in Norway and Switzerland and comprises aroma products (vanillin and ethyl vanillin), speciality oils (omega-3 products and fish oils) and the yeast business (yeast and yeast extract). The Ingredients area’s overall performance improved to a certain degree compared with 2004, primarily in the aroma chemicals segment where sales were higher and prices better, while profitability in the yeast business remained weak.
Borregaard Synthesis is a leading supplier of fine chemicals for X-ray contrast media and other selected niche markets in the pharmaceutical industry. Operating profit was significantly higher than in previous years, mainly due to successful restructuring and improved market conditions. Increased volumes, higher prices and a better product mix more than offset rising raw material costs and a weaker USD. Intermediates for the pharmaceutical industry performed well in 2005 and new products are helping to ensure high capacity utilisation at the Norwegian plants in 2006. The diphenol business based at the Ravenna plant in Italy also improved.
Borregaard Energy comprises the production and supply of power and trading on the Nordic power market. Production facilities are located in Sarpsborg, Moss and Kvinesdal. Power supplies are also ensured through long-term contracts. Operating revenues in 2005 increased by 13 % compared with 2004. In 2005 Borregaard Energy’s own plants produced 501 GWh (normal yearly production 475 GWh) and had total power supplies of 1,457 GWh. Combined with good results from financial power trading, this led to improved profit. At the beginning of 2006, the energy business was strengthened by the purchase of the minority shareholding in Mossefossen, in which Borregaard already owned a 61 % stake. This acquisition ensures the company a new supply of power totalling 5 GWh.
Øraveien Industripark, in which the remaining operations (real estate rentals and development, etc.) have been grouped after the restructuring of the former company Denofa, produced positive results.
Lignin: Additives, such as flow-regulating agents, for use in concrete, textile dyestuffs, ceramics, crop protection chemicals,
batteries and oil drilling. Binding agents for animal feed, briquetting and gravel roads.
Speciality cellulose: Speciality cellulose for products used in the construction and petroleum industries and in the manufacture
of food products, tablets, cosmetics and personal hygiene products, paint, varnish and printing ink. Other cellulose
qualities are used in textiles, plastics and paper.
Bioethanol: Bioethanol (produced by the fermentation of wood sugars) is used for technical applications in the pharmaceutical
industry, paint and varnish, car care products, etc.
Ingredients: Vanillin products, speciality oils and yeast products for use in food products, and selected animal feed products.
Pharmaceutical products: Intermediates for X-ray contrast media (diagnostic applications) and medicines.
Diphenols: Intermediates for aroma chemicals, agrochemicals,
photo chemicals and pharmaceutical products and applications.
Electric power: Power production and financial trading in electric power.
Business development: Industrial premises and rentals to businesses in Fredrikstad.
1 Excluding acquisitions, divestments and currency translation effects
The construction industry is an important market for many of Borregaard’s products
See definition
