Borregaard ASA (BRG) Earnings Call Transcript & Summary

Good morning. I would like to welcome all shareholders and other participants to the Ordinary General Meeting in Borregaard ASA 2023. My name is Andreas Jarbø and I am a lawyer with the law firm Selmer. As you will see from the notice convening the meeting, the Board of Directors in Borregaard ASA has appointed me to open today's general meeting. With me on the podium, I have the Chair of the Board,Helge Aasen; and the CEO, Per Sørlie. I would also like to inform you that in addition to Helgen Aasen and Per Sørlie, we have the auditor of the company, Kjetil Rimstad from Ernst and Young, present. I would like to thank all shareholders that have joined the meeting, in line with the experience from the past 2 years. This is a fully digital general meeting, and we have good experience with this solution and consider that it's more shareholder friendly and makes it more accessible. Today's Annual General Meeting will also be simultaneous translated into English for those who want an English version. I would like to start by giving you some practical information. You have 4 buttons at the top of the screen that you can press on, and they are home, messaging, voting and documents. By clicking home, you'll find further technical details about the conduct of this meeting, and I recommend that you read the text. The messaging icon enables you to see [ Audio gap] posted by other shareholders. You may also submit your own questions and comments inviting to the AGM, if you so wish. Documents will give you a copy of the notice convening the meeting and other relevant documents. The voting button will take you to the items to be dealt with here today? The voting icon will also appear on your screen when we move from one item to the next. This year, shareholders will also have the possibility if they participate online to ask for the floor by clicking on the request to speak in the live broadcast. We have now closed the Annual General Meeting for further log in, but if any of you now logged in, for some reason, should lose connection or which to log in from another device, you may log in again. We now move to the list of shares represented, and I will soon receive the lists from DNB, share of 54,74,749. That is approximately 54% of total shares issued. 7,620,881 shares are represented by proxy. And I may also mention that all items on the agenda today will already have had the requested and required majority because of the voting instructions to the Chair of the Board, unless someone changed their minds. We now move to the next item, namely the approval of the notice, election of chair on a person to cosign the minutes pursuant to the Public Limited Liability Company Act, PLLC, the general meeting is to elect the moderator to chair the meeting. As you will see, I will be elected Chair. According to the Act, the minutes of the AGM, shall be signed by the Chair and at least one other person, elected by the Annual General Meeting from among those in attendance, the person elected must be available to stay behind for a while after the general meeting. I move that Mimi Berdal, head on the Nomination Committee be elected to cosign. If you have any other proposals or candidates, please submit them by using the request, the floor function. In accordance with, PLLC Act and the Company's Articles of Association, the Annual General Meeting is convened by a written notice to all shareholders with a known address. The notice shall be sent at least 21 days before the AGM has to be held. The notice is dated 28th of March 2023 and was sent to the shareholders on the same day. The notice has also been announced by a notice to the Oslo Stock Exchange and has been available on the company website in Norwegian and English along with the documents referred to in the notice. The Annual General Meeting has not been convened in accordance with the provisions applicable to public limited liability companies and the company's Articles of Associations. I therefore assume that no one has any objections to the notice convening the AGM and the agenda. This item is about to be closed now. So shareholders will need to cast their vote or table the motion or change the vote do so immediately. Those who did not hear the explanation about how to vote, we'll find a description of this in the information page you are logged into. A click on the "I" icon on the screen, we'll take you to the info page. We'll wait a minute now to give everyone the opportunity to cast their vote. There is a slight lag in the system, but please also note that we have opened the vote for all the remaining items on the agenda so that you can also cast your vote for them all, if you so wish. [Voting]

All right. We have received the votes. I have been elected Chair. The notice has been approved and Mimi has been elected to cosign the minutes. We now move to Item 2, the approval of the 2022 financial statements for Borregaard ASA, the consolidated annual report and the Board of Directors' annual report, including the Board's proposal for an ordinary share dividend for 2022 of NOK 3.22 per share with the exception of treasury shares. Before we formally deal with the annual financial statements, the CEO of the company, Per Sørlie, will report on the company's activities and highlights for 2022. Then Helgen Aasen, Chair of the Board of Directors, will give an account of the Board's considerations behind the proposed dividend. The floor will then be open for shareholders who can ask questions by using the messaging function. I'll give the floor to Per Sørlie.

Thank you. I'll start by providing you with an introduction to our business model and the strategy for the company before I go on to the annual accounts for 2022. The first presentation here is the business model and its simplicity where we use biomass, first and foremost, from timber from the logs as a starting material for our products, and we use all of the components of this raw material, for producing different products for sales in the markets. These products often compete with oil-based chemicals so that we offer biochemicals as an alternative to create a better climate footprints for our customers. Here we see some presentation of the same model. Here, we see that when we use the starting material biomass from timber, we exploit 94% of that raw material, either for producing finished goods or for producing energy that forms part of our own processes. The fact that we produce many different products at the same time makes us have so-called coupling products, these are produced at a fixed rate and to prevent us from thus having challenges in the market. We have over time, developed a number of different products. And we can see here at the bottom of this picture, the different applications that our products are used in total Borregaard produced 800 different products from this common raw material. And this gives us a lot of opportunities in the market for moving around, when things happened when there are changes in cycles of the reductions or increase. If you look at our end markets, last year, 24% is used for building and construction in different -- of different kind, and that's typically the most cyclical of our markets. While the other markets, agriculture and food, medicines, pharmaceuticals are more stable markets, and they have also increased in importance over time. Even if you have a production set up, we will make a number of products from one raw material, we have to adapt to the markets that we operate in, because the products that we produce are quite different with regard to character and dynamics in the markets where we operate. So we have organized our activities into 3 main business areas. BioSolutions represents everything that is made from the natural link binding polymers in the biomass, and we have the -- also we have our wood-based [indiscernible], but an import have from the fibers, it's our specialty cellulose for cellulose fibrils, that is cellulose that we refine further. And then we have Fine Chemicals, the third area, which is the exploitation of the sugars in the biomass. And in addition, we have a -- and we have also intermediates for counter agents based on petrochemical input factors. If you look at the distribution, we have a quite global distribution, about half of it is sold in Europe, 1/4 in the Americas and the same in Asia. We have a market-driven organization in the sense that 10% of our employees work on sales, marketing and technical customer services. And the sales system handles more than 90% of our turnover. So we have a lot of direct customer contact, and we offer our customers not only physical products but also solutions. We are a specialty chemicals company, and so we follow what we call a specialization strategy, which is characterized by 3 components. Firstly, we operate in global niches that is in smaller market segments and so market segmentation is an important part of our strategy and to build barriers to entry, that makes us have strong positions in our markets. That's the first main point of our strategy. The second point is about having a lot of competence with regard to the use of our products and closeness to the markets where we operate, so that we offer solutions and not only physical products. The third point is what we mentioned earlier that we have a very diversified market strategy, which makes us have a lot of options in the market. Hence, we also have global market positions that make us be not only a regional player, but we also have options globally, where we want to sell our products. This gives us a lot of options and a lot of choices within our model. As a specialty chemicals company, we work both with innovation and with continuous improvements. Innovation is primarily something we work on to create entry barriers, develop specialized products and have growth at the top line and to maintain the bottom line margins. And at the same time, we have to work on continuous improvement. We do so through organizational development, confidence building and smart use of different kinds of technology. And so confidence is also our main [indiscernible]. We have sales and markets, research and development and production are our 3 core competencies that we develop in a very dedicated way over time, so that we strengthen our position in the market. At the Capital Market Day in September last year, we presented our current strategic situation, strategic figure I showed you is the so-called timeless strategy, which shows our dedication over time, but what is given priority at any given moment, of course, varies. We have to assess the current situation at any given time. And what is the core question is whether we should continue along the line that we have had so far by increasing our specialization within the company even further. And our assessment is that there's still a lot to be gained from both; going on further specialization, but also value growth. By value growth, we mean that our kind of products will become a scarce factor over time. So the value of it, will increase with time. Those who have bought this product earlier, must expect to have to pay more for the product as its value increases and in addition the specialization will give us new, hopefully, more valuable products. I also mentioned that we have 800 products for a number of applications of Borregaard, of course, we have a lot of optimization potential by reducing and focusing on the product portfolio over time. At the same time, we have a fantastic raw material base. We have both good assets, expert knowledge, which makes it possible for us to develop new products. We believe there's a lot of possibility within BioSolutions for further specialization that is like the glue of the biomass and also Speciality Cellulose, from the Fibrils because Cellulose Fibrils, they represent a further refining of the Speciality Cellulose with high value added. But we also communicated to the market in September of last year was that, we see possibilities of increasing our capacity somewhat at our Sarpsborg plant, representing almost 70% of our overall activities that is the Sarpsborg Biorefinery. You see now that we would rather low investment will be able to increase the capacity, maybe 5% to 10% at this plant and a time perspective, up to 20%, 30%, we believe it's realistic that we will do so. This will give us a possibility of increasing all products in our portfolio because we will then have a larger capacity and increase all of the [indiscernible] time in our production. What is a game changer in this market which makes us being optimistic with regard to further specialization is the increasing momentum we see within bio-based products. Both customers and investors, our owners, have been focused on greener solutions for a long time now, but also politicians, especially the European Union, adopt a lot of legislation that pressures our customers into more green solutions. And at the same time, many of our customers have established ambitious climate goals towards 2030 and 2050, in line with the Paris Agreement, 1.5 degree goal. And this will increase the demand for solutions that can contribute towards lower CO2 footprints. At the same time, we plan to do a number of investments so that we can fulfill our own environmental goals, we believe they will increase our competitive edge in the market win [indiscernible] for our solutions. So why is specialization important, BioSolutions, as I mentioned, represent almost 60% of our business. And this slide shows how specialization has developed and changed this business area over time. We have 3 market categories within BioSolutions. We have industry. We have industrial products, and we have specialties. The specialties of those products that have a higher value and a higher level of refinery than we see in the period from 2012 to 2022. During this period, the blue line here represents a specialty that the volume increase has been okay, but if you look at sales revenues from the sales -- those same volumes, they have tripled during this 10-year period. So in 2022, specialties amounted to 25% of the volume, but almost 60% of the revenue. And this shows the gearing you get when you increase specialization. And this is -- we have a lot more raw material available also in the market for us to be able to increase this degree of specialization. At the same time, the industries to state that the other categories also have increased substantially in terms of value, have used the sales to construction by 60% over this 10-year period, but the revenues are unchanged over time, within that segment. Industrial Products has a bit less volume than 10 years ago, but the revenue has doubled over that same time period. So we refer to this as value growth. As products become more scarce, the value of that product will increase. This underlines why specialization pays off and why it's an important road ahead also in the coming future for [Audio Gap]. Because Borregaard operates in global niche markets where we have a #1 or #2 position, there are limited possibilities of acquisitions or growth through acquisitions and mergers and further [indiscernible] in our markets. So as a consequence, we have made an assessment whereby we see -- say that we want to look for new growth areas for Borregaard outside of our existing fields of operations. At the same time, we are highly focused on the fact that when we want to enter a new field, it should be a field where Borregaard can offer more than only capital. So competence-wise, those areas should be close to our core competencies and also close to our markets preferably. So we have established a number of criteria for what kind of investments we are looking for. At the same time, Borregaard has good profits, so we have a certain degree of patients when we want to develop businesses from an early stage onwards. Now since we developed this criteria, we have made one such investment. It's in the company, Alginor, which is a marine biotechnology company, which has a very similar business model to that of Borregaard. The difference is that their starting material, kelp, big kelp, biomass from kelp instead of our biomass from timber. At the same time, they have a very sustainable business model as regards harvesting and processing of this kelp. Borregaard has made investments during several stages. And as late as last week, we announced that we have now acquired about 35% ownership of Alginor, and we work closely with that company for them to succeed in developing products for pharmaceutical and nutraceutical applications for these markets. Now sustainability has become ever more important to Borregaard. Here, we have a simple presentation of our value chain. Our raw materials or starting materials that come from the forest, it's important that they be from forest that are operated sustainably and that they should not be GMOs so that we can have a safe and secure starting material. So it's very important to us to have a good certification systems and that Borregaard can feel reassured that the raw materials received, come from sustainable forests. Last year, we had almost 100% of our raw materials from forests that are just certified under the PEFC arrangement or the FSC standard. If we then move on to our own processes. It's that it is here that Borregaard should put a major effort with regard to reducing our emissions over time. And we have actually in for almost 15 years, used life cycle analysis to document how our climate footprint is for our production process from when we cut down the trees in the forest until the finished products leave our plants. And over time, we've had a substantial reduction of CO2 emissions at our plants. And we also have future targets that I will return to shortly. If we look at what products we sell to the market, we have a broad approach to the question of sustainability. Of course, we want to focus on what climate advantages we can offer our customers through our solutions, but it's also the case that there are strong trends with regard to bio-based products, that these products that come from natural raw materials. And then forest raw materials are important. And also with regard to the health and safety aspects, with regard to aspects that is also important, especially the ones that we offer to agriculture. They have substantial advantages in terms of exposure to toxic chemicals, et cetera. So we can offer a much greener, environmentally friendly and safer products to the market. Borregaard has established ambitious targets for emission reductions. We have already reduced our emissions substantially by almost 50% from 2009 and until today. We have recently reviewed our targets. We want to have an additional 42% reduction of CO2 by 2030, that the base year is 2020. And we have a net zero target for 2050, which means that we buy as a minimum, should reduce by 90% to 100% our emissions from 2020, 2050 and the rest will be bought by quarters. This is in line with the 1.5 degree goal in the Paris Agreement, and we have a third part agreement because science-based target initiatives. They have looked at our plans and they have said these are realistic plans that may lead to us obtaining our climate reduction emission goals before 2030 and 2050, respectively. At the same time, Borregaard is also assessed by several external rating agencies. In the stock market, we look at our rating with CDP in particular, they rated 15,000 companies last year. They represent more than 2/3 of the world's stock-listed companies in terms of value. And Borregaard was among the top 20 out of the 15,000 companies that were assessed by CDP. We have the top score A in climate change. And within forest, we have an A- the second best score within water security, and there were less than 20 companies that obtained similar ratings by CDP. We are also assessed by EcoVadis. EcoVadis is more important for the value chain. They assess our suppliers and our customers often assess Borregaard through EcoVadis and we assess our suppliers. 90,000 companies are assessed by EcoVadis and Borregaard is among the top 1% to 90,000 companies that are assessed. So it's very beneficial in the marketing of our products, that we can show that we have a platinum rating by EcoVadis. I said that specialization is important. And I also said that agriculture has become an ever more important part of our portfolio. This shows a cross-section of our products delivered to agriculture. And they further get to the left here on this slide, the more advanced and valuable are our products. What we can see here, well, these are external assessments of the growth potential for these markets. At the same time, you should be aware that when Borregaard provides this offer to these markets, they often can provide a greener solution so that we can have a higher growth rate than the general growth rate in that market by conversion from solvent -- oil-based solvents to Borregaard's water-based solutions. In Borregaard, it is important to offer to agriculture that we can offer water-based solutions that are much less toxic to the agriculture, also work within agriculture when they use our products. Another important market to Borregaard has to do with batteries, energy. We have polymers in all led batteries. Led batteries are found in all kinds of vehicles, also electric vehicles need a led battery technology. Where we see great possibilities for growth is down to the right, where we have energy storage system that will have a lot of growth potential approaching 2030, and traditional led batteries have a large potential in this area. And after the third quarter of last year, we announced that we will increase our capacity substantially of the products that we sell into the batteries market. As for Speciality Cellulose and biomaterials, was the second area where I said that there was good potential for further specialization. Borregaard's strongest position is what we call cellulose ethers that's produced from Speciality Cellulose. Borregaard has special take nickel opportunities and also product portfolio that lends itself to this market, and we can only do it by soft wood types we use Norwegian spruce as the basis for our products, and that's a soft wood that is particularly well suited to produce Speciality Cellulose for ether products. There is a considerable growth potential. And that is the segment that grows the most. And that is also where we look to find further growth for our continued specialization in Speciality Cellulose. What's important is that a lot of these products are sold to food sector and also pharma, they are less cyclical and are more staple over time, that enables us to stable markets for our Speciality Cellulose products. I also mentioned that we produce Cellulose Fibrils from the starting material from our own specialty cellulose and they are then processed to fibrils. For a number of years, we have worked to grow this market. And we have now almost 3,000 active prospects, and we have more than 100 regular customers for our cellulose fibrils, but we still have a way to go until we have fully utilized the potential of this market, but this is a substantial specialization in this market. And the value added is 30x from Speciality Cellulose to a fibril product. Many people have asked us how Borregaard deals with the downturn in the market because there's concern in the markets that we are now in the face of a potential recession. Our response is that our business model is well prepared for cyclicality in the market with 800 products, global presence. We normally have more options than many other companies when faced with difficult economic times. 15 years ago when we had the financial crisis, then Borregaard has made 2 changes in its portfolio. In BioSolutions, we have reduced our exposure to the construction market, the concrete market by more than 60%. It's the market segment that is most cyclical. So we have been able to lower our exposure there. And we are also fully specialized our Cellulose business in biomaterials earlier, we sold 15 maybe up to 20% to textile cellulose and that is the most cyclical markets. Today, we have no sales there, so our assessment is that we are less vulnerable to cyclicality than we were in the past financial crisis 15 years ago, but naturally, I mean, if we face a potential recession, all businesses will be impacted by it to a certain degree. So we will need to assess this step by step as we move forward. Next, I would like to address financial statements. First, I would like to remind you of our financial objectives. We have a return on capital employed that, we should have more than 15% pretax over business cycle on our book capital. When we make new CapEx investments, then we should also have an internal interest rate of more than 15% pretax and average net working capital should be at 20% of operating revenues. That's another objective. And as for replacement CapEx, we have an objective that, that should be at the depreciation level. We also have a conservative assessment when it comes to our balance sheet. We say that our leverage ratio should be targeted between 0 -- sorry, 1.0 and 2.25 over time. If we look at the highlights and the financial performance for 2022, this was a rather special year as you can see this from the slide. This shows a 5-year perspective and revenues increased considerably by 19% in 2022. And of course, that was also the result of considerable cost increases as a result of Russia's aggression in Ukraine and the consequences has had for the cost base, especially in Europe. But we succeeded in actually shifting those costs to the market so that we maintain our EBIT, the aim that is earnings before depreciation and amortization, so it actually increased through the period. We also saw an increase that also increased to NOK 243 million, and that what has been positive to see in recent years is -- we have an increased return on capital employed to exceed 15% in the period. After 2015, there has been a slight decline. That is not because our earnings dropped but because we also made considerable investments in new ventures. These new ventures are now beginning to pay a return. And in 2021 and '22, we were back on track at our targeted level of more than 15%, so return on capital employed of 18% was a good level that we delivered in 2022. We can also take a look at the cash flow and debt levels. We see that cash flow in 2022 totaled NOK 735 million, and that was well below the operating profit, the EBITDA, and that was because the cost increases and price increases of our product also gave us an increase in our working capital, as we can see in the left figure. We also see that the average net working capital is at 20.3%. So we regard this as a much needed buildup in our investments, and there is no reason for any big concern for these levels. They are still within target, but that can also help explain why not the entire earnings ended up as a profit, but we also see the dark blue bonds and investments, our investments in existing plants and replacement facilities, we are at a target here, and we have also reinvested the depreciation, and this also means that at the end of 2022, we had a leverage ratio of 1.12 which is well within and actually in -- at the lower end of our targeted level of 1% to 2.25%. So there is some balance in this area, the end of 2022. This ends my summary and report on 2022.

Thank you, CEO, Per Sørlie. Before I open the floor for questions, and the comments submitted electronically. And so far, no one has asked for the floor. I would like to give the floor to Helge Aasen, chair of the Board of Directors, who will present the Board's proposal for a share dividend for 2022.

Thank you. Borregaard's dividend policy is to pay stable and hopefully increasing dividends over time. The results for 2022 gave a return on capital employed of 18.1%, which is higher than the targeted long-term average or at least 15%. This indicates dividend of somewhere below the middle of the dividend range of 30% to 50%. The Board has proposed to pay an ordinary dividend of NOK 3.25 per share, an increase of NOK 0.50 per share from last year. And this corresponds to 36% of net earnings. And treasury shares will not be subject to a dividend.

Thank you, Helge Aasen. Still, no one has requested the floor. No one has submitted questions. And therefore, we will move on. If someone has intend to do so, then please hurry on. We have now come to the formal dealing with the financial statements, the company's annual report for the financial year 2022, which amongst others, includes the Board's proposal for financial statements, the consolidated annual report and the director's report as well as the auditor's report have been made available on the company's website and highlights have been presented. I thus presume that the contents of the financial statements and annual reports are known to the participating shareholders. As for the auditor's report, I don't consider it necessary to have the report read out, but I would like to ask Kjetil Rimstad to Authorized Public Accountant to give us a brief account of his considerations.

Thank you. My name is Kjetil Rimstad. I'm a partner with Ernst & Young and responsible for Borregaard audit. We have completed the audit for 2022, and our auditor's report has been included in the annual report on Page 166. And that's a clean report. And the auditor's report follows the requirements for listed companies and also reports of general interest. And this means that we report on the key audit matters, and those matters are hedging on cash flow and also environmental obligations. These are key audit matters. We also comment, and we believe that nonfinancial information is consistent with the financial information in the annual report and we have also given a report -- a special report on sustainability. That is a clean report. So I'll leave with that. Thank you.

Thank you, Kjetil Rimstad. We will soon close the votes on this item. And therefore, you will -- if you haven't cast your vote yet and who wants to change your vote or if you have comments or questions, you need to do so, now. While we wait for the voting, I'll read the proposed resolution. The Annual General Meeting approves the Board of Directors' motion for the annual financial statements and Board of Directors' report for 2022, an ordinary dividend of NOK 3.25 per share will be paid with the exception of shares held by the group, the treasury shares. And I can inform you that the dividend will be paid to all shareholders registered in the company's share registers as at 20th of April 2023. This means that the share will be traded exclusive of dividend from tomorrow, that is 19th of April 2023, provided that traded shares are subject to ordinary settlement in the VPS securities register and then means that shares acquired up until today, the 18th of April, will entitle you to dividend, while shares acquired from tomorrow, 19th of April, will not entitle you to dividend. The expected day of payment is 27th of April. We don't tend to have received any comments. So this item has now -- a resolution has been passed with the required majority. I will not read all the numbers because we have already obtained a qualified majority, and therefore, you will see them from the minutes. Next item is the report on pay and other remuneration to senior management. The Annual General Meeting has early adopted policy for remuneration senior management according to new guidelines, and there is a proposal for some adjustments that we will handle under the next segment. Until then, first we're going to report on pay and other remuneration to senior management for 2022. It describes the application of the guidelines for establishment or pay another remuneration for last year. The AGM shall have an advisory vote on it. First, I give the floor to Helge Aasen, Chair of the Board, who will present a report on pay and other remuneration to senior management. Please go ahead.

Let me just start all over again. From last year, Norwegian authority adopted statutory reporting on pay and other remuneration to senior management, fulfilled requirement and also the reporting requirements adopted by the AGM. These guidelines are to be found on our website, and they are in an annex to the item on the agenda. The Board has a separate compensation committee that discusses and recommends the pay and other remuneration according to guidelines. And we want to follow up the varying part of the remuneration that is annual bonus and options and the criteria fulfilled the requirements for the long-term requirements that we have both with regard to the financial ESG and sustainability requirements. The report talks about the dimensioning and the conditions on the Board. We looked at the report, and we have the -- on the part of the Board, we confirm that through the report, the adopted guidelines for payment and other salaries remunerations were [indiscernible] throughout 2022. Thank you. Nobody wants the floor. There are no questions. So we will now close the possibility to vote on this item. Shareholders who have not voted yet or who want to change the vote should do this now immediately. [Voting] While we wait for the vote, I shall read the proposed decision. The Annual General Meeting approves or adopts the Board's report on pay and other remuneration to senior management. Okay. Then we're finished. We have adopted this item with a sufficient majority. Item 4 concerns guidelines for establishing, paying other remuneration to senior management or the ordinary General Meeting for last year. This was established by the AGM under 16, Limited Liabilities Company Act. These guidelines should be adopted, again every 4 years or more often. We propose that these guidelines should be adopted today. They were sent out together with the notice for this meeting, they will apply until they are again modified by the AGM. I will first give the floor to the Chairman of the Board, who will propose -- will present the adjusted guidelines for pay and other remuneration to senior management. The legislation in Norway, requires that the general meeting should adopt the Z salary policy, the current guidelines were adopted at the AGM in 2021, and may be valid for up to 4 years. The Board has, however, this year, proposed some amendments to the compensation policy that have been presented in a separate document to the AGM. The most important amendment is that we now introduce the performance criteria for the long-term incentives, the LTI, which is an options scheme, which has been a desire from some shareholders. In the new guidelines up to half of the maximum allotment of options with principles that the company should obtain defined minimum results in areas that are important to the company, including profitability, sustainability and innovation. The limiting circumstances for the LTI and the options scheme are not changed. That is the maximum number of options that may be allotted, the maximum benefit and the requirement that parts of the benefit should be used for the purchase of shares are unamended and they are continued from previous guidelines. Borregaard adjust the compensation package for the senior management from the 1st of January each year in practice, the new guidelines will thus apply from the 1st of January 2024.

Thank you, Helge Aasen. We cannot see that anybody has asked for the floor or submitted any comments to these items, then the possibilities for voting on this item will be closed soon. We ask any shareholders who have not voted yet, where we want to change the vote should do this immediately. While we wait for the vote, I will read the proposal. The General Meeting approves the proposal for guidelines for the picking of pay and other remuneration for senior management that are to apply from the 1st of January 2024. Now we have finished this item has been adopted with this sufficient majority. Now the next item is the presentation of the company's governance under the Limited Liabilities Companies Act. There should be a presentation to the general meeting with regard to the principles for corporate governance, and we have find this on in documents presented, and I give the floor to Helge Aasen again for the presentation.

Thank you. And the report of the Board of Directors for corporate governance have been included in Borregaard's annual reports for 2022 on the Pages 18 to 27. The principles and review of the company's corporate governance have been gone through in detail and the reporting requirement that is pursuant to the Companies Act, the Accounting Act and the Norwegian Code of Practice for Corporate Governance have also been applied and the organization of the corporate government has not significantly changed the last year. As we see from the reports, sustainability is an integral part of Borregaard's business model. Sustainability is important for risk assessment, investments, profitability and expectations from the financial and investor market, that means that sustainability now is a natural part of the Audit and Sustainability Committee's area of responsibility. Borregaard has through the governance systems and routines and through the bodies described acted in line with the Norwegian Code of Practice for Corporate Governance.

Thank you, Helge. You have now completed your report. This is just an information meeting. We are dealing with it. We haven't received comments. No one has asked for the floor. This is not something that we to vote on. So we hereby consider that the general meeting has dealt with it. We now move to Item 6 on the agenda, namely the Board of Directors' motion regarding authorization to clients' own shares. The full proposal of the Board has been included in the notice convening the general meeting. As you will see from the proposal, treasury shares acquired may be used for 2 purposes, either to fulfill incentive programs for employees or amortization that is cancellation of shares and any cancellation have to be decided at a later time. In accordance with the recommendations in the Norwegian Code of Practice for Corporate Governance, the newest rules, the voting instructions open for separate votes to be held for the 2 purposes, but we have traditionally dealt with them in a joint vote. We can't see that we have received any comments or questions to this item, and we, therefore, move to the vote. I will not be reading the entire proposed resolutions now while we wait, given that there is a slight lag than the previous Digital General Meeting. But this is just a continuation of a previous authorization. The only thing is that it runs until the ordinary general meeting in 2024, but no later than the 30th of June, then and that is as opposed to the current one that expired today. So we'll wait for the result of the vote. [Voting] All right. This item has now been -- a resolution has been adopted with the required majority.

Now #7 is the election of members and share with the Board of Borregaard. According to the statute, the Nomination Committee shall present candidates for the Board meeting, the recommendation on the 1st of March 2023 has together with the notice being available at the company's website. So I will give the floor to the Chair of the Nomination Committee, Mimi Berdal, who will present the Nomination Committee's recommendation.

Thank you, Andres. First, a few words about the work of the Nomination Committee since last time we were gathered, it was elected at the ordinary General Meeting in April 2022. It hasn't sited on myself being the chair, [indiscernible] . Representatives of the employees throughout our works, given their points of view with regard to the discussion of the candidate for the Chair of the Board. This is in line with the company's practice and agreement. We have also been in contact with the major shareholders in to work with candidates to the Board and to Nomination Committee and indicate documents referred to recently to the AGM. We have described in further detail how we have worked and what assessments we have made with regards to our recommendation. At the AGM in 2021, Helge Aasen was elected as new Chairman of the Board after having been a member of the Board for 3 years. [indiscernible] was elected as a new Board member that same year. And he now has 2 years of experience as a Board member. The other Board members have more years on the Board of Borregaard and the Board as a group amongst the combination of continuity and renewal. We believe that the Board members together have substantial and relevant competence that suits Borregaard's activities and the requirements and expectations that the company is subject to. And this is also something we have discussed with the management and other relevant stakeholders and shareholders. In our work on nominating candidates the committee in addition to the composition of competencies, we have also looked at where the candidates have the capacity and available time for being board members, they shouldn't be overboarded in other words, which is a topic that is an important topic to shareholders. Both the Chairman of the Board and various of the Board members have senior positions in other companies and some also have other board positions. And then we know that also in the dialogue with Borregaard owners that many want Board members not to have too many demanding offices and tasks that would prevent them from doing a good job as a Board member. This topic has been discussed individually with each Board member and the Chairman of the Board and Committee has also made its own assessments of this aspect. We have also been able to ascertain that the Board members elected by the shareholders have some good participation at all meetings since the last AGM and so they've been there when there's a need for them, and all Board members follow up on the company's activities and market in a good way, also apart from their Board work. And on this background, the Nominating Committee will propose reelection of Helge Aasen as a Chair and a reelection of the other shareholder-elected members, [indiscernible]. And as normal, we suggest a term for 1 year for all candidates until the ordinary AGM in 2024.

Thank you to the Chair of the Nominations Committee. We have not received any input. Nobody has asked for the floor. The possibility of voting or presenting new proposals will soon be closed. Please note that we will vote over the entire item 7 now, 712345 and B, that's the ones that you have to vote on. And then we will wait for the vote to end. [Voting]

Now then that's okay. And the Nominations Committee's recommendation has been adopted with the necessary majority. You have now arrived at Item 8. The choice of members of and Chair of the Nomination Committee, and we have the recommendation on the 1st of March 2023. This has been available at the website. And again, I give the floor to the Chair of the Nomination Committee, who will present the recommendation.

Also in the Nomination Committee, there is a need for continuity to secure a good understanding of the company and the needs of the Board. And to follow up on the assessments and conversations that take place over time with the company's owners, the Board and the potential candidates. And at the same time, it is logical to have a gradual replacement of members. Last time this happened at last year's AGM went up to give [indiscernible] management. One of Borregaard shareholders was elected as a new member. The committee has overall broad experience from different positions within trading commerce and as members of Boards Nomination Committees and other elected offices and also backgrounds from the shareholder communities of Borregaard. As Head of the committee, I proposed to be re-elected, renumeration committee members, [indiscernible] option, that is our recommendation, and we propose a term of 1 year until the ordinary AGM of 2024. Thank you.

And again, thank you to Mimi Berdal, Head of the Nomination Committee not received any [indiscernible] voting and presenting new proposals will soon be closed. This time, this will be 81234 and 8B that you should click on to vote on them. We have divided this so that you can vote for each individual candidate. We are now awaiting the vote. And the proposal is a reelection of the members of the Nomination Committee and the Chair of Committee. [Voting]

Now Item 8 has been adopted with this sufficient majority. We will now go on to item 9 and 10 of the agenda. These are 2 different items of what we have to decide on the fees to the Board and to the Nomination Committee for practical reasons, I propose that the Chair of the Nomination Committee shall present both proposals, but they should be voted on separately. Please, again, Chair of the Nomination Committee, Mimi Berdal.

Thank you. First, I would like to report on our proposal for remuneration to the Board. The proposals are evident from the Nomination Committee's recommendations available on the company's website and was also sent along with the notice conveying this. The work has based itself on the following, namely, first, that the remuneration level shall be competitive without being leading compared with relevant listed companies in Norway. And dependent benchmark studies are used as a basis for the assessment. And the second is a desire to link the shareholder-related members more closely to the owners' perspectives and interests through direct ownership in the company. So also, we propose to continue the requirement for board members to purchase shares in the company for at least 20% of gross board fees until the share value reaches a size of the annual fee. And during the work with fees than the Nomination committee has thoroughly reviewed comparative studies related to both Borregaard and to companies with which a comparison can be made. Against this background, the committee proposes adjusting remuneration for Board members and members of committees of approximately 4.3%, which is also in line with wage inflation in the company. As for the introduction of requirements to purchase shares. This has not been made applicable for employee-elected board members. They can use their own scheme to buy shares at a discount. Adjustment of the fee level was, therefore, not made applicable for employee-elected and their level of fees have therefore been somewhat lower than the shareholder-elected. The annual comparatives that's carried out for the companies on the Oslo Stock Exchange have shown that an increasing number of companies differentiate the Board remuneration between the employee-elect and shareholder-elected members. There is relatively significant difference from company to company. The responsibilities one has as a Board member are the same, but the employee-elected representatives can use paid working time for the duties and Borregaard has also some other schemes and requirements for purchasing shares. The nomination committee has on the basis of comparative studies and its own assessments concluded that it will propose that remuneration for the employee-elected Board members be set at 75% of the level of the shareholder-elected members in the future. The current level is somewhat higher, and it is therefore proposed that remuneration remain fixed until future is received. And the -- it is proposed that an observer received 1/3 of the remuneration for employee-elected Board members, which is at the same level as the current scheme. As for remuneration of all members of the Nomination Committee, we propose that they follow the same recommendation as for the Board members, namely that it is adjusted to the rate of 4.3%, which was also in line with the wage increases in the company. Sometimes, there may be certain years when we need more changes in the Board. It will require more meetings and more time than in other meetings. And that is the reason why we have applied a fee structure with a fixed contribution and then a fee for beyond for full meetings. And a very strict definition have been applied for full meetings, and it does not include talks, individual meetings or contacts that the chair or the meetings may have between meetings. In most years, therefore, only the basic fee has been paid out, which also applies during this term of the committee. And the proposed remuneration is evident in the documents and on the screen, and we have proposed that it applies until the ordinary General Meeting in 2024. Thank you.

Thank you, Mimi Berdal, Chair of the Nomination Committee. We have not received any request for the floor or any comments or questions to the proposed resolutions. And we, therefore, close the vote for Items 9 and 10 in a minute. So if you haven't yet voted or if you would like to change your vote cast, then please do so now. [Voting]

And the result of the vote will be that the general meeting approves the proposed remuneration of members of the Board of Directors, observers and deputy members and also the proposed remuneration of members of the Nomination Committee. I've now received confirmation that this vote has also been ended and that a sufficient majority has been achieved. The last item on the agenda is Item 11, approval of the auditor's fee. As stated in note for to the financial statements for Borregaard ASA and it was in the notice actually said to be notified, but this was just a mistake. And the correct cost is NOK 662,000, but the notice of the Annual General Meeting stated the amount at NOK 622,000. Any comments on this point must be submitted digitally now. And the vote on this agenda item and will also soon be closed. So we ask once again, shareholders who have not yet cast their vote or who would like to change the vote to do so immediately. So we'll wait for the last vote to be counted. [Voting]

All right. This concludes the last vote. We have now been through all the items on the agenda, all have achieved the sufficient majority. And I would like to thank you for your participation, and I hereby declare this ordinary general meeting of Borregaard ASA adjourned.