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Company Profiles: Borregaard and Luceco

By May 2017
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Company Profiles: Borregaard and Luceco


The EdenTree range of SRI screened ‘Amity’ funds hold over 250 different company stocks and debt instruments across their portfolios. As well as having a strong and compelling investment case, each holding must be researched and approved by the SRI team. Here we profile two holdings that deliver strongly on our nine positive screens. Borregaard, held within our Amity International Fund and Amity Global Equity Fund and Luceco, held within our Amity UK Fund, provide innovative solutions for environmental challenges. Both companies are well positioned post the Paris agreement, which will further encourage the use of environmentally beneficial products and solutions. This SRI briefing explores the investment and sustainability case for holding them in the Amity Funds.



Borregaard is a Norwegian biochemicals specialist operating in three divisions: Performance Chemicals (which develops lignin-based products), Specialty Cellulose and Other Businesses. Borregaard offers environmentally friendly substitutes to more carbon-intensive petrochemical products by using natural, sustainable raw materials which can be used in various applications, including textiles, coatings, adhesives, food, pharma and plastics. It operates its own specialised biorefinery.

Borregaard is well positioned in the biochemicals market with a leading position in lignin1 and cellulose2 as well as being the only provider of wood-based vanillin3. It has a 41% global market share in biochemicals.  With a strong R&D capacity, the company is well set to benefit from the expected growth of the bio-chemicals market going forward.

The company listed on the Oslo Stock Exchange in October 2012; its share price has increased 99% on a total return basis (in Sterling terms) over the last two years vs a 17% gain by the Oslo Stock Exchange.

The company delivered a 7% increase in revenue at NOK 4,492m (31 December 2016) with operating profit up by 39.4% to NOK 743m. The company also has a promising innovation pipeline with specialty products such as Ice Bear (high-purity cellulose) and Exilva (microfibrillar cellulose). The share price has performed strongly over the last year and currently yields a dividend of 4.1%, supported by the company’s strong balance sheet.

Borregaard’s product portfolio provides alternatives to fossil fuel based chemicals. In addition to the product’s sustainability credentials, the company operates in a responsible way with a strong commitment to sustainability. Only environmentally friendly materials that do not compete for food are used in its biochemicals and all wood is sourced from Norway and Sweden from PEFC4 or FSC5 certified origins. The company is a carbon intensive business, but has made tremendous efforts to reduce its carbon footprint, cutting emissions by half in the last decade. As it develops products with a positive environmental impact, it is likely to benefit as greenhouse gas emissions regulations intensify and to thrive from increased demand for alternatives to petro-chemicals post the Paris Agreement.

Borregaard Positive Amity Score

Borregaard Positive Amity Score Sustainability has been fully integrated into the company’s business model and this is reflected in the company’s transparent reporting. Borregaard provides environmentally friendly innovative solutions and scores well on all pillars.



Luceco is a manufacturer and distributor of high quality and energy efficient LED lighting products and wiring accessories distributed under different brand names: Luceco LED, BG Electrical, Masterplug and Ross. The group has an integrated model, with its own manufacturing sites in the UK and China. Luceco has over 70 years’ experience and listed on the London Stock Exchange in 2016 to help it pursue its growth strategy. The innovative UK company has circa 2,000 employees and clients in over 75 countries.

Luceco is well positioned to benefit from the growing LED market: in the UK, this is expected to grow to about £1.2bn by 2019 from £651m in 2015. Growth of LED lighting significantly exceeds GDP growth driven by retrofitting. The global adoption of LED lighting is also supported by public policy, as many countries have already introduced a ban on incandescent lighting.

Luceco launched its Luceco LED product in 2013 and revenues have grown from £1.5m in FY13 to more than £33m in FY16. Luceco estimates that it currently has a market share of 4% in LED products. It aims to increase this by benefitting from retrofitting activities and by entering new customer markets including UK house-builders.

The vertically integrated business model provides strong competitive advantages for the company, allowing it to control costs as well as the quality of its products.

The company has a market cap of £314m and achieved revenue growth of 30% in 2016 to £133.8m with a gross margin of 35.7%. The share price has performed strongly since the IPO, returning 56% on a total return basis vs a 9% gain by the FTSE All Share Index. For its first year of listing the company paid a dividend of 0.3p per share, currently yielding a modest 0.13%. This has the potential to grow as the Board intends to adopt a progressive dividend policy based on an initial pay‑out ratio of c.20% of profit after tax.

LED lighting assists reduced carbon emissions as 80% of energy is converted into light rather than heat. LEDs last between 4 to 10 times longer than traditional lighting and are safer to dispose of. LED lighting also offers other benefits as it provides brighter light and generates cost savings for users. The company also focuses on reducing its own environmental impact; its China operation site has achieved ISO 140001 certification for environmental management system in line with best practice. The company also emphasises the importance of good working conditions and employee training.

Luceco Positive Amity Score

Luceco Positive Amity Score As a leader in LED lighting, Luceco presents strong product positives for the Amity range of funds. The company shows commitment to sustainable business while providing innovative solutions with environmental benefits. The company scores well on all pillars including recognising potential risks arising from human rights and working conditions.

The value of an investment can fall as well as rise as a result of market and currency fluctuations, you may not get back the amount originally invested. Past performance should not be seen as a guide to future performance. If you are unsure which investment is most suited to you, the advice of a qualified financial adviser should be sought. EdenTree Investment Management Limited (EdenTree) Reg. No. 2519319. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, UK. EdenTree is authorised and regulated by the Financial Conduct Authority and is a member of the Investment Association.