Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — Q1 2005 Earnings Presentation
53 slides from Kemira Oyj's earnings presentation, May 2005
Slide 1: 1
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Slide 2: Kemira Group Interim Report January – March 2005
Kemira Group Interim Report January – March 2005 Lasse Kurkilahti, President & CEO May 2005
Slide 3: Contents
Contents January – March Group Highlights Business Areas in Q1 Development of the Kemira Share Looking Ahead 3
Slide 4: January – March Group Highlights
January – March Group Highlights
Slide 5: A Strong First Quarter
A Strong First Quarter EBIT up by 43%; all business areas improved EPS up from EUR 0.04 to EUR 0.15 Revenue of core businesses up by 8% Higher raw material costs were passed along into selling prices in Q1 Acquisitions of Finnish Chemicals and Verdugt No 2 in pulp and paper chemicals No 1 in organic
Slide 6: Revenue up by 2%, EBIT up by 43%
Revenue up by 2%, EBIT up by 43% Revenue EBIT + Price increases + Price increases + Volumes + Volumes + Acquisitions (Eaglebrook, + Acquisitions E.QU.I.P., etc.) + UK coatings disposal − UK coatings disposal + Goodwill depreciation − Water-soluble fertilizer − Raw material prices, logistics restruct
Slide 7: Profitability Up
Profitability Up Q1/05 Q1/04* Ch% 2004* Revenue (MEUR) 403.7 394.4 2 1,695.1 EBIT (MEUR) 30.3 21.2 43 111.6 EPS (EUR) 0.15 0.04 0.50 ROCE, % 9.4 7.7 8.6 Cash flow after capital exp. (MEUR) -43.5 -20.4 107.6 *Continuing operations, pro forma 7
Slide 8: Strong Balance Sheet
Strong Balance Sheet 31 Mar 05 31 Dec 04 Equity ratio, % 44 47 Gearing, % 25 21 Capital employed (MEUR) 1,245.1 1,252.5 Personnel 7,156 7,137 8
Slide 9: Net Working Capital Increased Seasonally
Net Working Capital Increased Seasonally MEUR Q1/05 Q1/04* 2004* Cash flow from operations -26.0 0.2 231.0 Capital expenditure -20.3 -21.7 -165.1 Sale of fixed assets 2.8 1.1 41.7 Cash flow from investing activities -17.5 -20.6 -123.4 Cash flow before financing -43.5 -20.4 107.6 *Continuing operatio
Slide 10: Business Areas in Q1
Business Areas in Q1 O 7 = ® ¥
Slide 11: Pulp & Paper Chemicals in Q1
Pulp & Paper Chemicals in Q1 Revenue up by 5% to EUR 143.1 million Volumes and prices up Increases in hydrogen peroxide capacity Acquisition of E.QU.I.P. EBIT up by 9% to EUR 11.6 million, ROCE 10.2% (9.8%) Volumes and prices up Efficiency measures EUR 1.8 million provision for the accident in Helsi
Slide 12: Kemira's Pulp and Paper Chemicals
Kemira’s Pulp and Paper Chemicals Pulping & Paper Coating Bleaching making • Pulping • Process Chemicals • Coating Pigments • Caustic Soda • Retention Chemicals • Calcium Sulfate • Sulfuric Acid • Deposit Control Agents • Titanium Dioxide • Defoamers • Defoamers • Additives • Deposit Control Agents
Slide 13: Pulp & Paper Chemicals net sales and EBIT
Pulp & Paper Chemicals Net sales EBIT & ROCE 600 50 12 % 500 10 40 400 8 € million 30 € million 300 6 200 20 4 100 10 2 0 0 0 01 02 03 04 5 01 02 03 04 5 Q1 Q2 Q3 Q4 EBIT % ROCE The figures are not fully comparable due to changes in the business structure. 13
Slide 14: Pulp & Paper Chemicals' Outlook
Pulp & Paper Chemicals’ Outlook Pulp and paper industry operating generally at a good rate Price rises in raw materials putting pressure on earnings Revenue and EBIT estimated to grow thanks to the acquisition of Finnish Chemicals 14
Slide 15: Kemwater in Q1
Kemwater in Q1 Revenue up by 31% to EUR 82.8 million Acquisition of Eaglebrook in 2004 Smaller acquisitions in Poland and Slovenia in 2004 Volumes and prices up EBIT up by 33% to EUR 6.4 million, ROCE 15.9%* (17.6%) Higher raw material costs compensated by: Higher selling prices Utilization of exist
Slide 16: Kemwater net sales and EBIT
Kemwater 300 Net sales EBIT & ROCE 250 30 25 % 25 200 20 € million 20 150 15 € million 15 100 10 10 50 5 5 0 0 0 01 02 03 04 5 01 02 03 04 5 Q1 Q2 Q3 Q4 EBIT % ROCE The figures are not fully comparable Q4/04 excluding extra write-downs and due to changes in business structure. costs of 11 MEUR. 16
Slide 17: Kemwater's Outlook
Kemwater’s Outlook Demand for water treatment chemicals expected to grow Price increases in raw materials putting earnings under pressure Revenue estimated to grow substantially thanks to the Eaglebrook acquisition EBIT estimated to increase 17
Slide 18: Industrial Chemicals in Q1
Industrial Chemicals in Q1 Revenue up by 12% to EUR 79.0 million TiO2 volumes up by 8%, average prices in euros up by 5% Volumes of formic acid products up, prices on par with Q1/04 Sales of sodium percarbonate similar to Q1/04 EBIT up by 82% to EUR 7.7 million, ROCE 12.3% (11.2%) Volumes of TiO2 up
Slide 19: Organic Acids and Salts
Organic Acids and Salts Segments and Market Positions Geographical Market Share Estimated End-Markets Market by Volume* Rank* Organic Salts World 36% 1 Organic Derivatives / Europe 43% 1 De-Icers Acidifiers & Europe 27% 1 Preservatives World 24% 2 Formic Acid Europe 40% 2 *Management estimates 19
Slide 20: Industrial Chemicals net sales and EBIT
Industrial Chemicals Net sales EBIT & ROCE 500 60 Net sales 18 % 400 50 16 14 40 € million 300 12 € million 30 10 200 8 20 6 100 4 10 2 0 0 0 01 02 03 5 04* 01 02 03 5 04* Q1 Q2 Q3 Q4 EBIT % ROCE The figures are not fully comparable *Continuing operations due to changes in the business structure. 20
Slide 21: Industrial Chemicals' Outlook
Industrial Chemicals’ Outlook A continued step-by-step rise in TiO2 prices expected, offsetting higher prices of raw materials TiO2 volumes estimated to be higher than in 2004, thanks to the expansion investments made Sales of formic acid and sodium percarbonate expected to grow Revenue estimated to
Slide 22: Paints & Coatings in Q1
Paints & Coatings in Q1 Revenue down by 4% to EUR 99.1 million UK coatings disposal -5.1 MEUR Growth in Russia continued Deliveries of exterior paints in the Nordic countries later than 2004 EBIT up by 5% to EUR 8.4 million, ROCE 14.1% (10.6%) Prices up, offsetting higher raw material costs UK dispo
Slide 23: Paints & Coatings net sales and EBIT
Paints & Coatings Net sales EBIT & ROCE 500 50 14 % 400 40 ------ 30 ------ 10 300 ------ € million € million 20 6 ------ 200 10 2 0 100 -10 -2 0 -20 -6 01 02 03 04 5 01 02 03 04 5 Q1 Q2 Q3 Q4 EBIT % ROCE 23
Slide 24: Paints & Coatings' Outlook
Paints & Coatings’ Outlook Demand expected to be good Due to the UK divestment, net sales estimated to be on the level of 2004 EBIT estimated to increase 24
Slide 25: Outlook for 2005 – Kemira Group
Outlook for 2005 – Kemira Group Full-year revenue, operating profit and EPS are estimated to increase on the pro forma figures posted in 2004. All forecasts and estimates mentioned in this report are based on the current judgement of the economic environment and the actual results may be significant
Slide 26: Development of the Kemira Share
Development of the Kemira Share
Slide 27: Shareholder Value Doubled
Shareholder Value Doubled 1400 6 May 2005: 1200 Market cap 1,336 MEUR, 1000 milj. € P/B 1.4 2 Jan 2001: 800 Market cap 620 MEUR, 600 P/B 0.55 400 01 02 03 04 05 Market cap Equity 27
Slide 28: Good Dividend Returns
Good Dividend Returns 2 0,33+1,34 1,5 EUR 1 0,5 0,3 0,3 0,34 0,3 0 2000 2001 2002 2003 2004 Cash dividend GrowHow shares 28
Slide 29: Increase in Value (100 shares)
Increase in Value (100 shares) Share price 31 March 2003: 5.34 EUR -534 EUR Share price 6 May 2005: 10.50 EUR +1050 EUR __________ Increase in value +516 EUR Dividend 2002: 0.30 +30 EUR 2003: 0.33 + 1.34 = 1.67 +167 EUR 2004: 0.34 +34 EUR GrowHow shares received: 25 shares Acquisition cost 5.35 EUR.
Slide 30: Shareholders 31 March 2005
Shareholders 31 March 2005 (31 March 2004) Households 7.4% Finnish Institutions (6.9%) 22.3% (27.1%) Kemira 3.4% (3.4%) International Institutions 11.7% (6.4%) Finnish State 55.2% Minimum state ownership 15% (56.2%) 30
Slide 31: Looking Ahead
Looking Ahead O 7 = ® ¥
Slide 32: Four Business Areas
Four Business Areas Kemira aims to be the leading chemicals company in all its business areas Pulp & Paper Industrial Chemicals Chemicals Kemwater Kemwater Paints Paints& & Coatings Coatings 32
Slide 33: Kemira's Strategy in Brief
Kemira’s Strategy in Brief Kemira strengthens its business areas through organic growth and acquisitions Strategic priorities when allocating financial resources and focusing activities Improve profitability Create growth Build a unique position Boost synergy across the Group 33
Slide 34: Net Sales 2004, Pro Forma ca. 2 BEUR
Net Sales 2004, Pro Forma ca. 2 BEUR Other Pulp & 4% Paper Chemicals 38 % Paints & Coatings 22 % Kemwater Industrial 14 % Chemicals 22 % Continuing business including acquisitions made in 2005 34
Slide 35: Targeting for Competitiveness and Organic Growth
Targeting for Competitiveness and Organic Growth Increasing focus on R&D A continuous flow of new, innovative products Increasing the share of new products → Organic growth and improved profitability Professional innovation process Combining own resources with university network Partnerships with in
Slide 36: Skilled Staff is Kemira's Strength
Skilled Staff is Kemira’s Strength Dynamic working environment Continuous coaching Participative corporate culture Annual employee opinion survey with actions Renewing the suggestion scheme Compensation system Fair, competitive and rewarding 36
Slide 37: From Good to Great
From Good to Great Implementation: Strategy Strategy Culture Culture Brand Brand Everyone at Kemira Kemira will have a strong, Everyone at Kemira will will know and participative company culture understand what Kemira understand what Kemira which will be created brand means and their role is and whe
Slide 38: Future Kemira
Future Kemira A global group of leading chemicals businesses with high mutual synergy Continuously improving profitability Growth: organic and through M&A Businesses with unique positions Participative corporate culture 38
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Slide 40: Pulp & Paper Chemicals
Pulp & Paper Chemicals No 2 pulp & paper chemicals supplier in the world Revenue 2004, pro forma: 762 MEUR (with Finnish Chemicals) Good market position Globally No 2 Europe No 3 North America No 3 Nordic No 2 Specialty Bleaching Chemicals Other Other Chemicals 54 % Europe 6% 34 % 14 % Pigments Nort
Slide 41: Strong Market Position
Strong Market Position Pulp & Paper Chemicals Bleaching Chemicals Ciba 900 MEUR Eka Chemicals 480 MEUR Kemira 762 Kemira 417 Eka Chemicals 750 Erco 250 BASF 730 Nexen 230 Hercules 730 Solvay 225 Dow 670 Nalco 550 Clariant 260 Erco 250 Bayer 240 41
Slide 42: Pulp and Paper Chemicals Market
Pulp and Paper Chemicals Market Year 2003 Year 2015 Total market EUR 20.3 billion Total market EUR 30.3 billion Recycling Recycling 5% Functional 4% Functional Bleaching chemicals 14 % chemicals Bleaching 0.8 19 % 1.5 20 % 16 % 4.2 6.1 3.3 3.9 Pulping Process 10 % 2.9 Pulping 2.3 2.2 chemicals 3.6 1
Slide 43: Kemwater
Kemwater The leading global supplier of coagulation chemicals to municipal waterworks; solutions for the management of industrial waste water and sludge Revenue 2004: 285 MEUR Geographical breakdown of revenue: Leading market position Nordic (coagulants) Other Countries 3% Global No 1 Americas 25 %
Slide 44: Coagulant Consumption
Coagulant Consumption Scandinavia 18 kg/p Russia North America 5 kg/p 1,5 kg/p Europe Asia 5,3kg/p 1,4 kg/p Mid East 0,7 kg/p Central America 1,5 kg/p Africa 0,6 kg/p South America 1,5 kg/p Australia 1,4 kg/p Kg/Person 44
Slide 45: Kemwater - Competition
Kemwater - Competition Europe North America Kemira Kemira >25% >25% Kemira >30% (all) Kemira >30% (all) (all) (all) Feralco Feralco >10% >10% (all) General General >25% >25% (all) (all) (all) Kronos Kronos >10% >10% (iron) (iron) Geo >10% Geo >10% Atofina >5% (Al) (Al) Atofina >5% (iron) (iron) Hunt
Slide 46: Kemwater - Market Size
Kemwater - Market Size kT Market growth Application Nordic Nordic 550 550 Mature Mature Potable Potable 14% 14% Waste Waste 86% 86% Europe Europe 3,500 3,500 2-3% 2-3% Potable Potable 40% 40% Waste Waste 60% 60% North NorthAmerica America 2,500 2,500 3-4% 3-4% Potable Potable 40% 40% Waste Waste 60%
Slide 47: Industrial Chemicals
Industrial Chemicals Leading position in growing specialty chemicals markets Revenue 2004, pro forma: 437 MEUR (with Verdugt) Good market position Pigments: Leading producer of TiO2 for printing inks Organic Acids and Salts: No 1 globally in selected customer segments Chemidet: No 3 globally Asia &
Slide 48: Industrial Chemicals - Global Market Potential
Industrial Chemicals - Global Market Potential TiO2 pigments 7.000 MEUR Printing ink 200 MEUR FDC (Food, Drug, Cosmetics, UV-Titan) 200 MEUR Organic Salts 150 MEUR Organic Derivatives 20 MEUR Acidifiers & Preservatives 150 MEUR Formic Acid 250 MEUR Propionic Acid 130 MEUR Detergent bleaching solutio
Slide 49: Specialty Pigments
Specialty Pigments Competitors and Customers Competitors (2004) Inks – Kemira share 33% (total market 200+ MEUR) Huntsman (USA) 30% Kronos (USA) 10% Japanese producers 10% FDC – Kemira share 15% (total market 150+ MEUR) Kronos 25% KMG (USA) 15% Huntsman 13% UV-Titan – Kemira share 15% (t
Slide 50: Paints & Coatings
Paints & Coatings Leading player in North and East Europe with strong local brands (Tikkurila, Alcro, Beckers, Vivacolor, etc.) Revenue 2004: 440 MEUR Leading market positions Selected markets: in decorative paints Finland No 1 * Eastern Other Europe 1% Sweden Sweden No 1 33 % 31 % Baltic No 1 * Pol
Slide 51: Paint Consumption in Europe by Area
Paint Consumption in Europe by Area Pohjakartta /Geodata Oy, lupa N:o 1164 /2000 Consumption per capita highest Population/country: in Western Europe million people Significant 5 9 5 145 growth potential 64 7 in Eastern Europe 26 5 17 10 83 39 16 48 20 litres/person 11 22 10 litres/person 16 31 5 li
Slide 52: Decorative Paint Market in Russia
Decorative Paint Market in Russia Market shares (%) Tikkurila Other foreign 9% 21 % Teks 10 % Akzo Nobel Yaroslavskie 6% Kraski 13 % Düfa 3% Empils Other 11 % Russian 27 % Source: Management estimates 52
Slide 53: No 1 or No 2 in Selected Markets
No 1 or No 2 in Selected Markets Pulp & Paper Chemicals: - Globally No 2 Kemwater: - Globally No 1 in coagulants Industrial Chemicals: - No 1 producer of TiO2 for printing inks - Organic acids and salts: No 1 in selected customer segments - No 2 producer of formic acid and No 1 or No 2 in its deriva