Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — Q2 2006 Earnings Presentation
41 slides from Kemira Oyj's earnings presentation, Jul 27, 2006
Slide 1: Kemira's Growth Continues
Kemira’s Growth Continues Lasse Kurkilahti, President & CEO 27 July 2006 Investor Relations: Päivi Antola, tel. +358 1086 21140
Slide 2: Contents
Contents Q2 Group Highlights Q2 Business Area Highlights Growth continues 2
Slide 3: Q2 Group Highlights
Q2 Group Highlights O = = ® ¥
Slide 4: Growth Continues
Growth Continues Q2 revenue up 23% Organic growth 8% Acquisitions EUR 86 million Kraski Teks Lanxess paper chemicals H1 revenue up 29% EPS up 73% in Q2 Overall, increases in raw material and energy prices were passed on into selling prices Kemira’s structural change and related projects continued, i
Slide 5: Growth Boosted by Acquisitions
Growth Boosted by Acquisitions Organic Q2/06 Q2/05 Change growth Revenue (MEUR) 647.5 526.2 23% 8% EBIT (MEUR) 51.5 39.6 30% EBIT, % 8.0 7.5 EPS (EUR) 0.26 0.15 73% ROCE, % 10.4 9.4 Cash flow after CapEx, excl. 44.0 35.3 acquisitions (MEUR) 5
Slide 6: Revenue up 23% in Q2
6 400 450 500 550 600 650 700 Q 2/ 20 05 MEUR Pr ic e Vo lu m e C ur re nc In y d us tri Revenue up 23% in Q2 al d is pu te A cq u is i tio n s D iv e st m en ts O th er Q 2/ 20 06
Slide 7: H1 Growth Profile, %
H1 Growth Profile, % 60 50 40 % 30 20 10 0 Pulp & Paper Kemwater Performance Paints & Chemicals Coatings Organic Growth Acquisitions Industrial Dispute 7
Slide 8: Revenue Development 2002-2006
Revenue Development 2002-2006 Q2/2006: 647.5 MEUR, +23% (Q2/2005: 526.2 MEUR) 2800 2400 2000 1600 MEUR 1200 800 400 0 2002 2003 2004* 2005 2006 Q1 Q2 Q3 Q4 *Continuing operations 8
Slide 9: EBIT up 30% in Q2
9 0 10 20 30 40 50 60 70 Q 2/ 20 05 Pr MEUR ic e Vo lu m e C ur re nc Va y ria b le co st EBIT up 30% in Q2 s Fi xe d In co d us st s tri al d is pu te A cq u is i tio n s D iv e N st m on en -r e cu ts rr in g ite m s O th er Q 2/ 20 06
Slide 10: EBIT by Quarter
EBIT by Quarter 200 10 8 150 6 MEUR 100 % 4 50 2 0 04* 0 02 03 05 06 EBIT % *Continuing operations. Excluding a write-down of 78 MEUR in Q4/02 10
Slide 11: EPS by Quarter, ROCE
EPS by Quarter ROCE 1 12 0,9 0,8 10 0,7 8 0,6 EUR % 0,5 6 0,4 0,3 4 0,2 2 0,1 * Continuing operations 0 0 excluding a non- recurring charge of 44.2 2002 2003 2005 2006 2004* MEUR in Q4/04. Q4/02 exludes a write- down of 78 MEUR. ROCE, 12-month rolling average 11
Slide 12: Balance Sheet
Balance Sheet 30 June 06 31 Dec 05 Net debt (MEUR) 770.2 619.7 Equity (MEUR) 1,042.9 1,019.2 Equity ratio, % 40 44 Gearing, % 74 61 Capital employed (MEUR) 1,853.0 1,766.2 Personnel 9,695 7,670 12
Slide 13: Cash Flows in H1
Cash Flows in H1 MEUR H1/06 H1/05 Cash flows from operations 28.3 -9.4 Acquisitions -102.2 -285.5 CapEx excl. acquisitions -59.6 -51.6 Sale of fixed assets 33.8 52.8 Cash flows from investing activities -128.0 -284.2 Free cash flow -99.7 -293.6 13
Slide 14: CapEx Excluding Acquisitions
CapEx Excluding Acquisitions CapEx H1/06: 59.6 MEUR (H1/05: 51.6) Investment in the chemical plant in Uruguay 13.8 MEUR Depreciation in H1/06: 59.4 MEUR (H1/05: 57.3) Maintenance Improvement 23 % 33 % Expansion 44 % 14
Slide 15: Q2 Business Area Highlights
Q2 Business Area Highlights O = = ® ¥
Slide 16: Pulp & Paper Chemicals in Q2
Pulp & Paper Chemicals in Q2 Revenue up by 55% to 257.9 MEUR Organic growth excl. 2005 industrial dispute 4% Acquisition of Lanxess paper chemicals +56.8 MEUR, integration progressing well EBIT 20.4 MEUR, ROCE 11.1% (8.6%) Efficiency measures High capacity utilization rates in the customer industry
Slide 17: Pulp & Paper Chemicals
Pulp & Paper Chemicals MEUR Revenue EBIT & ROCE MEUR % 800 70 20 700 60 600 15 50 500 40 400 10 30 300 200 20 5 100 10 0 0 0 02 03 04 05 06 02 03 04 05 06 EBIT % ROCE Q1 Q2 Q3 Q4 The figures are not fully comparable. 17
Slide 18: Pulp & Paper Chemicals' Outlook
Pulp & Paper Chemicals’ Outlook Revenue for 2006 expected to increase on 2005 Capacity utilization rates within the customer industry Acquisitions of Finnish Chemicals and Lanxess paper chemicals EBIT expected to increase Operative efficiency The acquisition of the Lanxess paper chemicals business e
Slide 19: Kemwater in Q2
Kemwater in Q2 Revenue up by 14% to 102.1 MEUR All growth organic Performance strong in North America and Central Europe EBIT up by 22% to 9.6 MEUR, ROCE 13.9% (13.9%) High raw material and transportation costs especially in North America Oulun Vesi in Finland a new sludge management customer Q2/06
Slide 20: Kemwater
Kemwater MEUR 400 Revenue MEUR EBIT & ROCE % 350 35 20 300 30 15 250 25 200 20 10 150 15 100 10 5 50 5 0 0 0 02 03 04 05 06 02 03 04 05 06 EBIT % ROCE Q1 Q2 Q3 Q4 Q4/04 excluding extra write-downs and The figures are not fully comparable. costs of 11 MEUR. 20
Slide 21: Exciting Opportunities for Growth by Broadening the Product Offering
Exciting Opportunities for Growth by Broadening the Product Offering • SNF r age • Polymers/specialities • Ciba e • Cytec lev g • Ashland/Degussa et in rk Ma 2 BEUR Growth rate 5%/a Package deals • Sludge management Coagulants (organic) (organic/acquisitions) EUR 2 billion Raw mate Growth rate 8%/a
Slide 22: Acquisition of Cytec Water Chemicals
Acquisition of Cytec Water Chemicals Revenue 270 MEUR Water treatment chemicals (polyacrylamides) 80% Intermediates for polymers (acrylamides) 20% Debt-free purchase price 190 MEUR EPS enhancing from 2007 Estimated synergies 10 MEUR: cross-selling, cost savings Strategic fit: from coagulant supplier
Slide 23: Flocculant Applications
Flocculant Applications WATER TREATMENT • Raw water treatment • Waste water purification • Sludge dewatering • Water clarification at dredging PULP & PAPER INDUSTRY • Retention and formation control • Improvement of drainage • Treatment of recycled water • Waste water and sludge treatment FLOCCULANT
Slide 24: Cytec Revenue
Cytec Revenue Revenue EUR 270 million Food 4 % Textile Other 2% Mining Chemicals 6% 6% 4% Paper Industrial 33 % North America Water 45 % 8% Oil Europe 10 % 49 % Municipal Intermediates 12 % 21 % 24
Slide 25: Kemwater's New Manufacturing Plants
Kemwater’s New Manufacturing Plants 25
Slide 26: Main Flocculant Players
Main Flocculant Players Company Market share SNF 35% Total market CIBA 18% ~ EUR 2 billion Kemira 15% Growth forecast 5% / a Ashland 10% Nalco 5% Hengju 4% (Management estimates) 26
Slide 27: Main Coagulant Players
Main Coagulant Players Europe North America Company Market share Company Market share Kemira (all) 30% Kemira (all) 30% Feralco (all) 10% General Chemicals (all) 26% Kronos (iron) 10% GEO (Al) 12% Giulini 8% PVS 5% Sachtleben 5% Arkema 5% Total market Akzo 5% ~ EUR 2 billion Growth forecast Huntsman
Slide 28: Kemwater after the Acquisition
Kemwater after the Acquisition The leading global supplier of coagulation chemicals to municipal waterworks, industrial waste water treatment and sludge management Revenue 2005, pro forma ~ 650 MEUR Leading market position in coagulants, No 3 in flocculants Other Municipal 12 % 46 % Industrial North
Slide 29: Kemwater's Outlook
Kemwater’s Outlook Revenue and EBIT for 2006 expected to increase from 2005 levels Demand for Kemwater’s water treatment chemicals expected to remain at a good level Particular attention devoted to expanding new businesses, i.e. flocculants, sludge treatment and water treatment services for industry
Slide 30: Performance Chemicals in Q2
Performance Chemicals in Q2 Revenue down by 1% to 107.6 MEUR Fall in sales volumes in TiO2 due to a one-day strike in Pori, Finland Average prices of TiO2 in euros slightly up Specialty TiO2 products’ share of sales up Sales prices of organic acids and acid derivatives up EBIT up by 30% to 11.7 MEUR
Slide 31: Performance Chemicals, cont.
Performance Chemicals, cont. Joint venture to be established in Brazil for feed additives JV with Metachem Industrial e Comercial, Kemira’s share 51% Organic acid derivatives for animal feeds Expansion of formic acid production in Oulu, Finland Investment 10 MEUR Technological improvements and energ
Slide 32: Performance Chemicals
Performance Chemicals MEUR Revenue EBIT & ROCE MEUR % 500 50 20 Net sales 400 40 15 300 30 10 200 20 100 5 10 0 0 0 02 03 05 06 04* 02 03 05 06 04* Q1 Q2 Q3 Q4 EBIT % ROCE The figures are not fully comparable. *Continuing operations 32
Slide 33: Performance Chemicals' Outlook
Performance Chemicals’ Outlook Revenue and EBIT expected to increase on 2005 TiO2 prices projected to be at the current level or slightly higher Demand for TiO2 expected to remain steady or edge up slightly Specialty pigments anticipated to increase their share of TiO2 sales Sales of organic acids a
Slide 34: Paints & Coatings in Q2
Paints & Coatings in Q2 Revenue up 23% to 170.3 MEUR Organic growth +3% Good demand for decorative paints in most of the main markets Acquisition of Kraski Teks +38.3 MEUR, integration progressing well EBIT up by 24% to 25.0 MEUR, ROCE 21.3% (14.5%) One-time income of 3.3 MEUR from the sale of a fac
Slide 35: Paints & Coatings
Paints & Coatings MEUR Revenue EBIT & ROCE MEUR % 500 60 20 400 50 16 40 ------ 300 12 30 ------ ------ 8 200 20 10 4 100 0 0 0 -10 -4 02 03 04 05 06 02 03 04 05 06 Q1 Q2 Q3 Q4 EBIT % ROCE 35
Slide 36: Paints & Coatings' Outlook
Paints & Coatings’ Outlook Paints & Coatings expected to generate higher revenue for 2006 Demand at a good level in all market areas EBIT projected to grow (excluding EUR 9.5 million in non-recurring income included in operating profit for 2005) The acquisition of Kraski Teks in Russia will boost th
Slide 37: Outlook for 2006 – Kemira Group
Outlook for 2006 – Kemira Group Kemira Group’s growth is expected to continue in Q3 Acquisitions of Lanxess and Kraski Teks Organic growth Raw material and energy prices are expected to increase to a certain extent and continue the pressure on profitability in all business areas Kemira’s revenue, EB
Slide 38: Growth continues
Growth continues O = = ® ¥
Slide 39: Revenue 2005, Pro Forma ~ EUR 2.8 Billion
Revenue 2005, Pro Forma ~ EUR 2.8 Billion Including Lanxess paper chemicals, Kraski Teks, Cytec water chemicals, Finnish Chemicals and Verdugt for the whole year Other Asia 1% Paints & Coatings 5% 20 % Pulp & Paper Chemicals 39 % Americas 28 % Performance Chemicals Europe 17 % 66 % Water Treatment C
Slide 40: Goal
Goal A global group of leading chemicals businesses with unique positions and high mutual synergy Great profitability, continuous improvement Continuous growth: organic and through M&A Participative, entrepreneurial company culture → More ambition, more dynamics 40
Slide 41: Just add
Just add