Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — Q1 2016 Earnings Presentation
58 slides from Kemira Oyj's earnings presentation, April 2016
Slide 1: Investor presentation
April 2016 Investor presentation • Kemira in brief (slides # 2-13) • Financials (# 14-26) • Pulp & Paper (# 27-34) • Oil & Mining (# 35-39) • Municipal & Industrial (# 40-46) • R&D (# 47-55) • CSR and Shareholders (# 53-56)
Slide 2: The first choice in chemistry for water-intensive industries
The first choice in chemistry for water-intensive industries 2015 Revenue EUR 2.4 billion, Operative EBITDA EUR 287 million and margin of 12.1% Pulp & Paper Oil & Mining Municipal & Industrial Leading global pulp and paper Growing chemical supplier to Oil, Market leader in water treatment chemical s
Slide 3: All segments delivering growth and improved profitability
All segments delivering growth and improved profitability 2017 financial targets: Revenue EUR 2.7 billion, Operative EBITDA 15%, Gearing <60% Pulp & Paper Oil & Mining Municipal & Industrial 60% of Group’s revenue 15% of Group’s revenue 25% of Group’s revenue Growth target Growth target Growth targe
Slide 4: Each segment provides a comprehensive offering
Each segment provides a comprehensive offering 2015 revenue split PULP & PAPER OIL & MINING MUNICIPAL & INDUSTRIAL Chemical, mechanical Packaging, Process chemicals to Minerals & Metals Industrial and recycled pulp board and other industries chemicals water treatment tissue grades 25% 40% 40% 35% 40
Slide 5: Global megatrends favor Kemira
Global megatrends Kemira’s relevant market favor Kemira Market data updated on 26 April 2016 (previous update at the CMD 2015) EUR billion Drivers for growth, including: +2.2% • Increased use of tissue, board and pulp 2.4% • Water reuse, recycled paper and board 5.4 4.8 • Lower water and energy cons
Slide 6: Kemira is truly global – sales in more than 100 countries
Kemira is truly global – sales in more than 100 countries R&D and technology centers Employees ASIA PACIFIC 8% EUR 200 million Manufacturing footprint Responsibility in 540 globally (64 sites): manufacturing: Polymers and other EUROPE, MIDDLE EAST process chemicals (25) We reduce greenhouse AND AFRI
Slide 7: Kemira – path to leading & focused chemical supplier
Kemira – path to leading & focused chemical supplier 2011-2015 2014 2015 2013 • Coagulant production consolidation in Europe mainly to • Closure of three sites to Dormagen (Germany) and Tarragona (Spain) enhance efficiency • Closure of Vaasa 2015 • Establishment of Business Service Center in Poland
Slide 8: Key figures and ratios
Key figures and ratios EUR million (except ratios) 2011* 2012* 2013 2014 2015 Q1 2015 Q1 2016 Revenue 2,207.2 2,240.9 2,229.1 2,136.7 2,373.1 553.0 582.7 Operative EBITDA 248.2 249.4 251.9 252.9 287.3 66.4 72.8 of which margin 11.8% 11.1% 11.3% 11.8% 12.1% 12.0% 12.5% Operative EBIT 152.2 155.5 164.
Slide 9: Growth expected in all segments
Growth expected in all segments 2016 outlook: Revenue and operative EBITDA are expected to increase compared to 2015 • Commercialization of new innovations, Revenue, EUR million 2,700 especially for packaging board and tissue industries 2,373 • Investments in pulp chemicals 2,137 • Revenue synergies
Slide 10: Well defined strategic initiatives driving higher margin
Well defined strategic initiatives driving higher margin Operative EBITDA margin 15% Manufacturing Regulation efficiency, 12.5% Entry into driven growth LEAN New new 11.8% AkzoNobel’s Efficiency roll out, innovative applications paper improvement Operational products, in Oil & Gas chemicals Chemical
Slide 11: 2016 outlook unchanged – Revenue and operative EBITDA to increase
2016 outlook unchanged – Revenue and operative EBITDA to increase 2014 2015 2016 outlook Revenue EUR 2.1 billion EUR 2.4 billion Increase Operative EBITDA EUR 253 million EUR 287 million Increase KEMIRA IN BRIEF FINANCIALS PULP & PAPER OIL & MINING MUNICIPAL & INDUSTRIAL R&D CSR & SHAREHOLDERS 11
Slide 12: Dividend policy – a stable and competitive dividend
Dividend policy – a stable and competitive dividend • Kemira has paid dividend every year since listing of shares in 1994 • Since 2000 Kemira has paid above EUR 800 million in cash dividends and distributed Tikkurila (worth of ~600 M€) and GrowHow (worth of ~160 M€) in dividends • Dividend in 2015,
Slide 13: Kemira investment case highlights
Kemira investment case highlights • Leading market position supporting above-the-market growth • Strong operating cash flow supports investments • Higher profitability through organic growth and efficiencies • Stable and competitive dividend KEMIRA IN BRIEF FINANCIALS PULP & PAPER OIL & MINING MUNIC
Slide 14: Q1 2016 Financial highlights
Q1 2016 Financial highlights Revenue +5% to EUR 583 million (553) • Growth driven by acquisitions Organic growth • Pulp & Paper +3% • Oil & Mining -19% • Municipal & Industrial +1% Operative EBITDA +10% to EUR 72.8 million (66.4) Operative EBITDA margin improved to 12.5% (12.0%) KEMIRA IN BRIEF FINA
Slide 15: Revenue growth continued in Pulp & Paper and Municipal & Industrial
Revenue growth continued in Pulp & Paper and Municipal & Industrial • Pulp & Paper organic growth +3% • Municipal & Industrial organic growth +1% • Oil & Mining revenue decreased 19% in local currencies Kemira Group revenue bridge Q1 2016, EUR million Operative EBITDA and operative EBITDA margin tre
Slide 16: Pulp & Paper continued EBITDA margin improvement
Pulp & Paper continued EBITDA margin improvement • Strong organic growth in APAC and South America, EMEA slightly positive, NA weaker • Operative EBITDA margin of 13.2% – clear improvement vs. 11.5% in Q1 2015 • 4th consecutive quarter for operative EBITDA margin increase Revenue and organic revenue
Slide 17: Oil & Mining – US shale market remains tough
Oil & Mining – US shale market remains tough • Demand for chemicals used in the US shale oil operations continued to decline • Market remains tough and predictability is low • Cost control helped to protect operative EBITDA margin, 8.6% in Q1 2016 Revenue and organic revenue growth (y-on-y) Operativ
Slide 18: Solid profitability in Municipal & Industrial
Solid profitability in Municipal & Industrial • Organic growth of +1% despite lower sales prices driven by higher volumes • Variable costs continued to decrease • Solid operative EBITDA margin of 12.7% – North America recovering from disruption caused by the closure of supplier’s site in Q4 Revenue
Slide 19: Positive impact from low raw material prices continued
Positive impact from low raw material prices continued Variable cost vs sales price trend Electricity price, Finland Forward price development (HELYR-18) 120 EUR/MWh 100 40 80 60 35 40 20 30 0 -20 25 -40 -60 20 -80 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 2016 Brent oil, USD Sales price
Slide 20: Revenue and cost distribution per currency
Revenue and cost distribution per currency • Currency exchange rates had EUR 1 million positive impact on the operative EBITDA in Q1 2016 • Guidance: 10% change in our main foreign currencies would approximately have EUR 15 million impact on operative EBITDA on an annualized basis Kemira revenue dis
Slide 21: Investments into growth
Investments into growth CAPEX (excl. acquisitions) outlook approximately EUR 200 million in 2016 Capital expenditure excl. M&A* EUR million (except Q1 Q1 EUR million ratios) 2014 2015 2015 2016 Capital expenditure excl. 70 146 182 27 31 61 acq. 2014 2015 2016 60 55 Pulp & Paper 83 119 18 17 49 50 44
Slide 22: Pulp & Paper key financials
Pulp & Paper Key financials EUR million 2011* 2012* 2013 2014 2015 Q1 2015 Q1 2016 Revenue 973 1,047 1,068 1,170 1,417 314.6 362.4 Operative EBITDA 120.4 109.0 130.3 137.2 171.0 36.1 47.9 of which margin 12.4% 10.4% 12.2% 11.7% 12.1% 11.5% 13.2% Operative EBIT 66.3 76.5 86.5 85.8 96.8 20.7 28.2 of w
Slide 23: Oil & Mining key financials
Oil & Mining Key financials EUR million 2011* 2012* 2013 2014 2015 Q1 2015 Q1 2016 Revenue 335.7 321.1 311.5 382.2 350.1 93.9 75.5 Operative EBITDA 33.9 40.6 32.7 48.4 33.5 11.1 6.5 of which margin 10.1% 12.6% 10.5% 12.7% 9.6% 11.8% 8.6% Operative EBIT 19.9 25.9 17.4 29.9 11.1 5.8 0.8 of which margi
Slide 24: Municipal & Industrial key financials
Municipal & Industrial Key financials EUR million 2011* 2012* 2013 2014 2015 Q1 2015 Q1 2016 Revenue 664.7 686.6 659.4 564.7 605.7 144.5 144.8 Operative EBITDA 68.7 64.0 68.3 68.1 82.8 19.2 18.4 of which margin 10.3% 9.3% 10.4% 12.1% 13.7% 13.3% 12.7% Operative EBIT 41.8 34.2 45.8 43.3 55.2 12.6 11.
Slide 25: Solid financial position with diversified debt portfolio
Solid financial position with diversified debt portfolio • Gearing increased to 60% (49%) due to Capital structure, end of Q1 2016 EUR million acquisitions and fair value valuation of energy assets Net debt, 644 million • Senior unsecured bond of EUR 150 million Cash and cash 1,074 issued in 2015, w
Slide 26: Shifting focus to fast growing differentiated products
Shifting focus to fast growing differentiated products Share of differentiated products were 51% in Q1 2016 Differentiated product line drivers: Commodity product line drivers: Application sales Capacity increases driving bleaching and pulping Production optimization Market share driving coagulants
Slide 27: Pulp & Paper – executing growth strategy
Pulp & Paper – executing Revenue, EUR million growth strategy +21% 1,417 1,170 • Regional market dynamics - North America: tight competitive situation - APAC: new greenfields projects • Synergy capture from AkzoNobel’s 2014 2015 paper chemicals acquisition is on track • Continued higher utilization
Slide 28: Pulp & Paper delivering on its growth strategy
Pulp & Paper delivering on its growth strategy 2015 P&P revenue: EUR 1,417 million (53% EMEA, 35% Americas, 12% APAC) Kemira revenue split in 40% Kemira revenue split in Pulp & Paper Pulp & Paper EUR billion Packaging, board and 1.4 tissue grades 1.1 1.2 APAC Americas 40% Chemical, mechanical EMEA a
Slide 29: Pulp & Paper market is expected to grow at 1.5% CAGR
Pulp & Paper market is expected to grow at 1.5% CAGR* Relevant target market (EUR billion) +1.5% +1.5% ~10 ~10 ~9.5 ~9.5 ~9 ~9 3-4% 2-3% Packaging SA & Tissue 2-3% APAC Printing -1% flat & Writing NA 1-2% 0-1% Pulp EMEA CAGR CAGR 2015- 2015- 2015 2017 2020 2020 2015 2017 2020 2020 *) Management esti
Slide 30: Long-term commitment to pulp and paper industry
Long-term commitment to pulp and paper industry Kemira pulp and paper revenue more than doubled since 2004 2015 Kemira (pulp and paper) #1 Solenis (paper) #2 AkzoNobel (pulp) #3 Ecolab (paper) #4 BASF (paper) #5 2004 Ciba #1 AkzoNobel #2 BASF #3 Hercules #4 Kemira #5 Nalco #6 KEMIRA IN BRIEF FINANCI
Slide 31: Acquisition of AkzoNobel's paper chemicals business strengthens market share
Acquisition of AkzoNobel’s paper chemicals business strengthens Kemira’s market share • Revenue of acquired business more than EUR 200 million • Transaction is expected to result in EUR 15 million annual net synergies • Kemira received 6 production sites of which 4 in APAC. One in Italy closed. #1 P
Slide 32: AkzoNobel's paper chemicals business synergies
EUR 15 million synergies from the integration of AkzoNobel’s paper chemicals business Expected synergies, EUR million Synergy realization run rate, % 15 100% ~50% ~20% Total Manu- Sourcing Other fixed 2015 2016 2017 facturing and supply costs chain KEMIRA IN BRIEF FINANCIALS PULP & PAPER OIL & MININ
Slide 33: Total Chemistry Management (TCM) offering brings new growth
Total Chemistry Management (TCM) offering brings new growth • Kemira’s wide offering, regional manufacturing footprint as well as knowledgeable, dedicated and experienced people enable better service compared to peers • In Q4 2015, several TCM deals signed in the EMEA and APAC region • New revenue o
Slide 34: Pulp & Paper – Technology and market leader
Pulp & Paper – Technology and market leader RAW CUSTOMER INTERMEDIATES PRODUCTS APPLICATIONS CUSTOMERS MATERIALS IDUSTRIES Electricity Tall oil rosin Sodium chlorate Pulping Pulp All the major Sodium chloride AKD Wax Hydrogen peroxide Bleaching Packaging global paper (salt) Isomerized olefins Polyme
Slide 35: Oil & Mining – near-term mitigations with focus on long-term opportunities
Oil & Mining – near-term Revenue, EUR million mitigations with focus on 382 -8% long-term opportunities 350 • Maintaining cost discipline • Protecting existing business • Investing in new applications 2014 2015 • CEOR sales pipeline development Operative EBITDA, EUR million • Adjusting CAPEX to new
Slide 36: Kemira's strength is in oil & gas shale market in NA
Kemira’s strength is in oil & gas shale market in NA 2015 O&M revenue: EUR 350 million (30% EMEA, 70% Americas) NA chemicals market in shale Polymer competitors operations 2015 • Drastic drop in oil price in E 2015 led to decrease in EUR Natural D activity of shale fracking million Polymers • Kemira
Slide 37: CEOR is a considerable growth opportunity
CEOR is a considerable growth opportunity • Kemira entered Chemical Enhanced Oil Oil recovery methods Recovery market with deliveries of polyacrylamides to Cairn in India in Q2 Primary recovery Natural flow Less than 30% Artificial lift 2015 • Master collaboration agreement with Chevron • Increase o
Slide 38: Continued focus on innovation and new services
Continued focus on innovation and new services Canada Oil Sands • Oil Sands Chemicals estimated market size EUR 400 million • Canadian Producers expect Oil Sands production to grow ~5% per year through 2030 • Polymers largest product segment at ~ EUR 150 million • New legislation in Canada requires
Slide 39: Oil & Mining – Strengthening position with innovation chemicals and application knowledge
Oil & Mining – Strengthening position with combination of innovation chemicals and application knowledge RAW INTERMEDIATES PRODUCTS APPLICATIONS CUSTOMERS MATERIALS Acrylonitrile Acrylamide Polymers Friction Reduction Pumpers Acrylic acid Dispersants & Formation & Well Scale Oil & Gas Various monome
Slide 40: Municipal & Industrial – continued steady growth and cash generation
Municipal & Industrial – Revenue, EUR million continued steady growth +7% 606 and cash generation 565 • Good execution in EMEA • Volume growth and favorable variable cost environment continued 2014 2015 in a competitive market Operative EBITDA, EUR million • Recovery from North American supply disru
Slide 41: M&I – Steady growth and cash flow generation
M&I – Steady growth and cash flow generation 2015 M&I revenue: EUR 606 million (65% EMEA, 31% Americas, 4% APAC) • Further strengthen the base business Revenue, EUR million 2,700 in raw and waste water treatment applications 2,373 • Ensure efficiency as well as cost and product leadership through op
Slide 42: M&I has increased its ROCE up to 17%
M&I has increased its ROCE up to 17% Operative ROCE Revenue projection 17% CAGR: 2-4% 14% 13% 10% 2012 2013 2014 2015 2015 2017 We have executed successfully the We plan to grow slightly faster than Circular economy and investment into cash generator strategy the underlying market whilst innovation
Slide 43: Fixed costs kept under tight control
Fixed costs kept under tight control Fixed cost development CAPEX development NWC development EUR million & percent of Revenue EUR million Percent of Revenue 27% 26% 26% 25% 13% 47 35 34 32 9% 8% 7% 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015 KEMIRA IN BRIEF FINANCIALS PULP & PAPER O
Slide 44: Our strategy is based on solid execution of base business
Our strategy is based on solid execution of base business Our current position Base initiatives Options for higher cash generation • Restructured to focus on core • Ensure efficiency and cost Building “Advanced Water business leadership Treatment” applications on • Market leader in water • Continue
Slide 45: Five focus areas for the future development
Five focus areas for the future development Innovation driven focus areas for growth – “Advanced Water Treatment” Water availability “Utilization of waste water for reuse” Sludge “From volume reduction to value” Nutrient “From removal to recovery” Energy “From saving to energy positive” Smart techno
Slide 46: Municipal & Industrial - Technology and market leader
Municipal & Industrial - Technology and market leader in raw and waste water as well as sludge treatment RAW INTERMEDIATES PRODUCTS APPLICATIONS SALES CHANNEL CUSTOMERS MATERIALS Acrylonitrile Acrylamide Polymers Raw water Direct sales Municipalities Sulfuric acid Cationic monomer (EPAM, DPAM) treat
Slide 47: Research and Development
Research and Development Sustainable solutions through innovations 47
Slide 48: Kemira Global R&D – a world class team
Kemira Global R&D – a world class team R&D investments over EUR 30 million annually New product revenue Employees & expertise Product time-to-market EUR million 75 Persons Months = Target 200 Oil and gas, minerals and mining Polymer chemistries Scale and corrosion control Manufacturing process devel
Slide 49: Clear path towards growth in innovation sales
Clear path towards growth in innovation sales New products in the pipeline M&I Paper O&M 10 M€ Revenue 2 years after 1 M€ Launch September 2015 December 2015 March 2016 June 2016 KEMIRA IN BRIEF FINANCIALS PULP & PAPER OIL & MINING MUNICIPAL & INDUSTRIAL R&D CSR & SHAREHOLDERS 49
Slide 50: Kemira enables sustainable packaging
Kemira enables sustainable packaging Example #1 FOR PULP & PAPER INDUSTRY LIGHTER DURABLE PACKAGES Kemira FennoBond™ enables usage of less Package weight fibers with maintained strength and stiffness properties. -10% Savings through raw material efficiency, contributing to lower transportation costs
Slide 51: Kemira enables higher oil recovery rate
Kemira enables higher oil recovery rate Example #2 FOR OIL & GAS INDUSTRY OIL WATER WATER WATER WATER In Chemical Enhanced Oil Recovery 1 % increase in recovery equals 2 years of oil Without polymer production. With Kemira polymer technology recovery rate improvement up to 15%. OIL OIL OIL OIL WATER
Slide 52: Kemira enables clean water cycle
Kemira enables clean water cycle Example #3 FOR WATER TREATMENT Water purified with Kemira products million m3* We optimize the efficient utilization of 20000 resources with chemistry and expertise at 18000 16000 every stage of water management. 14000 12000 10000 8000 Our global water challenges in
Slide 53: Corporate Responsibility and Shareholder structure
Corporate Responsibility and Shareholder structure 53
Slide 54: Targets & Performance: Q1 2016
Targets & Performance: Q1 2016 Focus area Issue, KPI, target value Comments Status INNOVATION SALES 10% 10% 8% 8% 8% 7% Share of innovation revenue of total Due to some delays in commercialization 8% TARGET 5% 6% revenue, % of NPD projects the Innovation sales is 4% Sustainable currently behind the
Slide 55: Targets & Performance: Q1 2016
Targets & Performance: Q1 2016 Focus area Issue, KPI, target value Comments Status OCCUPATIONAL HEALTH AND SAFETY EHSQ Code of Behaviours launched and trainings 10 8.5 7.1 7.2 Number of Total Recordable Injuries initiated globally. Safety KPIs set as bonus target 5.8 5.7 (TRI) (per million hours, Ke
Slide 56: Kemira – largest shareholders
Kemira – largest shareholders Shareholders on March 31, 2016 Institutional investors as of September 2015 Switzer- Rest of the world % of shares France land 2% 6% 4% 1. Oras Invest 18.2% The Netherlands 2. Solidium (owned by State of Finland) 16.7% 5% 3. Varma Mutual Pension Insurance Company 5.3% S
Slide 57: Shareholder value driven by growth and cash flow generation
Shareholder value driven by growth and cash flow generation • Leading market position supporting above-the-market growth • Strong operating cash flow supports investments • Higher profitability through organic growth and efficiencies • Stable and competitive dividend
Slide 58: Kemira Capital Markets Day
Kemira Capital Markets Day Haberdashers’ Hall, London Thursday, September 15, 2016 Program: 12.00 pm Buffet lunch and registration 12.30 pm Management presentations & breakout sessions 6.30 pm Cocktails and canapés Management attending: Jari Rosendal, President and CEO Petri Castrén, CFO Kim Poulsen