Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — FY2004 Earnings Presentation
64 slides from Kemira Oyj's earnings presentation, February 2005
Slide 1: Results for the 2004 financial year
Results for the 2004 financial year Lasse Kurkilahti President & CEO February 2005
Slide 2: Results for the 2004 financial year
Results for the 2004 financial year Highlights & key indicators Business area reviews Looking ahead 2
Slide 3: 2004 highlights
2004 highlights Focus on core businesses A year of significant structural changes Spin-off of Kemira GrowHow Several divestments (Calcium chloride business, Kemira Fine Chemicals Oy, etc.) Continuous improvement of performance and efficiency 3
Slide 4: 2004 key indicators
2004 key indicators 2004 2003 Ch% Net sales (MEUR) 2,533 2,738 -7 EBIT (MEUR) 194* 149 30 EPS (diluted, EUR) 0.63 0.64 ROCE, % 11.2 7.5 Cash flow after capital exp. 238 19 (MEUR) Proposed dividend EUR 0.34 / share (2003: EUR 0.33) *Including +62 MEUR of one-time items 4
Slide 5: 2004 key indicators
2004 key indicators 31 Dec 04 31 Dec 03 Ch% Equity ratio, % 47 41 Gearing, % 21 68 Capital employed (MEUR) 1,206 1,869 -35 Personnel 7,137 10,498 -32 5
Slide 6: Net sales, MEUR
Net sales, MEUR 2800 2400 2000 1600 1200 800 400 0 2000 2001 2002 2003 2004 Q1 Q2 Q3 Q4 6
Slide 7: EBIT, MEUR
EBIT, MEUR 200 11 % 9 150 7 100 5 50 3 1 0 -1 2000 2001 2002 2003 2004 -50 -3 Operating income % Excluding write-down of 78 MEUR in Q4/02 and extraordinary gain of 52 MEUR in Q3/04 7
Slide 8: EPS and ROCE
EPS and ROCE 1,5 12 % 10 1 8 6 0,5 4 2 0 0 2000 2001 2002 2003 2004 -2 -0,5 -4 ROCE 2004 EPS includes 18 MEUR one-time items. Q4/02 exludes a write-down of 78 MEUR. 8
Slide 9: Cash flow after net capital expenditure
Cash flow after net capital expenditure 550 550 450 450 350 350 250 250 150 150 50 50 -50 -50 2000 2001 2002 2003 2004 -150 -150 Cash flow from operations 9
Slide 10: Equity ratio and gearing, %
Equity ratio and gearing, % 50 80 70 40 60 30 50 40 20 30 20 10 10 0 0 2000 2001 2002 2003 2004 Gearing, % 10
Slide 11: Personnel
Personnel 10 000 8 000 6 000 4 000 2 000 0 00 01 02 03 04 Finland Other countries At year end 11
Slide 12: Focus on core businesses
Focus on core businesses Kemira GrowHow spin-off Divestments Calcium chloride business Kemira Fine Chemicals Oy Kemira Ecocat Oy Metpela Oy CPS Color Group Oy (remaining 27%) Kemira Engineering Oy Other asset divestments Cash flow from sale of businesses and assets 191 MEUR 12
Slide 13: Growth by investments and acquisitions
Growth by investments and acquisitions Pulp & Paper Chemicals De-bottlenecking of hydrogen peroxide, Helsingborg, Sweden E.QU.I.P International, Canada Kemwater Eaglebrook, USA; Zlotniki, Poland; Belinka, Slovenia Industrial Chemicals Ferrous sulphate dryer, Pori Paints & Coatings Kolorit Paints (51
Slide 14: 2004 key figures – continuing business
2004 key figures – continuing business Continuing business excluding GrowHow 2004 2003 Ch% Net sales (MEUR) 1,781 1,645 8 EBIT (MEUR) 185* 110 68 EPS (diluted, EUR) 0.65 0.28 132 ROCE, % 14.1 7.9 Cash flow after capital exp. 252 39 (MEUR) *Including +70 MEUR of one-time items 14
Slide 15: 2004 underlying results
2004 underlying results Continuing business excluding GrowHow and the effect of divested businesses 2004 2003 Ch% Net sales (MEUR) 1,695 1,496 13 EBIT (MEUR) 110* 100 10 EPS (diluted, EUR) 0.50* 0.39 24 ROCE, % 8.5 7.5 Cash flow after capital exp. 143 30 (MEUR) *Including +17 MEUR of one-time items
Slide 16: Q4 underlying results
Q4 underlying results Continuing business excluding GrowHow and the effect of divested businesses Q4/04 Q4/03 Ch% Net sales (MEUR) 391 348 12 EBIT (MEUR) 11* 10 EPS (EUR) 0.09* -0.05 ROCE, % 8.5 7.5 Cash flow after capital exp. 48 24 (MEUR) *Including +12 MEUR of one-time items 16
Slide 17: Net sales by business area
Net sales by business area Net sales 2004: 1,695 MEUR* Other 5% Paints & Coatings Pulp & 26 % Paper Chemicals 33 % Industrial Chemicals 19 % Kemwater 17 % *Continuing business excluding GrowHow and the effect of divested businesses 17
Slide 18: Geographical breakdown of net sales 2004
Geographical breakdown of net sales 2004 Net sales 2004: 1,695 MEUR* Other Asia 3% 7% Americas 21 % EU 59 % Other Europe 10 % *Continuing business excluding GrowHow and the effect of divested businesses 18
Slide 19: EBIT by business area
EBIT by business area Paints & Coatings; 38,4 Pulp & Paper MEUR Chemicals; 44,8 MEUR Industrial Chemicals; Kemwater; 33,0 MEUR 25,4 MEUR Excluding the effect of other operations and divested businesses. Kemwater excluding one-time write-off of 11 MEUR. 19
Slide 20: Capital employed by business area
Capital employed by business area 31 Dec 2004: 1,206 MEUR (31 Dec 2003: 1,869 MEUR) Paints & Coatings Pulp & Paper 22 % Chemicals 37 % Kemwater Industrial 16 % Chemicals 25 % 20
Slide 21: ROCE by business area 2004
ROCE by business area 2004 25 20 18,5 16,2* 15 13,4** 13,7 2003 11,4 10 9,6 9,9 9,8 2004 5 0 Pulp & Kemwater Industrial Paints & Paper Chemicals Coatings * Excl. extra write-downs and costs of 11 MEUR **Excl. capital gain of 52 MEUR. Including the capital gain: ROCE 29.4%. 21
Slide 22: Personnel by business area
Personnel by business area Kemira, total at 31 Dec 2004: 7,137 Other; 350 Pulp & Paper Chemicals; 1728 Paints & Coatings; 2288 Kemwater; 1461 Industrial Chemicals; 1310 22
Slide 23: Business area reviews
Business area reviews O 7 = ® ¥
Slide 24: Pulp & Paper Chemicals
Pulp & Paper Chemicals No 2 pulp & paper chemicals supplier in the world, thanks to the acquisition of Finnish Chemicals Net sales 2004: 566 MEUR (+250 MEUR) Good market position Globally No 2 Europe No 3 Breakdown of net sales (816 MEUR): North America No 3 Pigments Nordic No 2 and Specialty additi
Slide 25: Pulp & Paper Chemicals net sales, EBIT & ROCE
Pulp & Paper Chemicals Net sales EBIT & ROCE 600 50 12 % 500 10 40 400 € million 8 30 300 € million 6 200 20 4 100 10 2 0 0 0 00 01 02 03 04 00 01 02 03 04 1-3 4-6 7-9 10-12 Operating income % ROCE The figures are not fully comparable due to changes in the business structure. 25
Slide 26: Pulp & Paper Chemicals
Pulp & Paper Chemicals Net sales of all business units grew Organic growth especially in bleaching chemicals and calcium sulphate pigments EBIT up by 6.9% 7.9% of net sales (2003: 8.0%) ROCE 9.9% (2003: 9.6%) MEUR 2004 2003 Ch% Q4/04 Q4/03 Ch% Net sales 566 521 9 144 137 5 EBIT 44.8 41.9 7 12.8 8.3
Slide 27: Pulp & Paper Chemicals
Pulp & Paper Chemicals Acquisition of E.QU.I.P International Strengthening position in North America De-bottlenecking of hydrogen peroxide, Helsingborg, Sweden and Europoort, The Netherlands Outlook for 2005: Signs of improved business cycle in the pulp and paper industry Availability of some raw ma
Slide 28: Finnish Chemicals
Finnish Chemicals A leading pulp bleaching chemicals company with a turnover of close to 250 MEUR Locations: Äetsä, Joutseno and Kuusankoski in Finland; Eastover (SC) and Augusta (GA) in the USA Products: sodium chlorate (2/3 of the turnover), sodium borohydride, caustic, chlorine dioxide, sodium hy
Slide 29: Kemira growing in pulp and paper chemicals
Kemira growing in pulp and paper chemicals Situation today in total Situation after the acquisition Ciba 900 M€ Ciba 900 M€ Eka Chemicals 750 Kemira 810 BASF 730 Eka Chemicals 750 Hercules 730 BASF 730 Dow 670 Hercules 730 Kemira 570 Dow 670 Nalco 550 Nalco 550 Clariant 260 Clariant 260 Erco 250 Erc
Slide 30: Kemira / Finnish Chemicals synergies
Kemira / Finnish Chemicals synergies More efficient production North American position strengthened Favourable power supply situation The leading pulp producers common Increased volumes customers Increase in sales Bigger growth opportunities Full product portfolio for bleaching On-site bleaching che
Slide 31: Kemwater
Kemwater The leading global supplier of coagulation chemicals to municipal waterworks; solutions for the management of industrial waste water and sludge problems. Net sales 2004: 285 MEUR Geographical breakdown of Leading market position net sales (coagulants) Other Nordic countries Global No 1 3% A
Slide 32: Kemwater net sales, EBIT & ROCE
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 00 01 02 03 04 00 01 02 03 04 1-3 4-6 7-9 10-12 Operating income % ROCE The figures are not fully comparable Excluding extra write-downs and costs of due to changes in business structure.
Slide 33: Kemwater
Kemwater Net sales up by 33% Acquisitions of Eaglebrook, USA in November 2004 and Kemiron, USA in August 2003 EBIT 9% of net sales (2003: 11%) excluding one-time write-downs and costs of 11 MEUR in Q4/04 Higher prices of raw materials ROCE 16.0% (2003: 18.5%) without one-time items ROCE with one-tim
Slide 34: Kemwater
Kemwater Largest player in coagulants in North-America Acquisition of Eaglebrook Stronger position in water treatment in Poland and Slovenia Acquisitions of Zlotniki in Poland and Belinka in Slovenia Outlook for 2005: Demand for water treatment chemicals expected to grow Price increases in some raw
Slide 35: Industrial Chemicals
Industrial Chemicals A world-class specialist with a strong technology base and a leading position in attractive specialty chemicals markets Net sales 2004: 389 MEUR (excluding divested businesses: 315 MEUR) Good market position Breakdown of net sales Pigments: Leading producer (315 MEUR + 110 MEUR
Slide 36: Industrial Chemicals net sales, EBIT & ROCE
Industrial Chemicals Net sales EBIT & ROCE 500 60 % Net sales 18 400 50 16 14 300 40 € million 12 € million 30 10 200 8 20 6 100 4 10 2 0 0 0 00 01 02 03 04 00 01 02 03 04 1-3 4-6 7-9 10-12 Operating income % ROCE The figures are not fully comparable Excluding capital gain of 52 MEUR in Q3/04 due to
Slide 37: Industrial Chemicals
Industrial Chemicals Net sales of continuing business at the level of 2003 Divestments of Fine Chemicals and the calcium chloride business in September TiO2 prices in euros 7% below the level of 2003, sales volumes 11% higher. Weak US dollar eating the effect of higher prices during last months of 2
Slide 38: Industrial Chemicals
Industrial Chemicals ROCE 13.4%* (2003: 11.4%) ROCE for continuing businesses 11.1% Investment in ferrous sulphate, Pori, Finland Outlook for 2005: TiO2 prices expected to rise and volumes to increase, US dollar impacting net sales and earnings Sales of formic acid and sodium percarbonate expected t
Slide 39: Kemira and Verdugt BV
Kemira and Verdugt BV Verdugt is a global leader in organic salts and a large player in formic acid Verdugt Sales by segment (2004) Provider of specialty organic De-icers salts and solutions of organic n:o 1 in Europe, 40% market share acids Organic salts for Pharmaceuticals Feed hygiene and Strong
Slide 40: Complementary businesses
Complementary businesses Verdugt acquisition enables Kemira to move forward in the value chain Value- added derivatives Verdugt Value-added Kemira Acid production Formic Propionic Acetic acid acid acid 40
Slide 41: Combined Entity: Segments and Market Positions
Combined Entity Segments and Market Positions Geographical Market share Estimated End-markets market by volume rank Pharmaceutical World 28% 1 Industrial Food Preservatives World 38% 1 Airport Runway De-Icers Europe 42% 1 Feed Hygiene & World 23% 2 Preservatives Europe 34% 1 World 22% 2 Organic Acid
Slide 42: Combined sales 160 MEUR
Combined sales 160 MEUR De- icers Organic salts for Pharmaceuticals Feed hygiene and 8% preservatives 9% Organic salts 29 % for Chemicals 9% 11 % Food 34 % preservatives Organic acids 42
Slide 43: Paints & Coatings
Paints & Coatings Focusing in the eastern half of Europe with strong local brands (Tikkurila, Alcro, Beckers, Vivacolor, etc.) Net sales 2004: 440 MEUR Leading market positions in decorative paints Finland No 1 * Selected markets: Sweden No 1 Baltic No 1 * Eastern Other Europe 1% Sweden Poland No 2
Slide 44: Paints & Coatings net sales, EBIT & ROCE
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 00 01 02 03 04 00 01 02 03 04 1-3 4-6 7-9 10-12 Operating income % ROCE 44
Slide 45: Paints & Coatings
Paints & Coatings Net sales similar to 2003 due to restructuring Decorative paints +3% Coatings -4% Operating income up by 30% Impact of one-off items +3.9 MEUR Operating income 8.7% of net sales (2003: 6.7%) ROCE 13.7% (2003: 9.8%) MEUR 2004 2003 Ch% Q4/04 Q3/03 Ch% Net sales 440 439 0 84 84 0 EBIT
Slide 46: Paints & Coatings
Paints & Coatings Industrial coatings unit in the UK sold Acquisition of 51% holding of Kolorit Paints in Ukraine Outlook for 2005: Demand expected to be good Growth expected to continue in Russia and eastern Europe Due to the UK divestment, net sales estimated to be on the level of 2004 EBIT estima
Slide 47: Market capitalisation vs. equity, MEUR
Market capitalisation vs. equity, MEUR Market cap. 31 Dec 2004: 1,222 MEUR (2003: 1,087 MEUR) Net sales 2004 (underlying): 1,695 MEUR (Net sales 2003: 2,738 MEUR) 1400 1200 1000 800 600 400 03 04 Market cap. Equity 47
Slide 48: Ownership 31 Dec 2004
Ownership 31 Dec 2004 (31 Dec 2003) Households Finnish 7.1% institutions (6.8%) 22.5% (27.7%) Kemira 3.4% (3.4%) International institutions 11.8% (5.9%) Finnish state 55.2% Minimum state ownership 15% (56.2%) 48
Slide 49: Positive development of Kemira share
Positive development of Kemira share 11,00 10,00 9,00 8,00 7,00 6,00 5,00 4,00 01.03 02.03 03.03 04.03 05.03 06.03 07.03 08.03 09.03 10.03 11.03 12.03 01.04 02.04 03.04 04.04 05.04 06.04 07.04 08.04 09.04 10.04 11.04 12.04 KEMIRA HEX GENERAL HEX PORTFOLIO FTSE EUROTOP 300 CHEMICALS (dividend adjuste
Slide 50: Looking ahead
Looking ahead O 7 = ® ¥
Slide 51: Kemira strategy
Kemira strategy Kemira strengthens its four main business areas through organic growth and acquisitions Strategic priorities when allocating financial resources Improve profitability Ability to create growth Build a unique position Create corporate synergy 51
Slide 52: Development of R&D investment
Development of R&D investment TARGET: TO REACH PIONEER POSITION IN OUR BUSINESS AREAS YEAR 2000 2001 2002 2003 2004 B2005 TARGET NET SALES 1.37 1.29 1.44 1.65 1.70 (BEUR) R&D TOTAL 26 30 38 40 39 (MEUR) % OF NS 1.9 2.3 2.7 2.4 2.4 2.5 4.5 Personnel - Total 607 - Scientists,total 283 - Doctors 71 52
Slide 53: Renewal rate of Kemira
Renewal rate of Kemira Renewal Rate of Kemira: Share of New Products in Net Sales 250 9,0 % 8,0 % 200 7,0 % 6,0 % 150 5,0 % MEur 4,0 % 100 3,0 % 2,0 % 50 1,0 % 0 0,0 % Q1/2003 Q2/2003 Q3/2003 Q4/2003 Q1/2004 Q2/2004 Q3/2004 Q4/2004 New 0,3 1,8 3,1 5,5 7,9 10,1 14,7 15,2 Old 182 197 176 169 164 190 1
Slide 54: Future Kemira
Future Kemira A global group of leading chemicals businesses with high mutual synergy Businesses with unique positions Continuously improving profitability Growth: organic and through M&A Participative corporate culture 54
Slide 55: From good to great
From good to great FOCUS – focus actions AMBITION – more efficiency, profit and growth SPEED – speed up action TEAMWORK – effective cooperation 55
Slide 56: Outlook for 2005
Outlook for 2005 Net sales and EBIT expected to grow from the level of 2004 (excluding the impact of divested businesses) All forecasts and estimates mentioned in this report are based on the current judgement of the economic environment and the actual results may be significantly different. 56
Slide 57: Business Structure
Kemira Group Business Structure Kemira Oyj Corporate Kemira Group Centre SBU SBU SBU SBU Pulp & Paper Industrial Paints & Kemwater Chemicals Chemicals Coatings Local Business Organisations Legal Units and Manufacturing Sites Common Services Kemira Service Other local service units 58
Slide 58: Management Structure
Management Structure Kemira Strategic Board Lasse Kurkilahti Lasse Kurkilahti President and President and CEO Chief Executive Officer Esa Tirkkonen, Esa Tirkkonen Chief Financial Helena Tammi-Saarinen Officer CFO, Deputy , DeputyCEO CEO Executive Human VP, Human Resources Resources Hannu Toivonen Ra
Slide 59: Management Structure
Management Structure Kemira Operative Board Lasse Kurkilahti President and CEO Esa Tirkkonen Juhani Lindholm CFO, Deputy CEO President, Pulp & Paper Chemicals Raija Arasjärvi Lennart Johansson Executive VP, Group Controller President, Kemwater Tomas Forsgård Harri Kerminen Executive VP, Performance
Slide 60: Internal targetsetting
Internal targetsetting Internal guidelines ROCE: > 25 % Great > 20 % Good 15 − 20 % Satisfactory 10 − 15 % Acceptable < 10 % Not acceptable Cash flow after capex: Positive EPS: Continuous improvement 61
Slide 61: Pulp & Paper Chemicals, peer group
Pulp & Paper Chemicals, peer group Bleaching Pigments & Additives Akzo Nobel Omya Solvay Imerys Degussa SMI Specialty chemicals Hercules Nalco Akzo Nobel Ciba BASF 62
Slide 62: Kemwater, peer group
Kemwater, peer group General Chemicals Feralco Kronos Atofina GEO Huntsman 63
Slide 63: Industrial Chemicals, peer group
Industrial Chemicals, peer group Titanium dioxide Sodium percarbonate DuPont Solvey Millennium Degussa Kerr-McGee FMC Huntsman Kronos Rockwood Formic acid BASF BP Verdugt Feicheng Chemicals Perstorp 64
Slide 64: Paints & Coatings, peer group
Paints & Coatings, peer group Akzo Nobel Becker Teknos DAW (Caparol) Yaroslavskie Kraskie 65