Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — Q3 2003 Earnings Presentation
40 slides from Kemira Oyj's earnings presentation, 2003
Slide 1: Our Businesses
Our Businesses Pulp & Paper Kemwater Paints &and Industrial Growhow GrowHow Chemicals Coatings Chemicals 2 600 M€ (2002) Pulp & Other Paper Asia Other Chemicals Finland America GrowHow Kemwater Eastern Europe Other Euro area Paints and Other Coatings Industrial Western Chemicals Europe Annualized Ne
Slide 2: Strategic Focus
Strategic Focus Complete Pulp&&Paper Pulp Paper Solutions Chemicals Chemicals Kemwater Strategic Stretch Kemwater Paintsand Paints and Coatings Coatings Industrial Industrial Chemicals Chemicals GrowHow GrowHow Operational Leadership Niche Markets Regional Markets Global Markets 2
Slide 3: Strategy is moving ahead...
Strategy is moving ahead... Growth ~1000 M€ 2003 Acquisitions ~ 600 M€ Organic Growth ~ 400 M€ Continued Business Growth ~10 % y/y Divestments ~500 M€ 1999 Apparent Growth 500 M€ 2400 M€ ~ 5 % y/y 3
Slide 4: ...focusing on value growth...
...focusing on value growth... Pulp & Paper Chemicals Kemwater Paints and Coatings Industrial Chemicals GrowHow Third party Acquisitions ~300 M€* Acquisitions ~ 100 M€* Acquisitions ~200 M€ Org. growth ~100 M€ sourcing 2003 Growth ~ 1000 M€ Acquisitions ~600 M€ Divestments ~500 M€ 1999 2400 M€ GrowH
Slide 5: …ensuring operational excellence…
…ensuring operational excellence… kEmpower Cost position improvement 50 M€ Full effect by end 2005 Procurement & Logistics Cost position improvement 30 M€ By end 2005 Structural efficiency 20 M€ Production structures and profitability improvement 5
Slide 6: … and with targeted growth…
… and with targeted growth… Acquisitions Pulp & Paper Chemicals: Vulcan in Other US; Rhodia in France and Collodin 2% in Germany Pulp & GrowHow Paper Kemwater: majority of Kemiron in 19 % Chemicals US, Ageco in Italy and Pigments 34 % Corporation in St. Petersburg Paints and Coatings: Akzo Nobel’s I
Slide 7: …towards achieving financial objectives.
…towards achieving financial objectives. Profitable Growth and 2000 2001 2002 2003 Targets by 2005 Capital Efficiency Q1-3 Growth rate, % p.a. (* 11 8 6 4 >10 EBIT margin, % (* 7 6 5 6 >10 EPS growth, % p.a. (* 217 neg. 5 29 > 10 CFROI, % (* 11 7 15 10 > 10 Healthy Balance Sheet 2000 2001 2002 2003
Slide 8: Pulp & Paper Chemicals
Pulp & Paper Chemicals Strategic focus Mergers & Acquistions Target among top 3 paper chemical 1000 suppliers 800 Net sales, € mill. Complete solutions in paper making 600 process Increasing global presence following 400 customers 200 Application development driven by 0 customer needs Net sales Orga
Slide 9: Biggest pulp and paper chemical companies
Biggest pulp and paper chemical companies Bleaching Retention Sizing Dry/wet Deposit Water Coating Sales Strength Control Treatment Hercules 800 M€ BASF 780 M€ Eka 750 M€ Kemira 600 M€ Nalco 550 M€ Dow 520 M€ Ciba 500 M€ Raisio 430 M€ Clariant 350 M€ Degussa 300 M€ Bayer 300 M€ = strong market/techn
Slide 10: Kemwater
Kemwater Strategic focus Global leadership in coagulants for 400 Mergers & acquisitions acquisitions Net sales, € mill. municipalities 300 Increasing global market coverage 200 Local / Regional business based on low- cost raw material sourcing and logistics 100 Solutions for industrial waste water a
Slide 11: Strategy
Strategy ! Global expansion ambition with focus on North and Latin America Acquisitions ! Market re-structuring in Europe Product Productivity and Service differentiation ! Recycled raw materials ! Sludge management ! Production technology ! Service concepts ! Overall manufacturing structure ! Compl
Slide 12: Coagulant Consumption
Coagulant Consumption Pohjakartta /Geodata Oy, lupa N:o 1164 /2000 18 kg / person 5.5 kg / person 2.5 kg / person 5 kg / person 1.5 kg / person Total market 13.5 million tonnes € 1.9 billion 12
Slide 13: Paints and Coatings
Paints and Coatings Strategic focus 600 Net sales, € mill. Leading decorative paint company in Nordic countries and Eastern Europe 400 Decorative paints ~70 % Coatings ~30 % of sales, supported 200 by Deco infrastructure Strong regional brands 0 Value adding growth in Eastern Net sales 2002 Organic
Slide 14: Paint Consumption in Europe
Paint Consumption in Europe by Area (litres/person) Pohjakartta /Geodata Oy, lupa N:o 1164 /2000 Consumption per Population/country: capita highest in million people Western Europe. Significant growth 5 9 5 145 potential in Eastern 7 Europe. 5 10 39 16 48 11 22 < 20 litres/person 31 8 < 10 litres/pe
Slide 15: Industrial Chemicals
Industrial Chemicals Strategic focus 600 N et sales, € m ill. Benefits from Kemira’s synergies Platform for organic growth with high 400 profitability and strong cash flow Strong technology base 200 Differentiation into specialty products Leading positions in attractive niche segments 0 Net sales 20
Slide 16: Industrial Chemicals Market Segments
Industrial Chemicals Market Segments Business Offer Application Area Position Unit Calcium Dust binding Road maintenance Leading in De-icing Europe chloride Drilling fluids Oil fields De-humidifiers Different industrial areas Chemidet Bleaching agents Detergent industry Among top three percarbonate
Slide 17: GrowHow
GrowHow Strategic focus Operational leadership 1500 Net sales, € mill. Value added from segment specific 1200 customer concepts 900 Organic growth and development based 600 on own cash flow 300 0 Net sales 2002 Organic growth Net Sales 1 165 M€ in 2002 Market positions Eastern Other Finland No1 Euro
Slide 18: World Grain Stocks Drive Fertilizer Demand
World Grain Stocks Drive Fertilizer Demand World wheat stocks vs. price Long-term growth of 40 fertilizer demand 180 World population 35 continues to grow 140 Decreasing arable USD/t land/capita % 30 100 Dietary changes 25 60 Fertilizer demand and prices historically 20 20 correlate with grain stock
Slide 19: Highlights Q1-3 2003
Highlights Q1-3 2003 Sales € 2 054 million, growth 4% Q3 clearly better than last year, January-September operating income € 121 million (€ 105 million), 6% of net sales EPS € 0.58 (€ 0.45) Equity / share € 9.07 (€ 8.94 end 2002) Several acquisitions completed to support pulp and paper chemicals and
Slide 20: Kemira Group Q1-3 2003
Kemira Group Q1-3 2003 Q1-3 2003 Pulp & 40 Q1-3 2002 Other Paper 3% Chemicals 18 % 30 € million Kemwater 20 GrowHow 7% 41 % 10 Paints and Coatings 0 16 % Pulp&Paper Chemicals Paints and Kemwater GrowHow Industrial Coatings Chemicals Industrial Chemicals 15 % Net sales Q1-3 2003: € 2 054 m Operating
Slide 21: Pulp & Paper Chemicals
Pulp & Paper Chemicals Sales 8% higher than in 2002 Low production in pulp and paper industry Sulphur Acquisitions of pulp and paper chemicals chemicals Bleaching businesses of chemicals Vulcan in US Collodin in Germany Rhodia in France Expansions Calcium sulphate in Siilinjärvi, Finland Specialty p
Slide 22: Pulp & Paper Chemicals net sales and operating income
Pulp & Paper Chemicals Net sales Operating income 500 Net sales % 50 16 400 14 40 12 € million 300 10 30 € million 8 200 20 6 100 4 10 2 0 0 0 98 99 00 01 02 03 98 99 00 01 02 03 Q1 Q2 Q3 Q4 Figures are not fully comparable due to changes in business structure 22
Slide 23: Kemwater
Kemwater Sales up by 10% y-o-y Operating income up by 29% Holding in the US-based company Kemiron Companies Inc. increased from 15% to 60% Kemira to utilize Ageco’s plant for ferric chloride and take over Ageco’s water treatment business in Italy Net sales Q1-3 2003: € 149 m 23
Slide 24: Kemwater net sales and operating income
Kemwater Net sales Operating income 200 Net sales % 25 14 12 150 20 10 € million 15 € million 100 8 10 6 50 4 5 2 0 0 0 98 99 00 01 02 03 98 99 00 01 02 03 Q1 Q2 Q3 Q4 Figures are not fully comparable due to changes in business structure 24
Slide 25: Paints and Coatings
Paints and Coatings Deco (71% of sales) Sales 5% lower y-o-y due to unfavourable weather conditions and restructuring of product ranges in Poland and Sweden Strong growth in Russia continued Coatings (29% of sales) Sales 3% higher y-o-y thanks to acquisition of Akzo Nobel Industrial Coatings’ Nordic
Slide 26: Paints and Coatings net sales and operating income
Paints and Coatings Net sales Operating income 500 % 40 400 10 30 300 20 6 € million € million 10 200 2 0 100 -2 -10 0 -20 -6 98 99 00 01 02 03 98 99 00 01 02 03 Q1 Q2 Q3 Q4 26
Slide 27: Industrial Chemicals
Industrial Chemicals Sales up by 4% on last year Operating income 72% up on last Fine Chemicals year, including Helsingborg restructuring charge € 7 million TiO2 prices stabilized, average prices Chemidet y-t-d on last year’s level, expansion of specialty anatase products Demand for calcium chloride
Slide 28: Industrial Chemicals net sales and operating income
Industrial Chemicals Net sales Operating income 500 60 16 % Net sales 14 400 50 12 40 € million 300 10 € million 30 8 200 6 20 4 100 10 2 0 0 0 00 01 02 03 00 01 02 03 Q1 Q2 Q3 Q4 Figures are not fully comparable due to changes in business structure 28
Slide 29: GrowHow
GrowHow Food Chain Partner 26% Food Chain Partner Agro Agro 33% Nitrogen Nitrogen 38% 32% Specialty Crop Care 15% Specialty Intermediates Crop Care Intermediates 11% Animal 16% 10% Animal Nutrition Nutrition 10% 9% Net sales 2002: € 1 165 m Net sales Q1-3 2003: € 894 m 29
Slide 30: GrowHow
GrowHow Sales up by 3% y-o-y Operating income lower than last year Sales and profit negatively affected by lower feed phosphate prices, US dollar rate and higher freight costs Fertilizer sales volumes rose about 7% Compound prices 3-9%, nitrogen prices 13-25% higher going into new season Ammonia and
Slide 31: GrowHow net sales and operating income
GrowHow Net sales Operating income *) % 1 200 60 6 1 000 40 4 € million 800 € million 600 20 2 400 0 0 200 0 -20 -2 98 99 00 01 02 03 98 99 00 01 02 03 Q1 Q2 Q3 Q4 *) excluding € 78 m impairment loss in 2002 31
Slide 32: Kemira Group
Kemira Group Net sales Operating income *) 2800 180 10 % 2400 160 140 8 2000 120 € million 1600 6 € million 100 1200 80 4 60 800 40 2 400 20 0 0 0 98 99 00 01 02 03 98 99 00 01 02 03 Q1 Q2 Q3 Q4 *) excluding € 78 m impairment loss in 2002 32
Slide 33: Net Debt and Gearing
Net Debt 1 050 100 900 80 750 Gearing % 60 € million 600 450 40 300 20 150 0 0 98 99 00 01 02 Q3 03 33
Slide 34: Net Financing Expenses
Net Financing Expenses 60 7 50 6 5 40 Average cost € million 4 30 3 20 2 10 1 0 0 98 99 00 01 02 Q1-3 03 Q1 Q2 Q3 Q4 Average cost 34
Slide 35: Cash Flow
Cash Flow 550 450 350 € million 250 150 50 -50 -150 98 99 00 01 02 Q1-3 03 Cash flow from operations Cash flow after investments and disposals 35
Slide 36: Net Income and CFROI
Net Income and CFROI 100 16 90 14 80 12 70 10 € million CFROI % 60 50 8 40 6 30 4 20 10 2 0 0 98 99 00 01 02 Q1-3 03 Net income and EPS excluding non-recurring items EPS 0.61 0.53 0.73 0.58 0.61 0.58 CFPS 0.96 1.41 1.69 1.03 2.45 1.11 36
Slide 37: Valuation / Ownership
Valuation / Ownership Market capitalisation / equity Ownership 31 October 2003 1200 Finnish instit. Public 1000 28.4 % 6.7 % 800 Kemira € million 600 3.4 % Int. instit. 400 5.3 % 200 Finnish state 0 56.2 % 99 00 01 02 03 " Equity / share € 9.07 " State’s minimum ownership 15% " Option programme unti
Slide 38: Outlook for the Year 2003
Outlook for the Year 2003 Pulp & Paper Chemicals Depressed phase in pulp & paper industry cycle is estimated to continue Geographical presence, product range and scope of services have been strengthened further in North America and continental Europe Operating income is expected to improve Kemwater
Slide 39: Outlook for the Year 2003
Outlook for the Year 2003 Paints and Coatings Strong growth expected to continue in Russia The last quarter of the year is typically loss-making in decorative paints business Operating income is expected to be higher than last year Industrial Chemicals Outlook remains positive; TiO2 markets have sta
Slide 40: Outlook for the Year 2003
Outlook for the Year 2003 GrowHow New fertilizer year started with considerably higher prices, however higher prices are expected to have bigger impact on the profitability next year Overseas exports continue to suffer from the weak dollar and higher freights; the price war and the weak dollar reduc