Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — FY2003 Earnings Presentation
49 slides from Kemira Oyj's earnings presentation, Feb 10, 2004
Slide 1: Kemira Result 2003
Kemira Result 2003 10 February 2004
Slide 2: Our Businesses
Our Businesses Pulp & Paper Kemwater Paints & Industrial Growhow GrowHow Chemicals Coatings Chemicals 2 738 M€ Pulp & Other Paper Asia Other Chemicals Finland Americas GrowHow Kemwater Eastern Europe Other Paints & Euro area Coatings Other Industrial Western Chemicals Europe 2 10 February, 2004
Slide 3: Strategic Focus
Strategic Focus… Complete Pulp&&Paper Pulp Paper Solutions Chemicals Chemicals Kemwater Strategic Stretch Kemwater Paints&& Paints Coatings Coatings Industrial Industrial Chemicals Chemicals GrowHow GrowHow Operational Leadership Niche Markets Regional Markets Global Markets 3 10 February, 2004
Slide 4: ...on value growth...
...on value growth... Pulp & Paper Chemicals Kemwater Paints & 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€ GrowHow Capacity
Slide 5: ...ensuring operational excellence...
…ensuring operational excellence… Production site efficiency improvement, procurement & logistics and structural efficiency Full potential € 100 m 2003 achieved 25% 2004 achieved 50% 2005 achieved 100% 5 10 February, 2004
Slide 6: ... and with targeted growth...
… and with targeted growth… Acquisitions Other PPC: Vulcan in US; Rhodia in 3% Pulp & France and Collodin in Germany Paper GrowHow Chemicals KW: majority of Kemiron in US; 22 % 31 % Ageco in Italy and Pigments Co. in St. Petersburg P&C: Akzo Nobel’s general industrial liquid coatings in Nordic Indus
Slide 7: ...towards achieving financial objectives.
…towards achieving financial objectives. Profitable Growth and 2000 2001 2002 2003 Targets by Capital Efficiency 2005 over the cycles Growth rate, % p.a. 11 8 6 5 >10 EBIT margin, % 7 6 5 5 >10 EPS growth, % p.a. 217 neg. 5 2 > 10 CFROI, % 11 7 15 11 > 10 Healthy Balance Sheet 2000 2001 2002 2003 Co
Slide 8: New CEO Takes the Helm
New CEO Takes the Helm Faster implementation of strategy Focus on capital efficiency Global leadership positions Performance driven organization formerly CEO of Elcoteq Network Plc 2001-2003 Raisio Group Plc 2000-2001 Nokian Tyres Plc 1988-2000 8 10 February, 2004
Slide 9: Pulp & Paper Chemicals
Pulp & Paper Chemicals Strategic focus Mergers & 1000 acquistions Target among top 3 paper chemical suppliers 800 Net sales, € mill. Complete solutions in paper making 600 process Increasing global presence following 400 customers 200 Application development driven by customer needs 0 Net sales Orga
Slide 10: 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 11: Kemwater
Kemwater Mergers & Strategic focus acquisitions 400 Global leadership in coagulants for Net sales, € mill. municipalities 300 Increasing global market coverage 200 Local / Regional business based on low- 100 cost raw material sourcing and logistics Solutions for industrial waste water and 0 Net sale
Slide 12: 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 13: 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 13 10 February, 2004
Slide 14: Paints & Coatings
Paints & 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 2003 Organic grow
Slide 15: 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 16: 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 17: 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 18: GrowHow
GrowHow Strategic focus 1500 Operational leadership Net sales, € mill. 1200 Value added from segment specific customer concepts 900 Organic growth and development based 600 on own cash flow 300 0 Net sales 2003 Organic growth Net Sales 1 205 M€ in 2003 Market positions Nordic Finland No 1 Eastern Ot
Slide 19: 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 20: Highlights 2003
Highlights 2003 Sales € 2 738 million, growth 5% (8% excluding the currency effect) Operating income € 144 million, growth 22% EPS € 0.62 (€ 0.61) Equity / share € 9.04 (€ 8.94 end 2002) Dividend proposal € 0.33 Several acquisitions completed to support pulp and paper chemicals and water treatment c
Slide 21: Kemira Group 2003
Kemira Group 2003 Pulp & 2003 50 Other Paper 2002 4% Chemicals 18 % 40 € million 30 Kemwater GrowHow 7% 20 42 % Paints & 10 Coatings 15 % 0 Pulp&Paper Coatings Chemicals Kemwater GrowHow Paints & Industrial Chemicals Industrial Chemicals 14 % Net sales 2003: € 2 738 m Operating income 2003: € 144 m
Slide 22: Pulp & Paper Chemicals
Pulp & Paper Chemicals Sales 7% higher (11% at 2002 USD rates) Low production in pulp and paper industry Sulphur chemicals Bleaching Acquisitions of pulp and paper chemicals chemicals businesses of Vulcan in US Collodin in Germany Rhodia in France Expansions Calcium sulphate in Siilinjärvi, Finland
Slide 23: Pulp & Paper Chemicals
Pulp & Paper Chemicals Net sales & Capital employed Operating income & ROCE 500 50 16 % 14 400 40 12 € million 300 30 10 € million 8 200 20 6 100 4 10 2 0 0 0 99 00 01 02 03 99 00 01 02 03 Q1 Q2 Q3 Q4 Capital employed Operating margin ROCE Figures are not fully comparable due to changes in business
Slide 24: Kemwater
Kemwater Sales up by 22% mainly due to US acquisition Operating income up by 32% Holding in the US-based company Kemiron Companies Inc. increased from 15% to 60% Kemira to take over Ageco’s water treatment business in Italy Water treatment chemical company in St. Petersburg in Kemira’s ownership 100
Slide 25: Kemwater
Kemwater Net sales & Capital employed Operating income & ROCE 250 Net sales 30 25 % 200 25 20 € million 150 20 € million 15 100 15 10 10 50 5 5 0 0 0 99 00 01 02 03 99 00 01 02 03 Q1 Q2 Q3 Q4 Capital employed Operating margin ROCE Figures are not fully comparable due to changes in business structure
Slide 26: Paints and Coatings
Paints and Coatings Deco (70% of sales) Sales 4% lower due to unfavourable weather conditions and restructuring of product ranges in Poland and Sweden Strong growth in Russia continued Coatings (30% of sales) Sales 3% higher thanks to acquisition of Akzo Nobel Industrial Coatings’ Nordic business Go
Slide 27: Paints & Coatings
Paints & Coatings Net sales & Capital employed Operating income & ROCE 500 40 % 10 400 30 20 6 300 € million € million 10 200 2 0 100 -2 -10 0 -20 -6 99 00 01 02 03 99 00 01 02 03 Q1 Q2 Q3 Q4 Capital employed Operating margin ROCE 27 10 February, 2004
Slide 28: Industrial Chemicals
Industrial Chemicals Sales up by 1% Operating income up by 48%, Helsingborg restructuring charge Fine € 8 million Chemicals TiO2 prices 2% lower, dollar rate depressed the average selling price in euros, expansion of specialty anatase Chemidet Calcium chloride sales lower due to Helsingborg restruct
Slide 29: Industrial Chemicals
Industrial Chemicals Net sales & Capital employed Operating income & ROCE 500 60 18 % Net sales 16 400 50 14 40 12 € million 300 € million 10 30 200 8 20 6 100 4 10 2 0 0 0 00 01 02 03 00 01 02 03 Q1 Q2 Q3 Q4 Capital employed Operating margin ROCE Figures are not fully comparable due to changes in b
Slide 30: GrowHow
GrowHow Food Chain Partner Agro Food Chain 29% Nitrogen Partner 30% Agro 30% Nitrogen 34% Specialty Intermediates Specialty Crop Care 13% Intermediates Crop Care 17% Animal 12% Animal 14% Nutrition Nutrition 11% 10% Net sales 2002: € 1 165 m Net sales 2003: € 1 205 m 30 10 February, 2004
Slide 31: GrowHow
GrowHow Sales up by 3%, operating income 47% lower Fertilizer sales volumes rose about 7% NPK prices 4-11% and nitrogen prices 18-24% higher in January 2004 than a year ago Sales and profit negatively affected by US dollar rate, sharp drop in feed phosphates prices, higher price of natural gas, low
Slide 32: GrowHow
GrowHow Net sales & Capital employed Operating income & ROCE *) *) excluding € 78 m impairment loss in 2002 1 200 % 60 9 1 000 7 40 5 800 20 3 € million 1 € million 600 0 -1 400 -20 -3 -5 200 -40 -7 -60 -9 0 99 00 01 02 03 99 00 01 02 03 Q1 Q2 Q3 Q4 Capital employed Operating margin ROCE 32 10 Febru
Slide 33: Kemira Group
Kemira Group Net sales & Capital employed Operating income & ROCE*) *) excluding € 78 m impairment loss in 2002 2800 180 % 2400 160 10 2000 140 8 120 € million 1600 € million 100 6 1200 80 60 4 800 40 400 2 20 0 0 0 99 00 01 02 03 99 00 01 02 03 Q1 Q2 Q3 Q4 Capital employed Operating margin ROCE 33
Slide 34: Net Debt and Gearing
Net Debt 1 050 100 900 80 750 Gearing % 60 € million 600 450 40 300 20 150 0 0 99 00 01 02 03 34 10 February, 2004
Slide 35: Net Financing Expenses
Net Financing Expenses 60 6 % 50 5 Average financing cost 40 4 € million 30 3 20 2 10 1 0 0 99 00 01 02 03 Q1 Q2 Q3 Q4 Average cost 35 10 February, 2004
Slide 36: Cash Flow
Cash Flow 550 450 350 € million 250 150 50 -50 -150 99 00 01 02 03 Cash flow from operations Cash flow after investments and disposals 36 10 February, 2004
Slide 37: Net Income & CFROI & ROE
Net Income & CFROI &ROE 100 16 % 90 14 80 12 70 10 € million 60 ROE 50 8 CFROI 40 6 30 4 20 10 2 0 0 99 00 01 02 03 EPS 0.53 0.73 0.58 0.61 0.62 CFPS 1.41 1.69 1.03 2.45 1,85 Figures excluding non-recurring items 37 10 February, 2004
Slide 38: Valuation & Ownership
Valuation & Ownership Market capitalisation & equity Ownership 30 January 2004 Finnish Public 1200 instit. 6.9 % 1000 27.5% Kemira 800 3.4 % € million 600 Int. instit. 6.0 % 400 200 Finnish 0 state 00 01 02 03 04 56.2 % " Equity / share € 9.04 " State’s minimum ownership 15% " Option programme confi
Slide 39: Outlook for the Year 2004
Outlook for the Year 2004 Pulp & Paper Chemicals Low business cycle in pulp & paper industry is estimated to continue Geographical presence, product range and scope of services have been strengthened further in North America and continental Europe Sales and operating income are expected to improve K
Slide 40: Outlook for the Year 2004
Outlook for the Year 2004 Paints & Coatings Strong growth expected to continue in Russia Normalizing demand in Nordic area and measures aimed at improving profitability expected to generate higher operating income Industrial Chemicals Outlook remains positive; consumption of TiO2 pigments expected t
Slide 41: Outlook for the Year 2004
Outlook for the Year 2004 GrowHow New year started with considerably higher fertilizer prices High natural gas and ammonia prices raise production costs Signs of improvement in phosphate prices High sea freights and low dollar continue to influence exports Net sales and operating result are estimate
Slide 42: CEO's Review
CEO’s Review O — = ® x
Slide 43: Business Environment
Business Environment Increasing international competition Global customers Industrial work moving to emerging countries China Eastern Europe Economies of scale Change in business models 43 10 February, 2004
Slide 44: Kemira Today
Kemira Today Five strategic business units with their own roles Low growth in turnover Fluctuating profitability Strong balance sheet, equity ratio 44 % sufficient financial resources for strategy focusing Development potential in market cap free float low share liquidity low foreign ownership low v
Slide 45: Actions
Actions Speed up the implementation of strategy Improve internal efficiency productivity profitability cash flow return on capital employed Direction of the change process customer orientation R&D intensity network operation Stimulate personnel initiatives and development 45 10 February, 2004
Slide 46: Example of a Business Model
Example of a Business Model Customer of PPC bleaching process chemicals sizing coating Sales Research and Development Production Procurement R&D network based on own core competencies Own production capacity running always at full speed Sourcing network using the economies of scale 46 10 February, 2
Slide 47: Present Portfolio
Present Portfolio Global position Pulp & Paper Chemicals Kemwater Regional position Paints and Coatings GrowHow “Niche” position Industrial Chemicals 47 10 February, 2004
Slide 48: Conclusions
Conclusions Kemira has two strategic business units with global presence Pulp & Paper Chemicals Kemwater First priority is to develop these to leading positions globally 48 10 February, 2004
Slide 49: Kemira Result 2003
Kemira Result 2003 10 February 2004