Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — Q2 2015 Earnings Presentation
72 slides from Kemira Oyj's earnings presentation, Jul 22, 2015
Slide 1: Kemira Investor presentation
Kemira Investor presentation Updated on July 22, 2015
Slide 2: Our business is divided into three segments to best meet our customers' needs
Our business is divided into three segments to best meet our customers’ needs OIL & GAS, MINING EUR 382 million 20% Growing chemical supplier to Oil & PULP & PAPER Gas and Mining EUR 1,170 million industries A leading global pulp and paper chemical supplier 55% MUNICIPAL & INDUSTRIAL 25% EUR 565 mil
Slide 3: Bringing sustainable value to our customers in water intensive process industries
Bringing sustainable value to our customers in water intensive process industries Kemira revenue split by customer benefit, % Water quality and Product quality and regulatory compliance yield optimization 30% related to wastewater and sludge treatment 50% 20% Process and energy efficiency Kemira Inv
Slide 4: Each segment provides a comprehensive offering
Each segment provides a comprehensive offering PULP & PAPER OIL & GAS, MINING MUNICIPAL & INDUSTRIAL Packaging, board and Minerals & Metals Other Chemical, mechanical tissue grades applications and recycled pulp 15% 20% Polymers 35% 45% 20% 65% 20% 80% Oil & Gas and process Paper grades additives ap
Slide 5: Business units in 40 countries and sales in more than 100 reach our customers
Business units in 40 countries and sales in more than 100 reach our customers around the world KEMIRA HQ Helsinki, Finland Paper & M&I EMEA management Frankfurt, Germany Regional HQ ASIA PACIFIC 6% Atlanta, USA EUR 120 million 350 O&M management Regional HQ Houston, USA EUROPE, MIDDLE EAST Shanghai,
Slide 6: Reliable worldwide supply is guaranteed by an optimized global manufacturing network
Reliable worldwide supply is guaranteed by an optimized global manufacturing network Manufacturing footprint globally (65 sites): Polymers and other process chemicals (26) Coagulants (30) Bleaching and pulping (9) Kemira Investor Presentation (updated on July 22, 2015) 6
Slide 7: Mid term financial targets for 2017
Mid term financial targets for 2017 2014 2017 target Revenue EUR 2.1 billion EUR 2.7 billion Operative EBITDA margin 11.8% 15% Kemira Investor Presentation (updated on July 22, 2015) 7
Slide 8: Shifting focus to fast growing differentiated products
Shifting focus to fast growing differentiated products The share of differentiated products revenue increased to 50% (48% at the end of 2014) in H1 2015, mainly due to increased sales volumes in Paper and Municipal & Industrial Differentiated product line drivers: Commodity product line drivers: App
Slide 9: Innovating together with our customers to improve water, energy and raw material efficiency
Innovating together with our customers’ to improve water, energy and raw material efficiency We are attentive to the current and long- INNOVATION term needs of our customers • 250 R&D experts create new innovations in R&D centers in Finland, China and the USA INNOVATION REVENUE • 300 patent families
Slide 10: Paper and Oil & Mining exceeded market growth, profitability improved in Municipal & Industrial
Paper and Oil & Mining exceeded market growth, profitability improved in Municipal & Industrial Paper • Leverage strong market position Revenue, +5% 1,170 • Successful execution of investment projects EUR million #1 • Commercialization of new products 1,113 • Continue to evaluate bolt-on acquisition
Slide 11: CAPEX expected to increase due to ongoing investment projects in Paper
CAPEX expected to increase due to ongoing investment projects in Paper • Greenfield sodium chlorate project in Brazil in Capital expenditure, excluding M&A 2014-2016 EUR million • Integration of AkzoNobel’s paper chemicals 134 135 136 acquisition will require between EUR 20-30 million capex between
Slide 12: EUR 0.53 per share dividend was paid to shareholders in April 2015
EUR 0.53 (0.53) per share dividend was paid to shareholders in April 2015 Dividend amounted to EUR 81 million, 84% of the operative net profit Kemira revised dividend policy aims at paying a stable and competitive dividend 0.60 8.0% 0.53 0.50 5.4% 6.0% 0.40 0.30 4.0% 0.20 2.0% 0.10 0.00 0.0% 2006 20
Slide 13: Q2 2015 Results
Q2 2015 Results kemira
Slide 14: Financial highlights
April-June 2015 Financial highlights Revenue EUR 595 million (518), 15% • Paper, +25% • Municipal & Industrial, +11% • Favorable currency exchange rate fluctuations Operative EBITDA EUR 74.7 million (60.2), +24% • Operative EBITDA margin improved to 12.6% (11.6%) Operative earnings per share increas
Slide 15: Revenue growth with improved profitability
Revenue growth with improved profitability EUR million (except ratios) Q2 2015 Q2 2014 % H1 2015 H1 2014 % Revenue 595 518 15 1,148 1,048 10 Operative EBITDA 74.7 60.2 24 141.1 117.7 20 of which margin 12.6 11.6 - 12.3 11.2 - Operative EBIT 44.8 37.0 21 83.9 73.3 14 of which margin 7.5 7.1 - 7.3 7.0
Slide 16: Acquisition and favorable currencies drove revenue growth in Q2 2015
Acquisition and favorable currencies drove revenue growth in Q2 2015 Paper organic growth was 4% driven by increased sales volumes in EMEA and Americas Municipal & Industrial revenue continued to recover, organic growth was 3% Oil & Mining revenue decreased 20% in local currencies mainly due to lowe
Slide 17: Strengthened U.S. dollar continued to impact positively
Strengthened U.S. dollar continued to impact positively Favorable currency rates had EUR 9 million positive impact on the operative EBITDA in Q2 2015 Guidance: 10% change in our main foreign currencies would approximately have EUR 15 million impact on operative EBITDA on an annualized basis (YTD 201
Slide 18: Lower variable cost had positive impact on operative EBITDA
Lower variable cost had positive impact on operative EBITDA Kemira variable cost structure Oil direct + indirect Variable cost vs sales price trend (Acrylonitrile, acrylic acid, Alpha Olefins, 120 Logistics Sodium Chloride) 100 30% 80 20% 60 40 20 0 -20 15% Other raw materials -40 35% Q1 Q2 Q3 Q4 Q1
Slide 19: Paper segment delivering growth
Paper segment delivering growth • Increased sales volumes of differentiated products driven by growing packaging board and tissue demand • Pulp chemical deliveries to the new Montes del Plata pulp mill • Acquisition and favorable currency exchange rate fluctuations Revenue and revenue growth (y-on-y
Slide 20: Continued above-the-market growth in Paper
Continued above-the-market growth in Paper Pipeline of new innovations and increased sales and marketing efforts in EMEA region Improved utilization of our manufacturing capabilites and industry expertice in North America Investing in growing pulp markets in South America Paper organic revenue growt
Slide 21: Strengthened market presence in APAC region
Strengthened market presence in APAC region South Korea Paper R&D Japan in Shanghai, China Taiwan Local production covering the whole APAC region Thailand Over 300 experienced sales, service and application experts serving the paper industry Indonesia New Zeeland Australia Kemira sales offices Kemir
Slide 22: Successful start of the integration
Successful start of the integration • Integration started in line with plan: • Over 200 people involved • Nearly 30 townhall meetings in over 10 countries • First joint customer deals signed during the first week • Synergies expected to start to materialize towards the end of the year • Purchase pri
Slide 23: Paper
Paper January-June 2015 EUR million Q2/2015 Q2/2014 % H1/2015 H1/2014 % 2014 Revenue 351.3 282.0 25 665.9 562.4 18 1,170.0 Operative EBITDA 41.3 30.8 34 77.4 63.9 21 137.2 of which margin 11.8 10.9 - 11.6 11.4 - 11.7 Operative EBIT 23.2 18.2 27 43.9 40.1 9 85.8 of which margin 6.6 6.4 - 6.6 7.1 - 7.
Slide 24: Lower oil price impacting demand in Oil & Mining segment
Lower oil price impacting demand in Oil & Mining segment • Demand of polymers in horizontal drilling and fracking showing signs of stabilization • Improved operative EBITDA margin despite significantly lower sales volumes Revenue and revenue growth (y-on-y) trend Operative EBITDA and operative EBITD
Slide 25: Oil & Mining defending profitability despite the current slow down of oil and gas activity
Oil & Mining defending profitability despite the current slow down of oil and gas activity Operative EBITDA margin Horizontal rig count and oil price (WTI) index 160 12.3% Horizontal rig 140 count in US 11.8% 120 YTD 2014 YTD 2015 100 Operative EBITDA, EUR million 80 60 22 23 40 Oil price (WTI) 20 J
Slide 26: Oil & Mining
Oil & Mining January-June 2015 EUR million Q2/2015 Q2/2014 % H1/2015 H1/2014 % 2014 Revenue 89.7 97.6 -8 183.6 189.6 -3 382.2 Operative EBITDA 11.4 11.7 -3 22.5 22.4 0 48.4 of which margin 12.7 12.0 - 12.3 11.8 - 12.7 Operative EBIT 6.0 7.1 -15 11.8 13.4 -12 29.9 of which margin 6.7 7.3 - 6.4 7.1 -
Slide 27: Revenue recovery in Municipal & Industrial segment continued, profitability improved
Revenue recovery in Municipal & Industrial segment continued, profitability improved • Sales volumes recovering in all regions • Lower operating costs due to cost efficiency measures and lower raw material costs Revenue and revenue growth (y-on-y) trend Operative EBITDA and operative EBITDA margin t
Slide 28: Municipal & Industrial delivering profitable growth
Municipal & Industrial delivering profitable growth Revenue, +8% EUR million 298 276 YTD 2014 YTD 2015 Operative EBITDA margin 13.8% 11.6% YTD 2014 YTD 2015
Slide 29: Municipal & Industrial
Municipal & Industrial January-June 2015 EUR million Q2/2015 Q2/2014 % H1/2015 H1/2014 % 2014 Revenue 153.8 138.6 11 298.3 276.3 8 564.7 Operative EBITDA 22.0 17.7 24 41.2 32.2 28 68.1 of which margin 14.3 12.8 - 13.8 11.6 - 12.1 Operative EBIT 15.6 11.7 33 28.2 20.5 38 43.3 of which margin 10.1 8.4
Slide 30: Investments driven by pulp chemical project in Brazil and AkzoNobel integration
Investments driven by ongoing pulp chemical project in Brazil and the integration of AkzoNobel’s paper chemicals Kemira capital expenditure*, EUR million 60 2015 2014 51 50 44 40 31 30 27 28 26 20 10 0 Q1 Q2 Q3 Q4 * Excluding acquisitions of BASF AKD emulsion business and PVO shares in 2014, as well
Slide 31: Kemira operative ROCE trend
Kemira operative ROCE trend Kemira operative ROCE* Jun 30 Jun 30 EUR million, expect ratios 2015* 2014* Revenue 2,236 2,147 Goodwill 494 495 11.1% Other intangible assets 85 71 11.0% 10.9% 10.8% 10.8% 11.0% Property, plant and 10.2% 10.7% 715 652 equipment Net Working Capital ratio 10.7% 10.4% 9.7%
Slide 32: Cash flow statement
Cash flow statement Q2 Q2 H1 H1 EUR million 2015 2014 2015 2014 2014 Operative EBITDA 74.7 60.2 141.1 117.7 252.9 Change in net working -38.2 -10.0 -52.1 -31.2 -19.4 capital Cash flow from operations 11.7 -2.9 54.1 10.2 74.2 Investments -159.3 -34.0 -186.3 -59.6 -145.1 of which CAPEX -44.3 -34.0 -71
Slide 33: Solid financial position with diversified debt portfolio
Solid financial position with diversified debt portfolio Gearing (Net debt/equity) increased Capital structure, end of June, 2015 EUR million to 62% (42% at the end 2014) due to Net debt, dividend payment and AkzoNobel’s paper 711 million chemicals business acquisition 1,156 Cash and cash equivalent
Slide 34: 2015 outlook updated to include AkzoNobel's paper chemicals business acquisition
2015 outlook updated to include the impact of AkzoNobel’s paper chemicals business acquisition 2014 2015 outlook Revenue EUR 2.1 billion Increase Operative EBITDA EUR 253 million Increase
Slide 35: Value built in paper
Value built in paper PAPER WE ARE COMMITTED TO INNOVATING FOR THE LONG- TERM FUTURE TOGETHER WITH THE PULP & PAPER INDUSTRY. WE USE OUR EXPERTISE TO CREATE VALUE BOTH IN THE PROCESS AND FOR THE FINAL PRODUCT.
Slide 36: Paper delivering on its growth strategy
Paper delivering on its growth strategy • Growing packaging board markets, chemical demand driven by board lightweighting and higher use of recycled fibers • Growing pulp production in South America and Northern Europe • Kemira’s position in APAC will be substantially strengthened by the acquisition
Slide 37: The AkzoNobel's paper chemicals acquisition will strengthen us in Asian paper markets
The AkzoNobel’s paper chemicals acquisition will strengthen us especially in the growing Asian paper markets Strategic rationale Production sites • Consolidating capacity Contract manufacturing • Strengthening market position in all regions, especially in APAC Oulu Kristinehamn • Gaining new compete
Slide 38: Acquisition is strengthening Kemira's market share in all regions
The acquisition of AkzoNobel’s paper chemicals business is strengthening Kemira’s market share in all regions #1 Paper & Pulp in EMEA Revenue in 2014: EUR 676 million (652) #2 Paper & Pulp in Americas Market share: 23% (26% including Akzo) Revenue in 2014: EUR 397 million (371) Market share: 14% (17
Slide 39: Paper segment - Technology and market leader
Paper segment - 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 Polym
Slide 40: Setting new standards for binder efficiency
PAPER CASE Setting new standards for binder efficiency Kemira FennoBind™ 1. Maintain surface strength while improving cost-efficiency and print quality. 2. FennoBind has twice the binding power compared to standard binders. 3. 10–20% savings in total coating color costs. Improved coating coverage Sa
Slide 41: Making tissue with a cleaner process
PAPER CASE Making tissue with a cleaner process Kemira FennoClean™ PFA 1. Keeping the process free from microbiological deposits without creating harmful residuals or machine corrosion. 2. Cost-efficient and less hazardous disinfecting with halogen-free, corrosion safe and fully biodegradable FennoC
Slide 42: Stronger board using less fibers
PAPER CASE Stronger board using less fibers Kemira FennoBond™ 1. Maintain stiffness and strength at lower basis weight. 2. FennoBond enables usage of lower quality furnishes with maintained strength properties. 3. Savings through yield advantage and raw material efficiency. Improved sheet Allows the
Slide 43: Increasing paper machine performance and resource efficiency
PAPER CASE Increasing paper machine performance and resource efficiency Kemira KemFlite™ 1. Diagnosing paper machine deposits and final product defects in real time during the papermaking process. 2. Unique monitoring tools and innovative approach controlling the size and agglomeration tendency of h
Slide 44: Improving efficiency and recovery yield
Improving efficiency and recovery yield OIL & MINING WE PROVIDE A UNIQUE COMBINATION OF INNOVATIVE CHEMICALS AND APPLICATION KNOWLEDGE THAT IMPROVES PROCESS EFFICIENCY AND YIELD IN OIL, GAS AND METALS RECOVERY.
Slide 45: Growth driven by strong demand for oil and gas
Growth driven by strong demand for oil and gas Our growth drivers: Oil, gas and mining chemical market growth estimate, EUR billion (CAGR: 4%) • Global growth, especially in NA shale and in the Middle East • Increased activity in Chemical Enhanced 4.5 EMEA 4.8% Oil Recovery (CEOR) and oil sands 3.8
Slide 46: Oil & Mining segment improving cost efficiency in oil and gas production and recovery
Oil & Mining segment improving cost efficiency in oil and gas production and recovery yield in mining Minerals & Metals applications 20% • Investing in innovation, people and polyacrylamide technologies • Strengthening and expanding customer relationships focusing more on oil & gas and 80% Oil & Gas
Slide 47: Oil & Mining is a growing partner to the oil, gas and mining industry
Oil & Mining is a growing partner to the oil, gas and mining industry Kemira’s revenue split in oil and gas applications • Business is driven by cyclical oil, gas and metals prices • Less than 50% of Oil & Mining revenue is related to shale operations • Kemira is the world’s second largest dry and e
Slide 48: First signs of anticipated growth in CEOR
First signs of anticipated growth in CEOR First deliveries of polyacrylamides for CEOR from our manufacturing site in Bradford, UK Developing partnerships with key operators Expected chemically EOR end-market growth ~20% /a for the next 10 years Kemira Investor Presentation (updated on July 22, 2015
Slide 49: Oil & Mining segment - Strengthening market position
Oil & Mining segment - Strengthening market position with competitive combination of innovation chemicals and application knowledge RAW INTERMEDIATES PRODUCTS APPLICATIONS CUSTOMERS MATERIALS Acrylonitrile Acrylamide Polymers Friction Reduction Pumpers Acrylic acid Dispersants & Formation & Well Sca
Slide 50: Improved water and cost-efficiency
OIL & MINING CASE Improved water and cost-efficiency Kemira KemFlow® friction reducers 1. Reducing the use of fresh water by using hard surface, produced and flowback water. 2. Friction reducer technology with tolerance to saline and brackish water ensures quality performance in high TDS, high brine
Slide 51: Organic binder replaces bentonite
OIL & MINING CASE Organic binder replaces bentonite Kemira KemPel™ iron ore binder 1. There is a need to reduce or prevent an increase in silica content when mining a lower grade ore. 2. Organic KemPel binders provide an effective silica-free option to bentonite. 3. Organic binder, tailored for the
Slide 52: Squeeze life optimization in offshore applications
OIL & MINING CASE Squeeze life optimization in offshore applications Kemira KemGuard® detectable scale inhibitor 1. Effective prevention of mineral scale formation and deposition downhole and in the formation through use of squeeze or continuous deployment. Detection of minimum inhibitor concentrati
Slide 53: Optimizing the water cycle
Optimizing the water cycle MUNICIPAL & INDUSTRIAL WE OPTIMIZE THE EFFICIENT UTILIZATION OF RESOURCES WITH CHEMISTRY AND EXPERTISE AT EVERY STAGE OF WATER MANAGEMENT.
Slide 54: Regulation is driving the Municipal & Industrial market
Regulation is driving the Municipal & Industrial market Key market characteristics Relevant Municipal and Industrial market* and growth estimate, EUR billion (CAGR: 2.6%) • Mature market in Europe and North America • Regulatory driven APAC 4.4% • Price and cost sensitive 0.5 0.7 0.5 • Local business
Slide 55: Municipal & Industrial segment delivering strong cashflow after restructuring
Municipal & Industrial segment delivering strong cashflow after restructuring and profitability improvement Other • Leveraging leading market position 15% Polymers • Developing new solutions for raw and 20% waste water management • Focusing on cash flow maximization 65% Coagulants Revenue, EUR milli
Slide 56: Our products are applied in raw and waste water treatment
Our products are applied in raw and waste water treatment – serving a clean water cycle Main applications of Municipal & Industrial water treatment chemicals Phosphates removal Solids removal Sludge dewatering Raw water Waste water treatment Point of treatment water use River Lake/Sea Contaminated w
Slide 57: Significant turnaround program was implemented in 2013-2014
Significant turnaround program was implemented in 2013-2014 Turn around actions between 2013-2014 Operative EBITDA margin Geographic focus - exited South America, Romania 12.1% 10.4% Customer segmentation & sales model adaptation 2013 2014 SKU’s reduced by 50% Operative EBITDA, EUR million Manufactu
Slide 58: We are the leading chemicals supplier in mature markets for raw and waste water
We are the leading chemicals supplier in mature markets for raw and waste water treatment applications Americas EMEA #1 in chemicals for raw and #1 in chemicals for raw and waste water treatment waste water treatment Municipal & Industrial revenue Municipal & Industrial revenue in 2014: EUR 159 mill
Slide 59: 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 60: Polluted beaches disinfected fast and reliably
MUNICIPAL & INDUSTRIAL CASE Polluted beaches disinfected fast and reliably Kemira DesinFix™ Case: Biarritz 1. Heavy rainfall overloaded the local water treatment plant, and untreated wastewater polluted the sea with fecal bacteria. 2. DesinFix provided an easy to apply and reliable solution while en
Slide 61: Reducing waste water phosphorus levels
MUNICIPAL & INDUSTRIAL CASE Reducing waste water phosphorus levels Ferric Chloride Case: North Las Vegas Water Reclamation Facility 1. Phosphorus organisms were found to increase when temperatures reached 28°C. 2. Ferric Chloride was introduced to remove phosphorus compounds by adding 750–1,500 l/da
Slide 62: Corporate responsibility targets
Corporate responsibility targets
Slide 63: Kemira's approach to Corporate Responsibility
Kemira’s approach to Corporate Responsibility Kemira’s strategy, stakeholder expectations and commitment to international principles guide our corporate responsibility approach and target-setting Kemira Investor Presentation (updated on July 22, 2015) 63
Slide 64: Targets & performance: Q2/2015
CORPORATE RESPONSIBILITY UPDATE Sustainable Products and Solutions Targets & performance: Q2/2015 Innovation target: Innovation revenue share Responsible 93% 97% 90% Responsibility for 10% of total revenue in 2016* Supply chain Employees 8.5 Target: ≥ 90% of supplier 36% 7.1 6.7 contracts with signe
Slide 65: Debt information
Debt information kemira : 6
Slide 66: Debt portfolio EUR 821 million at the end of Q2 2015
Debt portfolio EUR 821 million at the end of Q2 2015 Bond EUR 350 million 43% Loans from banks and financial institutions EUR 351 million 43% 2% Commercial papers 2% 10% EUR 20 million Pension loans Other EUR 20 million EUR 80 million Kemira Investor Presentation (updated on July 22, 2015) 66
Slide 67: Maturity profile
Maturity profile Gross debt EUR 821 million, June 30, 2015 EUR million 250 200 150 100 50 0 2015 2016 2017 2018 2019 2020 2021 2022 Kemira Investor Presentation (updated on July 22, 2015) 67
Slide 68: Kemira shareholder structure
Kemira shareholder structure
Slide 69: Kemira's largest shareholders (June 30, 2015)
Kemira’s largest shareholders (June 30, 2015) Shareholders % of shares Oras Invest Oy 18.2% Solidium Oy 16.7% Varma Mutual Pension Insurance Company 5.3% Ilmarinen Mutual Pension Insurance Company 3.1% Kemira Oyj 2.1% Free float 54.6% Foreign shareholders share of free float 38% Households share of
Slide 70: Shareholder Structure
Shareholder Structure Institutional investors by investment style, 2015 Hedge Fund 1% 2% Other 7% 14% Growth 51% Index 30% 8% 22% Value 17% GARP 8% 30% 3% 9% 33% 39% 55% 36% Kemira Investor Presentation (updated on July 22, 2015) 70
Slide 71: Shareholder structure (institutional investors)
Shareholder structure (institutional investors) Geographical Distribution (%) France Rest of the world 4% 3% Norway 5% Sweden 5% Switzerland 2% Finland UK 40% 9% USA 17% Germany Canada 8% 7% Kemira Investor Presentation (updated on July 22, 2015) 71
Slide 72: Kemira Capital Markets Day
Kemira’s global R&D center in Espoo, Finland on Thursday, September 17, 2015 Kemira Capital Markets Day 12:00 Buffet lunch 12:30 Presentations • Strategy review by the President and CEO, Jari Rosendal • R&D: Heidi Fagerholm, CTO • Paper: Mats Rönnbäck, President and Billy Ford, SVP, Americas • Munic