Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — FY2005 Earnings Presentation
52 slides from Kemira Oyj's earnings presentation, Feb 7, 2006
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Slide 2: Kemira's Growth Continues from the Pole Position
Kemira’s Growth Continues from the Pole Position Lasse Kurkilahti, President & CEO 7 February 2006 IR Contact: Päivi Antola, paivi.antola@kemira.com, tel. +358 1086 21140
Slide 3: Contents
Contents 2005 Group Highlights 2005 Business Area Highlights Execution 3
Slide 4: 2005 Group Highlights
2005 Group Highlights © _ = ® x
Slide 5: 2005 Highlights
2005 Highlights Year of good growth: revenue up 18% Organic growth 4% Several acquisitions leading to pole positions Finnish Chemicals Verdugt Kraski Teks Lanxess EPS up 46% Continuous improvement of performance and efficiency Increases in raw material and energy prices were for a large part passed
Slide 6: Growth Boosted by Acquisitions
Growth Boosted by Acquisitions Organic 2005 2004* Change growth Revenue (MEUR) 1.994,4 1.695,1 18% 4% EBIT (MEUR) 165.5 111.6 48% EPS (EUR) 0.73 0.50 46% ROCE, % 9.9 8.6 Cash flow after CapEx, excl. 170.8 155.4 acquisitions (MEUR) Proposed dividend EUR 0.36 / share (2004: EUR 0.34) *Continuing opera
Slide 7: Revenue up 33% in Q4
Revenue up 33% in Q4 Organic Q4/05 Q4/04* Change growth Revenue (MEUR) 521.5 391.0 33% 8% EBIT (MEUR) 36.4 13.7 166% EPS (EUR) 0.15 0.13 15% ROCE, % 9.9 8.6 Cash flow after CapEx, excl. 106.8 49.4 acquisitions (MEUR) *Continuing operations 7
Slide 8: Revenue in 2005
Revenue in 2005 Paints & 2800 Coatings 2400 23 % 2000 MEUR Pulp & Paper 1600 37 % 1200 800 Performance 400 Chemicals 0 22 % Kemwater 2001 2002 2003 2004* 2005 18 % Q1 Q2 Q3 Q4 Total: 1,994.4 MEUR, +18% *Continuing operations (2004: 1,695.1 MEUR) 8
Slide 9: Revenue up 18% in 2005
9 1500 1600 1700 1800 1900 2000 2100 2200 MEUR 20 04 Pr ic e Vo lu m e C ur re nc y A cq u is i tio n s D Revenue up 18% in 2005 iv e st m en In ts d us tri al d is pu W te S re st ru ct u rin g O th er 20 05
Slide 10: Geographical Breakdown of Revenue
Geographical Breakdown of Revenue Total: 1,994.4 MEUR (2004: 1,695.1 MEUR) Asia Other 5% 1% Americas 24 % EU 61 % Other Europe 9% 10
Slide 11: EBIT in 2005
EBIT in 2005 EBIT by quarter Pulp & Paper 200 10 % Paints & Chemicals Coatings 63,4 MEUR 8 55,9 MEUR 150 EBIT-% 9 EBIT-% 12 6 MEUR 100 4 50 2 Performance Kemwater 0 0 Chemicals 31,9 MEUR 04* 01 02 03 05 41,1 MEUR EBIT-% 9 EBIT-% 10 EBIT % Total 2005: 165.5 MEUR, +48% (2004: 111.6 MEUR) *Continuing o
Slide 12: EBIT up 48% in 2005
12 50 75 100 125 150 175 200 20 MEUR 04 Pr ic e Vo lu m e C ur re nc Va y ria bl e co st s Fi xe d co EBIT up 48% in 2005 st A s cq N u is on -r i tio e n cu s rr in g it e m D s ep re In ia c d tio us tri n al di W sp S ut re e st ru ct ur in g O th er 20 05
Slide 13: Capital Employed by Business Area 31 Dec 2005
Capital Employed by Business Area 31 Dec 2005 31 December 2005: 1,766 MEUR (31 Dec 2004: 1,206 MEUR) Other 28 MEUR (2004: 33 MEUR) Paints & Coatings 260 MEUR Capital turnover 1.6 (2004: 263 MEUR) Pulp & Paper Chemicals 794 MEUR Performance Capital turnover 1.0 Chemicals (2004:432 MEUR) 449 MEUR Capi
Slide 14: EPS by Quarter, ROCE
EPS by Quarter ROCE EUR % 1 12 0,9 0,8 10 0,7 8 0,6 0,5 6 0,4 0,3 4 0,2 2 0,1 * Continuing operations 0 0 excluding a non- recurring charge of 44.2 2001 2002 2003 2005 2004* MEUR in Q4/04. Q4/02 exludes a write- down of 78 MEUR. ROCE 14
Slide 15: ROCE by Business Area
ROCE by Business Area Kemira Group: 9.9% (2004: 8.6%) 25 20,2 20 16,0* 15,0 15 13,7 % 2004 11,1 9,9 10,0 2005 10 8,8 5 0 Pulp & Paper Kemwater Performance Paints & Chemicals Coatings *Excluding the non-recurring expenses of 11.0 MEUR in Q4/04 15
Slide 16: Balance Sheet
Balance Sheet MEUR 31 Dec 05 31 Dec 04 Net debt 619.7 201.3 Equity 1019.2 956.0 Equity ratio, % 44 47 Gearing, % 61 21 Capital employed (MEUR) 1,766.2 1,205.9 Personnel 7,670 7,137 16
Slide 17: Cash Flows in 2005
Cash Flows in 2005 MEUR 2005 2004* Cash flows from operations 155.6 231.0 Acquisitions -285.5 -47.8 CapEx excl. acquisitions -116.4 -117.3 Sale of fixed assets 131.5 41.7 Cash flows from investing activities -270.4 -123.4 Free cash flow -114.8 107.6 *Continuing operations 17
Slide 18: CapEx Excluding Acquisitions
CapEx Excluding Acquisitions Total in 2005: 116.4 MEUR (2004: 117.3) Depreciation in 2005: 118.9 MEUR (2004: 120.4) Other Maintenance 9,0 MEUR Pulp & Paper 19 % Chemicals Paints & Coatings 36,7 MEUR 18,0 MEUR Improvement 49 % Expansion Performance Kemwater 32 % Chemicals 18,0 MEUR 34,7 MEUR 18
Slide 19: Personnel
Personnel Dec 31, 2005: 7,670 (Dec 31, 2004: 7,137) Asia 4% Americas 16 % Finland 40 % Other Europe 40 % 19
Slide 20: Shareholders 31 December 2005
Shareholders 31 December 2005 (31 December 2004) International Institutions 17.4% (11.8) Finnish Finnish State Institutions 48.7% (55.2) 22.1% (22.5) Households Kemira 8.5% (7.1) 3.3% (3.4) Minimum state ownership 15% 20
Slide 21: Shareholder Value
Shareholder Value Market cap 6 Feb 2006 1.750 MEUR Market cap 31 Dec 2002 800 MEUR 21
Slide 22: Good Dividend Returns
Good Dividend Returns 0,6 0,5 0,4 Cash dividend 0,3 Payout Ratio 0,2 0,1 0 2001 2002* 2003 2004** 2005 Board Proposal Dividend policy: 30-50% of operational net income. *Payout ratio excluding a write down of 78 MEUR within the fertilizer business **Additional dividend worth of 1.34 EUR was distribu
Slide 23: 2005 Business Area Highlights
2005 Business Area Highlights
Slide 24: Pulp & Paper Chemicals in 2005
Pulp & Paper Chemicals in 2005 Revenue up by 31% to 738.5 MEUR Acquisitions of Finnish Chemicals and E.QU.I.P. +164 MEUR Industrial dispute in the Finnish paper industry, impact -30 MEUR Organic growth 3% EBIT up by 42% to 63.4 MEUR, ROCE 8.8% (9.9%) Efficiency measures Industrial dispute, impact -1
Slide 25: Pulp & Paper Chemicals after the Lanxess acquisition
Pulp & Paper Chemicals after the Lanxess Paper Chemicals acquisition No 1 pulp & paper chemicals supplier in the world Revenue 2005, pro forma ~ 1.050 MEUR (incl. Lanxess & FC/Q1) Good market position Globally No 1 Europe No 2 North America No 3 Nordic No 1 Additives Other 8% 8% Nordic Pigments Nort
Slide 26: Kemira's Pulp and Paper Chemicals
Kemira’s Pulp and Paper Chemicals Pulping & Paper Coating Bleaching making • Hydrogen Peroxide • Retention • Calcium Sulphate • Sodium Chlorate • Deposit Control • Titanium Dioxide • Chlorine Dioxide • Defoamers • Dispersing Agents • Sodium Borohydride • Water Treatment • Deposit Control • Caustic •
Slide 27: Acquisition of Lanxess
Acquisition of Lanxess Making Kemira #1 in Pulp & Paper Chemicals Situation in total Situation after the acquisition Ciba 900 MEUR Kemira 1050 MEUR Kemira 739 Ciba 900 Akzo Nobel 750 Akzo Nobel 750 BASF 730 BASF 730 Hercules 730 Hercules 730 Dow 670 Dow 670 Nalco 550 Nalco 550 Process & Functional w
Slide 28: Chemical Island to Botnia's Pulp Plant in Uruguay
Chemical Island to Botnia’s Pulp Plant in Uruguay General Company in Uruguay registered and Montevideo office to be opened February 13, 2006 Local manager on board as of January 1, 2006 Environmental permission obtained Tax free zone user permit received Engineering Plant design on progress Major eq
Slide 29: Pulp & Paper Chemicals
Pulp & Paper Chemicals MEUR Revenue EBIT & ROCE MEUR % 800 70 12 700 600 60 10 500 50 8 400 40 6 300 30 4 200 20 100 10 2 0 0 0 01 02 03 04 05 01 02 03 04 05 Q1 Q2 Q3 Q4 EBIT % ROCE The figures are not fully comparable due to changes in the business structure. 29
Slide 30: Pulp & Paper Chemicals' Outlook
Pulp & Paper Chemicals’ Outlook Capacity utilization in the customer industry estimated to be good Revenue expected to grow, especially due to the acquisitions made EBIT estimated to increase Improved capacity utilization rate Structural changes Finnish Chemicals acquisition The high level of raw ma
Slide 31: Kemwater in 2005
Kemwater in 2005 Revenue up by 27% to 363.5 MEUR Volumes and prices up, especially in Europe Acquisitions +56 MEUR Organic growth 8% EBIT up to 31.9 MEUR, ROCE 15.0% (16.0%*) Higher raw material costs especially in the US Higher transport costs in the US Acquisitions +5.3 MEUR MEUR 2005 2004 Ch% Q4/
Slide 32: Kemwater
Kemwater MEUR 400 Revenue MEUR EBIT & ROCE % 350 40 25 35 300 20 30 250 25 15 200 20 150 15 10 100 10 5 50 5 0 0 0 01 02 03 04 05 01 02 03 04 05 EBIT % ROCE Q1 Q2 Q3 Q4 The figures are not fully comparable Q4/04 excluding extra write-downs and due to changes in business structure. costs of 11 MEUR.
Slide 33: Kemwater's Outlook
Kemwater’s Outlook Demand for Kemwater’s water treatment chemicals expected to remain good Particular attention to new businesses, i.e. sludge treatment and industrial outsourcing The high prices of hydrochloric acid, chlorine and aluminum hydrate, especially in the US, will put negative pressure on
Slide 34: Performance Chemicals in 2005
Performance Chemicals in 2005 Revenue up by 37% to 430.5 MEUR Organic growth 11% Average prices of TiO2 in euros up 7%, volumes up 3% Specialty TiO2 products’ share of sales up Acquisition of Verdugt +79 MEUR EBIT up by 25% to 41.1 MEUR, ROCE 10.0% (11.1%) One-time items +6.2 MEUR (2004: +8.7 MEUR)
Slide 35: Performance Chemicals
Performance Chemicals MEUR Revenue EBIT & ROCE MEUR % 500 60 Net sales 18 400 50 16 14 300 40 12 30 10 200 8 20 6 100 4 10 2 0 0 0 01 02 03 05 04* 01 02 03 05 04* Q1 Q2 Q3 Q4 EBIT % ROCE The figures are not fully comparable *Continuing operations due to changes in the business structure. 35
Slide 36: Performance Chemicals' Outlook
Performance Chemicals’ Outlook Prices of TiO2 estimated to rise during 2006; demand is set to hold steady or grow slightly The share of specialty pigments in Kemira’s sales is estimated to increase Higher prices of raw materials and especially energy will challenge margin development Sales of organi
Slide 37: Paints & Coatings in 2005
Paints & Coatings in 2005 Revenue up 4% to 457.5 MEUR Organic growth +7% Good demand for paints in most of the main markets Growth in Russia continued EBIT up by 45% to 55.9 MEUR, ROCE 20.2% (13.7%) One-time items +9.5 MEUR (2004: +3.9 MEUR) Coil coating business sold at the end of November MEUR 200
Slide 38: Decorative Paint Market in Russia
Decorative Paint Market in Russia Tikkurila 9% Teks Other Russian 10 % Tikkurila, 27 % Akzo Nobel, Top Düfa Caparol, ICI 3% Medium Akzo Nobel Düfa, Finncolor 6% Yaroslavskie Kraski, Empils, Low Empils Teks, Cherkessk, Zagorsky, 11 % Pigment, Odilak, Kotovsky, Raduga Other Foreign 21 % Yaroslavskie K
Slide 39: Paints & Coatings
Paints & Coatings MEUR Revenue EBIT & ROCE MEUR % 500 60 20 400 50 40 ------ 16 300 30 ------ 12 ------ 20 ------ 8 200 10 4 0 100 0 -10 0 -20 -4 01 02 03 04 05 01 02 03 04 05 Q1 Q2 Q3 Q4 EBIT % ROCE 39
Slide 40: Paints & Coatings' Outlook
Paints & Coatings’ Outlook Revenue expected to be higher thanks to continuing good demand in all its market areas EBIT estimated to grow in step with the good trend in sales and as a result of the structural arrangements that have been carried out Revenue and EBIT will get a boost from the Kraski Te
Slide 41: Outlook for 2006 – Kemira Group
Outlook for 2006 – Kemira Group Kemira Group’s full-year revenue, EBIT and EPS are estimated to increase on 2005 The high prices of energy and raw materials will continue to put negative pressure on profits All forecasts and estimates mentioned in this report are based on the current judgement of th
Slide 42: Execution
Execution © _ = ® x
Slide 43: Business Areas
Business Areas Pulp & Paper Water Treatment Performance Paints & Chemicals Chemicals Chemicals Coatings 43
Slide 44: Revenue 2005, Pro Forma ~ EUR 2.4 Billion
Revenue 2005, Pro Forma ~ EUR 2.4 Billion Including Lanxess paper chemicals, Kraski Teks, Finnish Chemicals and Verdugt for the whole year Paints & Coatings 22 % (23 %) Pulp & Paper Chemicals Performance 44 % (37 %) Chemicals 19 % (22 %) Kemwater 15 % (18 %) (Reported percentage in 2005) 44
Slide 45: Kemira - #1 in the World
Kemira - #1 in the World Pulp & Paper Performance Paints & Kemwater Chemicals Chemicals Coatings Market #1 after the Globally #1 in #1 in TiO2 for printing #1 in Finland, acquisition of coagulants inks Sweden, Russia and position* Lanxess paper in the Baltic #1 in selected chemicals customer segment
Slide 46: Goal
Goal A global group of leading chemicals businesses with unique positions and high mutual synergy Great profitability, continuous improvement Continuous growth: organic and through M&A Participative, entrepreneurial company culture → More ambition, more dynamics 46
Slide 47: Opportunities for Improved Profitability
Opportunities for Improved Profitability Streamlining the production network Professional attitude in all actions Economies of scale, utilizing the leading position Internal synergies to use New Sales Ratio up Idle / low productive capital out → World class internal efficiency 47
Slide 48: Opportunities for Growth
Opportunities for Growth Organic growth Extended sales New products Opportunity 5% / year Mergers and acquisitions 48
Slide 49: Opportunities within the Business Areas
Opportunities within the Business Areas Pulp & Paper Chemicals Kemwater Implementing consolidation Implement coagulant in selected areas strategy with more speed Efficiency programs Widen the product portfolio Global market EUR 20 Global target market EUR 8 billion, growth 700 MEUR/a billion, growth
Slide 50: Financial Benchmarks
Financial Benchmarks Earnings per share Continuous improvement Cash flow after capital expenditure (excl. acquisitions) Positive Return on capital employed > 20 % Great 15 − 20 % Good 10 − 15 % Acceptable < 10 % Not acceptable → Basis for incentive systems 50
Slide 51: Kemira from Good to Great
Kemira from Good to Great Operatives & Performance Culture Brand All our actions lead towards We have a strong, participative We are regarded as World Class Operative and entrepreneurial culture. the leading expert in Efficiency. Chemical Solutions. We will create it through Our strategy is unique,
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