Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — Q4 2015 Earnings Presentation
62 slides from Kemira Oyj's earnings presentation, February 2016
Slide 1: Investor presentation
February 2016 Investor presentation • Kemira in brief (slides # 2-17) • Financials (# 18-32) • Pulp & Paper (# 33-41) • Oil & Mining (# 42-46) • Municipal & Industrial (# 47-54) • R&D (# 54-57) • CSR and Shareholders (# 58-61)
Slide 2: The first choice in chemistry for water-intensive industries
The first choice in chemistry for water-intensive industries 2015 Revenue EUR 2.4 billion, Operative EBITDA EUR 287 million, EBITDA margin 12.1% Pulp & Paper Oil & Mining Municipal & Industrial Leading global pulp and paper Growing chemical supplier to Oil, Market leader in raw and wastewater chemic
Slide 3: All segments delivering growth and improved profitability
All segments delivering growth and improved profitability 2017 financial targets: Revenue EUR 2.7 billion, Operative EBITDA 15%, Gearing <60% Pulp & Paper Oil & Mining Municipal & Industrial 60% of Group’s revenue 15% of Group’s revenue 25% of Group’s revenue Growth target Growth target Growth targe
Slide 4: Global megatrends favor Kemira
Global megatrends favor Kemira BIOBASED ECONOMY Product quality crucial especially in pulp & paper industry CIRCULAR ECONOMY Recycled paper and board Water reuse Nutrient (phosphorus) removal and recovery RESOURCE EFFICIENCY More with less: e.g. less water, less virgin fiber More out of less: e.g. m
Slide 5: Kemira enables sustainable packaging
Kemira enables sustainable packaging FOR PULP & PAPER INDUSTRY LIGHTER DURABLE PACKAGES Kemira FennoBond™ enables usage of less Package weight fibers with maintained strength and stiffness properties. -10% Savings through raw material efficiency, contributing to lower transportation costs and reduci
Slide 6: Kemira enables higher oil recovery rate
Kemira enables higher oil recovery rate FOR OIL & GAS INDUSTRY OIL WATER WATER WATER WATER In Chemical Enhanced Oil Recovery 1 % increase in recovery equals 2 years of oil Without polymer production. With Kemira’s polymer technology recovery rate improvement up to 15%. OIL OIL OIL OIL WATER With Kem
Slide 7: Kemira enables clean water cycle
Kemira enables clean water cycle FOR WATER TREATMENT Water purified with Kemira products million m3* We optimize the efficient utilization of 20000 resources with chemistry and expertise at 18000 16000 every stage of water management. 14000 12000 10000 8000 Our global water challenges*: 6000 15,400
Slide 8: Each segment provides a comprehensive offering
Each segment provides a comprehensive offering PULP & PAPER OIL & GAS, MINING MUNICIPAL & INDUSTRIAL Packaging, Chemical, mechanical Industrial board and Process chemicals to Minerals & Metals and recycled pulp water treatment tissue grades other industries applications 25% 40% 40% 35% 40% 60% 20% 4
Slide 9: Kemira operates in growing markets
Kemira operates in growing markets We help customers create more value by applying our expertise where water meets chemistry • Kemira’s relevant market estimated* to grow +3.1% 3.1% per year • Targeting above the market growth 2.9% 5.5 • Drivers for growth, among others: 4.7 – Increased use of tissu
Slide 10: Kemira is truly global – sales in more than 100 countries
Kemira is truly global – sales in more than 100 countries R&D and technology centers Employees ASIA PACIFIC 8% EUR 190 million Manufacturing footprint Responsibility in 540 globally (64 sites): manufacturing: Polymers and other EUROPE, MIDDLE EAST process chemicals (25) We reduce greenhouse AND AFRI
Slide 11: Kemira's path to leading & focused chemical supplier
Kemira’s path to leading & focused chemical supplier 2011-2015 2014 2015 2013 • Coagulant production consolidation in Europe mainly to • Closure of three sites to Dormagen (Germany) and Tarragona (Spain) enhance efficiency • Closure of Vaasa 2015 • Establishment of Business Service Center in Poland
Slide 12: Key figures and ratios
Key figures and ratios EUR million (except ratios) 2011* 2012* 2013 2014 2015 Revenue 2,207.2 2,240.9 2,229.1 2,136.7 2,373.1 Operative EBITDA 248.2 249.4 251.9 252.9 287.3 of which margin 11.8% 11.1% 11.3% 11.8% 12.1% Operative EBIT 152.2 155.5 164.2 158.3 163.1 of which margin 6.9% 6.9% 7.4% 7.4%
Slide 13: Growth expected in all segments
Growth expected in all segments 2016 outlook: Revenue and operative EBITDA are expected to increase compared to 2015 • Commercialization of new innovations, Revenue, EUR million 2,700 especially for packaging board and tissue industries 2,373 • Investments in pulp chemicals 2,137 • Revenue synergies
Slide 14: Well defined strategic initiatives driving higher margin
Well defined strategic initiatives driving higher margin Operative EBITDA margin 15% Manufacturing Regulation efficiency, 12.1% Entry into driven growth LEAN New new 11.8% AkzoNobel’s Efficiency roll out, innovative applications paper improvement Operational products, in Oil & Gas chemicals Chemical
Slide 15: Dividend policy – a stable and competitive dividend
Dividend policy – a stable and competitive dividend • Kemira has paid dividend every year since listing of shares in 1994 • Since 2000 Kemira has paid above EUR 800 million in cash dividends and distributed Tikkurila (worth of ~600 M€) and GrowHow (worth of ~160 M€) in dividends • Dividend proposal
Slide 16: 2016 outlook – Revenue growth and operative EBITDA improvement
2016 outlook – Revenue growth and operative EBITDA improvement set to continue 2014 2015 2016 outlook Revenue EUR 2.1 billion EUR 2.4 billion Increase Operative EBITDA EUR 253 million EUR 287 million Increase 16
Slide 17: Kemira investment case highlights
Kemira investment case highlights Leading market position supporting above-the-market growth Strong operating cash flow supports investments Higher profitability through organic growth and efficiencies Stable and competitive dividend 17
Slide 18: Financial highlights 2015
Financial highlights 2015 Key financials Q4 2015 FY 2015 Revenue growth +11% Revenue, 600.2 2,373 Organic revenue growth in 2015: EUR million (547.1) (2,137) Operative EBITDA, 68.0 287.3 • +2% in Pulp & Paper EUR million (65.3) (252.9) • +1% in Municipal & Industrial Operative EBITDA margin 11.3% 12
Slide 19: Revenue growth in 2015
Revenue growth in 2015 • Pulp & Paper organic growth was flat in Q4, +2% in FY 2015 • Municipal & Industrial organic growth 2% in Q4, +1% for the year • Oil & Mining revenue decreased 25% in local currencies in Q4, -18% for the year Kemira Group revenue bridge Q4 2015, EUR million Kemira Group reven
Slide 20: Pulp & Paper segment delivering growth
Pulp & Paper segment delivering growth • Positive organic growth in EMEA and APAC was offset by negative development in Americas • Market outlook for 2016 looks good supported by growth in pulp chemicals market • Sequential operative EBITDA margin improvement in 2015 Revenue and revenue growth (y-on
Slide 21: Challenging market conditions continued to impact Oil & Mining
Challenging market conditions continued to impact the demand in the Oil & Mining segment • Demand of chemicals used in the US shale oil operations continued to decline • Market remains uncertain, but applications into CEOR* and Oil Sands are expected to generate new revenue • Modest revenue decline
Slide 22: Municipal & Industrial delivering profitable growth
Municipal & Industrial delivering profitable growth • Organic growth +2% in Q4 according to plan • Variable costs continued to decrease but the profitability was impacted by product mix and temporary cost increases Revenue and revenue growth (y-on-y) trend Operative EBITDA and operative EBITDA margi
Slide 23: Positive trend from raw materials continues
Positive trend from raw materials continues Kemira variable cost structure 2015 Variable cost vs sales price trend EUR 1,3 billion Oil direct + indirect 120 (Acrylonitrile, acrylic acid, 100 Alpha Olefins, Sodium Chloride) 80 Logistics 20% 60 40 20% 20 0 -20 15% -40 45% -60 Electricity and Other raw
Slide 24: Strengthened U.S. dollar continued to impact positively
Strengthened U.S. dollar continued to impact positively • Favorable currency rates had EUR 5 million positive impact on the operative EBITDA in Q4 2015 • Guidance: 10% change in our main foreign currencies would approximately have EUR 15 million impact on operative EBITDA on an annualized basis (FY
Slide 25: Additional disclosure on amortizations and non-recurring items
Additional disclosure on amortizations and non-recurring items • Investments have led to higher EUR million Q4 2014 Q4 2015 depreciation Operative EBITDA 65.3 68.0 Depreciation 24.5 28.4 • Acquisitions have increased purchase PPA amortisations 1.3 4.6 price allocation (PPA) amortizations FX impact v
Slide 26: Strong improvement in operating cash flow
Strong improvement in operating cash flow • Cash flow from operations improved by Q4 Q4 EUR million 2014 2015 2014 2015 EUR 88 million in Q4 2015 and more Operative EBITDA 65 68 253 287 than tripled for the year Reported EBITDA 73 58 253 264 • Good progress in net working capital Change in NWC 1 59
Slide 27: Investments into growth
Investments into growth CAPEX (excl. M&A) outlook approximately EUR 200 million in 2016 Capital expenditure excl. M&A* EUR million EUR million (except ratios) 2014 2015 % 70 Capital expenditure 146 182 25 2014 2015 61 60 55 Pulp & Paper 83 119 43 49 50 44 40 Oil & Mining 27 29 7 34 31 30 26 27 Munic
Slide 28: Pulp & Paper
Pulp & Paper Key financials EUR million 2011* 2012* 2013 2014 2015 Revenue 973 1,047 1,068 1,170 1,417 Operative EBITDA 120.4 109.0 130.3 137.2 171.0 of which margin 12.4% 10.4% 12.2% 11.7% 12.1% Operative EBIT 66.3 76.5 86.5 85.8 96.8 of which margin 6.8% 7.3% 8.1% 7.3% 6.8% Capital expenditure inc
Slide 29: Oil & Mining
Oil & Mining Key financials EUR million 2011* 2012* 2013 2014 2015 Revenue 335.7 321.1 311.5 382.2 350.1 Operative EBITDA 33.9 40.6 32.7 48.4 33.5 of which margin 10.1% 12.6% 10.5% 12.7% 9.6% Operative EBIT 19.9 25.9 17.4 29.9 11.1 of which margin 5.9% 8.1% 5.6% 7.8% 3.2% Capital expenditure incl. M
Slide 30: Municipal & Industrial
Municipal & Industrial Key financials EUR million 2011* 2012* 2013 2014 2015 Revenue 664.7 686.6 659.4 564.7 605.7 Operative EBITDA 68.7 64.0 68.3 68.1 82.8 of which margin 10.3% 9.3% 10.4% 12.1% 13.7% Operative EBIT 41.8 34.2 45.8 43.3 55.2 of which margin 6.3% 5.7% 6.9% 7.7% 9.1% Capital expenditu
Slide 31: Solid financial position with diversified debt portfolio
Solid financial position with diversified debt portfolio • Gearing increased to 54% (42%) due to Capital structure, end of 2015 EUR million dividend payment and acquisitions Net debt, • Senior unsecured bond of EUR 150 million 642 million issued in 2015, with a coupon of 2.25% Cash and cash 1,193 •
Slide 32: Shifting focus to fast growing differentiated products
Shifting focus to fast growing differentiated products Share of differentiated products were 51% in 2015 Differentiated product line drivers: Commodity product line drivers: Application sales Capacity increases driving bleaching and pulping Production optimization Market share driving coagulants Cap
Slide 33: Profitable growth in Pulp & Paper
Profitable growth Revenue, EUR million in Pulp & Paper +21% 1,417 1,170 • Integration of acquisitions well on track • Efficiency measures continued, one site closed 2014 2015 • In APAC, growth through ramp-up in Nanjing, China and new Total Operative EBITDA, EUR million Chemistry Management deals •
Slide 34: Pulp & Paper delivering on its growth strategy
Pulp & Paper delivering on its growth strategy 2015 P&P revenue: EUR 1,417 million (53% EMEA, 35% Americas, 12% APAC) Kemira’s revenue split in 40% Kemira’s revenue split in Pulp & Paper Pulp & Paper EUR billion Packaging, board and 1.4 tissue grades 1.1 1.2 APAC Americas 40% Chemical, mechanical EM
Slide 35: Pulp & Paper market is expected to grow at 1.5% CAGR
Pulp & Paper market is expected to grow at 1.5% CAGR* Relevant target market (EUR billion) +1.5% +1.5% ~10 ~10 ~9.5 ~9.5 ~9 ~9 3-4% 2-3% Packaging SA & Tissue 2-3% APAC Printing -1% flat & Writing NA 1-2% 0-1% Pulp EMEA CAGR CAGR 2014- 2014- 2014 2017 2020 2020 2014 2017 2020 2020 *) Management esti
Slide 36: Long-term commitment to pulp and paper industry
Long-term commitment to pulp and paper industry Kemira pulp and paper revenue more than doubled since 2004 2015 Kemira (pulp and paper) #1 Solenis (paper) #2 AkzoNobel (pulp) #3 Ecolab (paper) #4 BASF (paper) #5 2004 Ciba #1 AkzoNobel #2 BASF #3 Hercules #4 Kemira #5 Nalco #6 KEMIRA IN BRIEF FINANCI
Slide 37: Acquisition of AkzoNobel's paper chemicals business strengthens market share
Acquisition of AkzoNobel’s paper chemicals business strengthens Kemira’s market share • Revenue of acquired business more than EUR 200 million • Transaction is expected to result in EUR 15 million annual net synergies • Kemira received 6 production sites of which 4 in APAC. One in Italy closed. #1 P
Slide 38: Synergies from the integration of AkzoNobel's paper chemicals business
EUR 15 million synergies from the integration of AkzoNobel’s paper chemicals business Expected synergies, EUR million Synergy realization run rate, % 15 100% ~50% ~20% Total Manu- Sourcing Other fixed 2015 2016 2017 facturing and supply costs chain KEMIRA IN BRIEF FINANCIALS PULP & PAPER OIL & MININ
Slide 39: Pulp & Paper profitability improved sequentially in 2015
Pulp & Paper profitability improved sequentially in 2015 Pulp & Paper Operative EBITDA margin 12.6% 12.3% 11.8% 11.5% Q1 2015 Q2 2015 Q3 2015 Q4 2015 KEMIRA IN BRIEF FINANCIALS PULP & PAPER OIL & MINING MUNICIPAL & INDUSTRIAL R&D CSR & SHAREHOLDERS 39
Slide 40: Total Chemistry Management (TCM) offering brings new growth
Total Chemistry Management (TCM) offering brings new growth • Kemira’s wide offering, regional manufacturing footprint as well as knowledgeable, dedicated and experienced people enable better service compared to peers • In Q4 2015, several TCM deals signed in the EMEA and APAC region • New revenue o
Slide 41: Pulp & Paper – Technology and market leader
Pulp & Paper – 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 Polyme
Slide 42: Oil & Mining responds to market decline
Oil & Mining responds Revenue, EUR million to market decline 382 -8% 350 • Strict cost management to counteract very difficult market conditions in shale fracking • Growth in Mining partly offset 2014 2015 decline in segment’s revenue • Chemical Enhanced Oil Recovery Operative EBITDA, EUR million pr
Slide 43: Kemira's strength is in oil & gas shale market in NA
Kemira’s strength is in oil & gas shale market in NA 2015 O&M revenue: EUR 350 million (30% EMEA, 70% Americas) NA chemicals market in shale Polymer competitors operations 2014 • Drastic drop in oil price in E 2015 led to decrease in EUR Natural D activity of shale fracking million Polymers ~800> •
Slide 44: CEOR is a considerable growth opportunity
CEOR is a considerable growth opportunity • Kemira entered Chemical Enhanced Oil Oil recovery methods Recovery market with deliveries of polyacrylamides to Cairn in India in Q2 Primary recovery Natural flow Less than 30% Artificial lift 2015 • Master collaboration agreement with Chevron • Increase o
Slide 45: Continued focus on innovation and new services
Continued focus on innovation and new services Canada Oil Sands • Oil Sands Chemicals estimated market size EUR 400 million • Canadian Producers expect Oil Sands production to grow ~5% per year through 2030 • Polymers largest product segment at ~ EUR 150 million • New legislation in Canada mandates
Slide 46: Oil & Mining – Strengthening position with innovation chemicals and application knowledge
Oil & Mining – Strengthening position with combination of innovation chemicals and application knowledge RAW INTERMEDIATES PRODUCTS APPLICATIONS CUSTOMERS MATERIALS Acrylonitrile Acrylamide Polymers Friction Reduction Pumpers Acrylic acid Dispersants & Formation & Well Scale Oil & Gas Various monome
Slide 47: Robust year for Municipal & Industrial
Robust year for Revenue, EUR million Municipal & Industrial +7% 606 565 • Revenue growth with substantial profitability improvement • Restructuring done in 2013-2014 pays off 2014 2015 • Efficiency measures continued • Solid cash flow generation and Operative EBITDA, EUR million strong ROCE +22% 83
Slide 48: M&I – Steady growth and cash flow generation
M&I – Steady growth and cash flow generation 2015 M&I revenue: EUR 606 million (65% EMEA, 31% Americas, 4% APAC) • Further strengthen the base business Revenue, EUR million 2,700 in raw and waste water treatment applications 2,373 • Ensure efficiency as well as cost and product leadership through op
Slide 49: M&I has increased its ROCE up to 17%
M&I has increased its ROCE up to 17% Operative ROCE Revenue projection 17% CAGR: 2-4% 14% 13% 10% 2012 2013 2014 2015 2015 2017 We have executed successfully the We plan to grow slightly faster than Circular economy and investment into cash generator strategy the underlying market whilst innovation
Slide 50: Fixed costs under tight control, investments done selectively
We have kept fixed costs under tight control done investments selectively Fixed cost development CAPEX development NWC development EUR million & percent of Revenue EUR million Percent of Revenue 27% 26% 26% 25% 13% 47 35 34 32 9% 8% 7% 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015 KEMI
Slide 51: Our strategy is based on solid execution of base business
Our strategy is based on solid execution of base business Our current position Base initiatives Options for higher cash generation • Restructured to focus on core • Ensure efficiency and cost Building “Advanced Water business leadership Treatment” applications on • Market leader in water • Continue
Slide 52: Five focus areas for future development
Together with our customers we have defined five focus areas for the future development Innovation driven focus areas for growth – “Advanced Water Treatment” Water availability “Utilization of waste water for reuse” Sludge “From volume reduction to value” Nutrient “From removal to recovery” Energy “
Slide 53: Municipal & Industrial - Technology and market leader in water treatment
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 54: Research & Development
Research & Development Sustainable solutions through innovations 54
Slide 55: Kemira Global R&D – a world class team
Kemira Global R&D – a world class team R&D investments over EUR 30 million annually New product revenue Employees & expertise Product time-to-market EUR million 75 Persons Months = Target 200 Oil and gas minerals and mining Polymer chemistries Scale and corrosion control Manufacturing process develo
Slide 56: Clear path towards growth in innovation sales
Clear path towards growth in innovation sales New products in the pipeline M&I Paper O&M 10 M€ Revenue 2 years after 1 M€ Launch September 2015 December 2015 March 2016 June 2016 KEMIRA IN BRIEF FINANCIALS PULP & PAPER OIL & MINING MUNICIPAL & INDUSTRIAL R&D CSR & SHAREHOLDERS 56
Slide 57: Stronger board using less fibers
PULP & 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 All
Slide 58: Corporate Responsibility and Shareholder structure
Corporate Responsibility and Shareholder structure 58
Slide 59: Corporate responsibility contributing to our strategy
Corporate responsibility contributing to our strategy STRATEGY FINANCIAL CORPORATE RESPONSIBILITY CORPORATE RESPONSIBILITY TARGETS 2017 CONTRIBUTION TO STRATEGY FOCUS AREAS VISION Revenue The first choice in chemistry EUR Creating value for Kemira and for water intensive industries 2.7 billion stake
Slide 60: Corporate responsibility
Corporate responsibility Examples of sustainability performance EMPLOYEE ENGAGEMENT INDEX: TARGET CARBON INDEX: TARGET 80 BY END 2020 AT ABOVE EXTERNAL INDUSTRY NORM Based on Scope 1 and Scope 2 emissions Employee engagement index, % Participation rate, % of total employees 100 88 91 91 2012 2013 20
Slide 61: Kemira's largest shareholders
Kemira’s largest shareholders Shareholders on January 31, 2016 Institutional investors as of September 2015 Switzer- Rest of the world % of shares France land 2% 6% 4% 1. Oras Invest 18.2% The Netherlands 2. Solidium (owned by State of Finland) 16.7% 5% 3. Varma Mutual Pension Insurance Company 5.3%
Slide 62: Shareholder value driven by growth and cash flow generation
Shareholder value driven by growth and cash flow generation • Leading market position supporting above-the-market growth • Strong operating cash flow supports investments • Higher profitability through organic growth and efficiencies • Stable and competitive dividend