Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — Q1 2015 Earnings Presentation
70 slides from Kemira Oyj's earnings presentation, Apr 24, 2015
Slide 1: Kemira Investor presentation
Kemira Investor presentation Updated on April 24, 2015
Slide 2: Our business is divided into three segments
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 customers in water intensive 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
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: Kemira's manufacturing footprint globally (59 sites)
Kemira’s manufacturing footprint globally (59 sites) Polymers and EMEA North America South America other process chemicals (20) Coagulants (30) Bleaching and pulping (9) APAC Kemira Investor Presentation (updated on April 24, 2015) 6
Slide 7: Kemira Management Board
Kemira Management Board Jari Rosendal Petri Castrén President & CEO CFO Mats Rönnbäck Antti Salminen Tarjei Johansen Paper Municipal & Oil & Mining (Interim) Industrial Heidi Fagerholm Eeva Salonen Michael Löffelmann Esa-Matti Puputti CTO HR Projects & Operational Manufacturing Excellence Technology
Slide 8: 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 April 24, 2015) 8
Slide 9: Shifting focus to fast growing differentiated products
Shifting focus to fast growing differentiated products The share of differentiated products revenue increased to 49% (48% at the end of 2014) in Q1 2015, mainly due to increased sales volumes of sizing and strength chemicals in Paper Differentiated product line drivers: Commodity product line driver
Slide 10: Innovating together with our customers
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 11: Paper and Oil & Mining exceeded market growth
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 12: CAPEX expected to increase due to 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 paper chemical 134 135 136 acquisition will require between EUR 20-30 million capex between 201
Slide 13: EUR 0.53 per share dividend paid 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 14: Q1 2015 Results
Q1 2015 Results kemira
Slide 15: Financial Highlights January-March 2015
Financial Highlights January-March 2015 Revenue EUR 553 million (530) , +4% • Growth in Paper offset volume decline in Oil & Mining • Favorable currency exchange impact • Divested formic acid business (Q1 2014) impacted comparison by -4% Operative EBITDA EUR 66.4 million (57.5), +15% • Lower variabl
Slide 16: Key figures and ratios
Key figures and ratios EUR million (except ratios) Q1 2015 Q1 2014 % 2014 Revenue 553 530 4 2,137 Operative EBITDA 66.4 57.5 15 252.9 of which margin 12.0 10.9 - 11.8 Operative EBIT 39.1 36.3 8 158.3 of which margin 7.1 6.9 - 7.4 Share of profit or loss of associates 0.2 0.0 - 0.2 Financing income a
Slide 17: Favorable currencies drove revenue growth in Q1 2015
Favorable currencies drove revenue growth in Q1 2015 Paper organic growth was 4% driven by increased sales volumes in EMEA and Americas Oil & Mining revenue decreased 11% in local currencies due to lower sales volumes and prices Municipal & Industrial revenue remained largerly unchanged in local cur
Slide 18: Strengthened U.S. dollar had positive impact on operative EBITDA
Strengthened U.S. dollar had positive impact on operative EBITDA Favorable currency rates had EUR 6.5 million positive impact on the operative EBITDA in Q1 2015 Main transaction risk in pulp chemical business between CAD (revenue) and USD (costs) 10% change in our main foreign currencies would appro
Slide 19: Impacts of the declined oil price
The impacts of the declined oil price most evident in Oil & Mining and Municipal & Industrial segments Kemira variable cost structure Oil direct + indirect Variable cost vs sales price trend (Acrylonitrile, acrylic acid, Alpha Olefins, 140 Logistics Sodium Chloride) 120 30% 100 20% 80 60 40 20 0 15%
Slide 20: Paper segment growth continued
Paper segment growth continued Pulp chemical deliveries to Montes del Plata pulp mill in Uruguay continued in line with the ramp up of the new mill Higher manufacturing expenses and fixed costs related to the new manufacturing site in Nanjing, China Revenue and revenue growth (y-on-y) trend Operativ
Slide 21: Paper
Paper January-March 2015 EUR million Q1/2015 Q1/2014 % 2014 2013 % Revenue 314.6 280.4 12 1,170.0 1,112.8 5 Operative EBITDA 36.1 33.1 9 137.2 131.1 5 of which margin 11.5 11.8 - 11.7 11.8 - Operative EBIT 20.7 21.9 -5 85.8 85.9 0 of which margin 6.6 7.8 - 7.3 7.7 - Capital expenditure 17.7 12.3 44
Slide 22: Lower oil price impacting demand in Oil & Mining
Lower oil price impacting demand in Oil & Mining segment Strengthened U.S. dollar compensated the impact of lower sales volumes in Q1 2015 Lower oil price related raw material prices impacting variable costs and sales prices Revenue and revenue growth (y-on-y) trend Operative EBITDA and operative EB
Slide 23: Oil & Mining
Oil & Mining January-March 2015 EUR million Q1/2015 Q1/2015 % 2014 2013 % Revenue 93.9 92.0 2 382.2 311.5 23 Operative EBITDA 11.1 10.7 4 48.4 32.7 48 of which margin 11.8 11.6 - 12.7 10.5 - Operative EBIT 5.8 6.3 -8 29.9 17.4 72 of which margin 6.2 6.8 - 7.8 5.6 - Capital expenditure 4.6 4.4 5 26.3
Slide 24: Revenue recovery in Municipal & Industrial continued
Revenue recovery in Municipal & Industrial segment continued, profitability improved Sales volumes growing especially in North America Lower operating costs due to cost efficiency measures 3F synergies and decreased raw material prices Revenue and revenue growth (y-on-y) trend Operative EBITDA and o
Slide 25: Municipal & Industrial
Municipal & Industrial January-March 2015 EUR million Q1/2015 Q1/2014 % 2014 2013 % Revenue 144.5 137.7 5 564.7 659.4 -14 Operative EBITDA 19.2 14.5 32 68.1 68.3 0 of which margin 13.3 10.5 - 12.1 10.4 - Operative EBIT 12.6 8.8 43 43.3 45.8 -6 of which margin 8.7 6.4 - 7.7 6.9 - Capital expenditure
Slide 26: Investment pattern weighted on the second half
Investment pattern typically weighted on the second half of the year Kemira capital expenditure*, EUR million 60 2015 2014 51,4 50 40 30,6 30 27 28.2 25,6 20 10 0 Q1 Q2 Q3 Q4 *) Excluding acquisitions of BASF AKD emulsion business and PVO shares in 2014 Kemira Investor Presentation (updated on April
Slide 27: Kemira operative ROCE trend
Kemira operative ROCE trend Kemira operative ROCE* EUR million, expect ratios 2014* 2013* Revenue 2,136.7 2,229.1 Goodwill 476.7 520.8 Other intangible assets 75.6 63.5 10,9% 10,8% 10,8% 11,1% Property, plant and 664.3 656.8 equipment 10,2% 10,7% Net Working Capital ratio 9.9% 10.9% 9,7% Operative E
Slide 28: Cash flow statement
Cash flow statement EUR million Q1 2015 Q1 2014 2014 Operative EBITDA 66.4 57.5 252.9 Change in net working capital -13.9 -21.2 -19.4 Cash flow from operations 42.4 13.1 74.2 Investments -27.0 -25.6 -145.1 of which CAPEX -27.0 -25.6 -145.7 of which acquisitions 0.6 Cash impact of M&A 0.6 142.8 146.1
Slide 29: Solid financial position with diversified debt portfolio
Solid financial position with diversified debt portfolio Gearing (Net debt/equity) increased Capital structure, end of March, 2015 EUR million to 49% (42% at the end 2014) due to dividend payment, equals net debt/operative Net debt, 562 million EBITDA* ratio of 2.1 1,156 Cash and cash equivalents 68
Slide 30: 2015 outlook unchanged
2015 outlook unchanged 2014 2015 outlook* Revenue EUR 2.1 billion Increase Operative EBITDA EUR 253 million Approximately at the same level or increase *excluding the impact of AkzoNobel paper chemical business acquisition (expected closure in Q2 2015). At closing, AkzoNobel paper chemical business
Slide 31: Paper segment
Paper segment Value built in pulp and paper industry 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 32: 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 33: AkzoNobel paper chemical acquisition strengthens Asian position
The AkzoNobel paper chemical 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 competenci
Slide 34: AkzoNobel acquisition and Asian paper markets
The AkzoNobel acquisition will strengthen us especially in the growing Asian paper markets Kemira sales offices South Korea Kemira manufacturing Paper R&D in Japan AkzoNobel paper Shanghai, China chemicals manufacturing Paper Global HQ Hong Kong, China AkzoNobel paper chemicals sales offices Thailan
Slide 35: Acquisition strengthens market share in all regions
The acquisition of AkzoNobel paper chemical 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% i
Slide 36: 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 37: Setting new standards for binder efficiency
PAPER CASE Setting new standards for binder efficiency Kemira FennoBind™ Maintain critical surface properties and 1. print quality while improving cost-efficiency. FennoBind has twice the binding power 2. compared to standard binders. 3. 10–20% savings in coating color costs. Improved coating Saving
Slide 38: Making tissue with a cleaner and more efficient process
PAPER CASE Making tissue with a cleaner and more efficient process Kemira FennoClean™ PFA 1. Keeping the process free from microbiological deposits without creating harmful residuals or machine corrosion. Cost-efficient and less hazardous 2. disinfecting with halogen-free, corrosion safe and fully b
Slide 39: Stronger board using less fibers
PAPER CASE Stronger board using less fibers Kemira FennoBond™ To maintain stiffness and print quality at 1. lower basis weights. FennoBond maintains board strength and 2. folding properties at lower basis weight. Savings through yield advantage and raw 3. material efficiency. Lower basis weight Allo
Slide 40: Increasing paper machine and resource efficiency
PAPER CASE Increasing paper machine and resource efficiency Kemira KemFlite™ Diagnosing paper machine deposits 1. and final product defects in real time during the papermaking process. Unique analysis and monitoring tools and 2. innovative approach controlling proactively the size and agglomeration
Slide 41: Oil & Mining segment
Oil & Mining segment Improving efficiency and recovery yield WE PROVIDE A UNIQUE COMBINATION OF INNOVATIVE CHEMICALS AND APPLICATION KNOWLEDGE THAT IMPROVES PROCESS EFFICIENCY AND YIELD IN OIL, GAS AND METALS RECOVERY.
Slide 42: 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 43: Oil & Mining segment improving cost efficiency
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 44: Oil & Mining is a growing partner to oil, gas and mining
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 45: Capitalizing on anticipated growth in CEOR
Capitalizing on anticipated growth in CEOR • Relevant market size for polymers is about EUR 500 million • Expected chemical EOR end-market growth ~20% for the next 10 years • Kemira’ core offering to the customer includes products for: - viscosification - fluid diversion • Developing partnerships wi
Slide 46: Uncertainty around US shale operations expected to continue
Uncertainty around US shale operations expected to continue US shale business represents less than Horizontal rig count and oil price (WTI) index 50% of Oil & Mining segment revenues 160 Currently favorable U.S. dollar rate 140 Increased sales and marketing as well as 120 R&D focus in brownfield CEO
Slide 47: Analysts oil price estimates
Organization 2015 2016 2017 Analysts oil price estimate ABN Amro 60 75 85 for 2016 is 70$ and for ANZ Barclays 50 44 64 60 68 - 2017 76$ Banco BPI Bernstein 51 80 60 90 65 95 BNP Paribas 60 75 - BoA 52 58 - Capital Economics 55 60 62 Citigroup 63 70 - “A wave of spending cuts by oil CRISIL 60 78 - D
Slide 48: Oil & Mining - 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 49: 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. Friction reducer technology with tolerance 2. to saline and brackish water ensures quality performance in high TDS, high brine
Slide 50: Organic binder replaces bentonite
OIL & MINING CASE Organic binder replaces bentonite Kemira KemPel™ iron ore binder There is a need to reduce or prevent an 1. increase in silica content when mining a lower grade ore. Organic KemPel binders provide an 2. effective silica-free option to bentonite. Organic binder, tailored for the cus
Slide 51: Squeeze life optimization in offshore applications
OIL & MINING CASE Squeeze life optimization in offshore applications Kemira KemGuard® detectable scale inhibitor Effective prevention of mineral scale formation 1. and deposition downhole and in the formation through use of squeeze or continuous deployment. Detection of minimum inhibitor concentrati
Slide 52: Municipal & Industrial segment
Municipal & Industrial segment Optimizing the water cycle WE OPTIMIZE THE USE OF RESOURCES WITH CHEMISTRY AND EXPERTISE AT EVERY STAGE OF WATER MANAGEMENT.
Slide 53: 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% 0,7 • Price and cost sensitive 0,5 0.5 • Local business
Slide 54: Municipal & Industrial delivering strong cashflow
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 65% • Focusing on cash flow maximization Coagulants Revenue, EUR milli
Slide 55: Products 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 56: Significant turnaround program 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 57: Leading chemicals supplier in mature water markets
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 58: 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 59: Polluted beaches disinfected fast and reliably
MUNICIPAL & INDUSTRIAL CASE Polluted beaches disinfected fast and reliably Kemira DesinFix™ Case: Biarritz Heavy rainfall overloaded the local water 1. treatment plant, and untreated wastewater polluted the sea with fecal bacteria. DesinFix provided an easy to apply and 2. reliable solution while en
Slide 60: Reducing phosphorus at water treatment plant
MUNICIPAL & INDUSTRIAL CASE Reducing phosphorus at water treatment plant Ferric Chloride Case: North Las Vegas Water Reclamation Facility Phosphorus organisms were found to 1. increase when temperatures reached 28°C. Ferric Chloride was introduced to remove 2. phosphorus compounds by adding 750– 1,5
Slide 61: Corporate responsibility targets
Corporate responsibility targets
Slide 62: 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 April 24, 2015) 62
Slide 63: Targets & performance: Q1 2015
Targets & performance: Q1 2015 Sustainable Products and Solutions Innovation target: Innovation 93% revenue share 90% Responsible 78% Responsibility for 10% of total revenue in 2016* Supply chain Employees 8,5 Target: ≥ 90% of supplier 36% 7,1 6,6 contracts with signed Code of 5,8 Safety target: Con
Slide 64: Debt information
Debt information kemira
Slide 65: Debt portfolio at the end of Q1 2015
Debt portfolio EUR 687 million at the end of Q1 2015 Bond 29% EUR 200 million Loans from banks and financial institutions EUR 315 million 46% Commercial papers 10% EUR 70 million 3% 12% Pension loans EUR 23 million Other EUR 79 million Kemira Investor Presentation (updated on April 24, 2015) 65
Slide 66: Maturity profile
Maturity profile Gross debt EUR 687 million, March 31, 2015 EUR million Gross debt EUR 649 million on the 30th of June 2014 250 200 150 100 50 0 2015 2016 2017 2018 2019 2020 Kemira Investor Presentation (updated on April 24, 2015) 66
Slide 67: Kemira shareholder structure
Kemira shareholder structure
Slide 68: Kemira's largest shareholders (March 31, 2015)
Kemira’s largest shareholders (March 31, 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 33% Households share of
Slide 69: 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 April 24, 2015) 69
Slide 70: 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 April 24, 2015) 70