Kemira Oyj · OMXHEX:KEMIRA
Kemira Oyj — Q1 2006 Earnings Presentation
41 slides from Kemira Oyj's earnings presentation, May 4, 2006
Slide 1: Kemira Continues Strong Growth
Kemira Continues Strong Growth Lasse Kurkilahti, President & CEO May 4, 2006 Investor Relations: Päivi Antola, tel. +358 1086 21140
Slide 2: Contents
Contents Q1 Group Highlights Q1 Business Area Highlights Growth Continues 2
Slide 3: Q1 Group Highlights
Q1 Group Highlights © _ = ® x
Slide 4: Strong Growth Continues
Strong Growth Continues Revenue up 37% Organic growth 11% Acquisitions 26% / EUR 105 million Finnish Chemicals Verdugt Kraski Teks EPS up 40% Continuous improvement of performance and efficiency Increases in raw material and energy prices were for a large part passed on into selling prices 4
Slide 5: Growth Boosted by Acquisitions
Growth Boosted by Acquisitions Organic Q1/06 Q1/05 Change growth Revenue (MEUR) 552.9 403.7 37% 11% EBIT (MEUR) 45.5 30.3 50% EBIT, % 8.2 7.5 EPS (EUR) 0.21 0.15 40% ROCE, % 9.9 9.4 Cash flow after CapEx, excl. -41.5 -43.5 acquisitions (MEUR) 5
Slide 6: Revenue up 37%
Revenue up 37% MEUR 600 550 500 450 400 350 300 Q1/2005 Price Volume Currency Acquisitions Other Q1/2006 6
Slide 7: Revenue Development 2002-2006
Revenue Development 2002-2006 Q1/2006: 552.9 MEUR, +37% (Q1/2005: 403.7 MEUR) 2800 2400 2000 1600 MEUR 1200 800 400 0 2002 2003 2004* 2005 2006 Q1 Q2 Q3 Q4 *Continuing operations 7
Slide 8: EBIT up 50%
8 0 10 20 30 40 50 60 Q 1/ 20 MEUR 05 Pr ic e Vo lu m e EBIT up 50% C ur re nc Va y ria b le co st s Fi xe d co st s A cq u is N i tio on -r n s e cu rr in g ite m s D ep re c ia tio n O th er Q 1/ 20 06
Slide 9: EBIT by Quarter
EBIT by Quarter 200 10 % 8 150 6 MEUR 100 4 50 2 0 04* 0 02 03 05 06 EBIT % *Continuing operations Excluding a write-down of 78 MEUR in Q4/02 9
Slide 10: EPS by Quarter and 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 2002 2003 2005 2006 2004* MEUR in Q4/04. Q4/02 exludes a write- down of 78 MEUR. ROCE, 12-month rolling average 10
Slide 11: Balance Sheet
Balance Sheet MEUR 31 Mar 06 31 Dec 05 Net debt 690.6 619.7 Equity 1,057.6 1,019.2 Equity ratio, % 42 44 Gearing, % 65 61 Capital employed (MEUR) 1,818.8 1,766.2 Personnel 8,734 7,670 11
Slide 12: Cash Flows in Q1
Cash Flows in Q1 MEUR Q1/06 Q1/05 Cash flows from operations -20.3 -26.0 Acquisitions -30.3 0 CapEx excl. acquisitions -27.2 -20.3 Sale of fixed assets 6.0 2.8 Cash flows from investing activities -51.5 -17.5 Free cash flow -71.8 -43.5 12
Slide 13: CapEx Excluding Acquisitions
CapEx Excluding Acquisitions Maintenance CapEx in Q1/06: 27.2 MEUR 22 % Improvement (Q1/05: 20.3) 33 % Depreciation in Q1/06: 29.4 MEUR (Q1/05: 26.7) Expansion 45 % 13
Slide 14: Developing Procurement & Logistics 2006
Developing Procurement & Logistics 2006 Efficient competence development and optimized resourcing >10 new sourcing professionals in BAs Major competence development Harmonization of global sourcing, procurement and logistics processes One unified sourcing and procurement process enabling: Supplier m
Slide 15: Shareholders April 2006
Shareholders 28 April 2006 (29 April 2005) International Institutions 17.6% (12.0) Finnish Finnish State Institutions 48.7% (55.2) 21.6% (22.0) Households Kemira 8.9% (7.4) 3.2% (3.4) Minimum state ownership 15% 15
Slide 16: Shareholder Value
Shareholder Value IKRALY 14,30 + 8 +7 + 6 5 T T T T T T 4 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 16 Kemifra
Slide 17: Q1 Business Area Highlights
Q1 Business Area Highlights © _ = ® x
Slide 18: Pulp & Paper Chemicals in Q1
Pulp & Paper Chemicals in Q1 Revenue up by 52% to 209.5 MEUR Organic growth 8% Acquisition of Finnish Chemicals EBIT up by 132% to 26.0 MEUR, ROCE 9.5% (10.2%) Efficiency measures High capacity utilization rates within the customer industry One-time income of 4.1 MEUR (-2.0 MEUR) Raw material prices
Slide 19: Pulp & Paper Chemicals
Pulp & Paper Chemicals MEUR Revenue EBIT & ROCE MEUR % 800 70 20 700 60 600 15 50 500 40 400 10 30 300 200 20 5 100 10 0 0 0 02 03 04 05 06 02 03 04 05 06 EBIT % ROCE Q1 Q2 Q3 Q4 The figures are not fully comparable. 19
Slide 20: Integration of Lanxess Paper Chemicals
Integration of Lanxess Paper Chemicals Closing: April 1 357 employees in 19 countries The business has been taken over into Kemira ERP systems and infrastructure The global integration process is run by integration teams representing all business functions and locations Full time Integration Team He
Slide 21: Lanxess Paper Chemicals - Synergy Capture
Lanxess Paper Chemicals - Synergy Capture Great emphasis is put on synergy capture as the acquired business has been loss-making Synergies and cost benefits of EUR 20 million/a expected in 3 years’ time Major opportunities for synergies are found in Cross-selling based on combined stronger market pr
Slide 22: Restructuring PPC Production Network in North America
Restucturing PPC Production Network in North America Prince George Vancouver Washougal Montreal St Catharines Fortville Production t/a 30 000 15 000 3 000 Marietta Westoak Retention Retention, w ater treatment Columbus Shreveport Midway Sizing Deposit control Water treatment Deinking Defoamers Chang
Slide 23: Pulp & Paper Chemicals' Outlook
Pulp & Paper Chemicals’ Outlook Revenue for 2006 expected to increase on 2005 Capacity utilization rates within the customer industry Acquisitions of Finnish Chemicals and Lanxess paper chemicals EBIT expected to increase Restructuring Acquisition of Finnish Chemicals High levels of raw material and
Slide 24: Kemwater in Q1
Kemwater in Q1 Revenue up by 16% to 92.3 MEUR All growth organic Performance strong in North America EBIT up by 19% to 6.4 MEUR, ROCE 13.6% (14.6%) Higher raw material costs especially in North America Higher transport costs in the US Q1/06 Q1/05 Ch% 2005 Revenue, MEUR 92.3 79.6 16 353.2 EBIT, MEUR
Slide 25: Kemwater
Kemwater MEUR 400 Revenue MEUR EBIT & ROCE % 350 35 20 300 30 15 250 25 200 20 10 150 15 100 10 5 50 5 0 0 0 02 03 04 05 06 02 03 04 05 06 EBIT % ROCE Q1 Q2 Q3 Q4 Q4/04 excluding extra write-downs and The figures are not fully comparable. costs of 11 MEUR. 25
Slide 26: Kemwater's Outlook
Kemwater’s Outlook Revenue and EBIT for 2006 expected to increase from 2005 levels Demand for Kemwater’s water treatment chemicals expected to remain on a good level Particular attention devoted to expanding new businesses, i.e. sludge treatment and outsourcing services for industry The high prices
Slide 27: Performance Chemicals in Q1
Performance Chemicals in Q1 Revenue up by 56% to 118.6 MEUR Organic growth 10% Average prices of TiO2 in euros up 4%, volumes up 7% Specialty TiO2 products’ share of sales up Acquisition of Verdugt EBIT up by 33% to 11.3 MEUR, ROCE 10.5% (12.4%) Higher energy costs Measures to increase Verdugt’s eff
Slide 28: Performance Chemicals
Performance Chemicals MEUR Revenue EBIT & ROCE MEUR % 500 50 20 Net sales 400 40 15 300 30 10 200 20 100 5 10 0 0 0 02 03 05 06 04* 02 03 05 06 04* Q1 Q2 Q3 Q4 EBIT % ROCE The figures are not fully comparable. *Continuing operations 28
Slide 29: Performance Chemicals' Outlook
Performance Chemicals’ Outlook Revenue and EBIT expected to increase on 2005 TiO2 prices projected to be higher Demand for TiO2 expected to remain steady or edge up slightly Specialty pigments anticipated to increase their share of TiO2 sales High prices of raw materials and energy in particular wil
Slide 30: Paints & Coatings in Q1
Paints & Coatings in Q1 Revenue up 20% to 118.6 MEUR Organic growth +8% Good demand especially for decorative paints in most of the main markets Growth in Russia continued EBIT up by 14% to 9.6 MEUR, ROCE 20.2% (14.1%) Previous restructuring High raw material prices Acquisition of Kraski Teks closed
Slide 31: Paints & Coatings
Paints & Coatings MEUR Revenue EBIT & ROCE MEUR % 500 60 20 400 50 16 40 ------ 300 12 30 ------ ------ 8 200 20 10 4 100 0 0 0 -10 -4 02 03 04 05 06 02 03 04 05 06 Q1 Q2 Q3 Q4 EBIT % ROCE 31
Slide 32: Paints & Coatings' Outlook
Paints & Coatings’ Outlook Paints & Coatings expected to generate higher revenue for 2006 Demand at a good level in all market areas EBIT projected to grow (excluding EUR 9.5 million in non-recurring income included in operating profit for 2005) The acquisition in Russia of Kraski Teks will boost th
Slide 33: Outlook for 2006 – Kemira Group
Outlook for 2006 – Kemira Group Kemira Group’s growth is expected to continue strongly during Q2 Organic growth Acquisitions of Lanxess and Kraski Teks Raw material and energy prices are projected to remain high, putting pressure on business profitability Kemira’s revenue, EBIT and EPS for 2006 are
Slide 34: Growth Continues
Growth Continues © _ = ® x
Slide 35: 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 35
Slide 36: Opportunities for Improved Profitability
Opportunities for Improved Profitability Streamlining the production network Professional attitude towards customers and suppliers Economies of scale, utilizing the leading position Internal synergies to use New Sales Ratio up Idle / low productive capital out → World class internal efficiency 36
Slide 37: Opportunities for Growth
Opportunities for Growth Organic growth Extended sales New products Opportunity 5% / year Mergers and acquisitions 37
Slide 38: 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 39: Research & Development
Research & Development R&D expenditure breakdown in 2005: Total spend 2.2% of revenue Customer-oriented Varies between BAs and SBUs product development and service 39% New sales ratio ~ 20% Business-specific R&D personnel ~ 650 research projects Co-operation with universities and 37% research instit
Slide 40: Kemira from Good to Great
Kemira from Good to Great Operational Operational Efficiency Efficiency Culture Culture Brand Brand && Strategy Strategy All our actions lead towards We have a strong, participative We are regarded as World Class Operational and entrepreneurial culture. the leading expert in Efficiency. chemical sol
Slide 41: Just add
Just add