1. No category

Kemira Investor
Presentation
Q3 2014
Shareholder value creation
through
Acceleration of organic growth
Synergy realization and other acquisition
benefits
Continuous efficiency improvements and strict
working capital management
Sector leading dividend yield
Mid-term financial targets
2013
2017 target
Revenue
EUR 2,229 million
EUR 2.7 billion
Operative EBITDA margin
11.3%
15%
Gearing
41%
<60%
•
•
*)
Kemira expects to increase its capex-to-sales ratio from the current run rate in order to support
organic growth. Investments are especially focused on capacity expansion for polymers in North
America, in paper process chemicals in APAC and pulp chemicals in South America.
Dividend policy is to distribute a dividend that is 40%-60% of operative net profit.
Revenue growth in local currencies, excluding the impact of acquisitions and divestments
Kemira Q3 Investor Presentation
October 22, 2014
3
Our streamlined portfolio is ready for growth
Diversified portfolio in 2012..
..streamlined portfolio in 2014
Profitability
O&M
NAFTA
Paper
SA
O&M
EMEA
ChemSolutions
M&I
EMEA
M&I
Paper
EMEA
NAFTA
M&I
NAFTA
M&I
APAC
Paper
EMEA
Paper
APAC
Paper
Americas
O&M
EMEA
M&I SA
O&M
APAC
M&I
Americas
O&M
Americas
Paper
EMEA
Paper
APAC
O&M
SA
M&I
APAC
Differentiated products
Commodity products
Growth
Kemira Q3 Investor Presentation
October 22, 2014
4
Focusing on growth
Reviewing acquisition opportunities to accelerate growth
Revenue target
EUR 2,700 million
Revenue
EUR 2,229 million
Revenue in 2013
Organic growth in
2014
Acquisition and
divestment impact in
2014
AkzoNobel paper
chemical business
Organic growth
Revenue in 2017
Kemira Q3 Investor Presentation
October 22, 2014
5
Profitability improvement driven by synergies, growth and
continued efficiency measures
65% of the portfolio delivering more than 14% operative EBITDA margin
Operative EBITDA
margin 15%
Operative EBITDA
margin 11.8%
in 1-9/2014
Manufacturing
efficiency,
LEAN
roll out
Above-themarket
growth in
Paper and
O&M
Operative EBITDA
AkzoNobel
guidance for 2014 paper chemical
(issued Oct 22, 2014)
synergies
Organic growth
Cost efficiency
Inflation
Kemira Q3 Investor Presentation
October 22, 2014
6
Average dividend yield over 4% during 2005-2013
69%
61%
60%
76%
59%
53%
39%
38%
2010*
2011
42%
41%
41%
2012
2013
2014**
37%
2009
Gearing
Payout ratio
*) In addition in March, 86% of Tikkurila shares were distributed as dividend to Kemira shareholders (Tikkurila market capitalization was EUR 600 million after its listing)
**) Gearing at the end of September, 2014
Kemira Q3 Investor Presentation
October 22, 2014
7
Our strategic choices
1. BUSINESS FOCUS
We will focus on paper, oil & gas, mining
and water treatment
2. GROWTH
We target above-the-market growth
3. GEOGRAPHICAL FOCUS
We leverage mature markets and expand
in selected emerging markets
4. INNOVATION
We invest in innovation, expertise
(knowledge) and competencies (behavior)
Kemira strategy – from redesign to expansion
Expanding to leadership in target markets
2017–2020
Expand
Become leader in
target markets.
2012–2013
Redesign
Profitability
improvement by
implementing “Fit for
Growth”.
2014–2015
Focus
Achieve a sustainable
position in key
markets.
2015–2017
Accelerate
Grow in emerging
markets through new
products & services.
Kemira Q3 Investor Presentation
October 22, 2014
9
From restructuring to profitable growth
Portfolio restructuring and
efficiency improvement focus
LEAN
operation
Performance
management
system
Cost synergies
from acquired
operations
LEAN
roll-out
Divestments
Fit for
Growth
Application
expertise
and chemical supply
for water intensive
industries
Manufacturing
network
optimization
Acquisitions:
3F polymers
BASF AKD emulsion
AkzoNobel paper
chemicals
Investing in
customer-driven
innovation
Capacity expansions for
Polymers in North America
Paper chemicals in China
Bleaching chemicals
in South America
Growth focus
2012
2013
2014
Kemira Q3 Investor Presentation
October 22, 2014
10
Three core segments with clear strategic objectives
Paper
#1
•
•
•
•
Leverage strong market position
Successful execution of investment projects
Commercialization of new products
Continue to evaluate bolt-on acquisitions
Targeting profitable, above-themarket growth
#2*
• Invest in polymer production capacity
• Strengthen customer relationships
• Selective acquisitions to broaden
technological and business capabilities
Targeting profitable, above-themarket growth
Municipal
& Industrial
• Leverage strong market position
• Maintain aggressive cost controls
Maximizing cash flow
Oil & Mining
#1
*In emulsion and dry polyacrylamides
Kemira Q3 Investor Presentation
October 22, 2014
11
Paper and Oil & Mining exceeding market growth,
profitability improving in Municipal & Industrial
Paper
Well above-the-market growth,
6% organic growth in 1-9/2014
(market growth 2.0-2.5%)
Revenue,
EUR million
863
830
1-9/2013
Oil & Mining
Returning to above-the-market
growth, 23% in 1-9/2014,
Organic growth 15%
Revenue,
EUR million
286
233
1-9/2013
Municipal &
Industrial
Significant profitability
improvement, +2.9 pp
1-9/2014
1-9/2014
Operative EBITDA margin
12.2%
9.3%
2012
1-9/2014
Kemira Q3 Investor Presentation
October 22, 2014
12
Shifting focus to fast growing differentiated products
Differentiated product line drivers:
Commodity product line drivers:
Application sales
Capacity increases driving bleaching and pulping
Production optimization
Market share driving coagulants
Capacity expansion
Differentiated product lines
Commodity product lines
%-of total revenue
1-9 2014
Polymers
Sizing and
strength
Defoamers,
dispersants,
biocides and other
process chemicals
Coagulants
Bleaching&
Pulping
chemicals
Miscellaneous
commodity
products
Paper
11%
23%
14%
4%
38%
10%
Oil & Mining
62%
1%
21%
2%
7%
7%
Municipal & Industrial
22%
-
4%
65%
3%
6%
Kemira
23%
12%
13%
20%
22%
10%
Kemira Q3 Investor Presentation
October 22, 2014
13
Leverage mature markets and expand in selected
emerging markets
• Innovation driven growth in mature markets
• Emerging market revenue expected to grow from 14% to 16% in 2016
Paper, Oil &Mining and
Municipal & Industrial
Paper, Oil &Mining and
Municipal &Industrial
Paper (China, Indonesia and
South Korea)
Oil & Mining, Paper
Oil &Mining (Middle East and
Africa)
Kemira Q3 Investor Presentation
October 22, 2014
14
Innovation revenue share expected to
increase to 10% of total revenue in 2016
Kemira innovation revenue*, EUR million
300
250
250
• Next generation
Fennobind
160
200
• Rheology modifiers
150
M&I
106
O&M
100
50
Paper
0
2011
• Tagged antiscalants
• Guar replacement
• Strength by surface
application
40
*)
New innovation areas:
2012
2013
• Chemical Enhanced Oil
Recovery (CEOR)
2016 target
Sales from new products or existing products for new applications launched within
the previous 5 years
Kemira Q3 Investor Presentation
October 22, 2014
15
AkzoNobel acquisition strengthens Kemira’s global
leadership position in pulp and paper
Revenue of the stand-alone AkzoNobel
paper chemicals business was EUR 243
million and EBITDA EUR 23 million in
2013
Production sites
Contract manufacturing
Transaction is expected to result in EUR
15 million annual net synergies by the
end of 2016 through:
•
Revenue synergies
•
Manufacturing network optimization
•
Fixed costs
Kristinehamn
Moses Lake
Oulu
Mannheim
Ambes
Howard
Chattanooga
Estella
Soave
Gunsan
Suzhou
Wellgrow
EUR 20-30 million CAPEX required
between 2015-2016 to realize
production related synergies
Preliminary agreement
signed on July 7, 2014
Pasuruan
Jundiai
Hallam
Transaction price EUR 153 million
Mount
Maunganui
Closing expected during Q1 2015
Kemira Q3 Investor Presentation
October 22, 2014
16
Capital expenditure expected to increase from the current
run rate of approximately 6% of sales
Capex prioritization criteria:
Capital expenditure, EUR million
1. Driving profitable growth
2. Driving growth in strategic growth areas and in
emerging markets
134
135
43%
52%
55%-60%
57%
48%
40%-45%
2012
2013
2014
3. Reducing complexity, increasing efficiency and
driving synergies
Sodium chlorate project in Brazil
Expansion
Maintenance and improvement
Kemira Q3 Investor Presentation
October 22, 2014
17
Focusing on Growth
Q3 2014 organic growth: 3%
- Paper 5%
- O&M 14%
Soto
Industries
acquisition
Dormagen (DE)
coagulant site
Pulp chemical
deliveries to
Montes del Plata (UY)
Tarragona (ES)
coagulant site
3F
acquisition
AkzoNobel paper
chemical acquisition*
Q3/14
5/14
FennoBond capacity
expansion (IT)
Q4/14
-Q4/15
Q1/15
6/14
1/14
11/13
10/13
9/13
Nanjing (CN)
process
chemical site
Telemaco Borba (BR)
process chemical expansion
BASF AKD
emulsion
acquisition
Dry and emulsion
polyacrylamide
expansion (US)
Oulu (FI) pulp
chemicals expansion
Sodium Chlorate
to Klabin (BR)
Already announced investments
*) Expected transaction closure
Kemira Q3 Investor Presentation
October 22, 2014
18
Q3 2014 Results
Operative EBITDA
margin improvement and
organic revenue growth
Key figures and ratios
EUR million (except ratios)
Q3/2014
Q3/2013
%
Jan-Sep
2014
Jan-Sep
2013
%
2013
541.5
553.7
-2
1,589.6
1,683.9
-6
2,229.1
Operative EBITDA
69.9
68.9
1
187.6
193.9
-3
251.9
of which margin
12.9
12.4
-
11.8
11.5
-
11.3
45.5
47.5
-4
118.8
129.7
-8
164.2
8.4
8.6
-
7.5
7.7
-
7.4
0.0
0.1
-
0.0
-1.0
-
-1.1
Financing income and expenses
-6.6
-2.4
-
-20.4
-31.3
-
-39.0
Operative EPS, EUR
0.18
0.22
-18
0.47
0.53
-11
0.70
Operative ROCE*
11.7
11.1
-
11.7
11.1
-
11.9
Capital expenditure
30.6
32.6
-6
90.2
92.5
-2
197.5
Cash flow after investing activities
6.8
13.8
-51
97.6
214.2
-54
195.7
Gearing, % at period-end
41
34
-
41
34
-
41
4,244
4,469
-5
4,244
4,469
-5
4,453
Revenue
Operative EBIT
of which margin
Share of profit or loss of associates
Personnel at period-end
*12-month rolling average
Kemira Q3 Investor Presentation
October 22, 2014
20
Q3 2014
Highlights
Organic growth accelerated to 3% (1% in H1 2014)
–
Sales volumes growth in Paper and Oil & Mining, recovery in
Municipal & Industrial
Operative EBITDA margin improved to 12.9% (12.4%)
–
Sales volumes compensated for the higher fixed costs
–
Acquisitions (especially 3F) more than offset the
negative impact of divestments
–
Currency exchange trend turning more favorable
Finance expenses increased to EUR -6.6 million (-2.4)
–
Higher interest costs
–
Q3 2013 impacted positively by changes in fair values of
electricity derivatives and differencies in currency exchange
Reported EPS improved to EUR 0.16 (0.09)
–
Non-recurring charges had a significant impact in Q3 2013
Higher sales volumes and sales prices - divestments
continued to lower revenue
Kemira Group revenue bridge Q3 2014, EUR million
554
2.3%
0.4%
-0.7%
Sales
prices
Currency
impact
4.4%
-8.8%
542
590
570
550
530
510
490
470
450
Q3 2013
Sales
volumes
Acquisitions Divestments
Q3 2014
Kemira Q3 Investor Presentation
October 22, 2014
22
Kemira group revenue growth trend
10%
5%
0%
-5%
-10%
-15%
Q1
Q2
Q3
Q4
2012
Organic revenue in local currencies
Currency
Reported revenue
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Acquisitions
Divestments
Kemira Q3 Investor Presentation
October 22, 2014
23
Accelerating growth in businesses with the highest
profitability
The share of portfolio with >14% operative EBITDA margin has increased from 60% in 2013 to 65% in 2014
Revenue growth of >14% operative EBITDA margin businesses has been approximately 10% in 2014
Revenue, EUR million
600
Underperforming or
subscale businesses
500
Positive operative
EBITDA margin
400
300
>14% operative
EBITDA margin
200
100
0
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Kemira Q3 Investor Presentation
October 22, 2014
24
Sales prices and variable costs trend
200
150
100
50
0
-50
-100
-150
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2007
2008
2009
2010
Brent oil, USD
2011
Sales price*
2012
2013
2014
Variable costs*
*) 12-month rolling change vs previous year, EUR million, excl. Tikkurila and Pigments
Kemira Q3 Investor Presentation
October 22, 2014
25
Paper revenues record high with improved operative EBITDA
Paper organic growth was 5% in Q3 2014 (6% in 1-9 2014)
Recovered revenue in EMEA supported by improved utilization rates
Increased demand of recently launched product innovations (e.g Fennobind) in North America
Pulp chemical deliveries to Montes del Plata (UY) new pulp mill started in June
Revenue and revenue growth (y-on-y) trend
Operative EBITDA and operative EBITDA margin trend
EUR million
EUR million
320
300
280
260
240
220
200
180
6%
6%
8%
6%
4%
5%
Q1
1%
Q2
Q3
2013
Q4
Q1
Q2
2014
Q3
12% 45
40
35
8% 30
25
20
4% 15
10
5
0% 0
16%
12.3 %
12.6%
11.3%
10.9%
Q1
Q2
12.3%
12%
11.8%
10.9%
8%
Q3
Q4
Q1
2013
Kemira Q3 Investor Presentation
Q2
Q3
2014
October 22, 2014
26
Paper
January-September 2014
EUR million
Q3/2014
Q3/2013
%
Jan-Sep
2014
Jan-Sep
2013
%
2013
300.6
283.7
6
863.0
829.6
4
1,112.8
Operative EBITDA
37.0
35.7
4
100.9
96.4
5
131.1
of which margin
12.3
12.6
-
11.7
11.6
-
11.8
Operative EBIT
23.8
24.4
-2
63.9
62.8
2
85.9
7.9
8.6
7.4
7.6
-
7.7
Capital expenditure
16.4
16.9
-3
52.3
51.1
2
75.5
Cash flow
15.5
-11.7
-
-8.0
34.8
-
58.2
Revenue
of which margin
Kemira Q3 Investor Presentation
October 22, 2014
27
Oil & Mining growth driven by North American oil & gas
North America rotary rig count* up +11% year-on-year
Strong demand for dry and emulsion polyacrylamides used especially in horizontal drilling and stimulation
Organic growth of 14% and higher-than-expected EBITDA contribution from the acquisition of 3F main
reasons for the margin improvement
Revenue and revenue growth (y-on-y) trend
Operative EBITDA and operative EBITDA margin trend
EUR million
EUR million
120
100
80
21%
60
40
20
-5%
-3%
22%
25%
9%
-10%
0
Q1
Q2
Q3
2013
Q4
Q1
Q2
2014
Q3
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
16
20%
12
11.4%
14.4%
13.5%
9.1%
8.0%
8
12.0%
15%
10%
11.6%
4
5%
0
0%
Q1
Q2
Q3
Q4
Q1
2013
Q2
Q3
2014
*Source: Baker Hughes
Kemira Q3 Investor Presentation
October 22, 2014
28
Oil & Mining
January-September 2014
EUR million
Q3/2014
Q3/2013
%
Jan-Sep
2014
Jan-Sep
2013
%
2013
Revenue
95.9
76.8
25
285.5
233.0
23
311.5
Operative EBITDA
13.8
10.4
33
36.2
26.4
37
32.7
of which margin
14.4
13.5
-
12.7
11.3
-
10.5
Operative EBIT
9.3
6.7
39
22.7
15.3
48
17.4
of which margin
9.7
8.7
-
8.0
6.6
-
5.6
Capital expenditure
6.6
4.5
47
15.4
10.3
50
69.8
Cash flow
9.6
1.8
-
17.6
-8.2
-
-60.0
Kemira Q3 Investor Presentation
October 22, 2014
29
In Municipal & Industrial revenue decline slowed down and
profitability improved
Organic revenue declined 6% in Q3 2014 (-9% in 1-9 2014)
Sales volume decline slowed down in EMEA and North America
Divestments impacted reported revenue by -10%
Efficiency measures driving lower operating costs in EMEA as well as in North America
Revenue and revenue growth (y-on-y) trend
Operative EBITDA and operative EBITDA margin trend
EUR million
EUR million
200
180
5%
3%
24
0%
20
-5%
16
-10%
12
120
-15%
8
100
-20%
4
-25%
0
2%
-7%
-13%
160
-16%
140
-22%
-12%
80
Q1
Q2
Q3
2013
Q4
Q1
Q2
2014
Q3
11.9%
12.8% 13.2%
12.0%
8.9%
8.4%
15%
10.5%
10%
5%
0%
Q1
Q2
Q3
Q4
Q1
2013
Q2
Q3
2014
Kemira Q3 Investor Presentation
October 22, 2014
30
Municipal & Industrial
January-September 2014
EUR million
Q3/2014
Q3/2013
%
Jan-Sep
2014
Jan-Sep
2013
%
2013
145.0
164.2
-12
421.3
507.0
-17
659.4
Operative EBITDA
19.1
19.7
-3
51.3
54.7
-6
68.3
of which margin
13.2
12.0
-
12.2
10.8
-
10.4
Operative EBIT
12.4
14.4
-14
32.9
38.9
-15
45.8
of which margin
8.6
8.8
-
7.8
7.7
-
6.9
Capital expenditure
7.7
10.3
-25
21.8
29.3
-26
46.9
17.1
21.0
-19
25.5
26.4
-3
37.9
Revenue
Cash flow
Kemira Q3 Investor Presentation
October 22, 2014
31
After the restructuring phase, non-recurring charges at a
lower level
Non-recurring items impacting EBITDA,
EUR million
Restructuring,
EUR -32 million
CDC settlement
compensation,
EUR -20 million
-110
Capital gains
& losses,
EUR 44 million
-70
-8
2012
2013
1-9/2014
Kemira Q3 Investor Presentation
October 22, 2014
32
Kemira operative ROCE trend
Kemira operative ROCE*
11.9%
Sep 30,
2013*
Revenue
2,135
2,242
Goodwill
485.9
534.4
65.0
53.6
544.6
540.9
10.0
11.0
153.3
163.8
EUR million, expect ratios
12.0%
11.9%
Other intangible assets
11.7%
11.1%
10.8%
Property, plant and
equipment
Net Working Capital ratio
9.9%
Q1
Sep 30,
2014*
Operative EBIT
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
*Rolling 12 months
Kemira Q3 Investor Presentation
October 22, 2014
33
Strong balance sheet facilitating profitable growth
• Gearing (Net debt / equity): 41% in Q3
2014
• Leverage (Net debt / Operative EBITDA):
1.8
• Access to new financing source with
EUR 200 million five-year bond
Capital structure, end of June, 2014
EUR million
Net debt,
449 million
Cash and cash
equivalents
1,086
649
200
– Issued in May with an annual interest of 2.5%
• EUR 400 million undrawn RCF maturity
due July 2019 after first extension option
exercized
• Kemira mid-term gearing target (<60%)
Bond, 200
EIB and NIB, 270
Other, 179
Assets
Liabilities
Equity
Debt maturity profile, end of June, 2014
EUR million
0
-100
-200
-300
2014
2015
2016
2017
2018
Kemira Q3 Investor Presentation
2019
2020
October 22, 2014
34
Net debt at the level of the end of 2013
EUR million
Q3 2014
Q3 2013
1-9/2014
1-9/2013
2013
Operative EBITDA
69.9
68.9
187.6
193.9
251.9
Change in net working capital
10.4
-4.9
-20.8
-16.0
24.8
Cash flow from operations
39.0
49.4
49.2
128.3
200.3
Investments
-30.6
-32.6
-90.2
-92.5
-197.5
of which CAPEX
-30.6
-30.1
-90.2
-90.0
-138.9
0.0
-2.5
0.0
-2.5
-58.6
-1.6
-3.0
138.6
178.4
192.9
6.8
13.8
97.6
214.2
195.7
Dividend payments
-1.5
-1.8
-85.5
-85.1
-85.1
Net debt
457
409
457
409
456
of which acquisitions
Cash impact of M&A
Cash flow after investing activities*
*)
2013 numbers include EUR 98 million received from the divestment of the JV Sachtleben shares, EUR 81 million from the divestment of the
food and pharmaceuticals businesses and EUR 8 million from the divestment of coagulant business in Brazil. 3F acquisition was closed on
October 1, and had EUR -59 million impact in 2013. Divestment of formic acid business had EUR 122 million impact in 2014.
Kemira Q3 Investor Presentation
October 22, 2014 35
2014 Outlook (issued on October 22, 2014)
2013
2014 Outlook
Revenue
EUR 2,229 million
0%-5% organic growth*
Operative EBITDA
EUR 252 million
-5% to 5%
Operative EBITDA margin
11.3%
Gearing
41%
<60%
Kemira expects to increase its capex-to-sales ratio from the current run rate in order to support
organic growth. Investments are especially focused on capacity expansion for polymers in North
America, in paper process chemicals in APAC and pulp chemicals in South America.
*)
Revenue growth in local currencies, excluding the impact of acquisitions and divestments
Kemira Q3 Investor Presentation
October 22, 2014
36
Strategic objectives of
the segments
Paper - the only global
pulp and paper
chemical supplier
 We are the global leader
 We are delivering substantial
growth in a slowly growing
market
 We expect continued growth
through customer focused
approach
Long-term commitment to
the pulp and paper industry
Kemira pulp and paper revenues have more than
doubled since 2004
2015
Kemira* (pulp and paper)
#1
BASF (paper)
AkzoNobel (pulp)
Solenis (paper)
Ecolab (paper)
#2
#3
#4
#5
2004
Ciba
AkzoNobel
BASF
Hercules
#1
#2
#3
#4
Kemira
#5
Nalco
#6
*Including AkzoNobel paper chemicals acquisition
Broad and proven product portfolio in combination with
application know-how in Pulp and Paper industry
Pulping/Bleaching
Surface treatment
Sodium chlorate
Hydrogen peroxide
Chlorine dioxide
Caustic soda
Sulfuric acid
Defoamers
Pulping additives
Deinking additives
Binder replacements
Printability aids
Surface sizing
Coating dispersants
Crosslinkers
Rheology modifiers
Coating lubricants
Process chemicals Functional chemicals
Retention control
Deposit control
Defoamers
Microbio control
Water treatment
Internal sizing
Wet strength
Dry strength
Tissue specialties
Colorants
Synergy with Akzo offering
New products from Akzo offering
Kemira Q3 Investor Presentation
October 22, 2014
41
Growth in pulp and paper chemicals is driven by higher
volumes of packaging board and tissue grades
Main growth drivers:
• Growing packaging board and tissue
markets, especially in APAC
• Growing pulp production in South
America and Northern Europe
• Increasing demand for paper chemicals
for paper and board lightweighting and
higher use of recycled fibres
Pulp and paper chemical market growth estimate,
EUR billion (CAGR: 2.4%)
2.1
2.5
2.9
APAC
4.6%
2.8
3.0
3.2
Americas
1.9%
2.9
3.0
3.1
EMEA
0.7%
2013
2016
2020
CAGR
Source: Management estimation based on various sources
Kemira Q3 Investor Presentation
October 22, 2014
42
Paper delivering on its growth strategy
Growth in packaging & board and tissue in all regions
Growth in pulp chemicals in South America
New products for retention, strength and sizing applications
Chemical,
mechanical
and
recycled pulp
Packaging,
board and
tissue grades
APAC
Americas
35%
45%
EMEA
20%
Paper
grades
2012
2013
2014*
*Annualized January-June 2014, using 2012 currency exchange rates
Kemira Q3 Investor Presentation
October 22, 2014
43
The acquisition of AkzoNobel paper chemical business is
strengthening Kemira’s market share in all regions
#2 Paper & Pulp in Americas
Revenue in 2013: EUR 371 million
Market share: 13% (16% including Akzo)
#1 Paper & Pulp in EMEA
Revenue in 2013: EUR 651 million
Market share: 22% (25% including Akzo)
#2 Paper in China and Indonesia
Revenue in 2013: EUR 91 million
Market share in APAC: 4%
(8% including Akzo)
44
The AkzoNobel acquisition will strengthen us especially in
the growing Asian paper markets
Kemira sales offices
Paper R&D in
Shanghai, China
South Korea
Japan
Kemira manufacturing
Production sites
Contract
manufactuirng
Paper Global HQ
Hong Kong, China
AkzoNobel paper
chemicals sales
offices
Thailand
Indonesia
Australia
New Zealand
Kemira Q3 Investor Presentation
October 22, 2014
45
Growing business
partner to the Oil &
Mining industry
Growth driven by strong demand for oil and gas
Our growth drivers:
• Global growth, especially in NA shale
and in the Middle East
• Increased activity in Chemical Enhanced
Oil Recovery (CEOR) and oil sands
• Entering into Production Chemicals
• Need for improved processing for
declining ore grades
Oil, gas and mining chemical market growth estimate,
EUR billion (CAGR: 4%)
4.5
EMEA
4.8%
Americas
3.6%
3.8
3.3
5.1
5.6
2013
2016
6.3
CAGR
2020
Source: Management estimation based on various sources
Kemira Q3 Investor Presentation
October 22, 2014
47
Focusing on the mature markets as well as fast growing
Middle East, Africa and South America
O&M R&D in
Espoo, Finland
O&M R&D in
Atlanta, USA
O&M Global HQ
Houston, USA
Americas (75% of revenues)
Upstream, CEOR* and
unconventional sources
Iron ore & minerals
EMEA
EU, North Sea, Africa
& Middle East
(25% of revenues)
Upstream and CEOR*
Copper, gold and iron ore
*Chemical Enhanced Oil Recovery
48
Investing in growing oil & gas market
Relevant dry and emulsion polyacrylamide
Kemira is world’s second largest dry
market for oil & gas industry
and emulsion polyacrylamide producer
(4 sites in the US, 3 sites in Europe, 1 site in China)
Polyacrylamides for CEOR*
Close to 20% market share in North American
Polyacrylamides in drilling and stimulation
oil & gas polyacrylamide market
EUR
Kemira’s core technologies to
billion
2.1
the customer includes:
20%
• Friction reducers, Rheology modifiers,
Stabilizers and Viscosifiers
0.5
• New product and application revenue share of
5%
2.4
O&M revenue is more than 20% with better1.7
than-average profitability
First CEOR related orders expected within the next
2013
2020
12-24 months
*Chemical Enhanced Oil Recovery
Kemira Q3 Investor Presentation
October 22, 2014 49
Winning market share with competitive combination of
innovation, chemicals and application knowledge
Drilling & Cementing
• Rheology Control
• Mud Dewatering
• Fluid Loss Control
• Emulsifiers
• Foam Control
• Lubrication
Stimulation
•
•
•
•
Friction Reduction
Microbial Control
Scale Control
Clarification
Production
•
•
•
•
Scale Control
Separation
Oil Dehydration
Clarification
Chemical Enhanced Oil Recovery
• Viscosification
• Fluid Diversion
Kemira Q3 Investor Presentation
October 22, 2014
50
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 with key operators
First orders expected within the next 12-24
months
Kemira Q3 Investor Presentation
October 22, 2014
51
Market leader in raw
and waste water
treatment
Regulation is driving the Municipal & Industrial market
Key market characteristics
• Mature market in Europe
and North America
• Regulatory driven
• Price and cost sensitive
• Local business
• Public and private customer base
(60%/40%)
Relevant Municipal and Industrial market*
and growth estimate, EUR billion (CAGR: 2.6%)
0.7
APAC
4.4%
0.7
North
America
2.4%
EMEA
1.9%
0.5
0.5
0.6
0.6
1.3
1.4
1.5
2013
2016
2020
CAGR
* Coagulants and Polymers in EMEA, Coagulants in North
America and Polymers in APAC
Source: Management estimation based on various sources
Kemira Q3 Investor Presentation
October 22, 2014
53
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
treatment
Waste water
treatment
Point of
water use
River
Lake/Sea
Contaminated water
bodies restoration
Kemira Q3 Investor Presentation
October 22, 2014
54
We are the leading chemicals supplier in mature markets
for raw and waste water treatment applications
#1 in chemicals for raw and
waste water treatment
Municipal & Industrial revenue
in 2013: EUR 190 million
#1 in chemicals for raw and
waste water treatment
Municipal & Industrial revenue
in 2013: EUR 405 million
Re-entry into emerging markets once legislation comes into force
Kemira Q3 Investor Presentation
October 22, 2014
55
..achieving significant profitability improvements at stable
absolute EBITDA
Geographic focus
• exiting South America, Romania
Operative EBITDA margin
11.6%
Customer segmentation & sales model
adaptation
9.3%
2014*
2012
SKU’s reduced by 50%
Operative EBITDA, EUR million
Manufacturing footprint optimization, 12
sites/plants closed
Petro
Mono. Polym.
App.
Backward integration into key monomers
through 3F acquisition
64
64*
2012
2014*
* January-June 2014 annualized
Kemira Q3 Investor Presentation
October 22, 2014
56
Market and
product
specifications
Kemira Q3 Investor Presentation
October 22, 2014
57
Paper segment - Demand for sizing and strength
chemicals is growing fastest globally
Pulp and paper industry trends increasing
chemical demand:
• Increased use of recycled fibres
• Hardwood replacing softwood in virgin
pulp
• Lightweighting of packaging and board
grades
• Higher filler loads in graphic papers
• New digital printing methods
• Lower water / energy consumption
Market size,
EUR billion (CAGR: 2.4%)
2.0%
1.3%
1.9
1.5
1.7
1.8
2.0
2.3
3.3%
1.1
0.9
1.0
1.6
1.7
1.9
2.0
2.1
2.2
2013
2016
2020
2013
2016
2020
2.0%
3.5%
GAGR
Defoamers, biocides and other process chemicals
Polymers
Miscellaneous commodity chemicals
Sizing and strength
Bleaching chemicals
Source: Management estimation based on various sources
Kemira Q3 Investor Presentation
October 22, 2014
58
Paper segment - Technology and market leader in paper
wet-end chemistry
RAW
MATERIALS
Electricity
Sodium chloride
(salt)
Crude tall oil
Cationic monomer
Acrylonitrile
Acrylic acid
Olefins
Fatty acids
Maleic anhydride
Sulfur
INTERMEDIATES
Tall oil rosin
AKD Wax
Isomerized olefins
Acrylamide
PRODUCTS
Sodium chlorate
Hydrogen peroxide
Polymers
Defoamers
Coagulants
Biocides
Sizing
Strength Additives
Surface additives
Colorants
Sulfuric acid
APPLICATIONS
Pulping
Bleaching
Retention
Wet-end process
control
WQQM
Sizing
Strength
Surface treatment
Coloring
CUSTOMER
IDUSTRIES
Pulp
Packaging
and board
Printing
and writing
Tissue
CUSTOMERS
All the major
global paper
and pulp
producers
Value chain part covered by Kemira
Kemira Q3 Investor Presentation
October 22, 2014
59
Oil & Mining segment - Strong market growth across all
product lines
• High oil price spurs demand for
identifying new sources
• Global growth of shale gas and wet
shale
• Declining ore assays require improved
processing
• Increasing environmental pressure
which increases demand for waste
water treatment
Market size,
EUR billion (CAGR: 4%)
2.1
1.9
1.7
5.2
4.5
4.0
2.7
3.0
3.5
2013
2016
2020
Polymers
Defoamers, biocides
and other process
chemicals
Miscellaneous
commodity
products
Source: Management estimation based on various sources
Kemira Q3 Investor Presentation
October 22, 2014
60
Oil & Mining segment - Winning market share with
competitive combination of innovation chemicals and
application knowledge
RAW
MATERIALS
Acrylonitrile
Acrylic acid
Various monomers
Miscellaneous
specialty chemicals
and commodities
INTERMEDIATES
Acrylamide
PRODUCTS
Polymers
Dispersants &
Antiscalants
Biocides
Emulsifiers
Defoamers
Coagulants
Formulations
APPLICATIONS
Friction Reduction
Formation & Well Scale
Control
Asset integrity Microbial
Induced Corrosion
Enhanced Oil Recovery
Drilling muds
Concentrate thickening
Mineral slurry
preservation
Mining processes
Scale Control
CUSTOMERS
Pumpers
Oil & Gas
operators
Service
companies
Mine operators
Value chain part covered by Kemira
Kemira Q3 Investor Presentation
October 22, 2014
61
Municipal & Industrial - Commodity product lines expected
to grow, but slightly slower than the market
Polymers: Increasing sludge dewatering needs
Coagulants: Determined by raw water consumption and waste water discharge rate –
stable in mature markets
Municipal & Industrial relevant market,
EUR billion
1.9
1.6%
1.6
1.8
2.6
3.0
3.4
3.7%
2013
2016
2020
CAGR
Polymers (EMEA, APAC)
Coagulants (EMEA, NA)
Source: Management estimation based on various sources
Kemira Q3 Investor Presentation
October 22, 2014
62
Corporate
responsibility targets
Kemira Corporate responsibility targets
Compliance & Ethics:
Kemira Compliance program established by
2014
Code of Conduct for
Suppliers, Distributors and
Agents (CoC-SDA):
≥ 90% of Supplier
contracts with signed
CoC-SDA as
attachment by 2015
Supplier sustainability
assessment
45 of core, strategic and
critical suppliers
covered by supplier
sustainability
assessment
Climate change:
Safety:
Innovation:
Community involvement:
Kemira Carbon Index
≤ 80 by 2020
Achieve zero injuries
Water management:
95% of Kemira employees covered
by the global Performance
Management process by 2014
100% of new NPD
projects apply the
sustainability check in
Gate 1 by 2014
Each Kemira site with
over 50 employees
participates in local
community
involvement initiatives
at least once in period
2013–2015
Baseline analyzed and
water efficiency
program defined by
2014
Performance management:
Leadership development
People managers participated in
global leadership programs at least
once in period 2013–2015,
cumulative %
100% of existing NPD
projects apply the
sustainability check in
Gates 2–4 by 2014
Employee engagement:
Employee engagement index at or
above the external industry norm
by 2015
Kemira Q3 Investor Presentation
October 22, 2014
64
Kemira Corporate responsibility performance Q3 2014 (1/3)
Responsibility focus areas
KPI’s and KPI target values
Responsible business practices
Kemira Compliance program
• Responsible supply chain
Code of Conduct for Suppliers,
Distributors and Agents
Supplier sustainability
assessment
Status Q3 2014
• CoC training has been transferred into MyKem
Learning system.
• The creation of new e-learning modules
Kemira Compliance program established by the
(Competition law, Inside information and Antiend of 2014
bribery) has been finalized by the supplier.
• Transfer to MyKem is in process, roll out will
happen during Q4.
Supplier contracts with signed CoC-SDA as
attachment, 90% by the end of 2015
• 89%
Number of core, strategic and critical suppliers
covered by supplier sustainability assessment,
45 by the end of 2014
• A sustainability assessment program supported by
a third party assessing company (Ecovadis) has
been started . YTD 14 suppliers assessed, 40
suppliers in progress
Kemira Q3 Investor Presentation
October 22, 2014
65
Kemira Corporate responsibility performance Q3 2014 (2/3)
Responsibility focus areas
KPI’s and KPI target values
Responsibility for employees
Performance management
Leadership development
Employee engagement
Status Q3 2014
• 100% of employees are now covered by the
global Performance Management process
Kemira employees covered by the global
Performance Management process, > 95% by the • 95 % of all employees have held and
documented 2014 PDD as part of the
end of 2014
Performance Management process
• 11% cumulative in 2014
People managers participated in global leadership • Launch of new mid-level innovation leadership
program and expansion of the Lite Leadership
programs at least once in period 2013–2015,
cumulative %, > 95% by the end of 2015
inventory (level 4) have been postponed to 2015
due to cost reasons
Employee Engagement Index, Index % ≥ external
• Voices survey follow-up on-going. 97 % of
industry norm by end of 2015
managers have documented their action plans by
August. Preparations for the second Pulse survey
Participation rate in Voices@Kemira, 75–85% by
has started (to be implemented Oct. 27-Nov.4)
the end of 2015
Number of Total Recordable Injuries (TRI) (per
Occupational health and safety million hours, Kemira + contractor, 1 year rolling
average), Achieve zero injuries
• 8,2
Kemira Q3 Investor Presentation
October 22, 2014
66
Kemira Corporate responsibility performance Q3 2014 (3/3)
Responsibility focus areas
Responsible manufacturing
KPI’s and KPI target values
Status Q3 2014
• Internal water risk assessment project is conducted.
Six sites were selected for a more detailed analysis
Baseline analyzed and water efficiency program
Water efficiency
due to local water scarcity situation and water usage
defined by the end of 2014
at sites ( Tarrgagona, Ellesmer Port, Eastover,
Yangzhou, Botlek and Rheinberg)
• Kemira carbon index reported on annual basis.
• Key activities
Kemira Carbon Index performance
• Scope 1: Manufacturing process efficiency
Climate change
improvement identified as the most potential
Index ≤ 80 by the end of 2020 (baseline year
source of emission reduction
2012 = 100)
• Energy Efficiency Enhancement program will
continue by Projects & Manufacturing Technology
Sustainable products and solutions
New NPD projects apply the sustainability check
• 100% (13/13)
Sustainability aspects in New
in Gate 1, 100% by the end of 2014
Product Development (NPD)
Existing NPD projects apply the sustainability
process
• 100% (33/33)
check in Gates 2–4, 100% by the end of 2014
Responsibility towards the communities where we operate
Kemira sites with over 50 employees
• 88%of the relevant sites have participated in
Participation in local community participated in local community involvement
activities 2013 – Q3 2014
involvement activities
initiatives at least once in period 2013–2015,
100% by the end of 2015
Kemira Q3 Investor Presentation
October 22, 2014
67
Kemira shareholder
structure
Kemira’s largest shareholders (September 30, 2014)
Shareholders
% of shares
Oras Invest Oy
18.2%
Solidium Oy
16.7%
Varma Mutual Pension Insurance Company
5.3%
Ilmarinen Mutual Pension Insurance Company
3.3%
Kemira Oyj
2.1%
Free float
54.4%
Foreign shareholders share of free float
39%
Households share of free float
29%
Other share of free float
32%
Kemira Q3 Investor Presentation
October 22, 2014
69
Shareholder Structure
Top 25 Investor Comparison, 2013 vs 2010*
25 top investors by investment style, 2010
7%
2%
25 top investors by investment style, 2013
8%
Yield
9%
Yield
25%
Index
17%
51%
22%
Value
Sovereign wealth
value
GARP
Very low
turnover
8%
17%
39%
36%
Index
Value
42%
High
turnover
* Based on shareholder ID by Euroclear as of March 2010 and September 2013
Agressive growth
Sovereign wealth value
3%
9%
Low
turnover
Medium
turnover
16%
Very low
33%
55%
Low
Medium
High
Kemira Q3 Investor Presentation
October 22, 2014
70
Shareholder structure
Geographical Distribution of Free-Float (%)
Unidentified
Rest of Europe 6%
3%
Norway
3%
Geographical Distribution of Foreign Shares Identified (%)
Rest of the world
1%
Sweden
4%
France
9%
Rest of
Europe
8%
France
24%
Norway
7%
Germany
5%
Finland
57%
USA
8%
Germany
15%
USA
23%
UK
7%
Sweden
1%
UK
18%
Kemira Q3 Investor Presentation
October 22, 2014
71