1. No category

Kemira Interim Report
January-September 2014
Highlights July-September 2014
Accelerated organic
growth with improved
profitability
•
Organic revenue growth 3% (1% in H1 2014)
•
•
•
•
Paper: 5%
Oil & Mining: 14% (Reported growth 25%)
Municipal & Industrial -6%
Operative EBITDA improved to
EUR 70 million (69)
•
Margin improved to 12.9% (12.4%)
•
Acquisition of AkzoNobel paper chemicals
•
Antti Salminen appointed President of
Municipal & Industrial and region EMEA
•
Michael Löffelmann appointed EVP of
Projects & Manufacturing Technology
From restructuring to profitable growth
Portfolio restructuring and efficiency improvement focus
Cost synergies
from acquired
operations
LEAN
roll-out
Performance
management
system
Manufacturing
network
optimization
LEAN
operation
Investing in
customer-driven
innovation
Divestments
Fit for
Growth
Application
expertise
and chemical supply
for water intensive
industries
Acquisitions:
3F polymers
BASF AKD emulsion
AkzoNobel paper
chemicals
Capacity expansions
for Polymers in North America
Paper chemicals in China
Bleaching chemicals
in South America
Growth focus
2012
2013
2014 
Kemira Q3 2014 Interim Report
October 22, 2014
3
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-the-market 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 2014 Interim Report
October 22, 2014
4
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 2014 Interim Report
October 22, 2014
5
Long-term commitment to
the pulp and paper industry
The only global pulp and paper chemical supplier
after the closure of the AkzoNobel paper chemical
acquisition
2015
Kemira* (pulp and paper) ....................... #1
BASF (paper) ................................................................ #2
AkzoNobel (pulp) ........................................................... #3
Solenis (paper) .............................................................. #4
Ecolab (paper) ............................................................... #5
2004
Ciba ..............................................................................
AkzoNobel ....................................................................
BASF ............................................................................
Hercules .......................................................................
#1
#2
#3
#4
Kemira .................................................... #5
Nalco ............................................................................ #6
*) Including AkzoNobel paper chemicals acquisition
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
20%/a
2.1
the customer includes:
• Friction reducers, Rheology modifiers,
Stabilizers and Viscosifiers
0.5
• New product and application revenue share of
5%/a
2.4
O&M revenue is more than 20% with
1.7
better-than-average profitability
First CEOR related orders expected within the next
2013
2020
12-24 months
*Chemical Enhanced Oil Recovery
Kemira Q3 2014 Interim Report
October 22, 2014 7
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 2014 Interim Report
October 22, 2014
8
July-September 2014
Operative EBITDA
margin improvement and
organic revenue growth
9
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 2014 Interim Report
October 22, 2014
11
Accelerating growth in businesses with the highest
profitability
The share of portfolio with >14% operative EBITDA margin has increased from 60% in Q4 2013 to 65% in Q3 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 2014 Interim Report
October 22, 2014
12
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
Q2
Q3
2014
Kemira Q3 2014 Interim Report
October 22, 2014
13
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 2014 Interim Report
October 22, 2014
14
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 2014 Interim Report
October 22, 2014
15
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 2014 Interim Report
October 22, 2014
16
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 2014 Interim Report
October 22, 2014 17
2014 outlook and mid-term financial targets unchanged
2013
2014 outlook
2017 target
Revenue
EUR 2,229 million
0%-5% organic growth*
EUR 2.7 billion
Operative EBITDA
EUR 252 million
-5% to 5%
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.
*)
Revenue growth in local currencies, excluding the impact of acquisitions and divestments
Kemira Q3 2014 Interim Report
October 22, 2014
18