Kemira q4 2012 presentation

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Kemira q4 2012 presentation Kemira q4 2012 presentation Presentation Transcript

  • KemiraJanuary-December 2012: Year of changeWolfgang Büchele, President & CEOFebruary 6, 2013
  • AGENDA Executive overview Q4 2012 Outlook 2013 2
  • Satisfactory financial performance in 2012 Revenue EUR 2,240.9 million (2,207.2 in 2011), +2% - Revenue in emerging markets grew 9%, driven by Paper in APAC region Operative EBIT EUR 154.1 million (157.3), -2% - Operative EBIT margin 6.9% (7.1%) - ”Fit for Growth” launched in July 2012, to reach 10% EBIT margin in 2014 Operative earnings per share EUR 0.77 (0.89) - Lower income from associated companies had EUR 0.13 negative impact Board of Directors proposes EUR 0.53 dividend (0.53), 69% payout ratio (60%) Cash flow after investing activities EUR 71.8 million (115.3) 3
  • Significant structural change ongoing New organization in operation since October, 2012 - Accelerating growth, reducing complexity - New performance management system introduced to focus the whole organization on value creation Personnel reduction - Up to 600 employees, 12% of the total workforce - Most of the co-determination negotiations have been accomplished Manufacturing network optimization - Almost 20% of all production sites either decided to be closed or under review Leaner operation - NWC* ratio target is 11% in 2014 (12.8% in 2012) Sharpened strategy will be presented in April, 2013 *Net working capital 4
  • ”Fit for Growth” launched to improve profitability • Product mix optimization and growth driving profitability improvement in Paper and in Oil & Mining • Implemented cost savings and efficiency improvements will boost margins in Municipal & Industrial and ChemSolutions Kemira operative EBIT margin trend by segments 16% 14% 12% 10% 8% 6% 4% 2% 2009 2010 2011 2012 Paper Municipal & Industrial Oil & Mining ChemSolutions EBIT margin target 5
  • Municipal & Industrial - ”Fit for Growth” to driveprofitability turnaround • Manufacturing network optimization reduces cost volatility • Cost savings through site closures, M&I operates at 40 sites (over 20% of the sites decided to be closed, sold or under review) • Customer segmentation improves efficiency • Q1 2012 negatively impacted by higher maintenance costs, Q4 2012 by clearance of inventory of low-margin products Municipal & Industrial segment revenue split and operative EBIT margin EUR million 800 12% 10.9 % 700 9.2 % 10% 600 500 7.1 % 6.2 % 8% 400 6% 300 Industrial 4% 200 Municipal 2% 100 0 0% 2009 2010 2011 2012 6
  • Municipal & Industrial is currently optimizing the productionfootprint for inorganic coagulants • New site investments in Tarragona & Dormagen will yield quick returns thanks to improved network optimization. Fixed costs will be reduced by 40% and raw material costs are expected to decline by 20% in the specific market region Coagulant production footprint … in order to increase optimization… profitability Raw material* costs Access to raw materials Best use of available cheap raw materials + Fixed costs of plants Reduced cost of footprint Close plants to reduce overcapacity + in network Freights to customers Delivery to customers High freights require plants to be close to Minimize customer clusters *Copperas, magnetite, scrap iron, spent pickling liquor, liquid chlorine, sulphuric acid, hydrochloric acid 7
  • ChemSolutions - ”Fit for Growth” will improve profitability • Raw material prices and maintenance shutdown impacted profitability in 2012 • “Fit for Growth” to return profitability above 10% EBIT margin by 2014 • Focus on formic acid and related derivatives • Maximize output of Kemira’s formic acid plant in Oulu ChemSolutions revenue* split and operative EBIT margin EUR million 200 16% 180 15.0 % 14% 160 14.3 % 11.3 % 12% 140 10% 120 7.8 % De-icers 100 8% Chemical & Pharma 80 6% Food & Feed 60 4% 40 20 2% 0 0% 2009 2010 2011 2012 *Divestment of food and pharmaceutical businesses will have approximately EUR 50 million impact on revenue in 2013 8
  • Kemira target is to reduce 50% of the total # of SKU’s* • SKU reduction as part of the focus on lean operation will lead to significant cost savings • In ChemSolutions’ Oulu formic acid plant 70% SKU reduction was identified leading to EUR 2 million annual EBIT improvement • SKU reduction in Oulu accomplished by merging trade names and deleting small SKUs Oulu Kemira SKU reduction target ChemSolutions portfolio -70% reduction SKU reduction target # of SKU’s in 2014 Current # of SKU’s # of SKU’s in 2014*Stock-keeping units 9
  • Paper – Packaging and board driving growth • Over 5% market growth* in APAC (Packaging and Board) and SA (Pulp) • Newsprint share of Paper segment revenue less than 4% • Tissue and fiber based packaging markets are expected to grow over 4%* • Trend towards recycled fiber and lighter paper qualities will increase the chemicals consumption Paper segment revenue split and operative EBIT margin EUR million 1200 10% 5.0% 7.7% 7.7% 8.6% 1000 8% 31% 800 24% 600 6% 400 Tissues and specialties 4% Packaging and board 200 Printing and writing Pulp 0 2% 2009 2010 2011 2012 *Expected market growth 2013-2020 10
  • Understanding customers’ needs is a key competitive advantage• Kemira’s Fennobond enables yield advantage resulting in 5%-10 % lighter* end customer product• Chemicals helps customers to optimize their raw material use e.g fiber consumption• Customers’ process efficiency improves by using right chemistry …10,000 miles later *Source: MetsäBoard 11
  • Oil & Mining – Good base for growth • Atlanta R&D center ensuring continuous competence development • 60% polymer capacity expansion finalized at the end of 2012 • Small acquisitions targeted to gain stronger market position • Portfolio rebalancing by exiting low-margin product sales to be finalized by the end of 2013 (approximately EUR 10 million negative impact in 2013) Oil & Mining segment revenue and operative EBIT margin 14% EUR million 350 11.6 % 300 12% 250 10% 10.8 % 200 9.6 % 8% 150 6% 100 6.0 % 50 4% 0 2% 2009 2010 2011 2012 12
  • Revenue growth generated through new innovativesolutions• New product and application sales* generated EUR 106 million in 2012 (40 in 2011) - New products and product applications on average generate 15% higher gross margin - Most of the new sales in 2012 from oil and gas, as well as tissue customer segments• Kemira spends roughly 2% of its revenue on R&D EUR million 66 11 -20 -23 2,241 2,207 Revenue 2011 New product Other growth O&M product Divestments Revenue 2012 and product exit applications *New product and application sales = products and applications launched within the past 5 years 13
  • Executive overviewQ4 2012Outlook 2013 14
  • Kemira financial highlights – Q4 2012 • Revenue increased 3% to EUR 558.5 million (543.3) - Sales volumes increased in Paper and Municipal & Industrial segments • Fixed costs increased EUR 7 million despite ”Fit for Growth” savings • Operative EPS decreased due to EUR -5.7 million loss from JV Sachtleben • Cash flow after financing activities was positive as a result of net working capital reduction • Some 40% of the employees already made redundant are still on the payroll EUR million Oct-Dec Oct-Dec Jan-Dec Jan-Dec % % 2012 2011 2012 2011 Revenue 558.5 543.3 3 2,240.9 2,207.2 2 Operative EBIT 33.7 34.3 -2 154.1 157.3 -2 Operative EBIT, % 6.0 6.3 - 6.9 7.1 - Income from associated companies -5.7 7.2 - 11.2 31.0 -64 Financial income and expenses -4.1 -5.5 - -15.7 -20.9 - Operative EPS, EUR 0.13 0.24 -46 0.77 0.89 -13 Cash flow after financing activities 9.4 -27.3 - 71.8 115.3 -38 Number of personnel 4,857 5,006 -3 4,857 5,006 -3 15
  • Kemira Group revenue growth trend • Q4 2012 sales prices slightly higher year-on-year - Paper, Oil & Mining and ChemSolutions increased sales prices • Q4 2012 sales volumes grew vs Q4 2011 due to recovered demand in Paper and M&I • Reported revenue has been supported by favorable currency exchange in 2012 20% 15% 10% Sales volumes and prices 5% Divestments Acquisitions 0% Currency Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total growth ‐5% 2009 2010 2011 2012 ‐10% ‐15% 16
  • Good balance between sales and raw material prices Largest product categories (accounting for ~55% of Kemira’s revenue) and most relevant businesses: - Polymers: Oil & Mining, Paper wet-end and industrial customer segment - Electrolysis products: pulp customer segment - Coagulants: municipal customer segment Kemira sales prices vs variable costs 200 150 100 50 0 -50 Q4/2007 Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009 Q3/2009 Q4/2009 Q1/2010 Q2/2010 Q3/2010 Q4/2010 Q1/2011 Q2/2011 Q3/2011 Q4/2011 Q1/2012 Q2/2012 Q3/2012 Q4/2012 -100 -150 Brent oil, USD Sales price* Variable costs**12-month rolling change vs previous year, meur, excl. Tikkurila and Pigments 17
  • Kemira operative EBIT Q4 2012 vs Q4 2011 • Positive effect derived from higher sales volumes and sales prices was offset by higher variable and fixed costs EUR million 10 -4 -7 34.3 1 -1 33.7 Q4 2011 Sales Variable Fixed costs Currency Others, incl. Q4 2012 volumes and costs impact acquisitions prices and divestments 18
  • Kemira fixed costs in Q4 2012 vs Q4 2011• Fixed costs increased EUR 7 million in Q4 2012 vs Q4 2011• Exceptional high pension credits of EUR 4 million 2011 combined with higher headcount (mainly APAC,SA) EUR 2 million and cost inflation in wages and salaries EUR 3 million was partly compensated by ”Fit for Growth” savings. 2 -4 EUR million 1 1 4 3 Q4 2011 Wages and Pension costs Reclassification Maintenance Emerging "Fit for Growth" Q4 2012 fixed costs salaries of variable costs markets fixed costs fixed costs costs resources 19
  • Kemira fixed costs 2012 vs 2011 • Fixed costs increased EUR 15 million in 2012 • H1 2012 fixed costs were EUR 13 million higher due to higher maintenance and personnel expenses • H2 2012 fixed costs EUR 2 million higher despite ”Fit for Growth” cost savings 3 -5 EUR million 3 3 4 7 2011 fixed Wages and Pension costs Reclassification Maintenance Emerging "Fit for Growth" 2012 fixed costs salaries of variable costs in H1 markets fixed costs costs costs 2012 resources 20
  • Paper – EUR 1 billion revenue and improved profitability in 2012 Revenue increased by 7% vs. Q4/2011 • Reported revenue grew in all sub-segments • Recovered demand in pulp, increased sales prices to printing and writing • Currency exchange +2% • Divestments -1% Operative EBIT in Q4 2012 increased 46% to EUR 20.8 million (14.2) • Organic revenue growth • Efficiency improvements and ”Fit for Growth” • Operative EBIT margin improved to 8.3% (6.1%) Cash flow decreased mainly due to higher capex • Q4 2011 was positively impacted by hydrogen peroxide divestment in Canada (EUR million) Q4/12 Q4/11 % 2012 2011 % Revenue 250.3 234.5 7 1,002.0 973.3 3 Operative EBIT 20.8 14.2 46 86.2 75.4 14 Operative EBIT, % 8.3 6.1 - 8.6 7.7 - Cash flow* -3.4 38.8 - 30.6 90.9 -66 *After investing activities, excluding interest and taxes 21
  • Municipal & Industrial – sales volumes recovered in 2012 Revenue in Q4 2012 increased 5% to EUR 175.4 million (166.6) • Sales volumes recovered and were higher than in Q4 2011 • Sales prices unchanged Operative EBIT EUR 7.2 million (9.0) in Q4 2012 • Higher sales volumes • Higher variable and fixed costs • Gross margin was negatively impacted by the reduction of low margin product inventories • Operative EBIT margin decreased to 4.1% (5.4%) Positive cash flow (EUR million) Q4/12 Q4/11 % 2012 2011 % Revenue 175.4 166.6 5 686.6 664.7 3 Operative EBIT 7.2 9.0 -20 42.3 46.9 -10 Operative EBIT, % 4.1 5.4 - 6.2 7.1 - Cash flow* 21.3 24.3 -12 23.3 41.9 -44 *After investing activities, excluding interest and taxes 22
  • Oil & Mining – Improved product mix and profitability in 2012 Revenue in Q4 2012 decreased 10% to EUR 72.1 million (80.0) • -4% impact related to exited low margin products (impact will be fully accomplished at the end of 2013) • +1% currency exchange • Pressure on sales volumes due to temporary market softness in the Oil and Gas sub-segment in North America and in the global mining globally Operative EBIT decreased to EUR 5.8 million (8.5) in Q4 2012 • Lower sales volumes • Higher fixed costs due to increased sales and marketing activities • Operative EBIT margin was 8.0% (10.6%) (EUR million) Q4/12 Q4/11 % 2012 2011 % Revenue 72.1 80.0 -10 321.1 335.7 -4 Operative EBIT 5.8 8.5 -32 37.3 36.2 3 Operative EBIT, % 8.0 10.6 - 11.6 10.8 - Cash flow* 5.6 13.4 -58 21.6 28.7 -25*After investing activities, excluding interest and taxes 23
  • Other (ChemSolutions and Group expenses) ChemSolutions revenue in Q4 2012 was stable at EUR 49.8 million (49.1) • Slightly higher sales prices ChemSolutions Operative EBIT was EUR 5.2 million (5.3) in Q4 2012 • Higher sales prices • Operative EBIT margin was 10.4% (10.8%) Group expenses were EUR 3 million higher compared to Q4 2011 (EUR million) Q4/12 Q4/11 % 2012 2011 % Revenue* 60.7 62.2 -2 231.2 233.5 -1 of which 49.8 49.1 1 186.0 183.6 1 ChemSolutions Operative EBIT -0.1 2.6 - -11.7 -1.2 - of which 5.2 5.3 -2 14.6 20.8 -30 ChemSolutions As of January 1, 2013, ChemSolutions will be reported as a separate segment together with Paper, Municipal & Industrial and Oil & Mining. Revenue other than ChemSolutions and all Group expenses will be allocated to these four segments on a fixed quota basis, and the unit called “Other” will be abolished. Restated figures will be publicly available before the first quarter result release on April 23, 2013. *Including eliminations 24
  • EBIT 10% margin achieved through ”Fit for Growth”restructuring by 2014• ”Fit for Growth” cost savings impact was EUR 10 million in 2012 (EUR 7 million in Q4 2012) 1. Redundancies and leaner organization will contribute 50% to the savings EUR 60 million cost savings 2. Manufacturing network consolidation: 35% 3. Leaner operation: 15% Reported between Q3 2012 – Q2 2013: Restructuring • EUR 45 million cash cost, mainly for severance charges of EUR payments, EUR 41 million in 2012 85 million • EUR 40 million, asset write-downs, EUR 30 million in 2012 25
  • Executive overviewQ4 2012Outlook 2013 26
  • Kemira’s business model can cope with changes in its businessenvironment• More than 75% of Kemira’s revenue has limited exposure to economic cycles - Most exposed are oil and gas in the US as well as pulp business• Efficiency improvements carried out to compensate for annual cost inflation - Kemira fixed costs are about 25% of the revenues• Oil price has limited direct impact on Kemira’s raw material spend Oil dependency Kemira operating expenses (share of raw material spend) EUR million Indirectly dependent via feedstock 2,500 2,000 10% Fixed costs 1,500 Logistics 20% 1,000 Dependent Energy 500 Raw materials 70% Independent 0 2009 2010 2011 2012 27
  • Operative EBIT will be significantly higher in 2013Outlook for 2013Revenue in local currencies and excluding divestments expected toincrease 0%-5% in 2013 compared to 2012 -Jan-Dec 2012 revenue: EUR 2,240.9 millionOperative EBIT expected to increase more than 15% in 2013compared to 2012 - Jan-Dec 2012 operative EBIT: EUR 154.1 million 28
  • APPENDIX
  • Creating shareholder value Substantial • ”Fit for Growth” program earnings • New organization fosters growth in high margin businesses improvement potential • Strict cash flow management Organic • Leverage mature markets with existing strengths growth • Well established position in US Oil and Gas markets • Packaging and Board driving growth in Asia Strong • Good funding position balance • Relevant financial assets sheet • Smaller M&A possible also short term, if criteria are all met • Strong focus on shareholder returns • 40% - 60% dividend payout policy (based on operative net profit) 30
  • Consolidating our manufacturing network, 71 sites Site categorization started to enable consolidation of the manufacturing network - 8 sites and 2 production plants decided to be closed or sold by the end of H1 of 2013* - We have announced a project aiming to close 2 sites in France and have started the related co-determination negotiations - Another 2 sites under review Europe North America Germany Spain South America Asia Pacific Nanjing Coagulants Polymers India Common process chemicals and Paper wet-end chemicals Bleaching chemicals New production sites under construction Sites decided to be closed or sold * Sevilla, Tarragona old, Flix, Kvarntorp, Houston, Savannah, St Petersburg, Camaçari, Europoort (M&I), Xoxtla (M&I) 31
  • ”Fit for Growth” will improve EBIT by EUR 60 million in 2014 • Cost savings impact in operative EBIT 2012 was EUR 10 million • EUR 5 million impacted variable costs • EUR 5 million impacted fixed costs • Expected cost savings impact in operative EBIT 2013 is EUR 50 million • Expected cost savings impact in operative EBIT 2014 EUR 60 million EUR million 70 60 60 50 50 40 30 20 10 Expected savings 10 Realized 0 savings Savings impact 2012 Savings impact 2013 Savings impact 2014 32
  • ”Fit for Growth” requires EUR 85 million in restructuring costs• EUR 71 million booked in 2012 and EUR 14 million in H1 2013 • In 2012, restructuring charges amounted to EUR 71 million, of which EUR 41 million related to severance payments and external services and EUR 30 million to asset write-downs• Total non-recurring severance payments and external services approximately EUR 45 million• Total non-recurring asset write-downs approximately EUR 40 million Expected EUR million restructuring 45 41 charges 40 Realized restructuring 35 30 charges 30 25 20 15 10 10 5 4 0 Severance payments and Asset write-downs 2012 Severance payments and Asset write-downs 2013 external services 2012 external services 2013 33
  • Risk of the slowdown of the economy has a differentimpact in Mature markets vs. Emerging markets • Principle: Revenues impacted in case of slowdown in the economy; high correlation (1), medium (0.5) and low (0) • Higher correlation with slowdown of economy (28%) clearly on Matured markets; mainly in Oil & Gas and Pulp business portfolio • 25% of our global business has a high correlation with the impact of slowdown of economy Mature market revenue Emerging market revenue (EUR 1.9 billion sensitivity*) (EUR 0.3 billion sensitivity*) 2% 19% High 19% Low 28% Medium 54% 80% *Sensitivity based on management estimate 34
  • Kemira fixed costs are approximately 25% of revenues • Fixed costs includes personnel expenses, maintenance cost and leases • Expected ”Fit for Growth” savings EUR 50 million in 2013 • Efficiency improvements and operating leverage compensating the annual cost inflation of around 3% • TOP 10* raw materials account for 45% of raw material spend EUR million Kemira operating expenses 2,500 2,000 1,500 Fixed costs Logistics 1,000 Energy Raw materials 500 0 2009 2010 2011 2012 *From 1 to 10: Acrylic Acid, Cationic monomer, Acrylonitrile, Fatty acid, Petroleum solvents, Propionic acid, Aluminium Hydrate, Sodium hydroxide, Sulphuric acid, Hydrochloric acid 35
  • Kemira key ratios • Inventories were reduced by EUR 46 million during 2012 • Operative ROCE, %, excludes EUR 122 million non-recurring charges in 2012 • Net debt impacted by dividend payment of EUR 81 in March 2102 EUR million, except key ratios and personnel Dec, 31 Dec, 31 2012 2011 Capital employed* 1,673 1,705 Operative ROCE, %* 10% 11% Equity ratio, % at period-end 53% 51% Gearing, % at period-end 40% 38% Net debt 532 516* 12-month rolling average 36
  • Kemira cash flow statement EUR million Q4 Q4 YTD YTD % % 2012 2011 2012 2011 Operative EBITDA 57.1 59.6 -4 248.0 253.3 -2 Change in net working capital 6.6 37.5 -82 -21.1 -2.7 - Cash flow from operations 25.8 70.2 -63 176.3 177.7 -1 Capital expenditure -18.5 -93.6 83 -134.1 -201.1 33 Other investing activities 2.1 31.8 -93 29.6 138.7 -79 Cash flow after investing activities 9.4 -27.3 - 71.8 115.3 -38 37