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Kemira's January-June 2013 Interim Report result presentation

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Kemira's organic revenue growth and profitability improvement continues

Content:
- Where water meets chemistry
- Q2/2013
- Outlook
- Appendix

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Kemira's January-June 2013 Interim Report result presentation

  1. 1. January-June 2013 Kemira Interim report Wolfgang Büchele, President and CEO | July 23, 2013
  2. 2. Agenda Kemira Interim report January-June 2013 Where water meets chemistryTM Q2 2013 Outlook Appendix
  3. 3. Focus on paper, oil & gas, mining and water treatment Kemira in the value chain of WQQM* Expertise and tailored combinations of chemicals for water-intensive industries Improving our customers’ water, energy and raw material efficiency *) Water Quality and Quantity Management 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 3
  4. 4. Strengthening market position in polymer product line Kemira to acquire 3F Chimica for EUR 85 million 3F revenue is approximately EUR 75 million, mainly polymer product line related Acquisition increases polymer capacity (2 sites in Europe and 1 in the US) Closes technology gaps in monomer and polymer production Transaction is expected to result in substantial synergies 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 4
  5. 5. Kemira Interim report Q2 2013, Wolfgang Büchele Accelerating shift to fast growing differentiated products 3F acquisition and the divestment of ChemSolutions formic acid and derivatives product lines would increase the share of Kemira differentiated product line revenue from 40% to 45% Differentiated product lines Commodity product lines %-of total revenue in 2012 Polymers Sizing and strength Defoamers, dispersants, biocides and other process chemicals Coagulants Bleaching chemicals Formic acid and derivatives Miscellaneous commodity products* Paper 10% 20% 20% 5% 25% - 20% M&I 20% - 5% 65% - - 10% O&M 50% - 20% 5% - - 25% Chem- Solutions - - - - - 80% 20% Kemira 20% 10% 10% 25% 10% 10% 15% 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 5 *) Mainly sodium percarbonate, colorants, acrylamide, inorganic salts and acids as well as caustic soda
  6. 6. • Revenue EUR 569 million (562 in Q2 2012), +1% – Organic revenue growth +4%, driven by increased sales volumes • Operative EBIT EUR 40 million (36), +11% – Operative EBIT margin 7.0% (6.4%) – ”Fit for Growth” savings EUR 10 million • Non-recurring items impacting EBIT amounted to EUR 27 million – Thereof Vaasa site closure (15), Business Service Center (6) and ”Fit for Growth” related restructuring charges (3) • Net working capital (ratio) of revenue reduced to 11.3% (12.8% in 2012) – Lower inventories and higher payables • Cash flow after investing activities increased vs Q2 2012* Continued organic revenue growth and improved profitability April-June 2013 6 *) Excluding EUR 5.3 million dividends and EUR 27.3 million paid-in-capital from JV Sachtleben in Q2 2012 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele
  7. 7. Accelerating organic growth driven by increased sales volumes Kemira Group revenue growth trend -15% -10% -5% 0% 5% 10% 15% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 2011 2012 2013 Organic growth Currency Acquisitions Divestments Total growth 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 7
  8. 8. Sales volumes increased in all segments Kemira Group operative EBIT bridge, EUR million Q2 2012 Sales volumes Sales prices Variable costs Fixed costs Currency impact Others, incl. acquisitions and divestments Q2 2013 36.0 10.8 40.0-0.6-0.7-4.9 0.4 -1.0 Including one off consultancy and advisory expenses of EUR 3 million 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 8
  9. 9. Restructuring charges related to ”Fit for Growth” booked, all measures under implementation • ”Fit for Growth” cost savings impact was EUR 10 million in Q2 2013 (full run rate EUR 15 million per quarter) • Full run rate expected to be achieved in Q4 2013 EUR 60 million cost savings in 2014 1. Redundancies and leaner organization: EUR 30 million (Headcount reduced by 517) 2. Manufacturing network consolidation: EUR 21 million (12 site and 2 production plant closures decided) 3. Leaner operation: EUR 9 million (# SKU’s reduced by 45%) Restructuring charges amounted to EUR 76 million (85) Reported between Q3 2012 – Q2 2013: • EUR 46 million cash cost, mainly for severance payments • EUR 30 million, asset write-downs 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 9
  10. 10. Operative EBIT increased more year-on-year in Q2 compared to Q1 • Full run rate of ”Fit for Growth” savings expected in Q4 2013 • Vaasa process chemical site closure to bring EUR 5 million and Business Service Center EUR 10 million additional annualized cost savings • 3F acquisition expected to result in substantial synergies in raw material, logistics and other fixed costs in 2014 39 36 44 27 33 30 3 7 9 10 545 550 555 560 565 570 575 0 5 10 15 20 25 30 35 40 45 50 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Underlying operative EBIT "Fit for Growth" savings Revenue EUR million 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 10
  11. 11. Paper organic growth was 7% in Q2 2013 • Strong sales volume growth in Sizing, Polymers, and other differentiated process chemicals • Pulp chemical sales volumes grew, especially in EMEA and SA • Hydrogen peroxide capacity increased by 65% in Fray Bentos, Uruguay to serve growing pulp production in the region *) Divestments (FWA and Maitland hydrogen peroxide), exited businesses (Siilinjärvi calcium sulphate) and transferred businesses (Sodium percarbonate) are excluded 0 200 400 600 800 1,000 1,200 2009 2010 2011 2012 1-6 2012 1-6 2013 Commodity products Differentiated products CAGR:+12% CAGR:+5% Paper segment revenue*, EUR million 760 873 907 965 524497 +6% Share of revenues Packaging & Board 26% Tissue & Specialties 6% Printing & Writing 22% Pulp 47% 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 11
  12. 12. Profitable growth accelerated in Paper April-June 2013 Revenue increased by 6% to EUR 265 million (249) • EMEA revenue increased more than 10% driven by sales volume growth in all main product lines • Sales prices decreased slightly • Currency exchange -1% EUR million Q2/2013 Q2/2012 % 1-6/2013 1-6/2012 % 2012 Revenue 265 249 6 524 497 5 1,006 Operative EBIT 19.5 16.1 21 39.2 34.9 12 75.3 Operative EBIT, % 7.4 6.5 - 7.5 7.0 - 7.5 Cash flow 18 10 80 48 9 433 8 Operative EBIT increased 21% to EUR 19.5 million (16.1) • Organic revenue growth • Higher sales and marketing expenses compensated by ”Fit for Growth” savings • Operative EBIT margin increased to 7.4% (6.5%) Strong cash flow 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 12
  13. 13. 9.2% 7.1% 5.7% 7.1% 0 150 300 450 600 750 2010 2011 2012 YTD 2013 Municipal & Industrial profitability has started to turn around • Sales volumes growth in all the main product lines • Increased coagulant sales prices in SA • ”Fit for Growth” savings were EUR 5 million in Q2 2013 Coagulants Operative EBIT % Antiscalants, biocides, defoamers, miscellaneous commodity chemicals Polymers 644 665 687 343 M&I revenue and operative EBIT-% EUR million 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 13
  14. 14. Profitable growth in Municipal & Industrial April-June 2013 Revenue increased 2% to EUR 178 million (174) • Revenues increased in all regions, except APAC • Currency exchange -1% EUR million Q2/2013 Q2/2012 % 1-6/2013 1-6/2012 % 2012 Revenue 178 174 2 343 335 2 687 Operative EBIT 15.9 12.0 33 24.5 17.7 38 39.2 Operative EBIT, % 8.9 6.9 - 7.1 5.3 - 5.7 Cash flow 5 -3 - 5 4 25 39 Operative EBIT increased 33% to EUR 15.9 million (12.0) • Increased sales prices and sales volumes, as well as lower fixed costs • Higher variable costs due to increased propylene based raw material prices during Q1 2013 • Operative EBIT margin increased to 8.9% (6.9%) 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 14
  15. 15. Differentiated product line sales volumes continued to recover in Oil & Mining • Polymer sales volumes in NAFTA increased more than 20% year-on-year in Q2 2013 • Oil & Mining differentiated product lines revenue grew 7% in Q2 2013 compared to Q1 2013 211 235 247 61 65 0 50 100 150 200 250 2010 2011 2012 YTD 2013 Differentiated product lines revenue, EUR million CAGR: 9% Q2 Q1 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 15 +7%
  16. 16. Oil & Mining sales volumes increased April-June 2013 Revenue decreased 5% to EUR 79.9 million (84.5) • -4% impact related to exiting from low margin products as communicated earlier (full impact of EUR 10 million will be realized by the end of 2013, YTD 2013 impact EUR 7 million) • Sales volumes increased for the first time in six quarters • Sales prices declined EUR million Q2/2013 Q2/2012 % 1-6/2013 1-6/2012 % 2012 Revenue 79.9 84.5 -5 156 170 -8 321 Operative EBIT 3.5 7.2 -51 8.6 15.5 -45 25.9 Operative EBIT, % 4.4 8.5 - 5.5 9.1 - 8.1 Cash flow -8 1 - -10 -18 - -5 Operative EBIT decreased to EUR 3.5 million (7.2) • Price pressure in the market • Increased R&D spend to accelerate the differentiation • Variable costs started to come down towards the end of the quarter 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 16
  17. 17. Investing to meet customer challenges Challenges Oil & Mining applications Process efficiency/Increased energy demand Horsepower Reduction in Wet/Dry Shale Hydraulic Fracturing , Oil Sands, Cementing Declining reserves Pelletization, Flotation, EOR Water scarcity Water Reuse, Scale and Microbiological Control, Shale Water Management Environmental concerns Tailings Management, Shale Water Reuse, Contaminants Removal Key differentiated products Polymers, Biocides, Defoamers, Scale Inhibitors, Dispersants Targeting innovation sales* of EUR 100 million in 2016 *) Sales from new products or existing products for new applications launched within the previous 5 years 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 17
  18. 18. ChemSolutions revenue was impacted by the food and pharmaceuticals businesses divestment April-June 2013 Revenue decreased 16% to EUR 46 million (55) • Organic growth 7%, continued strong sales volumes growth of formic acid and derivatives product lines • Divestment of food and pharmaceuticals businesses had -22% impact EUR million Q2/2013 Q2/2012 % 1-6/2013 1-6/2012 % 2012 Revenue 46 55 -16 107 114 -6 228 Operative EBIT 1.1 0.7 57 9.9 6.5 52 15.1 Operative EBIT, % 2.4 1.3 - 9.2 5.7 - 6.6 Cash flow -4 -2 - 77 13 - 24 Operative EBIT increased 57% to EUR 1.1 million (0.7) • Higher sales volumes and lower variable costs • Strong market pressure on Sodium Percarbonate product line 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 18
  19. 19. Key figures and ratios EUR million (except ratios) 4-6/2013 4-6/2012 % 1-6/2013 1-6/2012 % 2012 Revenue 569.3 562.3 1 1,130.2 1,115.2 1 2,240.9 Operative EBITDA 61.5 58.2 6 125.0 121.0 3 249.4 of which margin 10.8 10.3 - 11.1 10.8 - 11.1 Operative EBIT 40.0 36.0 11 82.2 74.6 10 155.5 of which margin 7.0 6.4 - 7.3 6.7 - 6.9 Share of profit or loss of associates 0.1 5.8 - -1.1 16.6 - 11.2 Financing income and expenses -4.2 1.4 - -28.9 -8.9 - -15.7 Operative EPS, EUR 0.14 0.21 -33 0.31 0.41 -24 0.77 Operative ROCE* 10.4 10.5 - 10.4 10.5 - 10.0 Capital expenditure 30.9 51.0 -39 59.9 70.4 -15 134.1 Casf flow after investing activities** 10.5 24.2 -57 200.4 16.1 - 71.8 Gearing, % at period-end 36 44 - 36 44 - 42 Personnel at period-end 4,664 5,181 -10 4,664 5,181 -10 4,857 *12-month rolling average **2012 numbers include EUR 5.3 million dividends and EUR 27.3 million paid-in-capital from JV Sachtleben. 1-6/2013 numbers include EUR 97.5 million received from the divestment of the JV Sachtleben shares and EUR 80.6 million from the divestment of the food and pharmaceuticals businesses. 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 19
  20. 20. 2013 Revenue (local currencies and excl. divestments) 2014 2016 Operative EBIT 0%-5% growth vs 2012 EBIT margin 10% Revenue EBITDA margin Gearing EUR 2.6 – 2.7 billion 15% below 60% increase >15% vs 2012 Outlook for 2013 and financial targets for 2014 and 2016 unchanged 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 20
  21. 21. Kemira Capital Markets Day Tuesday 10 September 2013 in London, UK (London Stock Exchange) 12.00 Lunch and registration 12.30 Presentations • From redesign to expansion (Wolfgang Büchele, President and CEO) • M&I turnaround and efficiency improvements (Frank Wegener, M&I and Michael Löffelmann, SVP restructuring and strategic projects) • Innovation, incl. R&D showcases (Heidi Fagerholm, CTO and R&D management) 15.30 Breakout meetings • Four teams (CEO & CFO, Paper and APAC, Oil & Mining and SA, M&I and efficiency) 18.00 Cocktails 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 21
  22. 22. Appendix Kemira Interim report January-June 2013 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 23
  23. 23. Good balance between sales and raw material prices Kemira sales prices vs variable costs *) 12-month rolling change vs previous year, meur, excl. Tikkurila and Pigments -150 -100 -50 0 50 100 150 200 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2007 2008 2009 2010 2011 2012 2013 Brent oil, USD Sales price* Variable costs* 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 24
  24. 24. YTD 2013 operative EBIT bridge Kemira Group operative EBIT bridge, EUR million 0 10 20 30 40 50 60 70 80 90 100 YTD 2012 Sales volumes Sales prices Variable costs Fixed costs Currency impact Others, incl. acquisitions and divestments Q2 2013 74.6 17.0 82.24.23.2-9.1 -5.7 -2.0 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 25
  25. 25. ”Fit for Growth” will improve EBIT by EUR 60 million in 2014 • Cost savings impact in operative EBIT in Q2 2013 was EUR 10 million – EUR 4 million impacted variable costs – EUR 6 million impacted fixed costs • Expected cost savings impact in operative EBIT 2013 is approximately EUR 50 million • Expected cost savings impact in operative EBIT 2014 EUR 60 million ”Fit for Growth” status Q2 2013, EUR million 50 60 10 19 0 10 20 30 40 50 60 70 Savings impact 2012 Savings impact 2013 Savings impact 2014 Expected savings Realized savings 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 26
  26. 26. ”Fit for Growth” required EUR 76 million in restructuring costs • EUR 5 million booked YTD 2013 • Total non-recurring severance payments and external services EUR 46 million • Total non-recurring asset write-downs EUR 30 million 41 30 5 0 15 30 45 Severance payments and external services 2012 Asset write-downs 2012 Severance payments and external services 2013 Realized restructuring charges, EUR million 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 27
  27. 27. Fixed costs are approximately 25% of revenues • Fixed costs include personnel expenses, maintenance cost and leases • Expected ”Fit for Growth” savings approximately 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 Kemira cost breakdown EUR million *) From 1 to 10: Acrylic Acid, Cationic monomer, Acrylonitrile, Fatty acid, Petroleum solvents, Propionic acid, Aluminium Hydrate, Sodium hydroxide, Sulphuric acid, Hydrochloric acid 0 250 500 750 1,000 1,250 1,500 1,750 2,000 2010 2011 2012 Raw materials Logistics Energy Fixed costs 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 28
  28. 28. Cash flow statement EUR million Q2 2013 Q2 2012 1-6/2013 1-6/2012 FY 2012 Operative EBITDA 61.5 58.2 125.0 121.0 249.4 Change in net working capital -6.8 -0.6 -11.1 -43.2 -21.1 Cash flow from operations* 38.6 47.5 78.9 57.9 176.3 Capital expenditure -30.9 -51.0 -59.9 -70.4 -134.1 Other investing activities 2.8 27.7 181.4 28.6 29.6 Cash flow after investing activities* 10.5 24.2 200.4 16.1 71.8 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 29 *2012 numbers include EUR 5.3 million dividends and EUR 27.3 million paid-in-capital from JV Sachtleben. 1-6/2013 numbers include EUR 97.5 million received from the divestment of the JV Sachtleben shares and EUR 80.6 million from the divestment of the food and pharmaceuticals businesses.
  29. 29. Market and product specifications Kemira Interim report January-June 2013 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 30
  30. 30. 1.5 1.7 1.9 2.0 2.1 2.2 0.9 1.0 1.1 1.8 2.0 2.3 1.5 1.6 1.8 2012 2016 2020 2012 2016 2020 Defoamers, biocides and other wet-end process chemicals 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%) GAGR Sizing and strength Miscellaneous commodity chemicals Bleaching chemicals Polymers 3.5% 2.0% 3.0% 1.3% 2.0% 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 31
  31. 31. Paper segment - Technology and market leader in paper wet-end chemistry Value chain part covered by Kemira RAW MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS CUSTOMER IDUSTRIES CUSTOMERS Electricity Sodium chloride (salt) Crude tall oil Cationic monomer Acrylonitrile Acrylic acid Olefins Fatty acids Maleic anhydride Sulfur Tall oil rosin AKD Wax Isomerized olefins Acrylamide Sodium chlorate Hydrogen peroxide Polymers Defoamers Coagulants Biocides Sizing Strength Additives Surface additives Colorants Sulfuric acid Pulping Bleaching Retention Wet-end process control WQQM Sizing Strength Surface treatment Coloring Pulp Packaging and board Printing and writing Tissue All the major global paper and pulp producers 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 32
  32. 32. 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: 4.7%) 3.1 3.6 4.3 2.0 2.4 2.9 4.3 5.1 6.1 2012 2016 2020 2012 2016 2020 Polymers Defoamers, biocides and other process chemicals Miscellaneous commodity products 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 33
  33. 33. Oil & Mining segment - Winning market share with competitive combination of innovation chemicals and application knowledge Value chain part covered by Kemira RAW MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS CUSTOMERS Acrylonitrile Acrylic acid Various monomers Miscellaneous specialty chemicals and commodities Acrylamide Polymers Dispersants & Antiscalants Biocides Emulsifiers Defoamers Coagulants Formulations 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 Pumpers Oil & Gas operators Service companies Mine operators 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 34
  34. 34. Municipal & Industrial - Commodity product lines expected to grow, but slightly slower than the market Demand drivers for raw and waste water as well as sludge treatment chemicals: • Legislation and regulatory enforcements determine required treated water and sludge quality standards • Water reuse is most cost efficient solution to meet the increasing water demand 2.6 3.0 3.4 1.6 1.8 1.9 3.4 3.8 4.4 2012 2016 2020 GAGR Coagulants Antiscalants, biocides, defoamers, miscellaneous commodity chemicals 3.2% 2.8% 3.3% Polymers Realized restructuring charges, EUR billion 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 35
  35. 35. Municipal & Industrial - Technology and market leader in raw and waste water as well as sludge treatment • Kemira is the only major supplier producing major water treatment chemicals, polymers and coagulants – thereby enabling comprehensive application support • Cost competitiveness through backward integration into virgin raw materials • 60-70% of sourced raw materials are recycled utilizing waste streams from industrial producers, providing an additional cost advantage RAW MATERIALS INTERMEDIATES PRODUCTS APPLICATIONS SALES CHANNEL CUSTOMERS Acrylonitrile Sulfuric acid Hydrochloric acid Aluminium hydrate Iron ore Pickling liquor Copperas Acrylamide Polymers (EPAM, DPAM) Al Coagulants Fe Coagulants Antiscalants Biocides Defoamers Raw water treatment Wastewater treatment Sludge treatment Advanced water treatment Direct sales Distributor/reseller Service companies Municipalities Private operators Industrial customers Value chain part covered by Kemira 23 July 2013Kemira Interim report Q2 2013, Wolfgang Büchele 36

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